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Exhibit 10.1
SEQUUS PHARMACEUTICALS, INC.
LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Revolving Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Interest Rate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Interest Rates, Payments, and Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Crediting Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3. CONDITIONS OF LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Conditions Precedent to Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Conditions Precedent to all Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Delivery of Additional Documentation Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3 Right to Inspect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Due Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Due Authorization; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 No Prior Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4 Bona Fide Eligible Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Merchantable Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6 Name; Location of Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.8 No Material Adverse Change in Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.9 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.10 Regulatory Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.11 Environmental Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.13 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.14 Government Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.15 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Government Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 Financial Statements, Reports, Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.4 Inventory; Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.7 Principal Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.8 Quick Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.9 Debt-Net Worth Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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6.10 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.11 Minimum Liquidity/Debt Service Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.12 Monthly Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.13 Intellectual Property Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.14 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.1 Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.2 Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 Mergers or Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.4 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.5 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.6 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.7 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.8 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.9 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.10 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.11 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.1 Payment Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.2 Covenant Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.3 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.4 Attachment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.5 Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.6 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.7 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.8 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.9 FDA Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.10 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.11 Misrepresentations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9. BANK'S RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.1 Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.2 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.3 Accounts Collection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.4 Bank Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.5 Bank's Liability for Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.6 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.7 Demand; Protest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.3 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.4 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.5 Amendments in Writing, Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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This LOAN AND SECURITY AGREEMENT is entered into as of June 26, 1997,
by and between SILICON VALLEY BANK ("Bank") and SEQUUS PHARMACEUTICALS INC.
("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the
following terms shall have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.
"Account Audit" means an audit of the Collateral,
Borrower's Accounts and/or Borrower's Books prepared by Bank in accordance with
generally accepted business and accounting practices in form and substance
acceptable to Bank.
"Advance" or "Advances" means a Term Advance or a
Revolving Advance.
"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, and partners.
"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), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and
records including: ledgers; records concerning Borrower's assets or
liabilities, the Collateral, business operations or financial condition; and
all computer programs, or tape files, and the equipment, containing such
information.
"Borrowing Base" has the meaning set forth in Section
2.1 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.
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"Collateral" means the property described on Exhibit
A attached hereto.
"Committed Line" means Five Million Dollars
($5,000,000).
"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.
"Current Liabilities" means, as of any applicable
date, all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
as at such date, plus, to the extent not already included therein, all
outstanding Advances 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.
"Daily Balance" means the amount of the Obligations
owed at the end of a given day.
"Debt Service Coverage" means, as measured quarterly
as of the last day of each fiscal quarter of Borrower (unless measured monthly
in accordance with Section 6.12 herein), on a consolidated income basis
determined in accordance with GAAP, the ratio of (a) an amount equal to the sum
of (i) net income, plus (ii) depreciation, amortization of intangible assets
and other non-cash charges to income to (b) an amount equal to the sum of all
scheduled repayments for such quarter (or month, as applicable) and mandatory
prepayment of principal on account of long-term debt.
"Eligible Accounts" means those Accounts that arise
in the ordinary course of Borrower's business that comply with all of
Borrower's representations and warranties to Bank set forth in Section 5.4;
provided, that standards of eligibility may be fixed and revised from time to
time by Bank in Bank's reasonable judgment and upon thirty (30) days prior
written notification thereof to Borrower in accordance with the provisions
hereof. Unless otherwise agreed to by Bank, Eligible Accounts shall not
include the following:
(a) Accounts that the account debtor has failed
to pay within ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor,
fifty percent (50%) of whose Accounts the account debtor has failed to pay
within ninety (90) days of invoice date;
(c) Accounts with respect to which the account
debtor is an officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are
placed on consignment, guaranteed sale, sale or return, sale on approval, xxxx
and hold, or other terms by reason of which the payment by the account
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debtor may be conditional;
(e) Accounts with respect to which the account
debtor is an Affiliate of Borrower;
(f) Accounts with respect to which the account
debtor does not have its principal place of business in the United States,
except for Eligible Foreign Accounts;
(g) Accounts with respect to which the account
debtor is the United States or any department, agency, or instrumentality of
the United States;
(h) Accounts with respect to which Borrower is
liable to the account debtor for goods sold or services rendered by the account
debtor to Borrower, but only to the extent of any amounts owing to the account
debtor against amounts owed to Borrower;
(i) Accounts with respect to an account debtor,
including Subsidiaries and Affiliates, whose total obligations to Borrower
exceed twenty-five percent (25%) of all Accounts, to the extent such
obligations exceed the aforementioned percentage, except that the concentration
limit shall be thirty-five percent (35%) for Accounts owing by McKesson,
Cardinal Health and Xxxxxx-Xxxxxxxx, and except as approved in writing by Bank;
(j) 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;
(k) 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 or Canada 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 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 and that are listed on
Schedule 1 attached hereto, as may be amended from time to time.
"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 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.
"Inventory" means all present and future inventory in
which Borrower has any interest,
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including merchandise, raw materials, parts, supplies, packing and shipping
materials, work in process and finished products intended for sale or lease or
to be furnished under a contract of service, of every kind and description now
or at any time hereafter owned by or in the custody or possession, actual or
constructive, of Borrower, including such inventory as is temporarily out of
its custody or possession or in transit and including any returns upon any
accounts or other proceeds, including insurance proceeds, resulting from the
sale or disposition of any of the foregoing and any documents of title
representing any of the above, and Borrower's Books relating to any of the
foregoing.
"Investment" means any beneficial ownership of
(including stock, partnership interest or other securities) any Person, or any
loan, advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust,
charge, pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement,
any note or notes executed by Borrower, and any other agreement entered into
between Borrower and Bank in connection with this Agreement, all as amended or
extended from time to time.
"Material Adverse Effect" means a material adverse
effect on (i) the business operations or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents.
"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, and
Borrower's Books relating to any of the foregoing.
