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[NOTE: TEXT IN BRACKETS IS STRICKEN IN THE ORIGINAL.]
Exhibit 10.66
[LOGO] SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
BORROWER: DEPOTECH CORPORATION
ADDRESS: 10450 SCIENCE CENTER DRIVE
SAN DIEGO, CALIFORNIA 92121
DATE: JUNE 18, 1996
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK ("Silicon"), whose address is 3003 Tasman Drive, Santa
Clara, California 95054 and the borrower named above (the "Borrower"), whose
chief executive office is located at the above address ("Borrower's Address").
1. LOANS.
1.1 LOANS. Silicon, in its reasonable discretion, will make loans to the
Borrower (the "Loans") in amounts determined by Silicon in its reasonable
discretion up to the amount (the "Credit Limit") shown on the Schedule to this
Agreement (the "Schedule"), provided no Event of Default and no event which,
with notice or passage of time or both, would constitute an Event of Default
has occurred. The Borrower is responsible for monitoring the total amount of
Loans and other Obligations outstanding from time to time, and Borrower shall
not permit the same, at any time, to exceed the Credit Limit. If at any time
the total of all outstanding Loans and all other Obligations exceeds the Credit
Limit, the Borrower shall immediately pay the amount of the excess to Silicon,
without notice or demand.
1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule hereto. Interest shall be payable
monthly, on the due date shown on the monthly billing from Silicon to the
Borrower. Silicon may, in its discretion, charge interest to Borrower's
deposit accounts maintained with Silicon.
1.3 FEES. The Borrower shall pay to Silicon a loan origination fee in the
amount shown on the Schedule hereto concurrently herewith. This fee is in
addition to all interest and other sums payable to Silicon and is not
refundable.
2. GRANT OF SECURITY INTEREST.
2.1 OBLIGATIONS. The term "Obligations" as used in this Agreement means
the following: the obligation to pay all Loans and all interest thereon when
due, and to pay and perform when due all other present and future indebtedness,
liabilities, obligations, guarantees, covenants, agreements, warranties and
representations of the Borrower to Silicon, whether joint or several, monetary
or non-monetary, and whether created pursuant to this Agreement or any other
present or future agreement or otherwise. Silicon may, in its discretion,
require that Borrower pay monetary Obligations in cash to Silicon, or charge
them to Borrower's Loan account, in which event they will bear interest at the
same rate applicable to the Loans. Silicon may also, in its discretion, charge
any monetary Obligations to Borrower's deposit accounts maintained with
Silicon.
2.2 COLLATERAL. As security for all Obligations, the Borrower hereby
grants Silicon a continuing security interest in all of the Borrower's interest
in the types of property described below, whether now owned or hereafter
acquired, and wherever located (collectively, the "Collateral"): [(a) All
accounts, contract rights, chattel paper, letters of credit, documents,
securities, money, and instruments, and all other obligations now or in the
future owing to the Borrower; (b) All inventory, goods, merchandise, materials,
raw materials, work in process, finished goods, farm products, advertising,
packaging and shipping materials, supplies, and all other tangible personal
property which is held for sale or lease or furnished under contracts of
service or consumed in the Borrower's business, and all warehouse receipts and
other documents;] and (c) All equipment, including without limitation all
machinery, fixtures, trade fixtures, vehicles, furnishings, furniture,
materials, tools, machine tools, office equipment, computers and peripheral
devices, appliances, apparatus, parts, dies, and jigs; [(d) All general
intangibles including, but not limited to, deposit accounts, goodwill, names,
trade names, trademarks and the goodwill of the business symbolized thereby,
trade secrets, drawings, blueprints, customer lists, patents, patent
applications, copyrights, security deposits, loan commitment fees, federal,
state and]
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[local tax refunds and claims, all rights in all litigation presently or
hereafter pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom, all claims of
Borrower against Silicon, all rights to purchase or sell real or personal
property, all rights as a licensor or licensee of any kind, all royalties,
licenses, processes, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation
credit, liability, property and other insurance), and all other rights,
privileges and franchises of every kind; (e) All books and records, whether
stored on computers or otherwise maintained;] and (f) All substitutions,
additions and accessions to any of the foregoing, and all [products], proceeds
and insurance proceeds of the foregoing, and all guaranties of and security for
the foregoing; and all books and records relating to any of the foregoing.
