Exhibit 10.2
SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
by and between
SILICON VALLEY BANK
as Lender
and
PHARMAPRINT INC.
as Borrower
Dated: December 18, 1998
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND CONSTRUCTION............................................. 1
1.1 DEFINITIONS......................................................... 1
1.2 ACCOUNTING AND OTHER TERMS.......................................... 8
2. LOAN AND TERMS OF PAYMENT................................................ 8
2.1 CREDIT EXTENSIONS................................................... 8
2.2 OVERADVANCES........................................................10
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS..........................10
2.4 CREDITING PAYMENTS..................................................11
2.5 FEES................................................................11
2.6 ADDITIONAL COSTS....................................................11
2.7 TERM................................................................12
3. CONDITIONS OF LOANS......................................................12
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION....................12
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.......................13
4. CREATION OF SECURITY INTEREST............................................13
4.1 GRANT OF SECURITY INTEREST..........................................13
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED.......................13
4.3 RIGHT TO INSPECT....................................................13
5. REPRESENTATIONS AND WARRANTIES ..........................................13
5.1 DUE ORGANIZATION AND QUALIFICATION..................................13
5.2 DUE AUTHORIZATION; NO CONFLICT......................................13
5.3 NO PRIOR ENCUMBRANCES...............................................14
5.4 BONA FIDE ELIGIBLE ACCOUNTS.........................................14
5.5 MERCHANTABLE INVENTORY..............................................14
5.6 INTELLECTUAL PROPERTY...............................................14
5.7 NAME: LOCATION OF CHIEF EXECUTIVE OFFICE............................14
5.8 LITIGATION..........................................................14
5.9 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS..................14
5.10 SOLVENCY............................................................14
5.11 REGULATORY COMPLIANCE...............................................14
5.12 ENVIRONMENTAL CONDITION.............................................15
5.13 TAXES...............................................................15
5.14 SUBSIDIARIES........................................................15
5.15 GOVERNMENT CONSENTS.................................................15
5.16 FULL DISCLOSURE.....................................................15
6. AFFIRMATIVE COVENANTS.....................................................15
6.1 GOOD STANDING.......................................................15
6.2 GOVERNMENT COMPLIANCE...............................................15
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.........................16
6.4 INVENTORY: RETURNS..................................................16
6.5 TAXES...............................................................16
6.6 INSURANCE...........................................................17
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TABLE OF CONTENTS (contd)
PAGE
6.7 PRINCIPAL DEPOSITORY................................................17
6.8 QUICK RATIO.........................................................17
6.9 DEBT-NET WORTH RATIO................................................17
6.12 PROFITABILITY.......................................................17
6.10 MINIMUM CASH; DEBT SERVICE RATIO....................................17
6.11 FURTHER ASSURANCES..................................................17
7. NEGATIVE COVENANTS........................................................18
7.1 DISPOSITIONS........................................................18
7.2 CHANGES IN BUSINESS, OWNERSHIP, OR MANAGEMENT BUSINESS LOCATIONS....18
7.3 MERGERS OR ACQUISITIONS.............................................18
7.4 INDEBTEDNESS........................................................18
7.5 ENCUMBRANCES........................................................18
7.6 DISTRIBUTIONS.......................................................18
7.7 INVESTMENTS; LOANS; GUARANTEES......................................19
7.8 TRANSACTIONS WITH AFFILIATES........................................19
7.9 RESERVED............................................................19
7.10 SUBORDINATED DEBT...................................................19
7.11 INVENTORY...........................................................19
7.12 COMPLIANCE..........................................................19
8. EVENTS OF DEFAULT.........................................................19
8.1 PAYMENT DEFAULT.....................................................19
8.2 COVENANT DEFAULT....................................................19
8.3 MATERIAL ADVERSE CHANGE.............................................20
8.4 ATTACHMENT..........................................................20
8.5 INSOLVENCY..........................................................20
8.6 OTHER AGREEMENTS....................................................20
8.7 SUBORDINATED DEBT...................................................20
8.8 JUDGMENTS...........................................................20
8.9 MISREPRESENTATIONS..................................................20
8.10 GUARANTY............................................................20
9. BANK'S RIGHTS AND REMEDIES...............................................21
9.1 RIGHTS AND REMEDIES.................................................21
9.2 POWER OF ATTORNEY...................................................22
9.3 ACCOUNTS COLLECTION.................................................22
9.4 BANK EXPENSES.......................................................22
9.5 BANK'S LIABILITY FOR COLLATERAL.....................................23
9.6 REMEDIES CUMULATIVE.................................................23
9.7 DEMAND; PROTEST.....................................................23
10. NOTICES...................................................................23
11. CHOICE OF LAW AND VENUE; JURY WAIVER......................................23
12. GENERAL PROVISIONS........................................................24
12.1 SUCCESSORS AND ASSIGNS..............................................24
12.2 INDEMNIFICATION.....................................................24
12.3 TIME OF ESSENCE.....................................................24
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TABLE OF CONTENTS (contd)
PAGE
12.4 SEVERABILITY OF PROVISIONS..........................................24
12.5 AMENDMENTS IN WRITING, INTEGRATION..................................24
12.6 COUNTERPARTS........................................................24
12.7 SURVIVAL............................................................24
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of December 18, 1998 by and
between SILICON VALLEY BANK ("Bank") and PHARMAPRINT INC., a Delaware
corporation ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank desires
to extend credit to Borrower. This Agreement sets forth the terms on which Bank
will advance credit to Borrower, and Borrower will repay the amounts owing to
Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall have
the following definitions:
"Accounts" means all presently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods (including, without limitation, the licensing
of software and other technology) or the rendering of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower and Borrower's Books relating to any of the foregoing.
"Advance" or "Advances" means a loan advance under the Committed
Revolving Line.
"Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person that
is a limited liability company, such Persons, managers and members.
"AAHP" means American Home Products Corporation and its subsidiaries.
"AAHP Orders" means those orders made by AHP for products from the
Borrower, and which orders are final and binding on AHP.
"Bank Expenses" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents, (including fees and expenses of
appeal or review, or those incurred in any Insolvency Proceeding) whether or not
suit is brought.
"Borrower's Books" means all of Borrower's books and records including,
without limitation: ledgers; records concerning Borrower's assets or
liabilities, the Collateral, business operations or financial condition; and all
computer programs, or tape files, and the equipment, containing such
information.