"Net Cash Losses" means, with respect to any period
of determination, determined on a consolidated basis in accordance with GAAP
for such period for Borrower and its consolidated Subsidiaries, the sum of (i)
net income (loss), plus (ii) non-cash expenses, depreciation and amortization,
minus (iii) increases in gross fixed assets, plus (iv) increases (decreases) in
long term debt or capital leases excluding changes in deferred revenue.
"Obligations" means all debt, principal, interest,
Bank Expenses and other amounts owed to Bank by Borrower pursuant to this
Agreement or any other agreement, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay
to Bank pursuant to the terms and provisions of any instrument, or agreement
now or hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank
arising under this Agreement or any other Loan Document;
(b) Indebtedness secured by a Lien described in
Subsection (c) of the definition of "Permitted Liens" below provided the
principal amount of such Indebtedness does not exceed the lesser of the cost or
fair market value of the Equipment financed;
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(c) Subordinated Debt; and
(d) Indebtedness to trade creditors incurred in
the ordinary course of business.
"Permitted Investment" means: (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 Xxxxx'x
Investors Service, Inc., and (iii) certificates of deposit maturing no more
than one (1) year from the date of investment therein issued by Bank; and, (iv)
any Investments permitted by Borrower's investment policy, as amended from time
to time, provided that such investment policy (and such amendment thereto) has
been approved by Bank, which approval shall not be unreasonably withheld;
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and
disclosed in Schedule 2 or arising under the terms of this Agreement;
(a) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in
good faith by appropriate proceedings, provided the same have no priority over
any of Bank's security interests;
(b) Liens (i) upon or in any equipment acquired
or held by Borrower or any of its Subsidiaries to secure the purchase price of
such equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time
of its acquisition, provided that the Lien is confined solely to the property
so acquired and improvements thereon, and the proceeds of such equipment;
(c) Liens on Equipment leased by Borrower or any
Subsidiary pursuant to an operating or capital lease in the ordinary course of
business (including proceeds thereof and accessions thereto) incurred solely
for the purpose of financing the lease of such Equipment (including Liens
pursuant to leases permitted pursuant to Section 7.1 and Liens arising from UCC
financing statements regarding leases permitted by this Agreement);
(d) Leases or subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower's business not
interfering in any material respect with the business of Borrower and its
Subsidiaries taken as a whole, and any interest or title of a lessor, licensor
or under any lease or license;
(e) Liens on assets (including the proceeds
thereof and accessions thereto) that existed at the time such assets were
acquired by Borrower or any Subsidiary (including Liens on assets of any
corporation that existed at the time it became or becomes a Subsidiary);
provided such Liens are not granted in contemplation of or in connection with
the acquisition of such asset by Borrower or a Subsidiary;
(f) Liens arising from judgments, decrees or
attachments in circumstances not constituting an Event of Default under Section
8.8;
(g) Easements, reservations, rights-of-way,
restrictions, minor defects or irregularities in title and other similar
charges or encumbrances affecting real property not constituting a Material
Adverse Effect;
(h) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payments of customs duties in
connection with the importation of goods;
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(i) Liens that are not prior to the Lien of Bank
which constitute rights of set-off of a customary nature or banker's Liens with
respect to amounts on deposit, whether arising by operation of law or by
contract, in connection with arrangement entered in to with banks in the
ordinary course of business;
(j) Earn-out and royalty obligations existing on
the date hereof or entered into in connection with an acquisition permitted by
Section 7.3;
"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, at any date as of which the
amount thereof shall be determined, the sum of : (i) unrestricted cash, (ii)
cash-equivalents, (iii) net, billed accounts receivable, and (iv) investments
with maturities not to exceed twelve (12) months, of Borrower determined in
accordance with GAAP.
"Remaining Months Liquidity" means, at any time of
determination, the ratio of (i) Unrestricted Cash Reserves at such time to (ii)
the average of Net Cash Losses for the immediately preceding three month
period.
"Responsible Officer" means each of the Chief
Executive Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Advances" means cash advances made
pursuant to Section 2.1.
"Revolving Facility" means the facility under which
Borrower may request Bank to issue cash advances, as specified in Section 2.1
hereof.
"Revolving Maturity Date" means the date immediately
preceding the first anniversary of the date of this Agreement.
"Schedule" means the schedule of exceptions attached
hereto, if any.
"Subordinated Debt" means any debt incurred by
Borrower that is subordinated to the debt owing by Borrower to Bank on terms
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in
which (i) any general partnership interest or (ii) more than 50% of the stock
of which by the terms thereof ordinary voting power to elect the Board of
Directors, managers or trustees of the entity shall, at the time as of which
any determination is being made, be owned by Borrower, either directly or
through an Affiliate.
"Tangible Net Worth" means at any date as of which
the amount thereof shall be determined, the consolidated total assets of
Borrower and its Subsidiaries minus, without duplication, (i) the sum of any
amounts attributable to (a) goodwill, (b) intangible items such as unamortized
debt discount and expense, patents, trade and service marks and names,
copyrights and research and development expenses except prepaid expenses, and
(c) all reserves not already deducted from assets, and (ii) Total Liabilities.
"Term Advances" means cash advances made pursuant to
Section 2.1.1.
"Term Loan Facility" means the facility under which
Borrower may request Bank to
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issue cash advances, as specified in Section 2.1.1 hereof.
"Term Maturity Date" means December 26, 2001.
"Total Liabilities" means at 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 consolidated balance sheet of
Borrower, including in any event all Indebtedness, but specifically excluding
Subordinated Debt.
"Unrestricted Cash Reserves" means, at any time of
determination, the sum of Borrower's (i) cash balance of deposit accounts and
investment accounts, plus (ii) market value of all readily marketable
securities beneficially owned by Borrower, minus (iii) cash value of any
certificates of deposit or securities encumbered and/or restricted by any Bank
or any other Persons.