[Silicon's security interest in any present or future technology (including
patents, trade secrets, and other technology) shall be subject to any licenses
or rights now or in the future granted by the Borrower to any third parties in
the ordinary course of Borrower's business; provided that if the Borrower
proposes to sell, license or grant any other rights with respect to any
technology in a transaction that, in substance, conveys a major part of the
economic value of that technology, Silicon shall first be requested to release
its security interest in the same, and Silicon may withhold such release in its
discretion.] *
*FOLLOWING THE EARLIER OF (A) THE END OF THE SECOND DISBURSEMENT PERIOD (AS
DEFINED IN THE SCHEDULE) OR (B) THE DATE OF THE COMPLETE DRAWDOWN OF THE
AVAILABLE LOANS HEREUNDER, SILICON AGREES, ON REQUEST OF BORROWER, TO RELEASE
ITS SECURITY INTEREST IN EQUIPMENT OF THE BORROWER WHICH DOES NOT CONSTITUTE
FINANCED EQUIPMENT (AS DEFINED IN THE SCHEDULE), UPON CONFIRMATION THAT SILICON
HAS A FIRST-PRIORITY, PERFECTED SECURITY INTEREST IN ALL OF THE FINANCED
EQUIPMENT AND THAT NO EVENT OF DEFAULT AND NO EVENT WHICH, WITH NOTICE OR
PASSAGE OF TIME OR BOTH, WOULD CONSTITUTE AN EVENT OF DEFAULT HAS OCCURRED AND
IS CONTINUING.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
The Borrower represents and warrants to Silicon as follows, and the Borrower
covenants that the following representations will continue to be true, and that
the Borrower will comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. The Borrower, if a corporation, is
and will continue to be, duly authorized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. The Borrower is and
will continue to be qualified and licensed to do business in all jurisdictions
in which any failure to do so would have a material adverse effect on the
Borrower. The execution, delivery and performance by the Borrower of this
Agreement, and all other documents contemplated hereby have been duly and
validly authorized, are enforceable against the Borrower in accordance with
their terms, and do not violate any law or any provision of, and are not
grounds for acceleration under, any agreement or instrument which is binding
upon the Borrower.
3.2 NAME; TRADE NAMES AND STYLES. The name of the Borrower set forth in
the heading to this Agreement is its correct name. Listed on the Schedule
hereto are all prior names of the Borrower and all of Borrower's present and
prior trade names. The Borrower shall give Silicon 15 days' prior written
notice before changing its name or doing business under any other name. The
Borrower has complied, and will in the future comply, with all laws relating to
the conduct of business under a fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is the Borrower's chief executive office. In
addition, the Borrower has places of business and Collateral is located only at
the locations set forth on the Schedule to this Agreement. The Borrower will
give Silicon at least 15 days prior written notice before changing its chief
executive office or locating the Collateral at any other location.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. The Borrower is now, and will
at all times in the future be, the sole owner of all the Collateral, except for
items of equipment which are leased by the Borrower. The Collateral now is and
will remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for the following ("Permitted Liens"):
(i) purchase money security interests in specific items of equipment; (ii)
leases of specific items of equipment; (iii) liens for taxes not yet payable;
(iv) additional security interests and liens consented to in writing by Silicon
in its reasonable discretion, which consent shall not be unreasonably withheld;
and (v) security interests being terminated substantially concurrently with
this Agreement. [Silicon will have the right to require, as a condition to its
consent under subparagraph (iv) above, that the holder of the additional
security interest or lien sign an intercreditor agreement on Silicon's then
standard form, acknowledge that the security interest is subordinate to the
security interest in favor of Silicon, and agree not to take any action to
enforce its subordinate security interest so long as any Obligations remain
outstanding, and that the Borrower agree that any uncured default in any
obligation secured by the subordinate security interest shall also constitute
an Event of Default under this Agreement.] Silicon now has, and will continue
to have, a perfected and enforceable security interest in all of the
Collateral, subject only to the Permitted Liens, and the Borrower will at all
times defend Silicon and the Collateral against all claims of others. [None of
the Collateral now is or will be affixed to any real property in such a manner,
or with such intent, as to become a fixture.]
3.5 MAINTENANCE OF COLLATERAL. The Borrower will maintain the Collateral
in good working condition, and the Borrower will not use the Collateral for any
unlawful purpose. The Borrower will immediately advise Silicon in writing of
any material loss or damage to the Collateral.