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"Borrowing Base" means an amount equal to (A) 75% of Eligible Accounts,
as determined by Bank with reference to the most recent Borrowing Base
Certificate delivered by Borrower PLUS (B) 25% of the amount of the outstanding
AHP Orders, which are determined to be acceptable to the Bank in its discretion
exercised in the Bank's good faith business judgment, provided that in no event
shall the amount under this clause (B) as of any date exceed 25% of the
aggregate amount of AHP Orders as referred to in the forecast relating thereto
as provided to the Bank with respect to the then next three month period as of
such date, PROVIDED that in no event shall the aggregate amount of such AHP
Orders exceed the amount that represents the required amount of required
purchases of products by AHP under the contract between AHP and Borrower, as
such contract is amended or modified from time to time, PROVIDED, FURTHER, that
each of above advance percentages shall be subject to adjustment, in the
discretion of the Bank exercised in the Bank's good faith business judgment,
based on the results of an audit of the Collateral to be conducted on and after
the date hereof. It is understood that the components of (A) and (B) of the
Borrowing Base are not duplicative and thus an Account arising from an AHP Order
shall constitute an Eligible Account if it otherwise complies the requirements
set forth herein for Eligible Accounts and the related AHP Order or portion
thereof no longer comprises an outstanding AHP Order for purposes of clause (B)
hereof.
"Business Day" means any day that is not a Saturday, Sunday, or other day
on which banks in the State of California are authorized or required to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on EXHIBIT A attached hereto.
"Committed Revolving Line" means a Credit Extension of up to $4,000,000.
"Committed Term Line" means a Credit Extension of up to $500,000.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Credit Extension" means each Advance, Letter of Credit, Term Loan, and
each other extension of credit by Bank for the benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and Subsidiaries as of such date.
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"Current Liabilities" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and Subsidiaries, as at such date, plus,
to the extent not already included therein, all outstanding Credit Extensions
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Debt Service Ratio" means, on a consolidated basis, the ratio of (a) net
income of Borrower before interest, taxes, depreciation and other non-cash
amortization expenses and other non-cash expenses of Borrower, relating to the
immediately preceding four fiscal quarters, determined in accordance with GAAP,
consistently applied, to (b) the amount of Borrower's obligations to pay
interest on an annualized basis and current maturities of principal on
Borrower's outstanding long term indebtedness, determined in accordance with
GAAP, consistently applied.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's representations
and warranties to Bank set forth in Section 5.4; PROVIDED, that standards of
eligibility may be fixed and revised from time to time by Bank in Bank's
reasonable judgment and upon notification thereof to Borrower in accordance with
the provisions hereof. Unless otherwise agreed to by Bank in writing, Eligible
Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, in which fifty
percent (50%) or more of the outstanding balance of the Accounts owed by
such account debtor have not been paid within ninety (90) days of invoice
date;
(c) Accounts with respect to an account debtor, including
Affiliates, whose total obligations to Borrower exceed twenty-five
percent (25%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank (with
the understanding that the foregoing limitation shall not apply to any
Accounts arising from AHP);
(d) Accounts with respect to which the account debtor does not
have its principal place of business in the United States;
(e) Accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department, agency,
or instrumentality thereof, except for those Accounts of the United
States or any department, agency or instrumentality thereof as to which
the payee has assigned its rights to payment thereof to Bank and the
assignment has been acknowledged, pursuant to the Assignment of Claims
Act of 1940, as amended (31 U.S.C. 3727);
(f) Accounts with respect to which Borrower is liable to the
account debtor, but only to the extent of any amounts owing to the
account debtor (sometimes referred to as "contra" accounts, e.g. accounts
payable, customer deposits, credit accounts etc.);
(g) Accounts generated by demonstration or promotional
equipment, or with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold, or
other terms by reason of which the payment by the account debtor may be
conditional;
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(h) Accounts with respect to which the account debtor is an
Affiliate, officer, employee, or agent of Borrower;
(i) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim),
or is subject to any Insolvency Proceeding, or becomes insolvent, or goes
out of business;
(j) Accounts the collection of which Bank reasonably determines
to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect to which the
account debtor does not have its principal place of business in the United
States and that are: (1) covered by credit insurance in form and amount, and by
an insurer satisfactory to Bank less the amount of any deductible(s) which may
be or become owing thereon; or (2) supported by one or more letters of credit
either advised or negotiated through Bank or in favor of Bank as beneficiary, in
an amount and of a tenor, and issued by a financial institution, acceptable to
Bank; or (3) that Bank approves on a case-by-case basis.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in effect in the
United States from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including, without limitation,
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against any
person or entity under any provision of the United States Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including assignments
for the benefit of creditors, formal or informal moratoria, compositions,
extension generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Intellectual Property" means with respect to the Borrower, (a) any and
all copyright rights, copyright applications, copyright registrations and like
protections in each work or authorship and derivative work thereof, whether
published or unpublished and whether or not the same also constitutes a trade
secret, now or hereafter existing, created, acquired or held; (b) any trademark
and servicemark rights, whether registered or not, applications to register and
registrations of the same and like protections; (c) all patents, patent
applications and like protections including, without limitation, improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; and (d) all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired.
"Inventory" means all present and future inventory in which Borrower has
any interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials.
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work in process and finished products intended for sale or lease or to be
furnished under a contract of service, of every kind and description now or at
any time hereafter owned by or in the custody or possession, actual or
constructive, of Borrower, including such inventory as is temporarily out of its
custody or possession or in transit and including any returns upon any accounts
or other proceeds, including insurance proceeds, resulting from the sale or
disposition of any of the foregoing and any documents of title representing any
of the above.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Letter of Credit" means a letter of credit or similar undertaking issued
by Bank pursuant to Section 2.1.2.
"Letter of Credit Reserve" has the meaning set forth in Section 2.1.2(d).
