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EXHIBIT 10.11
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LASERSCOPE
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
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1. DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Revolving Facility . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Overadvances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Interest Rates, Payments, and Calculations . . . . . . . . . . . . . . 9
2.4 Crediting Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3. CONDITIONS OF LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Conditions Precedent to Initial Credit Extension . . . . . . . . . . . 11
3.2 Conditions Precedent to all Credit Extensions. . . . . . . . . . . . 12
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Delivery of Additional Documentation Required . . . . . . . . . . . . 12
4.3 Right to Inspect . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Due Organization and Qualification . . . . . . . . . . . . . . . . . . 12
5.2 Due Authorization; No Conflict . . . . . . . . . . . . . . . . . . . . 13
5.3 No Prior Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4 Bona Fide Eligible Accounts . . . . . . . . . . . . . . . . . . . . . 13
5.5 Merchantable Inventory . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6 Name; Location of Chief Executive Office . . . . . . . . . . . . . . . 13
5.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.8 No Material Adverse Change in Financial Statements . . . . . . . . . . 13
5.9 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.10 Regulatory Compliance . . . . . . . . . . . . . . . . . . . . . . . . 13
5.11 Environmental Condition . . . . . . . . . . . . . . . . . . . . . . . 14
5.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.13 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.14 Government Consents . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.15 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Government Compliance . . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 Financial Statements, Reports, Certificates . . . . . . . . . . . . . 14
6.4 Inventory; Returns . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.7 Principal Depository . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.8 Quick Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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6.9 Debt-Net Worth Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.10 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.11 Profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.1 Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.2 Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.3 Mergers or Acquisitions . . . . . . . . . . . . . . . . . . . . . . . 16
7.4 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.5 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.6 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.8 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.9 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . 17
7.10 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.11 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.12 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.1 Payment Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.2 Covenant Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.3 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 18
8.4 Attachment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.5 Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.6 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.7 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.8 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.9 Misrepresentations . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9. BANK'S RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.1 Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.2 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.3 Accounts Collection. . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.4 Bank Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.5 Bank's Liability for Collateral . . . . . . . . . . . . . . . . . . . 21
9.6 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.7 Demand; Protest . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER . . . . . . . . . . . . . . . . . . 21
12. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 22
12.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.3 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.4 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . 22
12.5 Amendments in Writing, Integration . . . . . . . . . . . . . . . . . . 22
12.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.8 Effect of Amendment and Restatement . . . . . . . . . . . . . . . . . 22
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This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into
as of November 27, 1996, by and between SILICON VALLEY BANK ("Bank") and
LASERSCOPE ("Borrower").
RECITALS
A. Borrower and Bank are parties to that certain Amended and
Restated Business Loan Agreement dated as of March 18, 1996 (the "Business Loan
Agreement"), that certain Commercial Security Agreement dated as of March 18,
1996 (the "Security Agreement") and a Promissory Note dated March 18, 1996, by
Borrower to Bank (the "Note") (the Business Loan Agreement, the Security
Agreement and the Note, each as may have been amended, the "Original Loan
Documents").
B. Borrower and Bank wish to amend and restate the terms of the
Original Loan Documents as stated herein. This Agreement sets forth the terms
on which Bank will loan money to Borrower and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
C. DEFINITIONS AND CONSTRUCTION
1. Definitions. As used in this Agreement, the
following terms shall have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.
"Advance" or "Advances" means 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.
"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.
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"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 Five Million Dollars
($5,000,000).
"Contingent Obligation" means, as applied to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to (i) any indebtedness, lease, dividend, letter of credit
or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or discounted
or sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable; (ii) any obligations with respect to
undrawn letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices;
provided, however, that the term "Contingent Obligation" shall not include
endorsements for collection or deposit in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determined amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by
such Person in good faith; provided, however, that such amount shall not in any
event exceed the maximum amount of the obligations under the guarantee or other
support arrangement.
"Credit Extension" means an Advance, Letter of Credit
and/or Exchange Contract.
"Current Liabilities" means, as of any applicable
date, all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
as at such date, plus, to the extent not already included therein, all
outstanding Advances made under this Agreement, including all Indebtedness that
is payable upon demand or within one year from the date of determination
thereof unless such Indebtedness is renewable or extendable at the option of
Borrower or any Subsidiary to a date more than one year from the date of
determination, but excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations
owed at the end of a given day.