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3.6 BOOKS AND RECORDS. The Borrower has maintained and will maintain at
the Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION AND STATEMENTS. All financial statements now or
in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect the financial condition of the
Borrower, at the times and for the periods therein stated. Since the last date
covered by any such statement, there has been no material adverse change in the
financial condition or business of the Borrower. The Borrower is now and will
continue to be solvent. The Borrower will provide Silicon: (i) within 30 days
after the end of each month, a monthly financial statement prepared by the
Borrower, and a Compliance Certificate in such form as Silicon shall reasonably
specify, signed by the Chief Financial Officer of the Borrower, certifying that
as of the end of such month the Borrower was in full compliance with all of the
terms and conditions of this Agreement, and setting forth calculations showing
compliance with the financial covenants set forth on the Schedule and such
other information as Silicon shall reasonably request; and (ii) within 120 days
following the end of the Borrower's fiscal year, complete annual financial
statements, certified by independent certified public accountants acceptable to
Silicon and accompanied by the unqualified report thereon by said independent
certified public accountants.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. The Borrower has
timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and the Borrower has timely paid, and
will timely pay, all foreign, federal, state and local taxes, assessments,
deposits and contributions now or in the future owed by the Borrower. The
Borrower may, however, defer payment of any contested taxes, provided that the
Borrower (i) in good faith contests the Borrower's obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted,
(ii) notifies Silicon in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a lien upon any of the
Collateral. The Borrower is unaware of any claims or adjustments proposed for
any of the Borrower's prior tax years which could result in additional taxes
becoming due and payable by the Borrower. The Borrower has paid, and shall
continue to pay all amounts necessary to fund all present and future pension,
profit sharing and deferred compensation plans in accordance with their terms,
and the Borrower has not and will not withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any such plan which could result in any liability of the
Borrower, including, without limitation, any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
3.9 COMPLIANCE WITH LAW. The Borrower has complied, and will comply, in
all material respects, with all provisions of all foreign, federal, state and
local laws and regulations relating to the Borrower, including, but not limited
to, those relating to the Borrower's ownership of real or personal property,
conduct and licensing of the Borrower's business, and environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of the
Borrower's knowledge) threatened by or against or affecting the Borrower in any
court or before any governmental agency (or any basis therefor known to the
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of the Borrower,
or in any material impairment in the ability of the Borrower to carry on its
business in substantially the same manner as it is now being conducted. The
Borrower will promptly inform Silicon in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or
against the Borrower involving amounts in excess of $250,000.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes.
4. ADDITIONAL DUTIES OF THE BORROWER.
4.1 FINANCIAL AND OTHER COVENANTS. The Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule to this
Agreement.
[4.2 OVERADVANCE; PROCEEDS OF ACCOUNTS. If for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit, without
limiting Silicon's other remedies, and whether or not Silicon declares an Event
of Default, Borrower shall remit to Silicon all checks and other proceeds of
Borrower's accounts and general intangibles, in the same form as received by
Borrower, within one day after Borrower's receipt of the same, to be applied to
the Obligations in such order as Silicon shall determine in its discretion.]
4.3 INSURANCE. The Borrower shall, at all times insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to Silicon, in such form and amounts as
Silicon may reasonably require. All such insurance policies shall name Silicon
as an additional loss payee, and shall contain a lenders loss payee endorsement
in form reasonably acceptable to Silicon. Upon receipt of the proceeds of any
such insurance, Silicon shall apply such proceeds in reduction of the
Obligations as Silicon shall determine in its sole and absolute discretion,
except that, provided no Event of Default has occurred, Silicon shall release
to the Borrower insurance proceeds with respect to equipment totaling less than
[$100,000]*, which shall be utilized by the Borrower for the replacement of the
equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used. If the Borrower fails to provide or pay for any insurance, Silicon may,
but is not obligated to, obtain the same at the Borrower's expense.
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The Borrower shall promptly deliver to Silicon copies of all reports made to
insurance companies.
* $250,000
4.4 REPORTS. The Borrower shall provide Silicon with such written reports
with respect to the Borrower (including without limitation budgets, sales
projections, operating plans and other financial documentation), as Silicon
shall from time to time reasonably specify *.
* SUBJECT, HOWEVER, TO SILICON ENTERING INTO A CONFIDENTIALITY AGREEMENT
REGARDING THE USE AND DISCLOSURE OF BORROWER'S CONFIDENTIAL INFORMATION, WHICH
SHALL BE SUBSTANTIALLY SIMILAR IN FORM AND SUBSTANCE TO THE EXISTING
CONFIDENTIALITY AGREEMENT (AS DEFINED IN SECTION 7.3 HEREOF) AND SUBJECT TO THE
RIGHTS TO DISCLOSURE UNDER SECTION 4.5 HEREOF
4.5 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At all reasonable times, and
upon one business day notice, Silicon, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy the Borrower's
accounting books and records and Borrower's books and records relating to the
Collateral. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Silicon shall have
the right to disclose any such information to its auditors, regulatory
agencies, and attorneys, and pursuant to any subpoena or other legal process.
