FORBEARANCE AGREEMENT
This Forbearance Agreement (this "Agreement") is entered into as of July
22, 1996, by and between Silicon Valley Bank ("Bank") and Meris Laboratories,
Inc. (the "Borrower"), with reference to the following facts:
A. Borrower and Bank (sometimes hereinafter referred to as the "Parties")
are parties to that certain Amended and Restated Loan and Security Agreement
dated as of April 21, 1995, as amended through the date hereof (as amended, the
"Loan Agreement"). The Loan Agreement and all related and supporting documents
are referred to in this Agreement as the "Loan Documents."
B. As of the date hereof, there is owing under the Loan Documents the
principal amount of Seven Million Five Hundred Fifty Thousand Dollars
($7,550,000), together with accrued but unpaid interest in the sum of
$49,671.88, plus costs, expenses and attorneys' fees. Such amount, plus accruing
interest and ongoing attorneys' fees and costs are hereinafter sometimes
referred to herein as the "Existing Debt."
C. One or more Events of Default have occurred under the Loan Documents by
virtue of Borrower's failures to comply with Sections 8.1, 8.2, 8.6 of the Loan
Agreement, including but not limited to failing to comply with Sections 6.8,
6.10, 6.11 and 6.13 of the Loan Agreement and to pay certain amounts (including
overadvances) under Sections 2.1 and 2.2 of the Loan Agreement. The Existing
Debt has fully matured by its own terms and is currently past due and payable in
full. Such Events of Default entitle Bank immediately to enforce all the
remedies set forth in the Loan Documents, or as otherwise may exist at law or in
equity. Borrower has asked Bank to forbear from exercising certain of those
remedies as a result of such currently existing Events of Default actually known
to Bank as of the date of this Agreement (the "Existing Defaults") and Bank has
agreed, provided Borrower timely performs each and all of the covenants and
agreements on its part to be performed under this Agreement.
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, the Parties agree as follows:
1. Defined Terms. Capitalized Terms not otherwise defined herein shall have
the same meanings as set forth in the Loan Documents.
2. Acknowledgement of Liability. As of the date of this Agreement, Borrower
acknowledges and agrees that it owes Bank an amount equal to the Existing Debt.
Borrower reaffirms each and all of its obligations under the Loan Documents and
hereby forever waives and relinquishes any and all claims, off sets or defenses
that Borrower may now have with respect to the payment of any sums due and the
performance of any other obligations under the Loan Documents. The security
interests granted to Bank under the Loan Documents in the Collateral are hereby
remade and reaffirmed and Borrower hereby represents and warrants that Bank
holds a valid and perfected first priority security interest in the Collateral.
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Borrower further hereby remakes and reaffirms each and all of the waivers,
covenants, representations and warranties contained in each of the Loan
Documents except as provided for in Schedule 1.
3. Forbearance. Borrower acknowledges that there are existing and uncured
Events of Default under the Loan Documents. Borrower further acknowledges and
agrees that Bank is not in any way agreeing to waive the Existing Defaults as a
result of this Agreement or the performance by the parties of their respective
obligations hereunder. Subject to the conditions contained herein and
performance by Borrower of each and all of the terms of this Agreement and of
the Loan Documents as modified herein, and provided there are no further Events
or Defaults, after the date hereof, Bank shall, until September 15, 1996, or
such earlier date that there shall occur any further Event of Default, forbear
from accelerating the Existing Debt as a result of the Existing Defaults
described in Recital C of this Agreement. Such forbearance does not apply to any
other Event of Default or other failure by Borrower to perform in accordance
with the Loan Documents or this Agreement (hereinafter a "New Event of
Default"). This forbearance shall not be deemed to be a continuing waiver or
forbearance with respect to any Event of Default of the same or a similar nature
that may occur after the date of this Agreement. Notwithstanding anything to the
contrary contained in this Agreement, Borrower shall continue to be obligated to
make the monthly interest payments required pursuant to Section 2.3(c) of the
Loan Agreement.
