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INVISION TECHNOLOGIES, 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 . . . . . . . . . . . . . . . . . . . . . . .10.
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . .10.
2.1 Advances.. . . . . . . . . . . . . . . . . . . . . . . . . . .10.
2.2 Overadvances.. . . . . . . . . . . . . . . . . . . . . . . . .13.
2.3 Interest Rates, Payments, and Calculations.. . . . . . . . . .13.
2.4 Crediting Payments.. . . . . . . . . . . . . . . . . . . . . .13.
2.5 Fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14.
2.6 Additional Costs.. . . . . . . . . . . . . . . . . . . . . . .14.
2.7 Term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15.
3. CONDITIONS OF LOANS . . . . . . . . . . . . . . . . . . . . . . . .15.
3.1 Conditions Precedent to Initial Advance. . . . . . . . . . . .15.
3.2 Conditions Precedent to all Advances . . . . . . . . . . . . .15.
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . .16.
4.1 Grant of Security Interest.. . . . . . . . . . . . . . . . . .16.
4.2 Delivery of Additional Documentation Required. . . . . . . . .16.
4.3 Right to Inspect . . . . . . . . . . . . . . . . . . . . . . .16.
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . .16.
5.1 Due Organization and Qualification.. . . . . . . . . . . . . .16.
5.2 Due Authorization; No Conflict.. . . . . . . . . . . . . . . .16.
5.3 No Prior Encumbrances. . . . . . . . . . . . . . . . . . . . .17.
5.4 Bona Fide Eligible Accounts. . . . . . . . . . . . . . . . . .17.
5.5 Merchantable Inventory.. . . . . . . . . . . . . . . . . . . .17.
5.6 Intellectual Property. . . . . . . . . . . . . . . . . . . . .17.
5.7 Name; Location of Chief Executive Office.. . . . . . . . . . .17.
5.8 Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . .17.
5.9 No Material Adverse Change in Financial Statements.. . . . . .18.
5.10 Solvency.. . . . . . . . . . . . . . . . . . . . . . . . . . .18.
5.11 Regulatory Compliance. . . . . . . . . . . . . . . . . . . . .18.
5.12 Environmental Condition. . . . . . . . . . . . . . . . . . . .18.
5.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .18.
5.14 Subsidiaries.. . . . . . . . . . . . . . . . . . . . . . . . .19.
5.15 Government Consents. . . . . . . . . . . . . . . . . . . . . .19.
5.16 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . .19.
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . .19.
6.1 Good Standing. . . . . . . . . . . . . . . . . . . . . . . . .19.
i.
TABLE OF CONTENTS
(CONTINUED)
PAGE
6.2 Government Compliance. . . . . . . . . . . . . . . . . . . . .19.
6.3 Financial Statements, Reports, Certificates. . . . . . . . . .19.
6.4 Inventory; Returns.. . . . . . . . . . . . . . . . . . . . . .20.
6.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .20.
6.6 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . .21.
6.7 Principal Depository.. . . . . . . . . . . . . . . . . . . . .21.
6.8 Adjusted Quick Ratio.. . . . . . . . . . . . . . . . . . . . .21.
6.9 Debt-Net Worth Ratio.. . . . . . . . . . . . . . . . . . . . .21.
6.10 Tangible Net Worth.. . . . . . . . . . . . . . . . . . . . . .21.
6.11 Profitability. . . . . . . . . . . . . . . . . . . . . . . . .21.
6.12 Registration of Intellectual Property Rights.. . . . . . . . .21.
6.13 Further Assurances.. . . . . . . . . . . . . . . . . . . . . .22.
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . .22.
7.1 Dispositions.. . . . . . . . . . . . . . . . . . . . . . . . .22.
7.2 Change in Business.. . . . . . . . . . . . . . . . . . . . . .23.
7.3 Mergers or Acquisitions. . . . . . . . . . . . . . . . . . . .23.
7.4 Indebtedness.. . . . . . . . . . . . . . . . . . . . . . . . .23.
7.5 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . .23.
7.6 Distributions. . . . . . . . . . . . . . . . . . . . . . . . .23.
7.7 Investments. . . . . . . . . . . . . . . . . . . . . . . . . .23.
7.8 Transactions with Affiliates.. . . . . . . . . . . . . . . . .23.
7.9 Intellectual Property Agreements.. . . . . . . . . . . . . . .23.
7.10 Subordinated Debt. . . . . . . . . . . . . . . . . . . . . . .24.
7.11 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . .24.
7.12 Compliance.. . . . . . . . . . . . . . . . . . . . . . . . . .24.
8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . .24.