[The foregoing audits shall be at Silicon's expense, except that the Borrower
shall reimburse Silicon for its reasonable out of pocket costs for semi-annual
accounts receivable audits by third parties retained by Silicon, and Silicon
may debit Borrower's deposit accounts with Silicon for the cost of such
semi-annual accounts receivable audits (in which event Silicon shall send
notification thereof to the Borrower)]. Notwithstanding the foregoing, after
the occurrence of an Event of Default all audits shall be at the Borrower's
expense *.
* , WITH REASONABLE COSTS AND EXPENSES TO BE CHARGED TO THE BORROWER IN
CONNECTION THEREWITH
4.6 NEGATIVE COVENANTS. Except as may be permitted in the Schedule
hereto, the Borrower shall not, without Silicon's prior written consent, do any
of the following: (i) merge or consolidate with another corporation, except
that the Borrower may merge or consolidate with another corporation if the
Borrower is the surviving corporation in the merger and the aggregate value of
the assets acquired in the merger do not exceed 25% of Borrower's Tangible Net
Worth (as defined in the Schedule) as of the end of the month prior to the
effective date of the merger, and the assets of the corporation acquired in the
merger are not subject to any liens or encumbrances, except Permitted Liens;
(ii) acquire any assets outside the ordinary course of business for an
aggregate purchase price exceeding 25% of Borrower's Tangible Net Worth (as
defined in the Schedule) as of the end of the month prior to the effective date
of the acquisition; (iii) enter into any other transaction outside the ordinary
course of business (except as permitted by the other provisions of this
Section); (iv) sell or transfer any Collateral, [except for the sale of finished
inventory in the ordinary course of the Borrower's business,] and except for the
sale of obsolete or unneeded equipment in the ordinary course of business*; (v)
make any loans of any money or any other assets **; (vi) incur any debts,
outside the ordinary course of business, which would have a material, adverse
effect on the Borrower or on the prospect of repayment of the Obligations;
(vii) guarantee or otherwise become liable with respect to the obligations of
another party or entity; (viii) pay or declare any dividends on the Borrower's
stock (except for dividends payable solely in stock of the Borrower); (ix)
redeem, retire, purchase or otherwise acquire, directly or indirectly, any of
the Borrower's stock; (x) make any change in the Borrower's capital structure
which has a material adverse effect on the Borrower or on the prospect of
repayment of the Obligations; or (xi) dissolve or elect to dissolve ***.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Event of Default and no event which (with notice or passage of
time or both) would constitute an Event of Default would occur as a result of
such transaction.
* (OTHER THAN EQUIPMENT SPECIFICALLY FINANCED BY SILICON)
** EXCEPT AS PERMITTED IN THE SCHEDULE HERETO
*** PROVIDED THAT NOTHING IN THIS SECTION SHALL PREVENT BORROWER FROM
EFFECTING A PUBLIC OFFERING OF BORROWER'S STOCK
4.7 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any
manner relating to the Borrower, the Borrower shall, without expense to
Silicon, make available the Borrower and its officers, employees and agents and
the Borrower's books and records to the extent that Silicon may deem them
reasonably necessary in order to prosecute or defend any such suit or
proceeding.
[4.8 VERIFICATION. Silicon may, from time to time, following prior
notification to Borrower, verify directly with the respective account debtors
the validity, amount and other matters relating to the Borrower's accounts, by
means of mail, telephone or otherwise, either in the name of the Borrower or
Silicon or such other name as Silicon may reasonably choose, provided that no
prior notification to Borrower shall be required following an Event of Default.]
4.9 EXECUTE ADDITIONAL DOCUMENTATION. The Borrower agrees, at its
expense, on request by Silicon, to execute all documents in form satisfactory
to Silicon, as Silicon, may deem reasonably necessary or useful in order to
perfect and maintain Silicon's perfected security interest in the Collateral,
and in order to fully consummate all of the transactions contemplated by this
Agreement.
5. TERM.
5.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule hereto (the "Maturity Date").
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5.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by the Borrower, effective three business days
after written notice of termination is given to Silicon; or (ii) by Silicon at
any time after the occurrence of an Event of Default, without notice, effective
immediately.
5.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, the Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether
or not all or any part of such Obligations are otherwise then due and payable.