4. Further Advances. Borrower may not request any Advances under the Loan
Documents from and after the date hereof, and Bank shall not be obligated to
extend any further loans or financial accommodations to Borrower except as
expressly provided herein.
5. INTENTIONALLY OMITTED.
6. Receipt and Application of Payments. All payments hereunder and under
the Loan Documents may, at Bank's option, first be applied against Bank Expenses
and accrued and unpaid interest, and the balance against the principal portion
of the Obligations, all in Bank's sole and absolute discretion. Acceptance by
Bank of any payment in an amount less than the amount then due shall be deemed
an acceptance on account only, and the failure to pay the entire amount then due
shall be and continue to be a New Event of Default pursuant to this Agreement,
and at any time thereafter and until the entire amount then due has been paid,
Bank shall be entitled to exercise all rights conferred upon it herein or in the
Loan Documents upon the occurrence of a New Event of Default. To the extent that
Bank receives any payment or benefit and such payment or benefit, or any part
thereof, is required to be repaid to a trustee, receiver, or any other party
under any bankruptcy act, state or federal law, common law or equitable cause,
then to the extent of such payment or benefit, the Obligations, or any part
thereof intended to be satisfied shall be revived and continued in full force
and effect as if such payment or benefit had not been made, shall accrue
interest at the highest rate applicable to any portion thereof, shall be secured
by the Collateral and payable on demand.
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7. Bank Expenses. Borrower shall reimburse Bank, on demand, for all
expenses incurred by Bank, at any time on, before or after the date hereof in
connection with (i) preparing and negotiating this Agreement; (ii) protecting
Bank's security interests and liens in the Collateral; and (iii) any matters
contemplated by or arising out of this Agreement or the Loan Documents
including, by way of illustration only, (a) to commence, prosecute, defend or
intervene in any litigation (adversary proceeding or otherwise) or to file a
petition, complaint, answer, motion or other pleadings, (b) to take any other
action in or with respect to any suit, case, motion, appeal or proceeding
(bankruptcy or otherwise), (c) to draft documents in connection with any of the
foregoing or in connection with any proposed modification or amendment of this
Agreement or the Loan Documents, or any proposed waiver, extension or refinance
of the Obligations, including, but not limited to, all inside and outside
counsel fees incurred by Bank in connection with the preparation and negotiation
of this Agreement and the Loan Documents, (d) to protect, collect, lease, sell,
take possession of or liquidate any of the Collateral or assets of Borrower, (e)
to attempt to enforce any rights of Bank to collect any Obligations, or (f) any
matter relating to the ongoing administration of this Agreement or the Loan
Documents. Bank Expenses shall include all expenditures by Bank, including
payment made by Bank for taxes, insurance, assessments, costs or expenses which
Borrower is required to pay under this Agreement or the Loan Documents, but
fails to pay; inside and outside counsel fees and any expenses, costs and
charges relating to such expenditures (including, without limitation, all fees
of legal assistants and other staff employed by such attorneys); and all other
expenses of any kind whatsoever incurred by Bank in connection with
administration of this Agreement and the Loan Documents, whether such
expenditures, fees and expenses are incurred before, after or in connection with
the commencement of an Insolvency Proceeding, including any actions taken in
connection with cash collateral orders, motions for relief from any stays,
preparation for any objections to plans of reorganization and any other
negotiations, actions or appeals entered into, taken or made in connection with
the reorganization, bankruptcy or liquidation of Borrower or the Collateral.