8.1 Payment Default. . . . . . . . . . . . . . . . . . . . . . . .24.
8.2 Covenant Default.. . . . . . . . . . . . . . . . . . . . . . .24.
8.3 Material Adverse Change. . . . . . . . . . . . . . . . . . . .25.
8.4 Attachment . . . . . . . . . . . . . . . . . . . . . . . . . .25.
8.5 Insolvency.. . . . . . . . . . . . . . . . . . . . . . . . . .25.
8.6 Other Agreements.. . . . . . . . . . . . . . . . . . . . . . .25.
8.7 Subordinated Debt. . . . . . . . . . . . . . . . . . . . . . .25.
8.8 Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . .25.
8.9 Misrepresentations.. . . . . . . . . . . . . . . . . . . . . .25.
9. BANK'S RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . .26.
9.1 Rights and Remedies. . . . . . . . . . . . . . . . . . . . . .26.
ii.
TABLE OF CONTENTS
(CONTINUED)
PAGE
9.2 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . .27.
9.3 Accounts Collection. . . . . . . . . . . . . . . . . . . . . .28.
9.4 Bank Expenses. . . . . . . . . . . . . . . . . . . . . . . . .28.
9.5 Bank's Liability for Collateral. . . . . . . . . . . . . . . .28.
9.6 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . .28.
9.7 Demand; Protest. . . . . . . . . . . . . . . . . . . . . . . .28.
10. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. . . . . . . . . . . . .29.
12. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . .29.
12.1 Successors and Assigns.. . . . . . . . . . . . . . . . . . . .29.
12.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . .30.
12.3 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . .30.
12.4 Severability of Provisions.. . . . . . . . . . . . . . . . . .30.
12.5 Amendments in Writing, Integration.. . . . . . . . . . . . . .30.
12.6 Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . .30.
12.7 Survival.. . . . . . . . . . . . . . . . . . . . . . . . . . .30.
12.8 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . .30.
iii.
This LOAN AND SECURITY AGREEMENT is entered into as of February 20, 1997,
by and between SILICON VALLEY BANK ("Bank") and INVISION TECHNOLOGIES, 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 credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"ADVANCE" or "ADVANCES" means an Advance under the Revolving
Facility.
"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.
1.
"BUSINESS DAY" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California are authorized or
required to close.
"CLOSING DATE" means the date of this Agreement.
"CODE" means the California Uniform Commercial Code.
"COLLATERAL" means the property described on EXHIBIT A
attached hereto.
"COMMITTED LINE" means Four Million Five Hundred Thousand
Dollars ($4,500,000).
"CONTINGENT OBLIGATION" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"COPYRIGHTS" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"CURRENT ASSETS" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current assets on
the consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"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
2.
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.
"ELIGIBLE ACCOUNTS" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; PROVIDED that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon notification thereof to Borrower in
accordance with the provisions hereof. Unless otherwise agreed to by Bank,
Eligible Accounts shall not include the following:
1.1.1 Accounts that the account debtor has failed to pay
within ninety (90) days of invoice date;
1.1.2 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;
1.1.3 Accounts with respect to which the account debtor is
an officer, employee, or agent of Borrower;
1.1.4 Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
1.1.5 Accounts with respect to which the account debtor is
an Affiliate of Borrower;
1.1.6 Accounts with respect to which the account debtor
does not have its principal place of business in the United States;
1.1.7 Accounts with respect to which the account debtor is
the United States or any department, agency, or instrumentality of the United
States, except for those Accounts of the United States or any department, agency
or instrumentality thereof as to which the payee has assigned its rights to
payment thereof to Bank and the assignment has been acknowledged, pursuant to
the Assignment of Claim Section Act of 1940, as amended (31 U.S.C. Section
3727);
1.1.8 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;
1.1.9 Accounts with respect to an account debtor,
including Subsidiaries and Affiliates, whose total obligations to Borrower
exceed twenty-five percent (25%) of all
3.
Accounts, to the extent such obligations exceed the aforementioned percentage,
except with respect to the United States Federal Aviation Administration, as to
which the percentage shall be one hundred percent (100%) subject to subsection
(g) hereof, and except as approved in writing by Bank;
1.1.10 Accounts with respect to which the account debtor
disputes liability or makes any claim with respect thereto as to which Bank
believes, in its reasonable 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; and
1.1.11 Accounts the collection of which Bank reasonably
determines to be doubtful.
"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.
"INTELLECTUAL PROPERTY COLLATERAL" means
(a) Copyrights, Trademarks and Patents;
(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;
4.
(c) Any and all design rights which may be available to
Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past,
present and future infringement of any of the rights included above, with the
right, but not the obligation, to ▇▇▇ for and collect such damages for said use
or infringement of the intellectual property rights identified above;
(e) 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;
(f) All amendments, renewals and extensions of any of
the Copyrights, Trademarks or Patents; and
(g) 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.