[Without limiting the generality of the foregoing, if on the Maturity Date, or
on any earlier effective date of termination, there are any outstanding letters
of credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an
amount equal to the face amount of all such letters of credit plus all
interest, fees and cost due or to become due in connection therewith, to secure
all of the Obligations relating to said letters of credit, pursuant to
Silicon's then standard form cash pledge agreement.] Notwithstanding any
termination of this Agreement, all of Silicon's security interests in all of
the Collateral and all of the terms and provisions of this Agreement shall
continue in full force and effect until all Obligations have been paid and
performed in full; provided that, without limiting the fact that Loans are
subject to the reasonable discretion of Silicon, Silicon may, in its sole
discretion, refuse to make any further Loans after termination. No termination
shall in any way affect or impair any right or remedy of Silicon, nor shall any
such termination relieve the Borrower of any Obligation to Silicon, until all
of the Obligations have been paid and performed in full. Upon payment and
performance in full of all the Obligations, Silicon shall promptly deliver to
the Borrower termination statements, requests for reconveyances and such other
documents as may be required to fully terminate any of Silicon's security
interests.
6. EVENTS OF DEFAULT AND REMEDIES.
6.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and the Borrower
shall give Silicon immediate written notice thereof: (a) Any warranty,
representation, statement, report or certificate made or delivered to Silicon
by the Borrower or any of the Borrower's officers, employees or agents, now or
in the future, shall be untrue or misleading in any material respect; or (b)
the Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation; or (c) the total Loans and other Obligations
outstanding at any time exceed the Credit Limit; or (d) the Borrower shall fail
to comply with any of the financial covenants set forth in the Schedule or
shall fail to perform any other non-monetary Obligation which by its nature
cannot be cured; or (e) the Borrower shall fail to pay or perform any other
non-monetary Obligation, which failure is not cured within 5 business days
after the date due; or (f) Any levy, assessment, attachment, seizure, lien or
encumbrance is made on all or any part of the Collateral which is not cured
within [10]* days after the occurrence of the same; or (g) Dissolution,
termination of existence, insolvency or business failure of the Borrower; or
appointment of a receiver, trustee or custodian, for all or any part of the
property of, assignment for the benefit of creditors by, or the commencement of
any proceeding by the Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law
or statute of any jurisdiction, now or in the future in effect; or (h) the
commencement of any proceeding against the Borrower or any guarantor of any of
the Obligations under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 30 days after the date commenced; (i) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing; or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (j) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all
of the Obligations, or any attempt to do any of the foregoing; or commencement
of proceedings by or against any such third party under any bankruptcy or
insolvency law; or (k) the Borrower makes any payment on account of any
indebtedness or obligation which has been subordinated to the Obligations other
than as permitted in the applicable subordination agreement or if any person
who has subordinated such indebtedness or obligations terminates or in any way
limits his subordination agreement; or (l) there shall be a change in the
record or beneficial ownership of an aggregate of more than [20%]** of the
outstanding shares of stock of the Borrower, in one or more transactions,
compared to the ownership of outstanding shares of stock of the Borrower in
effect on the date hereof, without the prior written consent of Silicon; or (m)
the Borrower shall generally not pay its debts as they become due; or the
Borrower shall conceal, remove or transfer any part of its property, with
intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law***. Silicon may cease making any Loans
hereunder during any of the above cure periods, and thereafter if an Event of
Default has occurred.
*20
**49%
***OR (N) BORROWER RECEIVES A NON-APPROVABLE LETTER FROM THE FOOD AND DRUG
ADMINISTRATION REGARDING DEPOCYT AND SUCH LETTER CONTAINS CORRECTIVE ACTIONS
NOT CAPABLE OF BEING CURED WITHIN ONE YEAR AFTER THE DATE OF SUCH LETTER
6.2 REMEDIES. Upon the occurrence of any Event of Default, and at any
time thereafter, Silicon, at its option,
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and without notice or demand of any kind (all of which are hereby expressly
waived by the Borrower), may do any one or more of the following: (a) Cease
making Loans or otherwise extending credit to the Borrower under this Agreement
or any other document or agreement; (b) Accelerate and declare all or any part
of the Obligations to be immediately due, payable, and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any Obligation; (c) Take possession of any or all of
the Collateral wherever it may be found, and for that purpose the Borrower
hereby authorizes Silicon without judicial process to enter onto any of the
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof
without charge for so long as Silicon deems it reasonably necessary in order to
complete the enforcement of its rights under this Agreement or any other
agreement; provided, however, that should Silicon seek to take possession of
any or all of the Collateral by Court process, the Borrower hereby irrevocably
waives: (i) any bond and any surety or security relating thereto required by
any statute, court rule or otherwise as an incident to such possession; (ii)
any demand for possession prior to the commencement of any suit or action to
recover possession thereof; and (iii) any requirement that Silicon retain
possession of and not dispose of any such Collateral until after trial or final
judgment; (d) Require the Borrower to assemble any or all of the Collateral and
make it available to Silicon at places designated by Silicon which are