8. Cash Secured Obligations. Borrower acknowledges that (i) certificate of
deposit number 8800012914 in the principal amount of $379,500 has been pledged
to secure its reimbursement obligations in connection with a letter of credit
issued for the account of Borrower and the Obligations owing to Bank, and (ii)
certificate of deposit number 0351267325 in the principal amount of $1,584,670
which has been pledged to secure the Obligations owing to Bank, and is subject
to the subordinate claim pertaining to certain obligations which Borrower
allegedly may owe in connection with one or more promissory notes made to, or
certain litigation involving, Chris Reidel. Borrower shall not request the use
of such certificates of deposit, or the proceeds thereof, in any application or
motion for the use of cash collateral with respect to the Obligations, including
the determination of adequate protection, and may not use or otherwise attempt
to use such certificates of deposit for any purpose other than the payment to
Bank of the Obligations absent Bank's express written consent.
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9. Functional Equivalent of Chapter 11 Case. Borrower acknowledges that
this Agreement is of considerable benefit to Borrower. The forbearances and
financial accommodations offered by Bank pursuant to this Agreement and
previously granted by Bank to Borrower result in a significantly delayed
repayment to Bank, provide Borrower with an opportunity to work out of its
financial difficulties, and allow Borrower to avoid bankruptcy, thus benefiting
all other creditors. Borrower acknowledges that this Agreement represents the
functional equivalent of the restructuring of its financial affairs under the
provisions of Chapter 11 of the United States Bankruptcy Code.
Borrower hereby acknowledges that:
(a) it has had a full and fair opportunity to reorganize its financial
affairs pursuant to this Agreement;
(b) the Agreement constitutes the functional equivalent of a confirmed
Chapter 11 plan;
(c) this Agreement represents a reasonable and sensible restructuring of
its indebtedness due and owing to Bank; and
(d) it would be manifestly unfair to Bank if Borrower was ever to seek
further restructuring of its indebtedness to Bank. If for any reason Borrower
defaults under the terms of this Agreement, it is agreed that it would be unfair
for the automatic stay of a bankruptcy case to impede Bank's ability to exercise
its legal rights and remedies. Consequently, Borrower hereby stipulates and
agrees that if any bankruptcy case shall be filed by or against Borrower, the
automatic stay arising in such bankruptcy case shall, after notice and a
hearing, be terminated upon the request of Bank and Bank shall then be allowed
to proceed with enforcement of its legal rights and remedies. Borrower further
agrees that it would be manifestly unfair to seek to use Bank's cash collateral
in a bankruptcy proceeding or to make any claim under sections 506(c) or 507(b)
of the Bankruptcy Code (including but not limited to any claim for attorneys'
fees) in commencing or prosecuting such bankruptcy case or proceeding without
Bank's express consent. Borrower hereby expressly waives any and all surcharge
rights on behalf of itself and its successors in interest which may exist
pursuant to Bankruptcy Code section 506(c), or otherwise.
10. Overadvance. Borrower acknowledges that the outstanding Advances exceed
the Borrowing Base as of the date hereof by approximately $1,700,000. Such
excess constitutes an "Overadvance" and is payable to Bank immediately under
Section 2.2 of the Loan Agreement. Subject to the terms of this Agreement, Bank
will forbear from accelerating the Existing Debt under the Loan Agreement to
collect the Overadvance until September 15, 1996 or upon the occurrence of a New
Event of Default, whichever occurs first; provided that, if and to the extent
the Overadvance at any time exceeds the lesser of $1,700,000 or $1,700,000 less
the permanent reductions provided for hereinbelow (the "Maximum Overadvance"),
Borrower shall be in default under this Agreement. Borrower shall immediately
pay Bank the amount of such excess, and the failure to do so shall, without any
4
notice to Borrower or any action by Bank, constitute a New Event of Default. For
the purpose of this Agreement, the term "Maximum Overadvance" shall mean
$1,700,000 less payments to be made by Borrower to Bank from any of the
following: (i) the amounts due and payable to Bank upon receipt of any tax
refund described in paragraph 5 above; (ii) the proceeds from the sale,
transfer, conveyance, or other disposition of any of the Bank's collateral which
results in a reduction in the Bank's collateral base; and (iii) the amount equal
to each payment Borrower is obligated to make to Bank in lieu of making such
payments to the subordinated debt, including, but not limited to, the
approximate $100,000 payments due from Borrower to the Bank on the last day of
each month.
