LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of May 5, 1998, by
and between Orthologic Corp. ("Borrower") whose address is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and Silicon Valley Bank ("Bank") whose chief executive
office is located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, with a loan
production office located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇, ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, a Loan and Security Agreement, dated March 2, 1998, as may be amended
from time to time, (the "Loan Agreement"). The Loan Agreement provided for,
among other things, a Committed Equipment Line in the original principal amount
of Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000) and a
Committed Revolving Line in the original principal amount of Ten Million and
00/100 Dollars ($10,000,000). Defined terms used but not otherwise defined
herein shall have the same meanings as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement. In addition,
Borrower has agreed not to sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber any of Borrower's Intellectual
Property pursuant to that certain Negative Pledge Agreement, dated March 2,
1998.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement
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1. Section 2.3 (a) entitled "Interest Rate" is hereby
amended in its entirety to read as follows:
(a) Interest Rate. (i) Advances accrue
interest on the outstanding principal balance at a
per annum rate of .650 of a percentage point above
the Prime Rate; and (ii) Equipment Advances accrue
interest on the outstanding principal balance at a
per annum rate of .450 of a percentage point above
the Prime Rate. Upon Borrower achieving 2 consecutive
quarters of profitability, the interest rate on the
Committed Revolving Line and the Committed Equipment
Line will reduce by .10% and will further reduce by
.10% upon Borrower achieving 4 consecutive quarters
of profitability. In addition, upon improvement of
Borrower's balance sheet sufficient to meet the
Original Covenants (as amended herein), the interest
rate for the Advances under the Committed Revolving
Line will decrease to the original interest rate of
.200 of a percentage point above the Prime Rate. Such
interest rate change shall be effective as of the
first day of the month following Bank's receipt of
Borrower's financial statements indicating Borrower
has met the above-described criteria. After an Event
of Default, Obligations accrue interest at 5.00
percentage points above the rate effective
immediately before the Event of Default. The interest
rate increases or decreases when the Prime Rate
changes. Interest is computed on a 360 day year for
the actual number of days elapsed.
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2. Sub-sections ( c) and (d) of Section 6.2 entitled
"Financial Statements, Reports, Certificates" are
hereby amended in their entirety to read as follows
(c) Within 30 days after the last day of each month,
Borrower will deliver to Bank with the monthly
financial statements; cash flow reports covering the
three previous months and the three future months;
and a Compliance Certificate signed by a Responsible
Officer in the form of Exhibit D.
(d) Bank has the right to audit Borrower's Accounts
at Borrower's expense, but the audits will be
conducted on a semi-annual basis unless an Event of
Default has occurred and is continuing.
3. Section 6.7 entitled "Financial Covenants" is hereby
amended in its entirety to read as follows:
Borrower will maintain as of the last day of each
month:
(i) Quick Ratio. A ratio of Quick Assets to Current
Liabilities of at least 1.50 to 1.00. (Original
Covenant is 2.00 to 1.00).
(ii) Debt/Tangible Net Worth Ratio. A ratio of Total
Liabilities less Subordinated Debt to Tangible Net
Worth plus Subordinated Debt of not more than 0.50 to
1.00. (Original Covenant is 0.50 to 1.00).
(iii) Tangible Net Worth. A Tangible Net Worth of at
least $41,000,000, excluding any scheduled expense
incurred or accounting treatment for option payments
to Chrysalis. (Original Covenant is $50,000,000).
(iv) Profitability. Borrower will not suffer
aggregate losses in excess of $3,000,000 for any two
(2) consecutive quarters, beginning with the quarter
ending June 30, 1998. (Original Covenant is Borrower
will be profitable each quarter, except that Borrower
may suffer losses, provided such losses do not exceed
$5,000,000 in aggregate for the quarters ending March
31, 1998 and June 30, 1998 excluding any scheduled
expense incurred or accounting treatment for option
payments to Chrysalis).
4. The following defined terms are hereby amended and or
added to Section 13 entitled "Definitions" to read as
follows:
"Borrowing Base" is 50% of Eligible Accounts as
determined by Bank from Borrower's most recent
Borrowing Base Certificate.
"Committed Revolving Line" is an Advance of up to
$7,500,000.
"Copyrights" are all copyright rights, applications
or registrations and like protections in each work or
authorship or derivative work, whether published or
not (whether or not it is a trade secret) now or
later existing, created, acquired or held.
Sub-sections (a), (b) and (c ) of the defined term
"Eligible Accounts" are hereby amended in part to
remove the number 120 reference therein and replace
it with the number 90.
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"Equipment Advance" is defined in Section 2.1.2,
however, effective as of the hereof, all Equipment
Advances available under Section 2.1.2 are hereby
suspended. Accordingly, Borrower is no longer
entitled to further Equipment Advances until it
receives approval from Bank, in its sole discretion.
"Intellectual Property" is:
(a) Copyrights, Trademarks, Patents, and Mask Works
including amendments, renewals, extensions, and all
licenses or other rights to use and all license fees
and royalties from the use;
(b) Any trade secrets and any Intellectual Property
Rights in computer software and computer software
products now or later existing, created, acquired or
held;
(c) All design rights which may be available to
Borrower now or later created, acquired or held;
(d) Any claims for damages (past, present or future)
for infringement of any of the rights above, with the
right, but not the obligation, to ▇▇▇ and collect
damages for use or infringement of the intellectual
property rights above;
All proceeds and products of the foregoing, including
all insurance, indemnity or warranty payments.
"Mask Works" are all mask works or similar rights
available for the protection of semiconductor chips,
now owned or later acquired.
"Patents" are patents, patent applications and like
protections, including improvements, divisions,
continuations, renewals, reissues, extensions and
continuations-in-part of the same.
"Trademarks" are trademark and service ▇▇▇▇ rights,
registered or not, applications to register and
registrations and like protections, and the entire
goodwill of the business of Assignor connected with
the trademarks.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay to Bank a fee in the amount of
One Thousand and 00/100 Dollars ($1,000) (the "Loan Fee") plus all out-of-pocket
expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
signing below) agrees that, as of the date hereof, it has no defenses against
the obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Indebtedness, Bank
is relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to modifications
to the existing Indebtedness pursuant to this Loan Modification Agreement in no
way shall obligate Bank to make any future modifications to the Indebtedness.
Nothing in this Loan Modification Agreement shall constitute a satisfaction of
the Indebtedness. It is the intention of Bank and Borrower to retain as liable
parties all makers and endorsers of Existing Loan Documents, unless the party is
expressly released by
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Bank in writing. No maker, endorser, or guarantor will be released by virtue of
this Loan Modification Agreement. The terms of this paragraph apply not only to
this Loan Modification Agreement, but also to all subsequent loan modification
agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon (1) Borrower's payment of the Loan Fee, (2) and Bank's receipt
of the Amendment to Warrant Agreement executed by Borrower.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: BANK:
ORTHOLOGIC CORP. SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇ ▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇ ▇▇▇ ▇▇▇▇▇
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Title: Sr. V.P. and CFO Title: Asst. to V.P.
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