reasonably convenient to Silicon and the Borrower, and to remove the Collateral
to such locations as Silicon may deem advisable; (e) [Require Borrower to
deliver to Silicon, in kind, all checks and other payments received with
respect to all accounts and general intangibles, together with any necessary
indorsements, within one day after the date received by the Borrower;] (f)
Complete the processing, manufacturing or repair of any Collateral prior to a
disposition thereof and, for such purpose and for the purpose of removal,
Silicon shall have the right to use the Borrower's premises, vehicles, hoists,
lifts, cranes, equipment and all other property without charge; (g) Sell, lease
or otherwise dispose of any of the Collateral in its condition at the time
Silicon obtains possession of it or after further manufacturing, processing or
repair, at any one or more public and/or private sales, in lots or in bulk, for
cash, exchange or other property, or on credit, and to adjourn any such sale
from time to time without notice other than oral announcement at the time
scheduled for sale. Silicon shall have the right to conduct such disposition
on the Borrower's premises without charge, for such time or times as Silicon
deems reasonable, or on Silicon's premises, or elsewhere and the Collateral
need not be located at the place of disposition. Silicon may directly or
through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve the
Borrower of any liability the Borrower may have if any Collateral is defective
as to title or physical condition or otherwise at the time of sale; [(h) Demand
payment of, and collect any accounts and general intangibles comprising
Collateral and, in connection therewith, the Borrower irrevocably authorizes
Silicon to endorse or sign the Borrower's name on all collections, receipts,
instruments and other documents, to take possession of and open mail addressed
to the Borrower and remove therefrom payments made with respect to any item of
the Collateral or proceeds thereof, and, in Silicon's sole discretion, to grant
extensions of time to pay, compromise claims and settle accounts and the like
for less than face value]; (i) Offset against any sums in any of Borrower's
general, special or other deposit accounts with Silicon; and [(j) Demand and
receive possession of any of the Borrower's federal and state income tax
returns and the books and records utilized in the preparation thereof or
referring thereto]. All reasonable attorneys' fees, expenses, costs,
liabilities and obligations incurred by Silicon with respect to the foregoing
shall be added to and become part of the Obligations, shall be due on demand,
and shall bear interest at a rate equal to the highest interest rate applicable
to any of the Obligations. Without limiting any of Silicon's rights and
remedies, from and [after]* the occurrence of any Event of Default, the interest
rate applicable to the Obligations shall be increased by an additional four
percent per annum.
*DURING
6.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. The Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to the
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase price
in cash or by cashier's check or wire transfer is required; (vi) With respect
to any sale of any of the Collateral, Silicon may (but is not obligated to)
direct any prospective purchaser to ascertain directly from the Borrower any
and all information concerning the same. Silicon may employ other methods of
noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
6.4 POWER OF ATTORNEY. Upon the occurrence of any Event of Default,
without limiting Silicon's other rights and remedies, the Borrower grants to
Silicon an irrevocable power of attorney coupled with an interest, authorizing
and permitting Silicon (acting through any of its employees, attorneys or
agents) at any time, at its option, but without obligation, with or without
notice to the Borrower, and at the Borrower's expense, to do any or all of the
following, in the Borrower's name or otherwise: (a) Execute on behalf of the
Borrower any documents that
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7
Silicon may, in its sole and absolute discretion, deem advisable in order to
perfect and maintain Silicon's security interest in the Collateral, or in order
to exercise a right of the Borrower or Silicon, or in order to fully consummate
all the transactions contemplated under this Agreement, and all other present
and future agreements; (b) Execute on behalf of the Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property
which is part of Silicon's Collateral or in which Silicon has an interest; [(c)
Execute on behalf of the Borrower, any invoices relating to any account, any
draft against any account debtor and any notice to any account debtor, any
proof of claim in bankruptcy, any Notice of Lien, claim of mechanic's,
materialman's or other lien, or assignment or satisfaction of mechanic's,
materialman's or other lien]; (d) Take control in any manner of any cash or
non-cash items of payment or proceeds of Collateral; endorse the name of the
Borrower upon any instruments, or documents, evidence of payment or Collateral
that may come into Silicon's possession; (e) Endorse all checks and other forms
of remittances received by Silicon; (f) Pay, contest or settle any lien,
charge, encumbrance, security interest and adverse claim in or to any of the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; [(g) Grant extensions of time to pay,
compromise claims and settle accounts and general intangibles for less than
face value and execute all releases and other documents in connection
therewith;] (h) Pay any sums required on account of the Borrower's taxes or to
secure the release of any liens therefor, or both; (i) Settle and adjust, and
give releases of, any insurance claim that relates to any of the Collateral and
obtain payment therefor; (j) Instruct any third party having custody or control
of any books or records belonging to, or relating to, the Borrower to give
Silicon the same rights of access and other rights with respect thereto as
Silicon has under this Agreement; and (k) Take any action or pay any sum
required of the Borrower pursuant to this Agreement and any other present or
future agreements. Silicon shall exercise the foregoing powers in a
commercially reasonable manner. Any and all reasonable sums paid and any and
all reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.