"INVENTORY" means all present and future inventory in which
Borrower has any interest, 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
5.
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.
"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.
"PATENTS means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
"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, ore, 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 existing on the Closing Date and
disclosed in the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the
ordinary course of business;
(e) Leases of Equipment pursuant to sale - leaseback
transactions, provided that sales of such leased-back equipment shall not
exceed, in the aggregate, Two Million Dollars ($2,000,000) in any fiscal year;
(f) Capital leases or indebtedness incurred solely to
purchase equipment which is secured in accordance with clause (c) of "Permitted
Liens" below and is not in excess of the lesser of the purchase price of such
equipment or the fair market value of such equipment on the date of acquisition;
6.
(g) Indebtedness secured by Permitted Liens; and
(h) Extensions, refinancings, modifications, amendments and
restatements of any of items of Permitted Indebtedness (a) through (g) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
"PERMITTED INVESTMENT" means:
(a) Investments existing on the Closing Date disclosed in
the Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., and
(iii) certificates of deposit maturing no more than one (1) year from the date
of investment therein issued by Bank.
(c) Investments consisting of notes receivable of, or
prepaid royalties and other credit extensions to, customers and suppliers who
are not Affiliates, in the ordinary course of business; provided that this
paragraph (c) shall not apply to Investments by Borrower in any Subsidiary;
(d) Investments consisting of the endorsement of
negotiable instruments for deposit or collection or similar transaction in the
ordinary course of business;
(e) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of business; and
(f) Investments consisting of (i) compensation of
employees, officers and directors of Borrower or its Subsidiaries so long as the
Board of Directors of Borrower determines that such compensation is in the best
interests of Borrower, (ii) travel advances, employee relocation loans and other
employee loans and advances in the ordinary course of business, (iii) loans to
employees, officers or directors relating to the purchase of equity securities
of Borrower or its Subsidiaries pursuant to employee stock purchase plans or
agreements approved by Borrower's Board of Directors in an aggregate amount not
in excess of Two Hundred Fifty Thousand Dollars ($250,000) outstanding at any
time; (iv) other loans to officers and employees approved by the Board of
Directors in an aggregate amount not in excess of Two Hundred Fifty Thousand
Dollars ($250,000) outstanding at any time; and
(g) Other Investments (including the creation of any
Subsidiary) aggregating not in excess of Two Hundred Fifty Thousand Dollars
($250,000) at any time.
7.
"PERMITTED LIENS" means the following:
(a) Any Liens existing on the Closing Date and disclosed
in the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, PROVIDED the same have no priority over any of
Bank's security interests;
(c) Liens (i) upon or in any equipment acquired or held
by Borrower or any 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;
(d) 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);
(e) Liens arising from judgments, decrees or attachments
in circumstances not constituting an Event of Default under Section 8.8;
(f) 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;
(g) 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;
(h) 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; and
(i) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (a) through (c) above, PROVIDED that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended,renewed or
refinanced does not increase.
"PERSON" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation,
8.
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 consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
"RESPONSIBLE OFFICER" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" means the date immediately
preceding the first anniversary of the Closing Date.
"REVOLVING FACILITY" means the facility under which Borrower
may request Bank to issue cash advances, as specified in Section 2.l hereof.
"SCHEDULE" means the schedule of exceptions attached hereto.
"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.
"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.
9.
"TRADEMARKS" means any trademark and servicemark rights,
whether registered or not, applications to register and registrations of the
same and like protections, and the entire goodwill of the business of Borrower
connected with and symbolized by such trademarks.
1.2 ACCOUNTING 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 ADVANCES.
(a) 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 (i) the Committed Line minus the face amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) minus the Foreign Exchange Reserve (defined in Section 2.1.3) or (ii)
the Borrowing Base minus the face amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit) minus the Foreign Exchange
Reserve. For purposes of this Agreement, "Borrowing Base" shall mean an amount
equal to (i) eighty percent (80%) 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 anytime prior to the Revolving Maturity Date.
(b) 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) The Revolving Facility shall terminate on the
Revolving Maturity Date, at which time all Advances under this Section 2.1 and
other amounts due under this Agreement shall be immediately due and payable.
2.1.1 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued letters of credit for the
account of Borrower in an aggregate face
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amount not to exceed (i) the lesser of the Committed Line or the Borrowing Base
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) shall not in any case exceed One Million Dollars
($1,000,000). Each such letter of credit shall have an expiry date no later
than the Revolving Maturity Date. All such 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 application and letter of credit
agreement. All amounts actually paid by Bank in respect of a letter of credit
shall, when paid, constitute an Advance under this 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 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 issued for the
account of Borrower.