1.2 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and all
calculations made hereunder shall be made in accordance with GAAP. When used
herein, the terms "financial statements" shall include the notes and schedules
thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 Revolving Facility.
(a) Advances. Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Advances to Borrower in an
aggregate amount not to exceed the lesser of the Committed Line minus the Cash
Management Sublimit or the Borrowing Base, minus in each case the face amount
of all outstanding Letters of Credit (including drawn but unreimbursed Letters
of Credit). For purposes of this Agreement, "Borrowing Base" shall mean an
amount equal to seventy-five percent (75%) of Eligible Accounts. 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 prior to the Revolving
Maturity Date.
(b) Procedures. Whenever Borrower desires an
Advance, Borrower will notify Bank by facsimile transmission or telephone no
later than 3:00 p.m. California 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 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, and
Borrower shall indemnify and hold Bank harmless for any damages or loss
suffered by Bank as a result of such reliance. Bank will credit the amount of
Advances made under this Section 2.1 to Borrower's deposit account.
(c) Revolving Maturity Date. The Revolving Facility
shall terminate on the Revolving Maturity Date, at which time all Advances
under this Section 2.1 shall be immediately due and payable.
2.1.1 Term Loan.
(a) Subject to and upon the terms and conditions
of this Agreement, Bank will make Term Advances from time to time to Borrower
in an aggregate amount not to exceed Five Million Dollars ($5,000,000). The
Term Loan Facility will be used to provide temporary working capital to
Borrower.
(b) Interest shall accrue on each Term Advance
from the date of such advance at the rate specified in Section 2.3(a), and
shall be payable monthly on the twenty-sixth day of each month through June 26,
1998. The aggregate Term Advances outstanding on June 30, 1998 shall be repaid
as follows: $100,000 per month beginning July 26, 1998 and continuing on the
twenty-sixth day of each month through June 26, 1999. Each such monthly
payment shall be applied first against accrued interest, then principal; the
principal balance
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outstanding on June 26, 1999 shall be payable in thirty (30) equal monthly
installments of principal, plus accrued interest, beginning July 26, 1999, and
continuing through the Term Maturity Date. All outstanding obligations under
this Agreement, including, but not limited to, any accrued and unpaid interest
and other unpaid charges or principal balances, shall be payable on the Term
Maturity Date.
(c) When Borrower desires a Term Advance,
Borrower will notify Bank by facsimile transmission or telephone no later than
3:00 p.m. California time, on the Business Day that the Term Advance is to be
made. Such notification shall be promptly confirmed by a Payment/Advance Form
in substantially the form of Exhibit B hereto. Bank shall be entitled to rely
on any telephonic notice given by a person who Bank reasonably believes to be a
Responsible Officer, 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 each Term Advance to Borrower's deposit account.
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
("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 face amount of outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve) shall not in any case exceed Five Hundred Thousand Dollars
($500,000). Each Letter of Credit shall have an expiry date no later than one
hundred eighty (180) days after the Revolving Maturity Date, provided that
Borrower's Letter of Credit reimbursement obligation shall be secured by cash
on terms acceptable to Bank at any time after the Revolving Maturity Date if
the term of this Agreement is not extended by Bank. 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.
(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 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 Cash Management Sublimit. Subject
to the terms and conditions of this Agreement, Borrower may utilize up to an
aggregate amount not to exceed Five Hundred Thousand Dollars ($500,000) (the
"Cash Management Sublimit") for cash management services provided by Bank,
which services may include merchant services, PC-ACH, direct deposit of
payroll, business credit card, Firstax, and other related check cashing
services as defined in that certain Cash Management Services Agreement provided
to Borrower in connection herewith (a "Cash Management Service," or the "Cash
Management Services"). Any amounts actually
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paid by Bank in respect of a Cash Management Service or Cash Management
Services shall, when paid, constitute an Advance under the Revolving Facility.
2.2 Interest Rate Protection. Subject to the terms and
condition of this Agreement, Borrower may prepay the Term Advances, in whole or
in part, only upon payment in full of (i) all accrued but unpaid interest and
all outstanding obligations hereunder (or, if partial prepayment, an applicable
or proportionate amount of such obligations), and (ii), if Borrower has elected
the fixed rate option set forth in Section 2.3(a), a fee as shall be determined
by Bank in its reasonable discretion to provide for interest rate protection in
the event the then current Treasury Note rate is lower than the fixed interest
rate set forth in Section 2.3(a).
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in
Section 2.3(b), the Revolving Advances shall bear interest, on the average
daily balance thereof, at a rate equal to one half of one percentage point
(0.5%) above the Prime Rate. Except as set forth in Section 2.3(b), prior to
June 30, 1998 the Term Advances shall bear interest, on the average daily
balance thereof, at a rate equal to one (1.0) percentage point above the Prime
Rate. Term Advances outstanding on June 30, 1998 shall bear interest, at
Borrower's option, either (i) at a floating rate equal to the Prime Rate plus
one percent (1.0%) or (ii) at a fixed rate equal to three and one-half
percentage (3.50%) points above the yield of the 42 month Treasury Note as
reported in the Western edition of The Wall Street Journal, which rate shall be
fixed at the time of Borrower's election. Borrower shall give written notice
to Bank of its interest rate election two (2) Business Days prior to June 30,
1998. If Borrower fails to give such notice, then the applicable rate shall be
based on the 42 month Treasury Note fixed rate described herein.
(b) Default Rate. All Obligations shall bear
interest, from and after the occurrence of an Event of Default, at a rate equal
to five (5) percentage points above the interest rate applicable immediately
prior to the occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due
and payable on the twenty-sixth (26th) calendar day of each month during the
term hereof. Bank shall, at its option, charge such interest, all Bank
Expenses, and all Periodic Payments against any of Borrower's deposit accounts
or against the Committed Line, in which case those amounts shall thereafter
accrue interest at the rate then applicable hereunder. Any interest not paid
when due shall be compounded by becoming a part of the Obligations, and such
interest shall thereafter accrue interest at the rate then applicable
hereunder.