In no event shall Silicon's rights under the foregoing power of attorney or any
of Silicon's other rights under this Agreement be deemed to indicate that
Silicon is in control of the business, management or properties of the
Borrower.
6.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the costs,
expenses, liabilities, obligations and attorneys' fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due
upon any of the Obligations, and third to the principal of the Obligations, in
such order as Silicon shall determine in its sole discretion. Any surplus
shall be paid to the Borrower or other persons legally entitled thereto; the
Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in
its [sole]* discretion, directly or indirectly enters into a deferred payment or
other credit transaction with any purchaser at any sale or other disposition of
Collateral, Silicon shall have the option, exercisable at any time, in its
[sole]* discretion, of either reducing the Obligations by the principal amount
of purchase price or deferring the reduction of the Obligations until the actual
receipt by Silicon of the cash therefor.
*REASONABLE
6.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth
in this Agreement, Silicon shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or
in the future entered into between Silicon and the Borrower, and all of such
rights and remedies are cumulative and none is exclusive. Exercise or partial
exercise by Silicon of one or more of its rights or remedies shall not be
deemed an election, nor bar Silicon from subsequent exercise or partial
exercise of any other rights or remedies. The failure or delay of Silicon to
exercise any rights or remedies shall not operate as a waiver thereof, but all
rights and remedies shall continue in full force and effect until all of the
Obligations have been fully paid and performed.
7. GENERAL PROVISIONS.
7.1 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by regular first-class mail, or
certified mail return receipt requested, addressed to Silicon or the Borrower
at the addresses shown in the heading to this Agreement, or at any other
address designated in writing by one party to the other party. All notices
shall be deemed to have been given upon delivery in the case of notices
personally delivered to the Borrower or to Silicon, or at the expiration of two
business days following the deposit thereof in the United States mail, with
postage prepaid.
7.2 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
7.3 INTEGRATION. This Agreement* and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between the Borrower and Silicon and
supersede all prior and contemporaneous negotiations and oral representations
and agreements, all of which are merged and integrated in this Agreement.
There are no oral understandings, representations or agreements between the
parties which are not set forth in this Agreement or in other written
agreements signed by the parties in connection herewith.
-7-
8
*,THE DEPOTECH CORPORATION CONFIDENTIAL DISCLOSURE AGREEMENT DATED JUNE 10,
1996 BETWEEN SILICON AND BORROWER (THE "EXISTING CONFIDENTIALITY AGREEMENT")
(SUBJECT TO THE RIGHT OF SILICON TO DISCLOSE CONFIDENTIAL INFORMATION IN
ACCORDANCE WITH SECTION 4.5 HEREOF),
7.4 WAIVERS. The failure of Silicon at any time or times to require the
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between the Borrower and Silicon shall not
waive or diminish any right of Silicon later to demand and receive strict
compliance therewith. Any waiver of any default shall not waive or affect any
other default, whether prior or subsequent thereto. None of the provisions of
this Agreement or any other agreement now or in the future executed by the
Borrower and delivered to Silicon shall be deemed to have been waived by any
act or knowledge of Silicon or its agents or employees, but only by a specific
written waiver signed by an officer of Silicon and delivered to the Borrower.
The Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, general
intangible, document or guaranty at any time held by Silicon on which the
Borrower is or may in any way be liable, and notice of any action taken by
Silicon, unless expressly required by this Agreement.
7.5 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other person
affiliated with or representing Silicon shall be liable for any claims,
demands, losses or damages, of any kind whatsoever, made, claimed, incurred or
suffered by the Borrower or any other party through the ordinary negligence of
Silicon, or any of its directors, officers, employees, agents, attorneys or any
other person affiliated with or representing Silicon.
7.6 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by the Borrower and a duly
authorized officer of Silicon.
7.7 TIME OF ESSENCE. Time is of the essence in the performance by the
Borrower of each and every obligation under this Agreement.