"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) Accounts that the account debtor has failed
to pay within ninety (90) days of invoice date;
(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;
(3) Accounts with respect to which the account
debtor is an officer, employee, or agent of Borrower;
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(4) Accounts with respect to which goods are
placed on consignment, guaranteed sale, sale or return, sale on approval, bill
and hold, or other terms by reason of which the payment by the account debtor
may be conditional;
(5) Accounts with respect to which the account
debtor is an Affiliate of Borrower;
(6) Accounts with respect to which the account
debtor does not have its principal place of business in the United States,
except for Eligible Foreign Accounts;
(7) Accounts with respect to which the account
debtor is the United States or any department, agency, or instrumentality of
the United States;
(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;
(9) Accounts with respect to an account debtor,
including Subsidiaries and Affiliates, whose total obligations to Borrower
exceed twenty-five percent (25%) of all Accounts, to the extent such
obligations exceed the aforementioned percentage, except as approved in writing
by Bank;
(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 sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(11) Accounts the collection of which Bank
reasonably determines to be doubtful.
"Eligible Foreign Accounts" means Accounts with
respect to which the account debtor does not have its principal place of
business in the United States and that are: (1) covered by credit insurance in
form and amount, and by an insurer satisfactory to Bank less the amount of any
deductible(s) which may be or become owing thereon; or (2) supported by one or
more letters of credit in favor of Bank as beneficiary, in an amount and of a
tenor, and issued by a financial institution, acceptable to Bank; or (3) that
Bank approves on a case-by-case basis.
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income
Security Act of 1974, as amended, and the regulations thereunder.
"Exchange Contract" has the meaning set forth in
Section 2.1.3 herein.
"Foreign Exchange Reserve" has the meaning set forth
in Section 2.1.3 herein.
"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.
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"Insolvency Proceeding" means any proceeding
commenced by or against any person or entity under any provision of the United
States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in
which Borrower has any interest, 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.
"Letter of Credit" or "Letters of Credit" has the
meaning set forth in Section 2.1.1 herein.
"Lien" means any mortgage, lien, deed of trust,
charge, pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement,
any note or notes executed by Borrower, and any other agreement entered into
between Borrower and Bank in connection with this Agreement, all as amended or
extended from time to time.
"Material Adverse Effect" means a material adverse
effect on (i) the business operations or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents.
"Maturity Date" means the date immediately preceding
the first anniversary of the date of this Agreement.
"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.
"Original Loan Documents" has the meaning set forth
in the recital paragraph above.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay
to Bank pursuant to the terms and provisions of any instrument, or agreement
now or hereafter in existence between Borrower and Bank.
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"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; and
(e) Indebtedness secured by Permitted Liens.
"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 Moody's Investors Service, Inc., and
(iii) certificates of deposit maturing no more than one (1) year from the date
of investment therein issued by Bank.
"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; and
(d) 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, institution, public benefit
corporation, firm, joint stock company, estate, entity or governmental agency.
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"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 Facility" means the facility under which
Borrower may request Bank to issue cash advances or letters of credit or enter
into foreign exchange contracts as specified in Section 2.1 herein.
"Schedule" means the schedule of exceptions attached
hereto, if any.
"Subordinated Debt" means any debt incurred by
Borrower that is subordinated to the debt owing by Borrower to Bank on terms
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in
which (i) any general partnership interest or (ii) more than 50% of the stock
of which by the terms thereof ordinary voting power to elect the Board of
Directors, managers or trustees of the entity shall, at the time as of which
any determination is being made, be owned by Borrower, either directly or
through an Affiliate.
"Tangible Net Worth" means at any date as of which
the amount thereof shall be determined, the consolidated total assets of
Borrower and its Subsidiaries minus, without duplication, (i) the sum of any
amounts attributable to (a) goodwill, (b) intangible items such as unamortized
debt discount and expense, patents, trade and service marks and names,
copyrights and research and development expenses except prepaid expenses, and
(c) all reserves not already deducted from assets, and (ii) Total Liabilities.
"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.
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.