(d) Computation. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
shall be increased or decreased effective as of 12:01 a.m. on the day the Prime
Rate is changed, by an amount equal to such change in the Prime Rate. All
interest chargeable under the Loan Documents shall be computed on the basis of
a three hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an
Event of Default, Bank shall credit a wire transfer of funds, check or other
item of payment to such deposit account or Obligation as Borrower specifies.
After the occurrence of an Event of Default, the receipt by Bank of any wire
transfer of funds, check, or other item of payment shall be immediately applied
to conditionally reduce Obligations, but shall not be considered a payment on
account 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 California 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:
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(a) Facility Fee. A Facility Fee equal to Sixty
Two Thousand Five Thousand Dollars ($62,500), which fee shall be due on the
Closing Date and shall be fully earned and nonrefundable;
(b) 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;
(c) Bank Expenses. Upon the date hereof, all
Bank Expenses incurred through the Closing Date, 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.
2.6 Additional Costs. In case any change in any law,
regulation, treaty or official directive or the interpretation or application
thereof by any court or any governmental authority charged with the
administration thereof or the compliance with any guideline or request of any
central bank or other governmental authority (whether or not having the force
of law), in each case after the date of this Agreement:
(a) subjects Bank to any tax with respect to
payments of principal or interest or any other amounts payable hereunder by
Borrower or otherwise with respect to the transactions contemplated hereby
(except for taxes on the overall net income of Bank imposed by the United
States of America or any political subdivision thereof);
(b) imposes, modifies or deems applicable any
deposit insurance, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with
respect to its performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, 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; provided, however, that Borrower shall
not be liable for any such amount attributable to any period prior to the date
of hundred eight (180) days prior to the date of such certificate.
Notwithstanding the foregoing, if Borrower repays all outstanding Advances
within forty-five (45) days of the date of such certificate, no amount shall be
assessed by virtue of this Section 2.6.
2.7 Term. 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 Term Maturity Date. Notwithstanding the
foregoing, Bank shall have the right to terminate its obligation to make
Advances under this Agreement immediately and without notice upon the
occurrence and during the continuance of an Event of Default. Notwithstanding
termination, Bank's Lien on the Collateral shall remain in effect for so long
as any Obligations are outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Advance. The
obligation of Bank to make the initial Advance is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:
(a) this Agreement;
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(b) a certificate of the Secretary of Borrower
with respect to incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(c) a negative pledge agreement in substantially
the same form as Exhibit E hereto;
(d) an Account Audit (condition to Revolving
Advance);
(e) financing statement (Form UCC-1);
(f) insurance certificate;
(g) payment of the fees and Bank Expenses then
due specified in Section 2.5 hereof; and
(h) such other documents, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation
of Bank to make each Advance, including the initial Advance, is further subject
to the following conditions:
(a) timely receipt by Bank of the 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 Advance
as though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Advance. The making of
each Advance shall be deemed to be a representation and warranty by Borrower on
the date of such Advance as to the accuracy of the facts referred to in this
Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants and
pledges to Bank a continuing security interest in all presently existing and
hereafter acquired or arising Collateral in order to secure prompt repayment 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 and Permitted Liens, 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.
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.
4.4 Requirement for Cash Collateral. If at any time
Borrower does not comply with Section 6.11, then Borrower shall pledge cash or
a certificate of deposit to the Bank on terms reasonably acceptable to Bank in
an amount equal to one hundred percent (100%) of the outstanding Obligations.
Bank shall release such
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pledge upon Borrower's compliance with Section 6.11.
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 with nor constitute a breach
of any provision contained in Borrower's Articles 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. The Eligible Accounts
are bona fide existing obligations. The property giving rise to such Eligible
Accounts has been 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 that is included in any Borrowing Base
Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all
material respects of good and marketable quality, free from all material
defects.
5.6 Name; Location of Chief Executive Office. Except as
disclosed in the Schedule, Borrower has not done 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.
5.7 Litigation. Except as set forth in the Schedule,
there are no actions or proceedings pending 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
Borrower's interest or Bank's security interest in the Collateral. Borrower
does not have knowledge of any such pending or threatened actions or
proceedings.
5.8 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.
5.9 Solvency. The fair saleable value of Borrower's
assets (including goodwill minus disposition costs) exceeds the fair value of
its liabilities; Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement; and Borrower is solvent and able
to pay its debts (including trade debts) as they mature.
5.10 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
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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" within the meaning of the Investment
Company Act of 1940. Borrower is not engaged principally, or as one of the
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.
5.11 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 releasing, or otherwise disposing of hazardous
waste or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or
caused to be filed all tax returns required to be filed, and has paid, or has
made adequate provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Borrower does not own any stock,
partnership interest or other equity securities of any Person, except for
Permitted Investments.
5.14 Government Consents. Borrower and each Subsidiary
has 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.
5.15 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 an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each
of its Subsidiaries' corporate existence and good standing in its jurisdiction
of incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which 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 subject to ERISA. Borrower shall
comply, and shall cause each Subsidiary to comply, with all statutes, laws,
ordinances and government rules and regulations to which it is subject,
noncompliance with which could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral.
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6.3 Financial Statements, Reports, Certificates.
Borrower shall deliver to Bank: (a) as soon as available, but in any event
within thirty (30) days after the end of each month in which the Liquidity of
Borrower is less than (i) Fifteen Million Dollars ($15,000,000) or (ii) nine
(9) months Remaining Months Liquidity, a company prepared consolidated balance
sheet and income statement covering Borrower's consolidated operations during
such period, certified by a Responsible Officer; (b) as soon as available, but
in any event within ninety (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
reasonably acceptable to Bank, provided that any "Big Six" accounting firm
shall be deemed acceptable to Bank; (c) within five (5) days upon becoming
available, 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 and 10-Q 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
could result in damages or costs to Borrower or any Subsidiary of One Hundred
Thousand Dollars ($100,000) or more; (e) within thirty 30 days after the end of
every alternating fiscal quarter, an Account Audit; and, (f) such budgets,
sales projections, operating plans or other financial information as Bank may
reasonably request from time to time.