11. Financial Reporting; Audits.
(a) Bank shall have a right at any time after the date of this Agreement to
audit Borrower's Accounts at Borrower's expense, which audits shall occur at
Bank's option not less than once per fiscal quarter.
(b) In addition to complying with the provisions of Section 6.3 of the Loan
Agreement, Borrower shall deliver a Borrowing Base Certificate to Bank, signed
by a Responsible Officer, reflecting Borrower's condition as of close of
business on Friday of each week. Such Certificate shall be delivered to Bank not
later than 12:00 p.m. on Tuesday of the immediately following week.
12. Subordinated Debt. Borrower acknowledges that there has occurred a
default in payment referred to in Section 7B(1)(a) of the Purchase Agreement
dated as of November 14, 1994 among Borrower and the Investors named therein and
that, until Borrower receives from Bank an express waiver of such default,
Borrower shall not make any payment with respect to the principal of or interest
or other amounts due with respect to the Subordinated Debt as defined in the
Purchase Agreement.
13. Sole Depository. Borrower represents and warrants that Borrower
maintains its deposit and investment accounts only at Bank, and no Investments
or deposits are held by any other Person. Borrower covenants that Borrower will
continue to maintain all of such accounts, deposits and Investments with Bank.
14. Eligible Accounts. In addition to the Eligible Accounts defined in
section 1.1 of the Loan Agreement, Borrower shall be entitled to include work in
progress and unbilled order edit accounts which but for the fact that Borrower
has not issued an invoice would otherwise constitute Eligible Accounts
(hereinafter the "Eligible Unbilled Accounts") provided, however, that only 50%
of the fully diluted value of such Eligible Unbilled Accounts shall be included
in the Borrowing Base. PIPRE accounts for which an invoice has been issued and
which are aged less than 31 days old will be included as Eligible Accounts. Such
accounts shall be included in the Borrowing Base at 85% of the fully diluted
value. No other PIPRE and/or PICOLLECT Accounts shall constitute or be included
as Eligible Accounts.
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15. Representations and Warranties.
(a) Borrower hereby represents and warrants that no Event of Default or
failure of condition has occurred or exists, or would exist with notice or lapse
of time or both under any of the Loan Documents, other than the Events of
Default referred to in Recital C.
(b) The forbearance period granted pursuant to the terms of this Agreement
is reasonable and is based upon the projections of Borrower.
(c) All representations and warranties of Borrower in this Agreement and
the other Loan Documents are true and correct as of the date hereof, and shall
survive the execution of this Agreement.
16. Default. In addition to all other Events of Default under the Loan
Documents, the following shall constitute Events of Default:
(a) Borrower's failure to perform any covenant or other agreement contained
in this Agreement or any other document entered into pursuant hereto; and
(b) Bank's determination, in its sole and absolute discretion, that
Borrower may not be able to pay all or any part of the Obligations, or to
satisfy any condition, or to perform any obligation under any of the Loan
Documents.
17. Rights and Remedies.
(a) Upon the occurrence of a default which is other than one of the
Existing Defaults identified in Recital C above and during the continuation of
the New 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:
(i) Without notice to Borrower. set off and apply to the amounts due and
owing under the Loan Documents and this Agreement:
(1) any and all certificates of deposit held by Bank for whatever purpose;
(2) any and all balances and deposits of Borrower held by Bank; and/or
(3) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
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(ii) Take action against Borrower for payment under the Loan Documents and
this Agreement; and/or
(iii) Exercise any right and remedy authorized by the Loan Documents and/or
this Agreement and/or applicable law or at equity.