"Lien" means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower pursuant to this Agreement, and any other present or future
agreement entered into between Borrower and/or for the benefit of Bank in
connection with this Agreement, all as amended, extended or restated from time
to time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means the later of (i) the Revolving Maturity Date, or
(ii) if the Term Loan is outstanding, the Term Loan Maturity Date.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement between Borrower and Bank, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"Payment Date" means the first calendar day of each month commencing on
the first such date after the Closing Date and ending on the Revolving Maturity
Date.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document:
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(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business;
(e) Indebtedness relating to operating leases of Borrower; and
(f) Indebtedness secured by Permitted Liens.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule;
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State
thereof maturing within one (1) year from the date of acquisition
thereof, (ii) commercial paper maturing no more than one (1) year from
the date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors
Service, Inc., and (iii) certificates of deposit maturing no more than
one (1) year from the date of investment therein issued by Bank;
(c) Investments that are otherwise permitted under Section 7.3
hereof; and
(d) Investments by Borrower in Subsidiaries in an aggregate
amount not to exceed $500,000 per fiscal year of the Borrower.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith
by appropriate proceedings and as to which adequate reserves are
maintained on Borrower's Books in accordance with GAAP, PROVIDED the same
have no priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired or held by
Borrower or any Subsidiary to secure the purchase price or lease
financing of such Equipment or indebtedness incurred solely for the
purpose of financing the acquisition of such Equipment, or (ii) existing
on such equipment at the time of its acquisition, PROVIDED that the Lien
is confined solely to the property so acquired and improvements thereon,
and the proceeds of such equipment;
(d) Liens arising in connection with collaborative relationships
with other entities, PROVIDED the same have no priority over any of
Bank's security interests and PROVIDED, FURTHER, that such Liens arise
only in connection with Borrower's copyright, patent and trade ▇▇▇▇
assets and related property;
(d) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described
in clauses (a)
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through (c) above, PROVIDED that any extension, renewal or replacement Lien
shall be limited to the property encumbered by the existing Lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase.
"Person" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Quick Assets" means, as of any applicable date, the following assets of
the Borrower: consolidated cash, cash equivalents, accounts receivable and
investments with maturities of less than one year determined in accordance with
GAAP.
"Responsible Officer" means each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Advances" means those Advances made under and pursuant to the
Revolving Committed Line.
"Revolving Maturity Date" means the date which is one day prior to the
first anniversary of the date of this Agreement.
"Schedule" means the schedule of exceptions attached hereto, if any.
"Subordinated Debt" means (i) any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank) and (ii) such other debt of
the Borrower in an aggregate amount not to exceed $50,000 at any time, which is
denominated as subordinated debt and the evidence of which and related
instruments and agreements contain subordination provisions that do not
necessarily comply with the conditions set forth in clause (i) hereof.
"Subsidiary" means with respect to Borrower, any corporation,
partnership, company association, joint venture, or any other business entity of
which more than fifty percent (50%) of the voting stock or other equity
interests is owned or controlled, directly or indirectly, by Borrower or one or
more Affiliates of Borrower.
"Tangible Net Worth" means as of any applicable date, the consolidated
total assets of Borrower and Subsidiaries MINUS, without duplication, (i) the
sum of any amounts attributable to (a) goodwill, (b) intangible items such as
unamortized debt discount and expense, patents, trade and service marks and
names, copyrights and research and development expenses except prepaid expenses,
and (c) all reserves not already deducted from assets, AND (ii) Total
Liabilities.
"Term Loan Maturity Date" means the date which is the first day of the
48th full calendar month ending after the date hereof.
"Term Loan Payment" has the meaning set forth in Section 2.1.3 hereof.
"Total Liabilities" means as of any date as of which the amount thereof
shall be determined, all obligations that should, in accordance with GAAP, be
classified as liabilities on the
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consolidated balance sheet of Borrower, including all Indebtedness, but
specifically excluding Subordinated Debt.
"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.
1.2 ACCOUNTING AND OTHER TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all calculations and
determinations made hereunder shall be made in accordance with GAAP. When used
herein, the term "financial statements" shall include the notes and schedules
thereto. The terms "including"/"includes" shall always be read as meaning
"including (or includes) without limitation", when used herein or in any other
Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 CREDIT EXTENSIONS. Borrower promises to pay to the order of Bank, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower hereunder. Borrower
shall also pay interest on the unpaid principal amount of all Credit Extensions
at rates in accordance with the terms hereof.
2.1.1 Advances.
(a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an aggregate
outstanding amount not to exceed (i) the Committed Revolving Line or the
Borrowing Base, whichever is less, minus (ii) the face amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters
of Credit). Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1 may be repaid and
reborrowed at any time during the term of this Agreement.
(b) Whenever Borrower desires an Advance, Borrower will notify
Bank by facsimile transmission or telephone no later than 3:00 p.m.
Pacific time, on the Business Day that the Advance is to be made. Each
such notification shall be promptly confirmed by a Payment/Advance Form
in substantially the form of EXHIBIT B hereto. Bank is authorized to make
Advances under this Agreement, based upon instructions received from a
Responsible Officer or a designee of a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be
entitled to rely on any telephonic notice given by a person who Bank
reasonably believes to be a Responsible Officer or a designee thereof,
and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the
amount of Advances made under this Section 2.1 to Borrower's deposit
account maintained with Bank. Further, Borrower shall supply to Bank
copies of all underlying purchase orders relating to AHP Orders when
Borrower requests an Advance relating to AHP Orders.
(c) The Committed Revolving Line shall terminate on the Revolving
Maturity Date, at which time all Advances under this Section 2.1 and
other amounts due under this Agreement (except as otherwise expressly
specified herein) shall be immediately due and payable.
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2.1.2 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, Bank
agrees to issue or cause to be issued Letters of Credit for the account
of Borrower in an aggregate outstanding face amount not to exceed (i) the
lesser of the Committed Revolving Line or the Borrowing Base, whichever
is less, minus (ii) the then outstanding principal balance of the
Advances; PROVIDED that the aggregate face amount of outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit and the
aggregate amount of any and all Letter of Credit Reserves) shall not in
any case exceed $500,000. Letters of Credit may have a maturity date up
to six months beyond the Maturity Date in effect from time to time,
provided that if on the Maturity Date, or on any earlier effective date
of termination, there are any outstanding Letters of Credit issued by
Bank or issued by another institution based upon an application,
guarantee, indemnity or similar agreement on the part of Bank, then on
such date Borrower shall provide to Bank cash collateral in an amount
equal to the face amount of all such letters of credit plus all interest,
fees and costs due or to become due in connection therewith, to secure
all of the Obligations relating to said Letters of Credit, pursuant to
Bank's then standard form cash pledge agreement. All Letters of Credit
shall be, in form and substance, acceptable to Bank in its sole
discretion and shall be subject to the terms and conditions of Bank's
form of standard Application and Letter of Credit Agreement.