Within fifteen (15) 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.
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the
form of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than every six (6) months unless an Event of Default
has occurred and is continuing.
6.4 Inventory; Returns. Borrower shall keep all
Inventory in good and marketable condition, free from all material defects.
Returns and allowances, if any, as between Borrower and its account debtors
shall be on the same basis and in accordance with the usual customary practices
of Borrower, as they exist at the time of the execution and delivery of this
Agreement. Borrower shall promptly notify Bank of all returns and recoveries
and of all disputes and claims, where 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 a Subsidiary
has made such payments or deposits; provided that Borrower or a Subsidiary need
not make any payment if the amount or validity of such payment is contested in
good faith by appropriate proceedings and is reserved against (to the extent
required by GAAP) by Borrower.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion,
sprinklers, and all other hazards and risks, and in such amounts, as ordinarily
insured against by other owners in similar businesses conducted in the
locations where Borrower's business is conducted on the date hereof. Borrower
shall also maintain insurance relating to Borrower's ownership and use of the
Collateral in amounts and of a type that are customary to businesses similar to
Borrower's.
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(b) All such policies of insurance shall be in
such form, with such companies, and in such amounts as 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. Upon 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 shall maintain, as of the last
day of each fiscal quarter, a ratio of Quick Assets to Current Liabilities of
at least 1.25 to 1.00, and at least 1.50 to 1.00 from and after the date that
Borrower receives at least Ten Million Dollars ($10,000,000) of the proceeds
from the sale or issuance of its equity assurities.
6.9 Debt-Net Worth Ratio. Borrower shall maintain, as of
the last day of each fiscal quarter, a ratio of Total Liabilities, excluding
deferred revenues, less Subordinated Debt to Tangible Net Worth plus
Subordinated Debt of not more than 1.00 to 1.00.
6.10 Tangible Net Worth. Borrower shall maintain, as of
the last day of each fiscal quarter, a Tangible Net Worth of not less than
Fifteen Million Dollars ($15,000,000) plus seventy-five percent (75%) of the
proceeds from the sale or issuance of Borrower's equity securities.
6.11 Minimum Liquidity/Debt Service Coverage. Borrower
shall maintain, as of the last day of each of Borrower's fiscal quarters, a
minimum Liquidity of (a) two (2) times the amount of outstanding Term Advances
and (b) six times (6x) the Average Monthly Cash Burn for the immediately
preceding three (3) month period. "Liquidity" means unrestricted cash, cash
equivalents and short term investments plus net availability under the
Revolving Facility. "Average Monthly Cash Burn" means the net change in
Borrower's cash per month, calculated on a three (3) month rolling average
basis, net of changes in debt and equity. Notwithstanding the foregoing, from
and after the time Borrower achieves a Debt Service Coverage Ratio of at least
1.50 to 1.00, Borrower shall not be subject to the minimum required liquidity
set forth above and, instead, Borrower shall maintain a Debt Service Coverage
Ratio of at least 1.50 to 1.00. "Debt Service Coverage Ratio" means the ratio
of (i) earnings after taxes plus non-cash expenses divided by (ii) current
portion of long-term debt.
6.12 Monthly Compliance. If at any time and during such
time Borrower's Liquidity is less than Fifteen Million Dollars ($15,000,000) or
nine (9) months Remaining Months Liquidity, Borrower shall comply with Sections
6.8, 6.9, 6.10 and 6.11 as of the last day of each calendar month.
6.13 Intellectual Property Security Agreement. Within
thirty (30) days of the Closing Date, Borrower will complete, execute and
deliver to Bank an Intellectual Property Security Agreement in a form
reasonably acceptable to Bank.
6.14 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, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any
Advances, Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or
otherwise dispose of (collectively, a "Transfer"), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, other
than: (i) Transfers of Inventory in the ordinary course of business; (ii)
Transfers of non-exclusive licenses and similar arrangements for the use of the
property of Borrower or its Subsidiaries; or (iii) Transfers of worn-out or
obsolete Equipment.
7.2 Change in Business. Engage in any business, or
permit any of its Subsidiaries to engage in any business, other than the
businesses currently engaged in by Borrower and any business substantially
similar or related thereto (or incidental thereto), or suffer a material change
in Borrower's ownership. Borrower will not, without thirty (30) days prior
written notification to Bank, relocate its chief executive office.
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, except for a merger affected solely for the purpose of reincorporation
of Borrower and as to which Bank acknowledges and consents in advance, and
except for mergers, consolidations or acquisitions in which the consideration
is less than Five Million Dollars ($5,000,000) and as to which an Event of
Default does not exist before the consummation thereof or after giving effect
thereto.
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, other than payments made in an aggregate amount not to
exceed $100,000 for the repurchase of stock effected in connection with the
termination of an employee.
7.7 Investments. Directly or indirectly acquire or own,
or make any Investment in or to any Person, or permit any of its Subsidiaries
so to do, other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly
enter into or permit to exist any material transaction with any Affiliate of
Borrower except for transactions that are in the ordinary course of Borrower's
business, upon fair and reasonable terms that are no less favorable to Borrower
than would be obtained in an arm's length transaction with a nonaffiliated
Person.