2.1.2 LETTER OF CREDIT REIMBURSEMENT; RESERVE.
(a) 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.
(b) 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 Line for letters of credit against fluctuations in currency
exchange rates, in an amount equal to twenty percent (20%) 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 Line shall be reduced by the amount of such reserve
for so long as such letter of credit remains outstanding.
2.1.3 FOREIGN EXCHANGE CONTRACT; FOREIGN EXCHANGE SETTLEMENTS.
(a) Subject to the terms of this Agreement, Borrower may
enter into foreign exchange contracts (the "Exchange Contracts") not to exceed
an aggregate amount of $1,000,000 (the "Contract Limit"), pursuant to which Bank
shall sell to or purchase from Borrower foreign currency on a spot or future
basis. Borrower shall not request any Exchange Contracts at any time it is out
of compliance with any of the provisions of this Agreement. All Exchange
Contracts must provide for delivery of settlement on or before the Revolving
Maturity Date. The amount available under the Committed Line at any time shall
be reduced by the following amounts (the "Foreign Exchange Reserve") on any
given day (the "Determination
11.
Date"): (i) on all outstanding Exchange Contracts on which delivery is to be
effected or settlement allowed more than two business days after the
Determination Date, 10% of the gross amount of the Exchange Contracts; plus (ii)
on all outstanding Exchange Contracts on which delivery is to be effected or
settlement allowed within two business days after the Determination Date, 100%
of the gross amount of the Exchange Contracts.
(b) Bank may, in its discretion, terminate the Exchange
Contracts at any time (a) that an Event of Default occurs or (b) that there is
no sufficient availability under the Committed Line and Borrower does not have
available funds in its bank account to satisfy the Foreign Exchange Reserve. If
Bank terminates the Exchange Contracts, and without limitation of any applicable
indemnities, Borrower agrees to reimburse Bank for any and all reasonable fees,
costs and expenses relating thereto or arising in connection therewith.
(c) Borrower shall not permit the total gross amount of
all Exchange Contracts On which delivery is to be effected and settlement
allowed in any two business day period to be more than $500,000 (the "Settlement
Limit"), nor shall Borrower permit the total gross amount of all Exchange
Contracts to which Borrower is a party, outstanding at any one time, to exceed
the Contract Limit. Notwithstanding the above, however, the amount which may be
settled in any two (2) business. day period may be increased above the
Settlement Limit up to, but in no event to exceed, the amount of the Contract
Limit under either of the following circumstances:
(i) if there is sufficient availability under the
Committed Line in the amount Of the Foreign Exchange Reserve as of each
Determination Date, provided that Bank in advance shall reserve the full amount
of the Foreign Exchange Reserve against the Committed Line; or
(ii) if there is insufficient availability under
the Committed Line,as to settlements within any two (2) business day period,
provided that Bank, in its sole discretion, may: (A) verify good funds overseas
prior to crediting Borrower's deposit account with Bank (in the case of
Borrower's sale of foreign currency); or (B) debit Borrower's deposit account
with Bank prior to delivering foreign currency overseas (in the case of
Borrower's purchase of foreign currency).
(d) In the case of Borrower's purchase of foreign
currency, Borrower in advance shall instruct Bank upon settlement either to
treat the settlement amount as an .advance under the Committed Line, or to debit
Borrower's account for the amount settled.
(e) Borrower shall execute all standard form
applications and agreements of Bank in connection with the Exchange Contracts
and, without limiting any of the terms of such applications and agreements,
Borrower will pay all standard fees and charges of Bank in connection with the
Exchange Contracts.
(f) Without limiting any of the other terms of this
Agreement or any such standard form applications and agreements of Bank,
Borrower agrees to indemnify Bank
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and hold it harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, costs and expenses (including, without
limitation, reasonable attorneys' fees of counsel of Bank's choice), of
every nature and description which it may sustain or incur, based upon, arising
out of, or in any way relating to any of the Exchange Contracts or any
transactions relating thereto or contemplated thereby.
2.2 OVERADVANCES. If, at any time or for any reason, the amount
of Obligations owed by Borrower to Bank pursuant to Section 2.1 of this
Agreement is greater than the lesser of (i) the Committed Line or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
such excess.
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. Except as set forth in Section
2.3(b), any Advances shall bear interest, on the average Daily Balance, at a
rate equal to one (1.0) percentage point above the Prime Rate.