(b) The obligation of Borrower to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the
terms of this Agreement and such Letters of Credit, under all
circumstances whatsoever. Borrower shall indemnify, defend, protect, and
hold Bank harmless from any loss, cost, expense or liability, including,
without limitation, reasonable attorneys' fees, arising out of or in
connection with any Letters of Credit. Further, Borrower shall pay to
Bank such standard and other fees for each Letter of Credit as the Bank
charges therefor, which shall be in addition to interest and all other
amounts payable under this Agreement.
(c) Borrower may request that Bank issue a Letter of Credit
payable in a currency other than United States Dollars. If a demand for
payment is made under any such Letter of Credit, Bank shall treat such
demand as an Advance to Borrower of the equivalent of the amount thereof
(plus cable charges) in United States currency at the then prevailing
rate of exchange in San Francisco, California, for sales of that other
currency for cable transfer to the country of which it is the currency.
(d) Upon the issuance of any Letter of Credit payable in a
currency other than United States Dollars, Bank shall create a reserve
under the Committed Revolving Line for Letters of Credit against
fluctuations in currency exchange rates, in an amount equal to ten
percent (10%) of the face amount of such Letter of Credit (the ALetter of
Credit Reserve"). The amount of such reserve may be amended by Bank from
time to time to account for fluctuations in the exchange rate. The
availability of funds under the Committed Revolving Line shall be reduced
by the amount of such reserve for so long as such Letter of Credit
remains outstanding.
2.1.3 Term Loan.
(a) Subject to and upon the terms and conditions of this
Agreement, Bank shall make term loans (jointly and severally referred to
as the ATerm Loan") available to Borrower through the period ending on
the date that is six months after the date hereof and shall be in an
aggregate amount outstanding at any time not to exceed the Committed Term
Line. Borrower shall deliver to Bank, at the time of each Term Loan
request, an invoice
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for the equipment and other items to be purchased or purchased within
the then immediately preceding 90 days. Each Term Loan shall be used
only to purchase equipment and related items, acceptable to the Bank,
and shall not exceed one-hundred percent (100%) of the invoice amount
of such items approved from time to time by Bank, plus taxes, shipping,
warranty charges, freight discounts and installation expense
(collectively all of the foregoing other than the invoice amount of the
item or items purchased are referred to herein as the "Soft Costs"),
provided that such Soft Costs shall at no time be in excess of twenty
percent (20%) of the aggregate amount of the Term Loan.
(b) The first Term Loan Payment (as defined below) plus interest
thereon shall be due and payable on the date that is the first day of the
month of the seventh full calendar month after the date hereof, and
Borrower shall continue to make a Term Loan Payment plus interest thereon
on the first calendar day of each succeeding calendar month during the
term hereof until the Term Loan Maturity Date, on which date the final
Term Loan Payment and all accrued and unpaid interest on the Term Loan
shall be fully due and payable. The "Term Loan Payment" shall be equal to
1/42nd of the aggregate principal amount of the Term Loan outstanding as
of the date of the required first Term Loan Payment determined prior to
the making of such payment. Prior to the making of the first Term Loan
Payment, Borrower shall pay interest only on the principal balance of the
Term Loan outstanding from time to time.
2.2 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1.1 or 2.1.2 of this
Agreement is greater than the lesser of (i) the Committed Revolving Line or (ii)
the Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount
of such excess.
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. Except as set forth in Section 2.3(b), (I) any
Revolving Advances shall bear interest, on the average daily balance thereof, at
a per annum rate equal to 1.00% percentage points above the Prime Rate and (II)
the Term Loan shall bear interest, on the average daily balance thereof, at a
per annum rate equal to 1.25% percentage points above the Prime Rate.
(b) DEFAULT RATE. Upon the occurrence and during the continuance of an
Event of Default, all Obligations shall bear interest at a rate equal to five
(5) percentage points above the interest rate applicable immediately prior to
the occurrence of such Event of Default, and all Obligations relating to the
Revolving Advances and all Obligations relating to the Term Loan shall bear
interest at a rate equal to five (5) percentage points above the interest rate
applicable immediately prior to the occurrence of such Event of Default
regarding Revolving Advances and the Term Loan, respectively.
(c) PAYMENTS. Interest on the outstanding principal balance of the
Revolving Advances shall be due and payable on each Payment Date. Interest on
the outstanding principal balance of the Term Loan shall be paid as set forth in
Section 2.1.3(b) hereof. Borrower hereby authorizes Bank to debit any accounts
maintained by Borrower with Bank, including, without limitation, Account Number
for payments of principal and interest due on the Obligations and any
other amounts owing by Borrower to Bank. Bank will notify Borrower of all
debits which Bank has made against Borrower's accounts. Any such debits
against Borrower's accounts in no way shall he deemed a set-off. Any interest
not paid when due shall be compounded by becoming a part of the Obligations,
and such interest shall thereafter accrue interest at the rate then
applicable hereunder.
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(d) COMPUTATION. In the event the Prime Rate is changed from time to time
hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
2.4 CREDITING PAYMENTS. Prior to the occurrence of an Event of Default, Bank
shall credit a wire transfer of funds, check or other item of payment to such
deposit account or Obligation as Borrower specifies. After the occurrence of an
Event of Default, the receipt by Bank of any wire transfer of funds, check, or
other item of payment, whether directed to Borrower's deposit account with Bank
or to the Obligations or otherwise, shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment in
respect of the Obligations unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 12:00 noon Pacific
time shall be deemed to have been received by Bank as of the opening of business
on the immediately following Business Day. Whenever any payment to Bank under
the Loan Documents would otherwise be due (except by reason of acceleration) on
a date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 FEES. Borrower shall pay to Bank the following:
(a) FACILITY FEE. A Facility Fee equal to $22,500, which fee shall be due
on the Closing Date and shall be fully earned and non-refundable;
(b) UNUSED LINE FEE. Borrower shall pay to Bank quarterly an unused line
fee equal to the rate of one-half of one percent (.50%) per annum multiplied by
the amount by which the Unused Line Fee Base Amount (as defined below) exceeds
the average daily principal balance of the outstanding Advances under the
Committed Revolving Line during the immediately preceding quarter (or part
thereof) while this Agreement is in effect and for so long thereafter as any of
the Obligations are outstanding, which fee shall be payable on the first day of
each quarter in arrears. The "Unused Line Fee Base Amount" shall mean
$4,000,000.