7.9 Subordinated Debt. Make any payment in respect of
any Subordinated Debt, or permit any of its Subsidiaries to make any such
payment, except in compliance with the terms of such Subordinated Debt, or
amend any provision contained in any documentation relating to the Subordinated
Debt without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee,
warehouseman, or similar party unless Bank has received a pledge of the
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 and described on Schedule 3, as amended from time to time,
Borrower shall keep the Inventory only at the location set forth in
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Section 10 hereof and such other locations of which Borrower gives Bank prior
written notice and as to which Borrower signs and files a financing statement
where needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" or become
"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 law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the
principal of, or any interest on, any Advances when due and payable; or fails
to pay any portion of any other Obligations not constituting such principal or
interest, including without limitation Bank Expenses, within thirty (30) days
of receipt by Borrower of an invoice for such other Obligations;
8.2 Covenant Default. If Borrower fails to perform any
obligation under Sections 6.7, 6.8, 6.9, 6.10 or 6.11 or violates any of the
covenants contained in Article 7 of this Agreement, or 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 Borrower receives notice thereof or any officer of Borrower
becomes aware thereof; provided, however, that if the default cannot by its
nature be cured within the ten (10) day period or cannot after diligent
attempts by Borrower be cured within such ten (10) day period, and such default
is likely to be cured within a reasonable time, then Borrower shall have an
additional reasonable period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable time period
the failure to have cured such default shall not be deemed an Event of Default
(provided that no Advances will be required to be made during such cure
period);
8.3 Material Adverse Change. If there occurs a material
adverse change in Borrower's business or financial condition, or if there is a
material impairment of the prospect of repayment of any portion of the
Obligations or a material impairment of the value or priority of Bank's
security interests in the Collateral;
8.4 Attachment. If any material portion of Borrower's
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any trustee, receiver or person
acting in a similar capacity and such attachment, seizure, writ or distress
warrant or levy has not been removed, discharged or rescinded within ten (10)
days, or if Borrower is enjoined, restrained, or in any way prevented by court
order from continuing to conduct all or any material part of its business
affairs, or if a judgment or other claim becomes a lien or encumbrance upon any
material portion of Borrower's assets, or if a notice of lien, levy, or
assessment is filed of record with respect to any of Borrower's assets by the
United States Government, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or governmental agency, and the
same is not paid within ten (10) days after Borrower receives notice thereof,
provided that none of the foregoing shall constitute an Event of Default where
such action or event is stayed or an adequate bond has been posted pending a
good faith contest by Borrower (provided that no Advances 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
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stayed within ten (10) 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
Fifty Thousand Dollars ($50,000) shall be rendered against Borrower and shall
remain unsatisfied and unstayed for a period of ten (10) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 FDA Determinations. If the FDA takes one or more of
the following actions with respect to all or substantially all of Borrower's or
a Subsidiary's products: (a) withdraws Investigational New Drug status for any
such product that is undergoing clinical trials as the result of a
determination by the FDA that such product exposes subjects or patients to an
unacceptable health risk; (b) suspends clinical trials of any such product as
the result of a determination that such product is not reasonably likely to be
demonstrated to be safe and efficacious; (c) withdraws product approval of any
such product as the result of any failure to comply with regulatory standards;
or (d) determines that such products are not safe or efficacious.
8.10 Change of Control. If any "person" or "group"
(within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient
number of shares of all classes of stock then outstanding of Borrower
ordinarily entitled to vote in the election of directors, empowering such
"person" or "group" to elect a majority of the Board of Directors of Borrower.
8.11 Misrepresentations. If any material
misrepresentation or material misstatement exists now or hereafter in any
warranty or representation set forth herein or in any certificate delivered to
Bank by any Responsible Officer pursuant to this Agreement or to induce Bank to
enter into this Agreement or any other Loan Document.
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) Settle or adjust disputes and claims directly
with account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(d) Without notice to or demand upon Borrower,
make such payments and do such
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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 owned premises, Borrower hereby grants Bank a license to enter
into possession of such premises and to occupy the same, without charge, in
order to exercise any of Bank's rights or remedies provided herein, at law, in
equity, or otherwise;
(e) Without notice to Borrower set off and apply
to the Obligations any and all (i) balances and deposits of Borrower held by
Bank, or (ii) indebtedness at any time owing to or for the credit or the
account of Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Bank is hereby granted a license or other
right, solely pursuant to the provisions of this Section 9.1, to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral and,
in connection with Bank's exercise of its rights under this Section 9.1,
Borrower's rights under all licenses and all franchise agreements shall inure
to Bank's benefit, except to the extent that such license would result in a
breach of such agreement;
(g) Sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including Borrower's
premises) as Bank determines is commercially reasonable, and apply any proceeds
to the Obligations in whatever manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any
public sale; and
(i) Any deficiency that exists after disposition
of the Collateral as provided above will be paid immediately by Borrower.
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 xxxx of lading relating to any Account, drafts against account
debtors, schedules and assignments of Accounts, verifications of Accounts, and
notices to account debtors; (d) make, settle, and adjust all claims under and
decisions with respect to Borrower's policies of insurance; 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. At any time from the date of
this Agreement, 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 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
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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 Revolving
Facility as Bank deems necessary to protect Bank from the exposure created by
such failure; or (c) obtain and maintain insurance policies of the type
discussed in Section 6.6 of this Agreement, and take any action with respect to
such policies as Bank deems prudent. Any amounts so paid or deposited by Bank
shall constitute Bank Expenses, shall be immediately due and payable, and shall
bear interest at the then applicable rate hereinabove provided, and shall be
secured by the Collateral. Any payments made by Bank shall not constitute an
agreement by Bank to make similar payments in the future or a waiver by Bank of
any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank
complies with 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 inconsistent
herewith 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, 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: Sequus Pharmaceuticals, Inc.
000 Xxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Attn: Mr. Xxxxxx Xxxxxxx
FAX: _____________________________
If to Bank: Silicon Valley Bank
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attn: Mr. Xxxx Xxxxx
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
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11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard
to principles of conflicts of law. Each of Borrower and Bank hereby submits to
the exclusive jurisdiction of the state and Federal courts located in the
County of Santa Xxxxx, State of California. BORROWER AND BANK EACH HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND 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 except as provided in Section 7.3,
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 defend, indemnify
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 this Agreement;
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 this Agreement, 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 orally. 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.