(b) DEFAULT RATE. All Obligations shall bear interest,
from and after the occurrence and during the continuance 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 in arrears on the nineteenth calendar day of each month during the term
hereof. Bank shall, at its option, charge such interest, all Batik 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 and during the continuance 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
13.
received by Bank as of the opening of business on the immediately following
Business Day. Whenever any payment to Bank under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date that is not a
Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue and be payable for
the period of such extension.
2.5 FEES. Borrower shall pay to Bank the following:
(a) FACILITY FEE. A Facility Fee equal to one quarter of
one percent (0.25%) per annum of the Committed Line (of which Bank acknowledges
receipt of $11,500), 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 others 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 recurred or determined, upon
presentation by Bank of a statement :of the amount and setting
14.
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 eighty (180) days prior to the date of such
statement.
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 Revolving 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;
(b) a certificate of the Secretary of Borrower with
respect to incumbency and resolutions authorizing the execution and delivery of
this Agreement;
(c) an intellectual property security agreement;
(d) financing statement (Form UCC-1);
(e) insurance certificate;
(f) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof; and
(g) 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
15.
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, 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. As long as an Event of Default has not occurred and is continuing,
upon (i) Borrower's achievement of three (3) consecutive quarters of minimum
net profit of at least $1, and (ii) Borrower's receipt of cash proceeds of at
least $16,000,000 from the issuance of its equity securities after the date
hereof, Bank shall release its security interest in Intellectual Property
Collateral, and from and after such release, the Intellectual Property
Collateral shall not constitute "Collateral" for purposes of the Loan
Documents.
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower
shall from time to time execute and deliver to Bank, at the request of Bank,
all Negotiable Collateral, all financing statements and other documents that
Bank may reasonably request, in form satisfactory to Bank, to perfect and
continue perfected Bank's security interests in the Collateral and in order
to fully consummate all of the transactions contemplated under the Loan
Documents.
4.3 RIGHT TO INSPECT. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's
Books and to make copies thereof and to check, test, and appraise the
Collateral in order to verify Borrower's financial condition or the amount,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws
of its state of incorporation and qualified and licensed to do business in,
and is in good standing in, any state in which the conduct of its business or
its ownership of property requires that it be so qualified, except for states
as to which any failure to so qualify would not have a Material Adverse
Effect.
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
16.
Certificate of Incorporation or Bylaws, nor will they constitute an event of
default under any material agreement to which Borrower is a party or by which
Borrower is bound. Borrower is not in default under any material 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 INTELLECTUAL PROPERTY. Borrower is the sole owner of the
presently registered Intellectual Property Collateral, except for non-exclusive
licenses granted by Borrower to its customers in the ordinary course of
business. Each of the registered Patents is valid and enforceable, and no part
of the Intellectual Property Collateral has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property Collateral violates the rights of any third party.
Except for and upon the filing with the United States Patent and Trademark
Office with respect to the Patents and Trademarks and the Register of Copyrights
with respect to the Copyrights necessary to perfect the security interests
created hereunder, and except as has been already made or obtained, no
authorization, approval or other action by, and no notice to or filing with, any
United States governmental authority or United States regulatory body is
required either (i) for the grant by Borrower of the security interest granted
hereby or for the execution, delivery or performance of Loan Documents by
Borrower in the United States or (ii) for the perfection in the United States or
the exercise by Bank of its rights and remedies hereunder.
5.7 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.
5.8 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.
17.
5.9 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.10 SOLVENCY. The fair saleable value of Borrower's assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement; and Borrower is able to pay its
debts (including trade debts) as they mature.
5.11 REGULATORY COMPLIANCE. Borrower and each Subsidiary has met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's failure
to comply with ERISA that is reasonably likely to result in Borrower's.incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" 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.
5.12 ENVIRONMENTAL CONDITION. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.13 TAXES. Borrower and each Subsidiary has filed or caused to
be filed all tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
18.
5.14 SUBSIDIARIES. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.15 GOVERNMENT CONSENTS. Borrower and each Subsidiary 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.
5.16 FULL DISCLOSURE. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or Statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
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 reasonably be expected to 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 reasonably be expected to have a Material Adverse Effect or a
material adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each fiscal quarter, 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; (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
19.
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) prompt notice of any material change in the
composition of the Intellectual Property Collateral, including, but not limited
to, any subsequent ownership right of the Borrower in or to any Copyright,
Patent or Trademark not specified in any intellectual property security
agreement between Borrower and Bank or knowledge of an event that materially
adversely effects the value of the Intellectual Property Collateral; and (f)
such budgets, sales projections, operating plans or other financial information
as Bank may reasonably request from time to time.
Within twenty (20) days after the last day of each month in which an
Advance is outstanding (and as a condition to Borrower requesting an Advance),
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 quarterly 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.