(c) FINANCIAL EXAMINATION AND APPRAISAL FEES. Bank's customary fees and
out-of-pocket expenses for Bank's audits of Borrower's Accounts, and for each
appraisal of Collateral and financial analysis and examination of Borrower
performed from time to time by Bank or its agents, PROVIDED, HOWEVER, prior to
occurrence and the continuance of an Event of Default, the frequency of such
audits shall not exceed twice per calendar year, PROVIDED, FURTHER, that on and
after the occurrence and continuance of an Event of Default the foregoing
frequency limitation shall no longer apply or otherwise be effective.
(d) BANK EXPENSES. Upon demand from Bank, including, without limitation.
upon the date hereof, all Bank Expenses incurred through the date hereof,
including reasonable attorneys' fees and expenses, and, after the date hereof,
all Bank Expenses, including reasonable attorneys' fees and expenses, as and
when they become due, provided, however, Bank's legal fees (but not associated
costs such as courier, copying, diligence and search charges and other similar
cost items customarily charged), which are incurred in connection with the
preparation, negotiation and closing of the Loan Documents, shall be limited to
Five Thousand ($5,000.00) Dollars plus fifty (50%) percent of the time value of
Bank's legal fees in excess of Five Thousand ($5,000.00) dollars.
2.6 ADDITIONAL COSTS. In case any law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the
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administration thereof or the compliance with any guideline or request of any
central bank or other governmental authority (whether or not having the force of
law):
(a) subjects Bank to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by Borrower or otherwise with
respect to the transactions contemplated hereby (except for taxes on the overall
net income of Bank imposed by the United States of America or any political
subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance, reserve,
special deposit or similar requirement against assets held by, or deposits in or
for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its performance
under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loan or other credit accommodation, including, the Credit Extensions, Bank
shall notify Borrower thereof. Borrower agrees to pay to Bank the amount of such
increase in cost, reduction in income or additional expense as and when such
cost, reduction or expense is incurred or determined, upon presentation by Bank
of a statement of the amount and setting forth Bank's calculation thereof, all
in reasonable detail, which statement shall be deemed true and correct absent
manifest error.
2.7 TERM. Except as otherwise set forth herein, this Agreement shall become
effective on the Closing Date and, subject to Section 12.7, shall continue in
full force and effect for a term ending on the Maturity Date. Notwithstanding
the foregoing, Bank shall have the right to terminate its obligation to make
Credit Extensions under this Agreement immediately and without notice upon the
occurrence and during the continuance of an Event of Default. Notwithstanding
termination of this Agreement, Bank's lien on the Collateral shall remain in
effect for so long as any Obligations are outstanding. Further, Borrower shall
have the right to prepay the Obligations at any point in time without penalty.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The obligation of Bank
to make the initial Credit Extension is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to articles,
bylaws, incumbency and resolutions authorizing the execution and delivery of
this Agreement;
(c) negative pledge agreement in Bank's standard form;
(d) financing statements (Forms UCC-1);
(e) insurance certificate;
(f) payment of the fees and Bank Expenses then due specified in Section
2.5 hereof;
(g) certificate of foreign qualification regarding Borrower (if
applicable); and
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(h) such other documents, and completion of such other matters, as Bank
may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. The obligation of Bank to
make each Credit Extension, including the initial Credit Extension, is further
subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided in
Section 2.1; and
(b) the representations and warranties contained in Section 5 shall be
true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Credit Extension. The
making of each Credit Extension shall be deemed to be a representation and
warranty by Borrower on the date of such Credit Extension as to the accuracy of
the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt payment of any and all Obligations
and in order to secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents. Except as set forth in the Schedule, such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof. Borrower
acknowledges that Bank may place a "hold" on any deposit account pledged as
Collateral to secure the Obligations. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long as
any Obligations are outstanding.
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower shall from time
to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 RIGHT TO INSPECT. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and each Subsidiary is a
corporation duly existing and in good standing under the laws of its state of
incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified.
5.2 DUE AUTHORIZATION: NO CONFLICT. The execution, delivery, and performance
of the Loan Documents are within Borrower's powers, have been duly authorized,
and are not in conflict
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with nor constitute a breach of any provision contained in Borrower's
Certificate of Incorporation or Bylaws, nor will they constitute an event of
default under any material agreement to which Borrower is a party or by which
Borrower is bound. Borrower is not in default under any agreement to which it is
a party or by which it is bound, which default could have a Material Adverse
Effect.
5.3 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible title to the
Collateral, free and clear of Liens, except for Permitted Liens.
5.4 BONA FIDE ELIGIBLE ACCOUNTS; BONA FIDE AHP ORDERS. The Eligible Accounts
are bona fide existing obligations of the related account debtors. The service
or property giving rise to such Eligible Accounts has been performed or
delivered to the account debtor or to the account debtor's agent for immediate
shipment to and unconditional acceptance by the account debtor. Borrower has not
received notice of actual or imminent Insolvency Proceeding of any account
debtor whose accounts are included in any Borrowing Base Certificate as an
Eligible Account. The AHP Orders are bona fide existing obligations; the
underlying contracts relating thereto represent binding purchase orders from AHP
and Borrower has no knowledge of any dispute in connection therewith.
5.5 MERCHANTABLE INVENTORY. All Inventory is in all material respects of good
and marketable quality, free from all material defects.
5.6 INTELLECTUAL PROPERTY. Borrower is the sole owner of the Intellectual
Property, except for non-exclusive licenses granted by Borrower to its customers
in the ordinary course of business, Permitted Liens and licenses that the
Borrower has granted to AHP.
5.7 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE. Except as disclosed in the
Schedule, Borrower has not done business and will not without at least thirty
(30) days prior written notice to Bank do business under any name other than
that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
5.8 LITIGATION. Except as set forth in the Schedule, there are no actions or
proceedings pending, or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary before any court or administrative agency in which an
adverse decision could have a Material Adverse Effect, or a material adverse
effect on either Borrower's interest in its assets or Bank's security interest
in the Collateral.