21
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
SEQUUS PHARMACEUTICALS, INC.
By:
-----------------------------------
Title:
-------------------------------
SILICON VALLEY BANK
By:
-----------------------------------
Title:
-------------------------------
22
26
EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies, packing
and shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any of
the foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, claims, literature, reports, catalogs, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract
rights, royalties, license rights and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods, the licensing of technology
or the rendering of services by Borrower, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor, as
well as all merchandise returned to or reclaimed by Borrower and Borrower's
Books relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, letters of credit, certificates of deposit,
instruments and chattel paper now owned or hereafter acquired and Borrower's
Books relating to the foregoing; and
(f) Any and all claims, rights and interests in any of the above
and all substitutions for, additions and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not be deemed to
include any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; any patents,
trademarks, servicemarks and applications therefor; any trade secret rights,
including any rights to unpatented inventions, know-how, operating manuals,
license rights and agreements and confidential information, now owned or
hereafter acquired; or any claims for damages by way of any past, present and
future infringement of any of the foregoing; provided Collateral shall include
the proceeds of any disposition outside the ordinary course of Borrower's
business of any of the foregoing.
23
27
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:______________________
FAX#: (000) 000-0000 TIME:______________________
FROM:_______________________________________________________________________
CLIENT NAME (BORROWER)
REQUESTED BY:_______________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:_______________________________________________________
PHONE NUMBER:_______________________________________________________________
FROM ACCOUNT # __________________ TO ACCOUNT #__________________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $____________________________________
PRINCIPAL PAYMENT (ONLY) $____________________________________
INTEREST PAYMENT (ONLY) $____________________________________
PRINCIPAL AND INTEREST (PAYMENT) $____________________________________
PRINCIPAL INCREASE (ADVANCE) $____________________________________
OTHER INSTRUCTIONS:_________________________________________________________
____________________________________________________________________________
All representations and warranties of Borrower stated in the Loan and Security
Agreement are true, correct and complete in all material respects as of the
date of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
24
28
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
-------------------------------- -----------------
Authorized Requester Phone #
--------------------------------- -----------------
Received By (Bank) Phone #
___________________________________
Authorized Signature (Bank)
25
29
EXHIBIT C
BORROWING BASE CERTIFICATE
-------------------------------------------------------------------------------
Borrower: Sequus Pharmaceuticals, Inc. Lender: Silicon Valley Bank
Commitment Amount: $5,000,000
-------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE (excluding Initial Shipment Accounts)
1. Accounts Receivable Book Value as of $
-------- ----------------------
2. Additions (please explain on reverse) $
----------------------
3. TOTAL ACCOUNTS RECEIVABLE $
----------------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
----------------------
5. Balance of 50% over 90 day accounts $
----------------------
6. Concentration Limits* $
----------------------
7. Foreign Accounts $
----------------------
8. Governmental Accounts $
----------------------
9. Contra Accounts $
----------------------
10. Promotion or Demo Accounts $
----------------------
11. Initial Shipment Accounts $
----------------------
12. Intercompany/Employee Accounts $
----------------------
13. Other (please explain on reverse) $
----------------------
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
----------------------
15. Eligible Accounts (#3 minus #14) $
----------------------
16. LOAN VALUE OF ACCOUNTS (75% of #15) $
----------------------
BALANCES
17. Maximum Loan Amount $
----------------------
18. Total Funds Available (Lesser of #16 or #17) $
----------------------
19. Present balance owing on Line of Credit $
----------------------
20. RESERVE POSITION (#18 minus #19) $
----------------------
*25%, except 35% for McKesson, Cardinal Health and Xxxxxx-Xxxxxxxx
The undersigned represents and warrants that the foregoing is true, complete
and correct, and that the information reflected in this Borrowing Base
Certificate complies with the representations and warranties set forth in the
Loan and Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS:
BANK USE ONLY
Rec'd By: ___________________
Auth. Signer
Date: ________________________
Verified: ____________________
Auth. Signer
Date: ________________________
_________________________
---------------------------
By: _______________________
Authorized Signer
26
30
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: SEQUUS PHARMACEUTICALS, INC.
The undersigned authorized officer of Sequus Pharmaceuticals, Inc.
hereby certifies that in accordance with the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (the "Agreement"), (i)
Borrower is in complete compliance for the period ending ______________ with
all required covenants except as noted below and (ii) all representations and
warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days(1) Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 15 days Yes No
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly Basis(2)
Minimum Quick Ratio 1.25:1.00(3) ____:1.00 Yes No
Minimum Tangible Net Worth $15,000,000(4) $________ Yes No
Maximum Debt/Tangible Net Worth 1.00:1.00 ____:1.00 Yes No
Minimum Liquidity/RML/DSC 2x Term Advances or
6 months RM(5) Yes No
--------
(1) Only if Liquidity <$15,000,000 or 9 months RML
(2) Monthly if Liquidity <$15,000,000 or 9 months RML
(3) 1.50:1.00 after $10,000,000 of new equity received
(4) Plus 75% of new equity
(5) Replaced by Debt Service Coverage of 1.50:1.00 after
two quarters of DSC of at least 1.50 to 1.00
27
31
COMMENTS REGARDING EXCEPTIONS:
See Attached. BANK USE ONLY
Sincerely, Received by:________________________
____________________________ Date:_______________________________
SIGNATURE
Verified:___________________________
____________________________ AUTHORIZED SIGNER
TITLE Date:_______________________________
____________________________ Compliance Status: Yes No
DATE
28
32
EXHIBIT E
FORM OF NEGATIVE PLEDGE AGREEMENT
This Negative Pledge Agreement is made as of June ___, 1997, by and
between SEQUUS PHARMACEUTICALS, INC. ("Borrower") and SILICON VALLEY BANK
("Bank").