20.
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.
(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 ADJUSTED QUICK RATIO. Borrower shall maintain, as of the last
day of each fiscal quarter, a ratio of Quick Assets to Current Liabilities,
excluding deferred revenue and customer deposits, of at least 1.25 to 1.0.
For purposes of this Section, Quick Assets shall be deemed to include cash,
cash-equivalents, and investments with maturities not exceeding 90 days held
in deposit accounts in which Bank has a Lien prior to any other Lien.
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 revenue and customer deposits, less Subordinated Debt to Tangible Net
Worth plus Subordinated Debt of not more than 1.0 to 1.0.
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 Eight Million
Dollars ($8,000,000) plus seventy-five percent of the net proceeds from the sale
of Borrower's equity securities after the Closing Date.
6.11 PROFITABILITY. Borrower shall be profitable for each fiscal
quarter, except Borrower may suffer a loss not to exceed $600,000 for one fiscal
quarter in any fiscal year.
6.12 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
(a) Borrower shall register or cause to be registered
(to the extent not already registered) with the United States Patent and
Trademark Office or the United States
21.
Copyright Office, as applicable, those intellectual property rights listed on
Exhibits A, B and C to the Intellectual Property Security Agreement delivered to
Bank by Borrower in connection with this Agreement within thirty (30) days of
the date of this Agreement. Borrower shall have no duty to register or cause to
be registered with the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, those additional intellectual property
rights developed or acquired by Borrower from time to time in connection with
any product prior to the sale or licensing of such product to any third party,
including without limitation revisions or additions to the intellectual property
rights listed on such Exhibits A, B and C.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents and Copyrights, (ii) use
its best efforts to detect infringements of the Trademarks, Patents and
Copyrights and promptly advise Bank in writing of material infringements
detected and (iii) not allow any Trademarks, Patents or Copyrights to be
abandoned, forfeited or dedicated to the public without the written consent of
Bank, which shall not be unreasonably withheld, unless Bank determines that
reasonable business practices suggest that abandonment is appropriate.
(d) Bank shall have the right, but not the obligation,
to take, at Borrower's sole expense, any actions that Borrower is required under
this Section 6.12 to take but which Borrower fails to take, after fifteen (15)
days' notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.12.
6.13 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.
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; (iii) Transfers of worn-out or obsolete Equipment; or (iv)
sale-leaseback transactions of Equipment as described in clause (e) of the
defined term "Permitted Indebtedness."
22.
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 of greater than forty percent (40%). 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
such transactions that do not result in a change of more than 25% of Borrower's
Net Worth PROVIDED that immediately after giving effect to such merger or
consolidation, no Event of Default, or event which with the lapse of time or
giving of notice or both, would result in an Event of Default shall have
occurred and be continuing.
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. Notwithstanding the foregoing, Borrower may redeem or
repurchase its common stock and pay dividends on its preferred stock, provided
the sum of (i) the purchase price of any stock sore deemed or repurchased and
(ii) any such dividends paid on preferred stock does not exceed, in the
aggregate, $250,000 in any fiscal year.
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 INTELLECTUAL PROPERTY AGREEMENTS. Borrower shall not permit
the inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way prevent the creation of a security
interest in Borrower's rights and interests in any property included within the
definition of the Intellectual Property Collateral acquired under such
contracts.
23.
7.10 SUBORDINATED DEBT. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.11 INVENTORY. Store the Inventory with a bailee, warehouseman,
or similar party unless Bank has received a pledge of 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,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.12 COMPLIANCE. Become an "investment company" 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
24.
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 a material impairment of
the value or priority of Bank's security interests in the Collateral;
8.4 ATTACHMENT. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within thirty (30) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within thirty,
(30) days after Borrower receives notice thereof, provided that none of the
foregoing shall constitute an Event of Default where such action or event is
stayed or an adequate bond has been posted pending a good faith contest by
Borrower (provided that no 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 stayed within thirty (30)
days (provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 OTHER AGREEMENTS. If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in the
exercise of a right by such third party or parties to accelerate the maturity of
any Indebtedness in an amount in excess of Two Hundred Fifty Thousand Dollars
($250,000) 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 One Hundred
Fifty Thousand Dollars($150,000) shall be rendered against Borrower and shall
remain unsatisfied and unstayed for a period of thirty (30) days (provided that
no Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 MISREPRESENTATIONS. If any material misrepresentation or
material misstatement exists now or as of any date made or deemed made or
hereafter in any warranty
25.
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) Demand that Borrower (i) deposit cash with Bank in
an amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;
(d) Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(e) Without notice to or demand upon Borrower, make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's 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;
(f) 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;
(g) 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
26.