D. LOAN AND TERMS OF PAYMENT
1. Revolving Facility.
(1) Advances. Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Advances to Borrower in an
aggregate amount outstanding at any time not to exceed the lesser of (i) the
Committed Line minus the sum of (A) the face amount of all outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit) and (B) the
Foreign Exchange Reserve or (ii) the Borrowing Base minus the sum of (A) the
face amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) and (B) the Foreign Exchange Reserve. Subject
to the terms and conditions of this Agreement, amounts borrowed pursuant to
this Section 2.1. may be repaid and reborrowed at any time before the Maturity
Date. For the purposes of this Agreement, "Borrowing Base" shall mean an
amount equal to seventy-five percent (75%) of Eligible Accounts, provided that
if aggregate amount of outstanding Advances in a quarter exceeds fifty percent
(50%) of the average Borrowing Base for the preceding quarter, the Bank
reserves the right to transfer all of Borrower's
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rights, obligations and benefits under this Agreement including, without
limitation, its commitment to lend, to the Bank's Commercial Finance Department
provided (x) that the Borrower executes Bank's standard form of the Commercial
Finance Department's documents which documents shall establish additional
reporting and monetary requirements and such additional terms, conditions and
customary pricing as Bank determines in its sole discretion and (y) Borrower
pays all Bank Expenses incurred in preparing and negotiating such agreement.
(2) Procedures. Whenever Borrower desires an
Advance, Borrower will notify Bank by facsimile transmission or telephone no
later than 3:00 p.m. California time, on the Business Day that the Advance is
to be made. Each such notification shall be promptly confirmed by a
Payment/Advance Form in substantially the form of Exhibit A 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.
(3) Maturity. The Revolving Facility shall
terminate on the Maturity Date, at which time all Advances under this Section
2.1 and all other amounts owing under this Agreement shall be immediately due
and payable.
b. Letters of Credit.
(1) 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 (each a "Letter of Credit," collectively, the
"Letters of Credit") in an aggregate face amount not to exceed the lesser of
(i) the Committed Line minus the sum of (A) the then outstanding principal
balance of the Advances and (B) the Foreign Exchange Reserve or (ii) the
Borrowing Base minus the sum of (A) the then outstanding principal balance of
the Advances and (B) the Foreign Exchange Reserve, provided that the face
amount of outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit) shall not in any case exceed Two Million Dollars
($2,000,000). Each such Letter of Credit shall have an expiry date no later
than the Maturity Date, provided that Borrower's letter of credit reimbursement
obligation shall be secured by cash on terms acceptable to Bank at any time
after the Maturity Date if the term of this Agreement is not extended by Bank.
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.
(2) 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.
c. Letter of Credit Reimbursement; Reserve.
(1) 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.
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(2) 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.
d. Foreign Exchange Contract; Foreign Exchange
Settlements.
(1) Subject to the terms of this
Agreement, Borrower may enter into foreign exchange contracts (the "Exchange
Contracts") not to exceed an aggregate amount of the lesser of (i) the
Committed Line minus the sum of (A) the then outstanding principal balance of
the Advances and (B) the face amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit); (ii) the Borrowing Base
minus the sum of (A) the then outstanding principal balance of the Advance and
(B) the face amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit); or (iii) Two Million Dollars ($2,000,000) (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 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 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,
ten percent (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, one
hundred percent (100%) of the gross amount of the Exchange Contracts.
(2) 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 fees, costs and expenses relating thereto or arising in
connection therewith.
(3) 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 One Million
Dollars ($1,000,000) (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:
(a) 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
(b) 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).
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(4) 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.
(5) 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.
(6) 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 and hold it harmless from and
against any and all claims, debts, liabilities, demands, obligations, actions,
costs and expenses (including, without limitation, 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. 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.
3. Interest Rates, Payments, and Calculations
(1) 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) percentage point above the Prime 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 three-quarters (.75) of a percentage point
above the Prime Rate on the date that Borrower simultaneously (i) achieves, as
of the last day of any calendar month, a ratio of Quick Assets to Current
Liabilities of at least 1.15 to 1.00, and (ii) achieves, as of the last day of
any fiscal quarter a net profit, for the preceding three quarters, of at least
Two Million Five Hundred Thousand Dollars ($2,500,000), and (iii) has a net
profit of at least One Dollar ($1.00) in each of the preceding three quarters.
(2) Default Rate. All Obligations shall bear
interest, from and after the occurrence of an Event of Default, at a rate equal
to five (5) percentage points above the interest rate applicable immediately
prior to the occurrence of the Event of Default. From and after the date
Borrower (i) fails to comply with Sections 6.8, 6.9, 6.10 or 6.11 herein and
(ii) cures or waives any such covenant violations, provided such waiver shall
be given in Bank's sole discretion, any Advances shall bear interest, on the
average Daily Balance, at a rate equal to one and one quarter (1.25) percentage
points above the Prime Rate.