5.9 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All consolidated
financial statements related to Borrower and any Subsidiary that have been
delivered by Borrower to Bank fairly present in all material respects Borrower's
consolidated financial condition as of the date thereof and Borrower's
consolidated results of operations for the period then ended. There has not been
a material adverse change in the consolidated financial condition of Borrower
since the date of the most recent of such financial statements submitted to Bank
on or about the Closing Date.
5.10 SOLVENCY. The fair saleable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities; the
Borrower is not left with unreasonably small capital after the transactions
contemplated by this Agreement; and Borrower is able to pay its debts (including
trade debts) as they mature.
5.11 REGULATORY COMPLIANCE. Borrower and each Subsidiary has met the minimum
funding requirements of ERISA with respect to any employee benefit plans subject
to ERISA. No event has occurred resulting from Borrower's failure to comply with
ERISA that is reasonably likely to result in Borrower's incurring any liability
that could have a Material Adverse Effect. Borrower is not an "investment
company" or a company "controlled" by an "investment company"
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within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.12 ENVIRONMENTAL CONDITION. None of Borrower's or any Subsidiary's
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure .pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the release, or other
disposition of hazardous waste or hazardous substances into the environment.
5.13 TAXES. Borrower and each Subsidiary has filed or caused to be filed all
tax returns required to be filed on a timely basis, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
5.14 SUBSIDIARIES. Borrower does not own any stock, partnership interest or
other equity securities of any Person, except for Permitted Investments.
5.15 GOVERNMENT CONSENTS. Borrower and each Subsidiary have obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted.
5.16 FULL DISCLOSURE. No representation, warranty or other statement made by
Borrower in any certificate or written statement furnished to Bank contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained in such certificates or statements not
misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all outstanding
Obligations, and for so long as Bank may have any commitment to make a Credit
Extension hereunder, Borrower shall do all of the following:
6.1 GOOD STANDING. Borrower shall maintain its and each Subsidiary's
corporate existence and good standing in its respective jurisdiction of
incorporation and establish and maintain qualification in each jurisdiction in
which the failure to so qualify could have a Material Adverse Effect. Borrower
shall maintain, and shall cause each Subsidiary to maintain in force, to the
extent consistent with prudent management of Borrower's business, all licenses,
approvals and agreements, the loss of which could have a Material Adverse
Effect.
6.2 GOVERNMENT COMPLIANCE. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans
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subject to ERISA. Borrower shall comply, and shall cause each Subsidiary to
comply, with all statutes, laws, ordinances and government rules and regulations
to which such Person is subject, the noncompliance with which could have a
Material Adverse Effect or a material adverse effect on the Collateral or the
priority of Bank's Lien on the Collateral.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall deliver to
Bank: (a) as soon as available, but in any event within 45 days after the end of
each month, a company prepared consolidated balance sheet and income statement
covering Borrower's consolidated operations during such period, in a form and
certified by an officer of Borrower reasonably acceptable to Bank; (b) as soon
as available, but in any event within 90 days after the end of Borrower's fiscal
year, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an unqualified opinion
on such financial statements of an independent certified public accounting firm
selected by Borrower and reasonably acceptable to Bank; (c) within 10 days of
filing, copies of all statements, reports and notices sent or made available
generally by Borrower to its security holders or to any holders of Subordinated
Debt and all reports on Form 10-K, 10-Q and 8-K filed with the Securities and
Exchange Commission; (d) promptly upon receipt of notice thereof, a report of
any legal actions pending or threatened against Borrower or any Subsidiary that,
in the Company's reasonable opinion, could result in damages or costs to
Borrower or any Subsidiary of One Hundred Thousand Dollars ($100,000) or more;
(e) [reserved]; and (f) such budgets, sales projections, operating plans or
other financial information as Bank may reasonably request from time to time,
including, without limitation, all forecasts and updates regarding or relating
to AHP within 10 days of receipt thereof by the Borrower.
Within 20 days after the last day of each MONTH, Borrower shall deliver to
Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of EXHIBIT C hereto, together with aged listings of
accounts receivable and accounts payable.
Within 45 days after the last day of each MONTH, Borrower shall deliver to
Bank with the MONTHLY financial statements a Compliance Certificate signed by a
Responsible Officer in substantially the form of EXHIBIT D hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts and AHP Orders at Borrower's expense, provided that such audits will be
conducted no more often than every six (6) months unless an Event of Default has
occurred and is continuing, with the understanding that the first of such audits
shall be conducted within 90 days of the date hereof.
6.4 INVENTORY; RETURNS. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries of inventory and of all
disputes and claims, where the return, recovery, dispute or claim involves more
than Fifty Thousand Dollars ($50,000).
6.5 TAXES. Borrower shall make, and shall cause each Subsidiary to make, due
and timely payment or deposit of all material federal, state, and local taxes,
assessments. or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower or Subsidiary has made such payments or deposits;
provided that Borrower or a Subsidiary need not make any
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payment it the amount or validity of such payment is (i) contested in good faith
by appropriate proceedings, (ii) is reserved against (to the extent required by
GAAP) by Borrower and (iii) no lien other than a Permitted Lien results
therefrom.
6.6 INSURANCE.
(a) Borrower, at its expense, shall keep the Collateral insured against
loss or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, as ordinarily insured against by other owners in similar businesses
conducted in the locations where Borrower's business is conducted on the date
hereof.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as are reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. At Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 PRINCIPAL DEPOSITORY. Borrower shall maintain its principal depository
and operating accounts with Bank.
6.8 QUICK RATIO. Borrower, on a consolidated basis, shall maintain, as of the
last day of each calendar month prior to the period ending March 31, 1999, a
ratio of Quick Assets to Current Liabilities of at least 0.80 to 1.0. With
respect to the month ending March 31, 1999 and as of the last day of each
calendar month thereafter, Borrower, on a consolidated basis, shall maintain a
ratio of Quick Assets to Current Liabilities of at least 1.00 to 1.0.
6.9 DEBT-NET WORTH RATIO. Borrower, on a consolidated basis, shall maintain,
as of the last day of each calendar month commencing with the period ending
December 31, 1998 and thereafter, a ratio of Total Liabilities to Tangible Net
Worth plus Subordinated Debt of not more than 1.00 to 1.0.