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;
(h) 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;
(i) Bank may credit bid and purchase at any public sale;
and
(j) 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
▇▇▇▇ 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; (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; (f) to modify, in its
sole discretion, any intellectual property security agreement entered into
between Borrower and Bank without first obtaining Borrower's approval of or
signature to such modification by amending Exhibit A, Exhibit B and Exhibit C,
thereof, as appropriate, to include reference to any right, title or interest in
any Copyrights, Patents or Trademarks acquired by Borrower after the execution
hereof or to delete any reference to any right, title or interest in any
Copyrights, Patents or Trademarks in which Borrower no longer has or claims any
right, title or interest; (g) to file, in its sole discretion, one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of Borrower where permitted by law; and (h)
to transfer the Intellectual Property Collateral into the name of Bank or a
third party to the extent permitted under the California Uniform Commercial Code
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.
27.
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. Upon the
occurrence and during the continuance of an Event of Default, 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 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. Bank shall
have a non-exclusive, royalty-free license to use the Intellectual Property
Collateral to the extent reasonably necessary to permit Bank to exercise its
rights and remedies upon the occurrence of an Event of Default.
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,
except for any loss, damage or destruction caused by Bank's gross negligence or
wilful misconduct.
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.
28.
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: InVision Technologies, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇, CFO
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to Bank: Silicon Valley Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
FAX: (▇▇▇)▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
The Loan Documents shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
▇▇▇▇▇, 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,
29.
HOWEVER, that neither this Agreement nor any rights hereunder may be assigned by
Borrower without Bank's prior written consent, which consent may be granted or
withheld in Bank's sole discretion. Bank shall have the right without the
consent of or notice to Borrower to sell, transfer, negotiate, or grant
participation in all or any part of, or any interest in, Bank's obligations,
rights and benefits hereunder.
12.2 INDEMNIFICATION. Borrower shall 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 the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE. Time is of the essence for the performance
of all obligations set forth in this Agreement.
12.4 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION. This Agreement cannot
be amended or terminated 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.
12.8 CONFIDENTIALITY. In handling any confidential information
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor
30.
of Borrower and have delivered a copy to Borrower, (iii) as required by law,
regulations, rule or order, subpoena, judicial order or similar order, (iv) as
may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may determine in connection with the
enforcement of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
INVISION TECHNOLOGIES, INC.
By:
--------------------------------------
Title:
---------------------------------
SILICON VALLEY BANK
By:
--------------------------------------
Title:
-----------------------------------
31.
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, trademarks, service marks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs,
computer discs, computer tapes, literature, reports, catalogs, design rights,
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, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
(f) All 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; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
32.
EXHIBIT C
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower: InVision Technologies, Inc. Lender: Silicon Valley Bank
Commitment Amount: $4,500,000
-------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
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. Ineligible Governmental Accounts $ _____________________
9. Contra Accounts $ _____________________
10. Promotion or Demo Accounts $ _____________________
11. Intercompany/Employee Accounts $ _____________________
12. Other (please explain on reverse) $ _____________________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $ _____________________
14. Eligible Accounts (#3 minus #13) $ _____________________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $ _____________________
BALANCES
16. Maximum Loan Amount $ ____________________
17. Total Funds Available [Lesser of #16 or #15 $ _____________________
18. Present balance owing on Line of Credit $ _____________________
19. Outstanding:under Sublimits ( ) $ _____________________
20. RESERVE POSITION (#17 minus #18 and #19) $ _____________________
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:
InVision Technologies, Inc.
By: BANK USE ONLY
--------------------- Rec'd By:
--------------------
Auth. Signer
Date:
--------------------
Verified:
-------------------
Auth. Signer
Date:
----------------------
----------------------
33.
DISCLOSURE SCHEDULE TO LOAN AND SECURITY AGREEMENT BETWEEN
INVISION TECHNOLOGIES, INC. AND SILICON VALLEY BANK
Liens
------
Secured Party UCC File No. Date
------------- ----------- ------
Telogy, Inc. 9434560289 Dec. 2, ▇▇▇▇
▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Inc.
Citicorp Dealer Finance 9504860580 Feb. 10, 1995
Instituto Bancario San Paolo di
Torino, SpA
(To be terminated on or prior to Closing Date) 9600260210 Dec. 28, 1995
Anaconda Partners, L.P.
(To be terminated on or prior to Closing Date) 9600260218 Dec. 28, 1995
Leasing Technologies International, Inc. ▇▇▇▇▇▇▇▇▇▇ May 13, 1996
Leasing Technologies International, Inc. 9633160900 Nov. 25, 1996
European American Bank 9626960074 Sep. 20, 1996
INVESTMENTS
-----------
Investments in subsidiaries: Imatron Federal Systems, Inc. and Invision
International, Inc.