(3) Payments. Interest hereunder shall be due
and payable on the twenty-sixth calendar day of each month during the term
hereof. Bank shall, at its option, charge such interest, all Bank Expenses,
and all Periodic Payments against any of Borrower's deposit accounts or against
the Committed Line, in which case those amounts shall thereafter accrue
interest at the rate then applicable hereunder. Any interest not paid when due
shall be compounded by becoming a part of the Obligations, and such interest
shall thereafter accrue interest at the rate then applicable hereunder.
(4) 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.
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4. Crediting Payments. Prior to the occurrence of an
Event of Default, Bank shall credit a wire transfer of funds, check or other
item of payment to such deposit account or Obligation as Borrower specifies.
After the occurrence of an Event of Default, the receipt by Bank of any wire
transfer of funds, check, or other item of payment shall be immediately applied
to conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon California time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the
Loan Documents would otherwise be due (except by reason of acceleration) on a
date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
5. Fees. Borrower shall pay to Bank the following:
(1) Facility Fee. A Facility Fee equal to Twenty
Thousand Dollars ($20,000), which fee shall be due on the Closing Date and
shall be fully earned and nonrefundable;
(2) Letters of Credit. An issuance fee for each
standby Letter of Credit of two percent (2%) of the amount of such Letter of
Credit, due on the date of the issuance of such Letter of Credit;
(3) 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;
(4) 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.
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:
(1) subjects Bank to any tax with respect to
payments of principal or interest or any other amounts payable hereunder by
Borrower or otherwise with respect to the transactions contemplated hereby
(except for taxes on the overall net income of Bank imposed by the United
States of America or any political subdivision thereof);
(2) 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
(3) imposes upon Bank any other condition with
respect to its performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
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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 Maturity Date. Notwithstanding the foregoing,
Bank shall have the right to terminate its obligation to make Credit Extensions
under this Agreement immediately and without notice upon the occurrence and
during the continuance of an Event of Default. Notwithstanding termination,
Bank's Lien on the Collateral shall remain in effect for so long as any
Obligations are outstanding.
E. CONDITIONS OF LOANS
1. Conditions Precedent to Initial Credit Extension.
The obligation of Bank to make the initial Credit Extension is subject to the
condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, the following:
(1) this Agreement;
(2) a certificate of the Secretary of Borrower
with respect to incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(3) financing statements (Forms UCC-1);
(4) insurance certificate;
(5) payment of the fees and Bank Expenses then
due specified in Section 2.5 hereof; and
(6) such other documents, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.
2. Conditions Precedent to all Credit Extensions. The
obligation of Bank to make each Credit Extension, including the initial Credit
Extension, is further subject to the following conditions:
(1) timely receipt by Bank of the Payment/Advance
Form as provided in Section 2.1;
(2) timely receipt by Bank of the letter of
credit applications, foreign exchange documents and/or other documents
specified in Section 2.1 hereof; and
(3) the representations and warranties contained
in Section 5 shall be true and correct in all material respects on and as of
the date of such Payment/Advance Form and on the effective date of each Credit
Extension as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would result from such Credit
Extension. The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Credit Extension as
to the accuracy of the facts referred to in this Section 3.2(c).
F. CREATION OF SECURITY INTEREST
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.
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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.
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.
REPRESENTATIONS AND WARRANTIES Borrower represents and warrants as
follows:
4. Due Organization and Qualification. Borrower and
each Subsidiary is a corporation duly existing and in good standing under the
laws of its state of incorporation and qualified and licensed to do business
in, and is in good standing in, any state in which the conduct of its business
or its ownership of property requires that it be so qualified.
5. Due Authorization; No Conflict. The execution,
delivery, and performance of the Loan Documents are within Borrower's powers,
have been duly authorized, and are not in conflict with nor constitute a breach
of any provision contained in Borrower's Articles of Incorporation or Bylaws,
nor will they constitute an event of default under any material agreement to
which Borrower is a party or by which Borrower is bound. Borrower is not in
default under any agreement to which it is a party or by which it is bound,
which default could have a Material Adverse Effect.
6. No Prior Encumbrances. Borrower has good and
indefeasible title to the Collateral, free and clear of Liens, except for
Permitted Liens.
7. 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.
8. Merchantable Inventory. All Inventory is in all
material respects of good and marketable quality, free from all material
defects.
8.
9. 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.
10. 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.
11. 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
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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.
12. Solvency. Borrower is solvent and able to pay its
debts (including trade debts) as they mature.
13. 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.
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14. 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.
15. 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.
16. Subsidiaries. Borrower does not own any stock,
partnership interest or other equity securities of any Person, except for
Permitted Investments.
17. 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.
18. 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.
G. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of
all outstanding Obligations, and for so long as Bank may have any commitment to
make a Credit Extension hereunder, Borrower shall do all of the following:
1. Good Standing. Borrower shall maintain its and each
of its Subsidiaries' corporate existence and good standing in its jurisdiction
of incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
2. Government Compliance. Borrower shall meet, and
shall cause each Subsidiary to meet, the minimum funding requirements of ERISA
with respect to any employee benefit plans subject to ERISA. Borrower shall
comply, and shall cause each Subsidiary to comply, with all statutes, laws,
ordinances and government rules and regulations to which it is subject,
noncompliance with which could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral.
3. Financial Statements, Reports, Certificates.
Borrower shall deliver to Bank: (a) as soon as available, but in any event
within thirty (30) days after the end of each month, 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
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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 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; and (e) 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, Borrower
shall deliver to Bank a Borrowing Base Certificate signed by a Responsible
Officer in substantially the form of Exhibit C hereto, together with aged
listings of accounts receivable and accounts payable.
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the
form of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than every six (6) months unless an Event of Default
has occurred and is continuing.
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 Two Hundred Fifty Thousand Dollars ($250,000).
5. Taxes. Borrower shall make, and shall cause each
Subsidiary to make, due and timely payment or deposit of all material federal,
state, and local taxes, assessments, or contributions required of it by law,
and will execute and deliver to Bank, on demand, appropriate certificates
attesting to the payment or deposit thereof; and Borrower will make, and will
cause each Subsidiary to make, timely payment or deposit of all material tax
payments and withholding taxes required of it by applicable laws, including,
but not limited to, those laws concerning F.I.C.A., F.U.T.A., state disability,
and local, state, and federal income taxes, and will, upon request, furnish
Bank with proof satisfactory to Bank indicating that Borrower or a Subsidiary
has made such payments or deposits; provided that Borrower or a Subsidiary need
not make any payment if the amount or validity of such payment is contested in
good faith by appropriate proceedings and is reserved against (to the extent
required by GAAP) by Borrower.
6. Insurance
(1) 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.
(2) 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
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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.
7. Principal Depository. Borrower shall maintain its
principal depository and operating accounts with Bank.
8. Quick Ratio. Borrower shall maintain, as of the last
day of each calendar month, a ratio of Quick Assets to Current Liabilities of
at least 0.80 to 1.00.
9. Debt-Net Worth Ratio. Borrower shall maintain, as of
the last day of each calendar month, a ratio of Total Liabilities less
Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not more than
.90 to 1.00.
10. Tangible Net Worth. Borrower shall maintain, as of
the last day of each of Borrower's fiscal quarters, a Tangible Net Worth of not
less than Twenty One Million Five Hundred Thousand Dollars ($21,500,000) plus
seventy-five percent (75%) of net profit (excluding losses) for the prior
quarter, on a consolidated basis, plus one hundred percent (100%) of net
proceeds of equity or Subordinated Debt received after the date hereof.
11. Profitability. Beginning with the fiscal quarter
ending December 31, 1996, Borrower shall have a minimum net profit of One
Dollars ($1.00) for each fiscal quarter.
12. Further Assurances. At any time and from time to
time Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
H. 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 Credit
Extensions, Borrower will not do any of the following:
1. Dispositions. Convey, sell, lease, transfer or
otherwise dispose of (collectively, a "Transfer"), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, other
than: (i) Transfers of Inventory in the ordinary course of business; (ii)
Transfers of non-exclusive licenses and similar arrangements for the use of the
property of Borrower or its Subsidiaries; or (iii) Transfers of worn-out or
obsolete Equipment.
2. Change in Business. Engage in any business, or
permit any of its Subsidiaries to engage in any business, other than the
businesses currently engaged in by Borrower and any business substantially
similar or related thereto (or incidental thereto), or suffer a material change
in Borrower's ownership. Borrower will not, without thirty (30) days prior
written notification to Bank, relocate its chief executive office.
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
ten percent (10%) of Net Worth. 3.
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.
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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.
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.
7. Repayment of Heraeus Med. GmbH. Make any payment in
respect of an obligation due and owing to Heraeus Med. GmbH with respect to an
account payable in the amount as of the date hereof of Two Million Five Hundred
Thousand Dollars ($2,500,000) without the prior written consent of Bank, given
in its sole discretion.
8. 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 and as permitted in Section 7.3.
9. 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.
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.
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.
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.
I. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
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;
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2. Covenant Default. If Borrower fails to perform any
obligation under Sections 6.7, 6.8, 6.9, 6.10 or 6.11 or violates any of the
covenants contained in Article 7 of this Agreement, or fails or neglects to
perform, keep, or observe any other material term, provision, condition,
covenant, or agreement contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and
Bank and as to any default under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure such default within
ten (10) days after Borrower receives notice thereof or any officer of Borrower
becomes aware thereof; provided, however, that if the default cannot by its
nature be cured within the ten (10) day period or cannot after diligent
attempts by Borrower be cured within such ten (10) day period, and such default
is likely to be cured within a reasonable time, then Borrower shall have an
additional reasonable period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable time period
the failure to have cured such default shall not be deemed an Event of Default
(provided that no Credit Extensions will be required to be made during such
cure period);
3. Material Adverse Change. If there occurs a material
adverse change in Borrower's business or financial condition, or if there is a
material impairment of the prospect of repayment of any portion of the
Obligations or a material impairment of the value or priority of Bank's
security interests in the Collateral;
4. Attachment. If any material portion of Borrower's
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any trustee, receiver or person
acting in a similar capacity and such attachment, seizure, writ or distress
warrant or levy has not been removed, discharged or rescinded within ten (10)
days, or if Borrower is enjoined, restrained, or in any way prevented by court
order from continuing to conduct all or any material part of its business
affairs, or if a judgment or other claim becomes a lien or encumbrance upon any
material portion of Borrower's assets, or if a notice of lien, levy, or
assessment is filed of record with respect to any of Borrower's assets by the
United States Government, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or governmental agency, and the
same is not paid within ten (10) days after Borrower receives notice thereof,
provided that none of the foregoing shall constitute an Event of Default where
such action or event is stayed or an adequate bond has been posted pending a
good faith contest by Borrower (provided that no Credit Extensions will be
required to be made during such cure period);
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 ten (10)
days (provided that no Credit Extensions will be made prior to the dismissal of
such Insolvency Proceeding);
6. Other Agreements. If there is a default in any
agreement to which Borrower is a party with a third party or parties resulting
in a right by such third party or parties, whether or not exercised, to
accelerate the maturity of any Indebtedness in an amount in excess of One
Hundred Thousand Dollars ($100,000) or that could have a Material Adverse
Effect;
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. Judgments. If a judgment or judgments for the
payment of money in an amount, individually or in the aggregate, of at least
One Hundred Thousand Dollars ($100,000) shall be rendered against Borrower and
shall remain unsatisfied and unstayed for a period of ten (10) days (provided
that no Credit Extensions will be made prior to the satisfaction or stay of
such judgment); or
9. Misrepresentations. If any material
misrepresentation or material misstatement exists now or hereafter in any
warranty or representation set forth herein or in any certificate delivered to
Bank by any
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Responsible Officer pursuant to this Agreement or to induce Bank to enter into
this Agreement or any other Loan Document.
10. BANK'S RIGHTS AND REMEDIES 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:
(1) 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);
(2) 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;
(3) 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;
(4) Settle or adjust disputes and claims directly
with account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(5) 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;
(6) 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;
(7) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Bank is hereby granted a license or other
right, solely pursuant to the provisions of this Section 9.1, to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral and,
in connection with Bank's exercise of its rights under this Section 9.1,
Borrower's rights under all licenses and all franchise agreements shall inure
to Bank's benefit;
(8) 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;
(9) Bank may credit bid and purchase at any
public sale; and
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(10) Any deficiency that exists after disposition
of the Collateral as provided above will be paid immediately by Borrower.
11. 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 bill of lading relating to any Account, drafts against account
debtors, schedules and assignments of Accounts, verifications of Accounts, and
notices to account debtors; (d) make, settle, and adjust all claims under and
decisions with respect to Borrower's policies of insurance; and (e) settle and
adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable;
provided Bank may exercise such power of attorney to sign the name of Borrower
on any of the documents described in Section 4.2 regardless of whether an Event
of Default has occurred. The appointment of Bank as Borrower's attorney in
fact, and each and every one of Bank's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully repaid
and performed and Bank's obligation to provide advances hereunder is
terminated.
12. Accounts Collection. At any time from the date of
this Agreement, Bank may notify any Person owing funds to Borrower of Bank's
security interest in such funds and verify the amount of such Account.
Borrower shall collect all amounts owing to Borrower for Bank, receive in trust
all payments as Bank's trustee, and immediately deliver such payments to Bank
in their original form as received from the account debtor, with proper
endorsements for deposit.
13. 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.
14. 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.
15. 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.