6.10 PROFITABILITY. Borrower, on a consolidated basis, shall not incur a net
loss in any fiscal quarter in excess of $1,000,000. Further, with respect to
each consecutive four fiscal quarter period commencing with such period ending
September 30, 1999 and for each such consecutive four fiscal quarter period
thereafter, Borrower, on a consolidated basis, shall attain net profitability.
6.11 MINIMUM CASH: DEBT SERVICE RATIO. Borrower, on a consolidated basis,
shall maintain, as of the last day of each calendar month, cash and cash
equivalents, as determined by the Bank, in the amount of $1,000,000, PROVIDED
that on and after the two consecutive quarters that the Borrower, on a
consolidated basis, demonstrates to Bank that it has maintained a Debt Service
Ratio of at least 1.50 to 1.0, Borrower, on a consolidated basis, shall
maintain, as of the last day of each quarter, such ratio of at least 1.50 to 1.0
and shall no longer be required to comply with the foregoing cash and cash
equivalents financial covenant.
6.12 FURTHER ASSURANCES. At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.
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7. NEGATIVE COVENANTS
Borrower covenants and agrees that until payment in full of the outstanding
Obligations, Borrower will not do any of the following:
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than Transfers: (i) of inventory
in the ordinary course of business, (ii) of nonexclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; (iii) that constitute payment of normal and usual
operating expenses in the ordinary course of business; (iv) of worn-out or
obsolete Equipment or (iv) Transfers denoted as "Permitted Transfers" under the
Negative Pledge Agreement dated of even date herewith by Borrower in favor of
Bank.
7.2 CHANGES IN BUSINESS, OWNERSHIP, OR MANAGEMENT BUSINESS LOCATIONS. Engage
in any business, or permit any of its Subsidiaries to engage in any business,
other than the businesses currently engaged in by Borrower and any business
substantially similar or related thereto (or incidental thereto), or suffer to
exist a Change of Control (as defined below). "Change of Control" shall mean any
of the following events: (i) the merger or consolidation of the Borrower where
parties other than the Borrower's current security holders own, following
consummation of such merger or consolidation, less than fifty percent (50%) of
the surviving entity's issued and outstanding shares of common stock, after
giving effect to the exercise, exchange or conversion of any outstanding
options, warrants, preferred stock or other securities exercisable, exchangeable
or convertible into shares of common stock or (ii) if any Person, other than the
Borrower or an employee benefit plan of the Borrower or any "Affiliate" or
"Associate" (each as defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended), shall, individually or together with Affiliates or Associates
of such Person, acquire or become the beneficial owner of, in the aggregate, in
excess of fifty percent (50%) of the issued and outstanding shares of common
stock of the Borrower following such acquisition after giving effect to the
exercise, exchange or conversion of any outstanding options, warrants, preferred
stock or other securities exercisable, exchangeable or convertible into shares
of common stock. Borrower will not, without at least thirty (30) days prior
written notification to Bank, relocate its chief executive office or add any new
offices or business locations.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person, provided
that the foregoing shall not restrict stock acquisitions in an aggregate amount
not to exceed $10,000,000 by the Borrower of other entities as long as no
default or Event of Default is in existence either before or after such
transaction, and no event or occurrence with which the passage of time or notice
would constitute an Event of Default has occurred either before or after such
transaction.
7.4 INDEBTEDNESS. Create, incur, assume or be or remain liable with respect
to any Indebtedness, or permit any Subsidiary so to do, other than Permitted
Indebtedness.
7.5 ENCUMBRANCES. Create, incur, assume or suffer to exist any Lien with
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 DISTRIBUTIONS. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock.
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7.7 INVESTMENTS; LOANS; GUARANTEES. Directly or indirectly acquire or own, or
make any Investment in or to any Person, or permit any of its Subsidiaries so to
do, other than Permitted Investments, or make any loans of any money or any
other assets to any Person, or guarantee or otherwise become liable with respect
to the obligations of any other Person.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or permit
to exist any material transaction with any Affiliate of Borrower except for
transactions that are in the ordinary course of Borrower's business, upon fair
and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a nonaffiliated Person.
7.9 [RESERVED].
7.10 SUBORDINATED DEBT. Make any payment in respect of any Subordinated Debt,
or permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt, or amend any provision contained in
any documentation relating to the Subordinated Debt without Bank's prior written
consent.
7.11 INVENTORY. Store the Inventory with a bailee, warehouseman, or similar
party unless Bank has received a pledge of any warehouse receipt covering such
Inventory. Except for Inventory sold in the ordinary course of business and
except for such other locations as Bank may approve in writing, Borrower shall
keep the Inventory only at the location set forth in Section 10 hereof and such
other locations of which Borrower gives Bank prior written notice and as to
which Borrower signs and files a financing statement where needed to perfect
Bank's security interest.
7.12 COMPLIANCE. Become an "investment company" or a company controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose; fail
to meet the minimum funding requirements of ERISA; permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral; or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of Default
by Borrower under this Agreement:
8.1 PAYMENT DEFAULT. If Borrower fails to pay, when due, any of the
Obligations.
8.2 COVENANT DEFAULT.
(a) If Borrower fails to perform any obligation under Sections 6.3, 6.6,
6.7, 6.8, 6.9, 6.10, 6.11 or 6.12, or violates any of the covenants contained in
Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep, or observe any other
material term, provision, condition, covenant, or agreement contained in this
Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Borrower be cured within such
ten (10) day period, and such default is likely
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to be cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure
to have cured such default shall not be deemed an Event of Default (provided
that no Advances will be required to be made during such cure period);
8.3 MATERIAL ADVERSE CHANGE. If there (i) occurs a material adverse change in
the business, operations, or condition (financial or otherwise) of the Borrower,
or (ii) is a material impairment of the prospect of repayment of any portion of
the Obligations or (iii) is a material impairment of the value or priority of
Bank's security interests in the Collateral;
8.4 ATTACHMENT. If any material portion of Borrower's assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any- trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within thirty (30) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within thirty (30)
days after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 INSOLVENCY. If Borrower becomes insolvent, or if an Insolvency Proceeding
is commenced by Borrower, or if an Insolvency Proceeding is commenced against
Borrower and is not dismissed or stayed within 30 days (provided that no
Advances will be made prior to the dismissal of such Insolvency Proceeding);
8.6 OTHER AGREEMENTS. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could have a Material Adverse Effect;
8.7 SUBORDINATED DEBT. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 JUDGMENTS. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least Two-Hundred Thousand
Dollars ($200,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgement); PROVIDED, HOWEVER, an Event of Default shall occur if a judgment
lien arises with respect to the Borrower in any amount (including regarding an
amount that is less that $200,000), which lien does not otherwise constitute a
Permitted Lien hereunder; or
8.9 MISREPRESENTATIONS. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate or writing delivered to Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document.