INDEBTEDNESS
------------
Lender
-----
Telogy, Inc.
Yale-Northern California, Inc.
Citicorp Dealer Finance
Leasing Technologies
International, Inc.
Equipment purchased from Hyster to be financed.
OTHER
-----
Invision's Intellectual Property rights are subject to FAA contracts.
34.
EXHIBIT A
INVISION CTX 5000 SP TECHNICAL SPECIFICATIONS
THE CTX 5000 SP SCREENS PASSENGER LUGGAGE, PACKAGES AND LIGHT CARGO FOR
EXPLOSIVES OR NARCOTICS. CTX IS THE ONLY SYSTEM TO USE COMPUTERIZED TOMOGRAPHY
AND IS THE ONLY FAA CERTIFIED EXPLOSIVES DETECTION SYSTEM. CTX CAN BE USED
STAND-ALONE OR INTEGRATED INTO AN AIRPORT BAGGAGE HANDLING SYSTEM. IT CAN
OPERATE AT 3 DIFFERENT LEVELS OF DETECTION FOR SCREENING UNDER LOW, MEDIUM OR
HIGH THREAT CONDITIONS.
[illustration of CTX 5000 SP]
SCANNER WORKSTATION
Weight 9320 lbs. 4208 kg Dimensions 42" L x 53" W x 54" H
1069 x 1336 x 1350 mm
Length 174 in. 4421 mm
Footprint 56 sq.ft. 5.2 sq. m Monitors (VDL) 2 x 17"
Conveyor Height (+ 1") 29.25 in. 740 mm Monitor resolution 800 x 600.028 mm
Loading Velocity 1.8 ft./sec 0.45 m/sec. Image depth 128 grey level + colors
Unload Velocity LESS THAN- LESS THAN 2.5m/sec SP image resolution 576 x 410 pixels
9.8 ft./ sec CT image resolution 512 x 512 pixels
LUGGAGE Threat coloring red
Detonator coloring green
Maximum dimension 46 in. L x 26 in. W x Metal coloring blue
22 in. H Controls (images, hard-soft keys, trackball
119 cm L x 66 cm W x system)
56 cm H
Maximum weight 110 lbs. 50 kg Cable length 16.5 ft. 5 m
(Standard)
ENVIRONMENT SAFETY
Voltage 350-480V 3 phase
3 W & PE Exceeds FDA 21 CFR 1020.40
Frequency 30 - 60 Hz X-ray shielded cabinet with safety
interlocks
Power 12 kVA Emergency stop
Tolerance =5% Uninterrupted power supply for
computer (20 min)
Temperature 10 - 40 DEG C
Humidity LESS THAN-80%
X-RAY SYSTEM
SP Operating range 140 kV. 0.8 mA
35.
SP sensitivity 12 bit
Sp detectors 768
CT Operating range 80-200 kV. 1-20 mA
CT sensitivity 18 bit
CT detectors 480
Cooling system Continuous oil filled
36.
EXHIBIT B
DRAFT
EDS SPECIFICATIONS
[Illustration of EDS System]
Definition of the components:
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
COMPONENT: DEFINITION: RESPONSIBILITY:
------------------------------------------------------------------------------------------------------------
Q Queuing conveyor belt: One or more queuing Joint
conveyor belts that feed the luggage to the system or forward
inspected luggage to the bags movement system. Their
number defines the input and output queue length, their
functionality is controlled by the CTX.
------------------------------------------------------------------------------------------------------------
LPA Active Luggage Positioner: Positions the luggage at the InVision
center of the conveyor belt with the long dimension of the
luggage in direction of the movement. May stop oversize
luggage.
------------------------------------------------------------------------------------------------------------
Z The Z-scanner made by EG&G Astrophysics Astrophysics
------------------------------------------------------------------------------------------------------------
D Diverter: Optional luggage diverter that may be required Joint
for some non certified application of the EDS System
------------------------------------------------------------------------------------------------------------
CTX The CTX 5000 without the pre-scanner InVision
------------------------------------------------------------------------------------------------------------
CONSOLE The CTX 5000 operator console InVision
------------------------------------------------------------------------------------------------------------
I/O BOX The common and only interface between the EDS Joint
SYSTEM and the airport bags movement system
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Overall performance:
- FAA certification at 500 bph or better
- Maximum throughput in non FAA certified mode of 1200 bph with the
diverter
- Detection mode changeable from bag to bag
The Prototypes will be jointly manufactured by the two parties at a
location to be agreed upon
37.