16. 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,
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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.
J. 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: Laserscope
3052 Orchard Drive
San Jose, CA 95134
Attn: Dennis LaLumandiere
FAX: (408) 943-1462
If to Bank: Silicon Valley Bank
1731 Embarcadero Road, Suite 220
Palo Alto, CA 94303
Attn: Gary Reagan
FAX: (415) 812-0640
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.
K. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard
to principles of conflicts of law. Each of Borrower and Bank hereby submits to
the exclusive jurisdiction of the state and Federal courts located in the
County of Santa Clara, 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.
L. GENERAL PROVISIONS
1. Successors and Assigns. This Agreement shall bind
and inure to the benefit of the respective successors and permitted assigns of
each of the parties; provided, however, that neither this Agreement nor any
rights hereunder may be assigned by Borrower without Bank's prior written
consent, which consent may be granted or withheld in Bank's sole discretion.
Bank shall have the right without the consent of or notice to Borrower to sell,
transfer, negotiate, or grant participation in all or any part of, or any
interest in, Bank's obligations, rights and benefits hereunder.
2. Indemnification. Borrower shall defend, indemnify
and hold harmless Bank and its officers, employees, and agents against: (a)
all obligations, demands, claims, and liabilities claimed or asserted by any
other party in connection with the transactions contemplated by this Agreement;
and (b) all losses or Bank Expenses in any
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way suffered, incurred, or paid by Bank as a result of or in any way arising
out of, following, or consequential to transactions between Bank and Borrower
whether under this Agreement, or otherwise (including without limitation
reasonable attorneys fees and expenses), except for losses caused by Bank's
gross negligence or willful misconduct.
3. Time of Essence. Time is of the essence for the
performance of all obligations set forth in this Agreement.
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.
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, except that any financing statements or other
agreements or instruments filed by Bank with respect to Borrower shall remain
in full force and effect.
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.
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.
8. Effect of Amendment and Restatement. This Agreement
is intended to and does completely amend and restate, without novation, the
Original Loan Documents. All security interests granted under the Original
Loan Documents are hereby confirmed and ratified and shall continue to secure
all Obligations under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
LASERSCOPE
By: /s/ Dennis LaLumandiere
Title: Vice President of Finance and CFO
By: /s/ Robert V. McCormick
Title: President and CEO
SILICON VALLEY BANK
By: /s/ Gary Reagan
Title: Vice President
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EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
M. 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;
N. 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;
O. All contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, trademarks,
servicemarks, 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;
P. 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;
Q. 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;
R. 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
S. Any and all claims, rights and interests in any of the above
and all substitutions for, additions and accessions to and proceeds thereof.
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EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: ______________________
FAX#: (408) 496-2426 TIME: ________________
_______________________________________________________________________________
FROM: LASERSCOPE
-------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY: _________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE: _________________________________________________________
PHONE NUMBER: _________________________________________________________________
FROM ACCOUNT # ___________ TO ACCOUNT # _______________________________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $______________________________________
PRINCIPAL PAYMENT (ONLY) $______________________________________
INTEREST PAYMENT (ONLY) $______________________________________
PRINCIPAL AND INTEREST (PAYMENT) $______________________________________
OTHER INSTRUCTIONS: ___________________________________________________________
_______________________________________________________________________________
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the
date of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that these representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
_______________________________________________________________________________
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- -------------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
- ------------------------------ --------------------------------
Authorized Requestor Phone #
- ------------------------------ --------------------------------
Received By (Bank) Phone #
-------------------------------
Authorized Signature (Bank)
- -------------------------------------------------------------------------------
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EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: Laserscope
Lender: Silicon Valley Bank
Commitment Amount: $5,000,000
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. 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 (75% of #14) $
-----------
BALANCES
16. Maximum Loan Amount $
-----------
17. Total Funds Available [Lesser of #16 or (#13 plus #15)] $
-----------
18. Present balance owing on Line of Credit/Foreign Exchange Reserve $
-----------
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:
----------------------------
BANK USE ONLY
LASERSCOPE
Rec'd By:___________________
Authorized Signer
Date:_______________________
By: _____________________________
Authorized Signer Verified:___________________
Authorized Signer
Date:_______________________
----------------------------
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EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: LASERSCOPE
The undersigned authorized officer of Laserscope hereby certifies that
in accordance with the terms and conditions of the Amended and Restated Loan
and Security Agreement between Borrower and Bank (the "Agreement"), (i)
Borrower is in complete compliance for the period ending ____________ with
all required covenants except as noted below and (ii) all representations and
warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 20 days Yes No
A/R Audit Initial and Semi-Annual Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio .80:1.00 _____:1.0 Yes No
Maximum Debt/Tangible Net Worth .90:1.00 _____:1.0 Yes No
Maintain on a Quarterly Basis:
Minimum Tangible Net Worth $21,500,000* $________ Yes No
Profitability: Quarterly** $1 $________ Yes No
* Plus 75% of net profit (exclusive of losses) plus 100% of new equity
or subordinated debt
** Beginning 12/31/96.
Comments Regarding Exceptions: See Attached.