8.10 GUARANTY. Any guaranty of all or a portion of the Obligations ceases for
any reason (other than a release by Bank of such guaranty) to he in full force
and effect, or any Guarantor fails
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to perform any obligation under any guaranty of all or a portion of the
Obligations, or any material misrepresentation or material misstatement exists
now or hereafter in any warranty or representation set forth in any guaranty of
all or a portion of the Obligations or in any certificate delivered to Bank in
connection with such guaranty, or any of the circumstances described in Sections
8.4, 8.5 or 8.8 occur with respect to any Guarantor.
9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence and during the continuance of an
Event of Default, Bank may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by any
of the other Loan Documents, or otherwise, immediately due and payable (provided
that upon the occurrence of an Event of Default described in Section 8.5 all
Obligations shall become immediately due and payable without any action by
Bank);
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement or under any other agreement between Borrower and
Bank;
(c) Demand that Borrower (i) deposit cash with Bank in an amount equal to
the amount of any Letters of Credit remaining undrawn, as collateral security
for the repayment of any future drawings under such Letters of Credit, and
Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance
all Letters of Credit fees scheduled to be paid or payable over the remaining
term of the Letters of Credit;
(d) [Reserved]
(e) Settle or adjust disputes and claims directly with account debtors
for amounts, upon terms and in whatever order that Bank reasonably considers
advisable;
(f) Without notice to or demand upon Borrower, make such payments and do
such acts as Bank considers necessary or reasonable to protect its security
interest in the Collateral. Borrower agrees to assemble the Collateral if Bank
so requires, and to make the Collateral available to Bank as Bank may designate.
Borrower authorizes Bank to enter the premises where the Collateral is located,
to take and maintain possession of the Collateral, or any part of it, and to
pay, purchase, contest, or compromise any encumbrance, charge, or lien which in
Bank's determination appears to be prior or superior to its security interest
and to pay all expenses incurred in connection therewith. With respect to any of
Borrower's premises, Borrower hereby grants Bank a license to enter such
premises and to occupy the same, without charge in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower, set off and apply to the Obligations any
and all (i) balances and deposits of Borrower held by Bank, or (ii) indebtedness
at any time owing to or for the credit or the account of Borrower held by Bank;
(h) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale. advertise for sale, and sell (in the manner provided for herein) the
Collateral. Subject to the rights of any licensee now existing and hereafter
arising/permitted under the terms of this Agreement. now existing or hereafter
arising, Bank is hereby granted a non-exclusive, royalty-free license or other
right, solely pursuant to the provisions of this Section 9.1, to use, without
char e. Borrower's labels, patents, copyrights, mask works, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling
-21-
any Collateral and, in connection with Bank's exercise of its rights under this
Section 9. l, Borrower's rights under all licenses and all franchise agreements
shall inure to Bank's benefit;
(i) Sell the Collateral at either a public or private sale, or both, by
way of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including Borrower's premises) as Bank determines is
commercially reasonable, and apply the proceeds thereof to the Obligations in
whatever manner or order it deems appropriate;
(j) Bank may credit bid and purchase at any public sale, or at any
private sale as permitted by law; and
(k) Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower.
(l) Subject to the rights of any licensee permitted under the terms of
this Agreement, now existing or hereafter arising, Bank shall have a
non-exclusive, royalty-free license to use the Intellectual Property to the
extent reasonably necessary to permit Bank to exercise its rights and remedies
upon the occurrence of an Event of Default.
9.2 POWER OF ATTORNEY. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or ▇▇▇▇ of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable, provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
9.3 ACCOUNTS COLLECTION. Upon the occurrence and during the continuance of an
Event of Default, Bank may notify any Person owing funds to Borrower of Bank's
security interest in such funds and verify the amount of such Account. Borrower
shall collect all amounts owing to Borrower for Bank, receive in trust all
payments as Bank's trustee, and if requested or required by Bank, immediately
deliver such payments to Bank in their original form as received from the
account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof; (b) set up such reserves under the
Committed Revolving Line as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
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9.5 BANK'S LIABILITY FOR COLLATERAL. So long as Bank complies with reasonable
banking practices, Bank shall not in any way or manner be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto
occurring or arising in any manner or fashion from any cause; (c) any diminution
in the value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other person whomsoever. All risk of loss, damage
or destruction of the Collateral shall be borne by Borrower.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this Agreement, the
Loan Documents, and all other agreements shall be cumulative. Bank shall have
all other rights and remedies not expressly set forth herein as provided under
the Code, by law, or in equity. No exercise by Bank of one right or remedy shall
be deemed an election, and no waiver by Bank of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.
9.7 DEMAND: PROTEST. Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: PharmaPrint Inc.
▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
FAX: ▇▇▇-▇▇▇-▇▇▇▇
If to Bank: Silicon Valley Bank
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇
FAX: ▇▇▇-▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.
11. CHOICE OF LAW AND VENUE; JURY WAIVER
The Loan Documents shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Orange,
State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR
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CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF
THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; PROVIDED, HOWEVER, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 INDEMNIFICATION. Borrower shall, indemnify, defend, protect and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE. Time is of the essence for the performance of all
obligations set forth in this Agreement.
12.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.5 AMENDMENTS IN WRITING. INTEGRATION. This Agreement cannot be amended or
terminated except by a writing signed by Borrower and Bank. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement,
if any, are merged into this Agreement and the Loan Documents.
12.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 SURVIVAL. All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding. The obligations of Borrower to indemnify Bank with respect
to the expenses, damages, losses, costs and liabilities described in Section
12.2 shall survive until all applicable statute of limitations periods with
respect to actions that may be brought against Bank have run.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
PHARMAPRINT INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. Trad
----------------------
Title: Senior Vice President
----------------------
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Title: Senior Vice President
-----------------------
SILICON VALLEY BANK
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------
Title: VP
----------------------
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