(b) 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 the part of Borrower shall be
deemed a continuing waiver. No delay by Bank shall constitute a waiver,
election, or acquiescence by it. Bank shall have the right to take any action it
deems necessary against Borrower in order to enforce or perfect, or to realize
on its security interest in the Collateral.
18. Turnover of Intellectual Property.
(a) Borrower shall, concurrent with the execution of the Agreement, turn
over to Bank one copy of all software and related materials (the "Software")
held for use, license and/or sale by Borrower. For the purpose of this
Agreement, the term "Software" shall consist of all existing or future annotated
source code listings, flow charts, decision tables, schematics, drawings,
specifications, documentation, design details, and other related documents and
all technology in which Bank has a security interest. The Software also will
include any update, modification, enhancement, or change to the materials.
Borrower agrees to deliver to Bank on January 15, April 15, July 15, and October
15 of each year, a package certified by an officer of Borrower to contain all
updates, modifications, enhancements, and changes to the Software made during
the period three (3) month period (the "Updates").
(b) Borrower hereby agrees that Bank shall be entitled to retain and use
the Software as provided for in this Agreement until it has been timely paid in
full by Borrower; provided, however, in the event Borrower defaults under this
Agreement or any agreements executed in connection herewith or referred to
herein, Bank shall be entitled to sell, transfer, license and/or otherwise
convey or utilize the Software as Bank, in its sole discretion, determines.
(c) Borrower and Bank acknowledge that this Agreement constitutes a license
of a right to intellectual property, and this Agreement is an "agreement
supplementary to" such license as provided in Section 365(n) of Title 11, United
States Code (the "Bankruptcy Code"). Borrower acknowledges that if Borrower, as
a debtor in possession, or a trustee in bankruptcy in a case under the
Bankruptcy Code, rejects this Agreement, Bank may elect to retain its rights
under this Agreement as provided in Section 365(n) of the Bankruptcy Code. Upon
written request of Bank to Borrower or the bankruptcy trustee, Borrower or such
7
bankruptcy trustee shall not interfere with the rights of Bank as provided in
this Agreement, including the right to obtain, use, license and/or otherwise
dispose of the Software.
(d) Subject to the rights granted Bank hereunder Bank shall hold the
software in confidence and not disclose, transfer or distribute the same to any
third party, except if there is a New Event of Default.
(e) License Grant for Use of Software; Security Interest.
(i) Borrower hereby grants Bank, its agents and assignees the right to use
and/or sell or otherwise transfer the Software for the purpose of exercising the
rights of Bank under the Loan Agreement and this Agreement. Bank shall not take
any actions in exercise of such right unless a New Event of Default occurs and
shall be continuing.
(ii) To secure the performance of Borrower under the Loan Agreement and
this Agreement, Borrower hereby affirms, remakes, regrants and grants Bank a
first priority security interest in the Escrowed Materials. Borrower will
execute such documents and take such steps as Bank reasonably requests to
perfect such security interest.
19. Conditions Precedent to Bank's Obligation to Forbear.
The Bank's obligation to forbear under this Agreement in relation to the
Existing Defaults described in recital C above is subject to the following
conditions precedent:
(a) Receipt by Bank of this Agreement and such other agreements and
instruments reasonably requested by Bank pursuant hereto (including such
documents as are necessary to create and perfect Bank's interest in the
Collateral), each duly executed by Borrower;
(b) A certificate of the secretary of Borrower with respect to incumbency
and resolutions authorizing the execution and delivery of this Agreement, in
form acceptable to Bank;
(c) Receipt of the source codes and other materials pertaining to the
Software in a form acceptable to Bank;
(d) Payment by Borrower of all Bank Expenses incurred in the preparation of
this Agreement; and
(e) Such other documents and completion of such other matters as Bank may
reasonably deem necessary or appropriate.