In connection with the Loan and Security Agreement being concurrently
executed between Borrower and Bank, Borrower agrees as follows:
1. Except as permitted in the Loan and Security Agreement,
Borrower shall not sell, transfer, assign, mortgage, pledge, lease, grant a
security interest in, or encumber any of Borrower's intellectual property,
including, without limitation, the following:
a. Any and all copyright rights, copyright applications,
copyright registrations and like protection in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not
the same also constitutes a trade secret, now or hereafter existing, created,
acquired or held (collectively, the "Copyrights");
b. Any and all trade secrets, and any and all
intellectual property rights in computer software and computer software
products now or hereafter existing, created, acquired or held;
c. Any and all design rights which may be available to
Borrower now or hereafter existing, created, acquired or held;
d. All patents, patent applications and like
protections, including, without limitation, improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same, including, without limitation, the patents and patent applications
(collectively, the "Patents");
e. Any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks (collectively, the "Trademarks");
f. Any and all claims for damages by way of past,
present and future infringements of any of the rights included above, with the
right, but not the obligation, to xxx for and collect such damages for said use
or infringement of the intellectual property rights identified above;
g. All licenses or other rights to use any of the
Copyrights, Patents or Trademarks and all license fees and royalties arising
from such use to the extent permitted by such license or rights;
h. All amendments, extensions, renewals and extensions
of any of the Copyrights, Patents or Trademarks; and
i. All proceeds and products of the foregoing,
including, without limitation, all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing.
The foregoing not withstanding, Borrower shall be able to grant
security interests or licenses of its intellectual property in connection with
corporate partnering arrangements entered into in the ordinary course of
business.
2. It shall be an Event of Default under the Loan Documents
between Borrower and Bank if there is a breach of any term of this Negative
Pledge Agreement.
3. Capitalized items used herein without definition shall have
the same meanings as set forth in the Loan and Security Agreement of even date
herewith.
SEQUUS PHARMACEUTICALS, INC. SILICON VALLEY BANK
By:___________________________ By:________________________________
Title:________________________ Title:_____________________________
29
33
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Sequus Pharmaceuticals, Inc. Bank: Silicon Valley Bank
-------------------------------------------------------------------------------
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $5,000,000 and a Term Loan Facility of a principal amount up to
$5,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital and Product Development.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Loan Term Loan
-------------- ---------
Amount paid to Borrower directly: $ $
-------- --------
Undisbursed Funds $ $
-------- --------
Principal $ $
-------- --------
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Charges Paid in Cash:
$62,500 Loan Fee
$________ Accounts Receivables Audit
$________ UCC Search Fees
$________ UCC Filing Fees
$________ Patent Filing Fees
$________ Trademark Filing Fees
$________ Copyright Filing Fees
$________ Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $________
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct
from Borrower's account numbered ______________ the amount of any loan payment.
If the funds in the account are insufficient to cover any payment, Bank shall
not be obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF JUNE 26, 1997.
BORROWER: SEQUUS PHARMACEUTICALS, INC.
______________________________
______________________________
Authorized Officer
-------------------------------------------------------------------------------
34
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: Sequus Pharmaceuticals, Inc. BANK: Silicon Valley Bank
-------------------------------------------------------------------------------
INSURANCE REQUIREMENTS. Sequus Pharmaceuticals, Inc. ("Grantor")
understands that insurance coverage is required in connection with the
extending of a loan or the providing of other financial accommodations to
Grantor by Bank. These requirements are set forth in the Loan Documents. The
following minimum insurance coverages must be provided on the following
described collateral (the "Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and
liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation
that coverage will not be cancelled or
diminished without a minimum of twenty (20)
days' prior written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on
or before closing, evidence of the required insurance as provided above, with
an effective date of June 26, 1997, or earlier. Grantor acknowledges and
agrees that if Grantor fails to provide any required insurance or fails to
continue such insurance in force, Bank may do so at Grantor's expense as
provided in the Loan and Security Agreement. The cost of such insurance, at
the option of Bank, shall be payable on demand or shall be added to the
indebtedness as provided in the security document. GRANTOR ACKNOWLEDGES THAT
IF BANK SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED
PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE
LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN
ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JUNE 26,
1997.
GRANTOR: SEQUUS PHARMACEUTICALS, INC.
x ________________________________
Authorized Officer
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
35
CORPORATE RESOLUTIONS TO BORROW
-------------------------------------------------------------------------------
Borrower: Sequus Pharmaceuticals, Inc.
-------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of Sequus
Pharmaceuticals, Inc. (the "Corporation"), HEREBY CERTIFY that the Corporation
is organized and existing under and by virtue of the laws of the State of
California.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Articles of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the
Corporation, duly called and held, at which a quorum was present and voting (or
by other duly authorized corporate action in lieu of a meeting), the following
resolutions were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- ------------------
________________ ______________ ---------------------------
________________ ______________ ---------------------------
________________ ______________ ---------------------------
________________ ______________ ---------------------------
acting for an on behalf of this Corporation and as its act and deed be, and
they hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of June 26, 1997 (the "Loan
Agreement").
EXECUTE NOTES. To execute and deliver to Bank the promissory note or
notes of the Corporation, on Bank's forms, at such rates of interest and on
such terms as may be agreed upon, evidencing the sums of money so borrowed or
any indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion
of the notes.
GRANT SECURITY. To grant a security interest to Bank in the
Collateral described in the Loan Agreement, which security interest shall
secure all of the Corporation's Obligations, as described in the Loan
Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
1
36
FURTHER ACTS. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances thereunder,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as they may in their discretion deem reasonably necessary or proper
in order to carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect
at the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names;
that the foregoing Resolutions now stand of record on the books of the
Corporation; and that the Resolutions are in full force and effect and have not
been modified or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on June 26, 1997 and
attest that the signatures set opposite the names listed above are their
genuine signatures.
CERTIFIED TO AND ATTESTED BY:
X ________________________________
-------------------------------------------------------------------------------
2