Sincerely,
----------------------------
- -------------------------------------- BANK USE ONLY
SIGNATURE
Rec'd By:___________________
- -------------------------------------- Authorized Signer
TITLE
Date:_______________________
- --------------------------------------
DATE Verified:___________________
Authorized Signer
Date:_______________________
Compliance Status Yes No
----------------------------
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DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Laserscope Bank: Silicon Valley Bank
LOAN TYPE. This is a variable rate, revolving line of credit of a principal
amount up to $5,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line
Amount paid to Borrower directly: $
--------
Undisbursed Funds $
--------
Principal $
--------
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the following charges:
Prepaid Finance Charges Paid in Cash: $
--------
$ 20 ,000 Loan Fee
$ Accounts Receivables Audit
---------
Other Charges Paid in Cash: $
--------
$TBD UCC Search Fees
$75 UCC Filing Fees
$TBD Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $
--------
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct
from Borrower's account numbered ______________ the amount of any loan payment.
If the funds in the account are insufficient to cover any payment, Bank shall
not be obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF NOVEMBER 27, 1996.
BORROWER:
- ----------------------------------
- ----------------------------------
Authorized Officer
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AGREEMENT TO PROVIDE INSURANCE
Grantor: Laserscope Bank: Silicon Valley Bank
INSURANCE REQUIREMENTS. Laserscope ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or
the providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and
liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation
that coverage will not be cancelled or
diminished without a minimum of twenty (20)
days' prior written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on
or before closing, evidence of the required insurance as provided above, with
an effective date of November 27, 1996, or earlier. Grantor acknowledges and
agrees that if Grantor fails to provide any required insurance or fails to
continue such insurance in force, Bank may do so at Grantor's expense as
provided in the Loan and Security Agreement. The cost of such insurance, at
the option of Bank, shall be payable on demand or shall be added to the
indebtedness as provided in the security document. GRANTOR ACKNOWLEDGES THAT
IF BANK SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED
PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE
LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN
ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED NOVEMBER
27, 1996.
GRANTOR:
LASERSCOPE
x
Authorized Officer
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
CORPORATE RESOLUTIONS TO BORROW
Borrower: LASERSCOPE
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I, the undersigned Secretary or Assistant Secretary of LaserScope (the
"Corporation"), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the State of California.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Articles of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the
Corporation, duly called and held, at which a quorum was present and voting (or
by other duly authorized corporate action in lieu of a meeting), the following
resolutions were adopted.
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- ------------------
- ----------------------- -------------------- -----------------------
- ----------------------- -------------------- -----------------------
- ----------------------- -------------------- -----------------------
- ----------------------- -------------------- -----------------------
acting for an on behalf of this Corporation and as its act and deed be, and
they hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of November 27, 1996 (the "Loan
Agreement").
Execute Notes. To execute and deliver to Bank the promissory note or
notes of the Corporation, on Lender's forms, at such rates of interest and on
such terms as may be agreed upon, evidencing the sums of money so borrowed or
any indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion
of the notes.
Grant Security. To grant a security interest to Bank in the
Collateral described in the Loan Agreement, which security interest shall
secure all of the Corporation's Obligations, as described in the Loan
Agreement.
Negotiate Items. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
Letters of Credit; Foreign Exchange. To execute letters of credit
applications, foreign exchange agreements and other related documents
pertaining to Bank's issuance of letters of credit and foreign exchange
contracts.
2
36
Further Acts. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances thereunder,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as they may in their discretion deem reasonably necessary or proper
in order to carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect
at the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names;
that the foregoing Resolutions now stand of record on the books of the
Corporation; and that the Resolutions are in full force and effect and have not
been modified or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on November 27, 1996
and attest that the signatures set opposite the names listed above are their
genuine signatures.
CERTIFIED TO AND ATTESTED BY:
X
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Attachment 1 - Articles of Incorporation
Attachment 2 - Bylaws
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