8
20. Waiver of Notice and Cure. Borrower acknowledges that an Event of
Default occurred under the Loan Documents that, but for this Agreement, would
have entitled Bank to exercise all the remedies available to Bank under the Loan
Documents and applicable law. Borrower waives, after default, all notices of
default and rights to cure that are otherwise provided in the Loan Documents or
applicable law, including rights to notice and redemption under California
Uniform Commercial Code sections 9504, 9505 and 9506.
21. Release.
(a) Borrower acknowledges that Bank would not enter into this Agreement
without Borrower's assurance that Borrower has no claims against Bank or any of
Bank's officers, directors, employees or agents. Except for the obligations
arising hereafter under this Agreement, Borrower releases Bank and each of
Bank's officers, directors and employees from any known or unknown claims which
Borrower now has against Bank of any nature, including any claims that Borrower,
its successors, counsel, and advisors may in the future discover they would have
now had if they had known facts not now known to them, whether founded in
contract, in tort or pursuant to any other theory of liability, including but
not limited to any claims arising out of or related to the Loan Documents or the
transactions contemplated thereby. Borrower waives the provisions of California
Civil Code section 1542, which states:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
(b) The provisions, waivers and releases set forth in this section are
binding upon Borrower and Borrower's shareholders, agents, employees, assigns
and successors in interest. The provisions, waivers and releases of this section
shall inure to the benefit of Bank and its agents, employees, officers,
directors, assigns and successors in interest.
(c) The provisions of this section shall survive payment in full of the
Obligations, full performance of all the terms of this Agreement and the Loan
Documents, and/or Bank's actions to exercise any remedy available under the Loan
Documents or otherwise.
(d) Borrower warrants and represents that Borrower is the sole and lawful
owner of all right, title and interest in and to all of the claims released
hereby and Borrower has not heretofore voluntarily, by operation of law or
otherwise, assigned or transferred or purported to assign or transfer to any
person any such claim or any portion thereof. Borrower shall indemnify and hold
harmless Bank from and against any claim, demand, damage, debt, liability
9
(including payment of attorneys' fees and costs actually incurred whether or not
litigation is commenced) based on or arising out of any assignment or transfer.
22. Further Assurances. Borrower will take such other actions as Bank may
reasonably request from time to time to perfect or continue Bank's security
interests in Borrower's property, and to accomplish the objectives of this
Agreement.
23. Consultation of Counsel. Borrower acknowledges that Borrower has had
the opportunity to be represented by legal counsel of its own choice throughout
all of the negotiations that preceded the execution of this Agreement. Borrower
has executed this Agreement after reviewing and understanding each provision of
this Agreement and without reliance upon any promise or representation of any
person or persons acting for or on behalf of Bank. Borrower further acknowledges
that Borrower and its counsel have had adequate opportunity to make whatever
investigation or inquiry they may deem necessary or desirable in connection with
the subject matter of this Agreement prior to the execution hereof and the
delivery and acceptance of the consideration described herein.
24. Miscellaneous.
(a) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of Borrower and Bank and their respective successors and
assigns; provided, however, that the foregoing shall not authorize any
assignment by Borrower of its rights or duties hereunder.
(b) Entire Agreement. This Agreement and the Loan Documents contain the
entire agreement of the parties hereto and supersede any other oral or written
agreements or understandings with respect to the subject matter hereof and
thereof.
(c) Course of Dealing; Waivers. No course of dealing on the part of Bank or
its officers, nor any failure or delay in the exercise of any right by Bank,
shall operate as a waiver thereof, and any single or partial exercise of any
such right shall not preclude any later exercise of any such right. Bank's
failure at any time to require strict performance by Borrower of any provision
shall not affect any right of Bank thereafter to demand strict compliance and
performance. Any suspension or waiver of a right must be in writing signed by an
officer of Bank.
(d) Time is of the Essence. Time is of the essence as to each and every
term and provision of this Agreement and the other Loan Documents.
(e) Counterparts. This Agreement may be signed in counterparts and all of
such counterparts when properly executed by the appropriate parties thereto
together shall serve as a fully executed document, binding upon the parties.
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(f) Appointment of Bank as Borrower's Attorney-in-Fact. Borrower hereby
irrevocably designates, makes, constitutes and appoints Bank, acting through any
and all individuals, persons and entities lawfully representing Bank, as
Borrower's true and lawful agent and attorney-in-fact (which appointment shall
for all purposes be deemed to be coupled with an interest and shall be
irrevocable) and authorizes Bank, in Bank's and/or Borrower's name, to take any
and all actions set forth in Section 9.2 of the Loan Agreement and as Bank
otherwise deems appropriate in connection with Bank's administration of this
Agreement or any other Loan Documents.
(g) Legal Effect. The Loan Documents remain in full force and effect. If
any provision of this Agreement conflicts with applicable law, such provision
shall be deemed severed from this Agreement, and the balance of this Agreement
shall remain in full force and effect.
(h) WAIVER OF JURY. BANK AND BORROWER ACKNOWLEDGE AND AGREE THAT THE TIME
AND EXPENSE REQUIRED FOR TRIAL BY JURY EXCEED THE TIME AND EXPENSE REQUIRED FOR
A BENCH TRIAL AND HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON, RELATED TO OR ARISING OUT OF THE
TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, 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.
(i) Assignment and Indemnity. Borrower consents to Bank's assignment of all
or any part of Bank's rights under this Agreement and the Loan Documents.
Borrower shall indemnify and defend and hold Bank and any assignee of Bank's
interests harmless from any actions, costs, losses or expenses (including
attorneys' fees) arising out of such assignment, this Agreement and the Loan
Documents.
(j) Severability. In the event that any provision of this Agreement shall
be unenforceable or invalid under any applicable law or be so held by applicable
court or arbitration decision, such unenforceability or invalidity shall not
render this Agreement unenforceable or invalid as a whole, and, in such event,
such provision shall be changed and interpreted so as to bestaccomplish the
objectives of such unenforceable or invalid provision within the limits of
applicable law or applicable court decisions.
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IN WITNESS WHEREOF the undersigned have executed this Agreement as of
the first date above written.
MERIS LABORATORIES, INC.
Date: August 14, 1996
------------------ By: /s/ Thurman Jordan
----------------------------
Title: Sr. V.P. - CFO
----------------------------
MERIS LABORATORIES, INC.
By: /s/ William E. Neeley, M.D.
----------------------------
Title: President & CEO
----------------------------
SILICON VALLEY BANK
By: /s/ Judy Sanchez
----------------------------
Title: Sr. Vice President
----------------------------
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SCHEDULE 1
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
Set forth below are the exceptions, as of July 22, 1996, to the
representations and warranties set forth in the Loan Agreement.
1. Section 5.2. Agreement Defaults. Borrower is in default under (a)
agreements with the holders of its 10% senior convertible subordinated
debentures, (b) the Loan Agreement, and (c) its agreements with Chris Reidel.
2. Section 5.3. Liens. Existing liens, other than those held by Bank, are
(a) such liens as would be shown by a search of federal, state and county
records, (b) the liens held by Chris Riedel, and (c) the judgment in favor of
Kenneth Hadler.
3. Section 5.7. Litigation. See Exhibit 1 attached.
4. Section 5.9. Solvency. Borrower admits that it is not paying its debts
as they become due.
5. Section 5.12. Taxes. Borrower has not filed its federal or state tax
returns for 1995.
6. Section 5.13. Subsidiaries. Meris, Inc. is a subsidiary of Borrower.
7. Section 5.15. Full Disclosure. This representation is subject to the
disclosures in Borrower's financial statements furnished to Bank and the
disclosures in its Quarterly report on Form 10-Q for the period ended March 31,
1996, its Annual Report on Form 10-K for the period ended December 31, 1995 and
the Proxy Statement for the Annual Meeting of Borrower's shareholders on May 21,
1996.
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