7.8 ATTORNEYS FEES AND COSTS. The Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, account debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of the Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise represent Silicon
in any litigation relating to the Borrower. In satisfying Borrower's
obligation hereunder to reimburse Silicon for attorneys fees, Borrower may, for
convenience, issue checks directly to Silicon's attorneys, Levy, Small &
Lallas, but Borrower acknowledges and agrees that Levy, Small & Lallas is
representing only Silicon and not Borrower in connection with this Agreement.
If either Silicon or the Borrower files any lawsuit against the other
predicated on a breach of this Agreement, the prevailing party in such action
shall be entitled to recover its reasonable costs and attorneys' fees,
including (but not limited to) reasonable attorneys' fees and costs incurred in
the enforcement of, execution upon or defense of any order, decree, award or
judgment. All attorneys' fees and costs to which Silicon may be entitled
pursuant to this Paragraph shall immediately become part of the Borrower's
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations*.
*PROVIDED THAT THE BORROWER SHALL NOT BE DEEMED TO HAVE EXCEEDED THE CREDIT
LIMIT HEREUNDER SOLELY BY VIRTUE OF THE ADDITION OF THE AMOUNT OF SUCH
ATTORNEYS' FEES AND COSTS TO THE OBLIGATIONS IF BORROWER OTHERWISE WOULD NOT
HAVE EXCEEDED THE CREDIT LIMIT HAD THE AMOUNT OF SUCH ATTORNEYS' FEES AND COSTS
NOT BEEN ADDED TO THE OBLIGATIONS
7.9 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of the parties hereto; provided, however,
that the Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall
release the Borrower from its liability for the Obligations.
7.10 JOINT AND SEVERAL LIABILITY. If the Borrower consists of more than one
person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
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9
7.11 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used in
this Agreement for convenience. The Borrower acknowledges that the headings
may not describe completely the subject matter of the applicable paragraph, and
the headings shall not be used in any manner to construe, limit, define or
interpret any term or provision of this Agreement. This Agreement has been
fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed
strictly against Silicon or the Borrower under any rule of construction or
otherwise.
7.12 MUTUAL WAIVER OF JURY TRIAL. THE BORROWER AND SILICON EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND THE BORROWER, OR ANY
CONDUCT, ACTS OR OMISSIONS OF SILICON OR THE BORROWER OR ANY OF THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH SILICON OR THE BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
7.13 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and the
Borrower shall be governed by, and in accordance with, the laws of the State of
California. Any undefined term used in this Agreement that is defined in the
California Uniform Commercial Code shall have the meaning assigned to that term
in the California Uniform Commercial Code. As a material part of the
consideration to Silicon to enter into this Agreement, the Borrower (i) agrees
that all actions and proceedings relating directly or indirectly hereto shall,
at Silicon's option, be litigated in courts located within California, and that
the exclusive venue therefor shall be San Diego County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method
permitted by law; and (iii) waives any and all rights the Borrower may have to
object to the jurisdiction of any such court, or to transfer or change the
venue of any such action or proceeding.
BORROWER:
DEPOTECH CORPORATION
BY /s/ Edward L. Erickson
_______________________________
PRESIDENT OR VICE PRESIDENT
BY /s/ Faye H. Russell
_______________________________
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY /s/ RITA PERKL
_______________________________
TITLE Senior Vice President
____________________________
44,531-2
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10
SILICON VALLEY BANK
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: DEPOTECH CORPORATION
ADDRESS: 10450 SCIENCE CENTER DRIVE
SAN DIEGO, CALIFORNIA 92121
DATE: JUNE 18, 1996
THIS SCHEDULE is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of
(a) $9,000,000 at any one time
outstanding, or
(b) 100% of the net purchase price
of new equipment purchased by
Borrower (the "Financed Equipment")
during the Purchase Period (as
defined below, which is general
purpose, scientific, laboratory,
manufacturing and test equipment and
associated software components, or
office furniture and equipment, and
which is acceptable to Silicon in
its discretion. The net purchase
price of Financed Equipmentmeans the
purchase price thereof, as shown on
the applicable invoice, net of all
charges for taxes, freight,
delivery, insurance, set-up,
training, manuals, fees, service
charges and other similar items.
The "Purchase Period" is the period
from 30 days prior to the date of
this Agreement through June 30,
1997.
DISBURSEMENT AND
LOAN REPAYMENT
(Section 1.1): Loans shall be made only during the
following two disbursement periods (the
"Disbursement Periods"):
The date hereof to and including
December 31, 1996 (the "First
Disbursement Period"); and
January 1, 1997 to and including
June 30, 1997 (the "Second
Disbursement Period").
There shall be no more than one
disbursement in any one calendar month.
Requests for disbursement shall be in
writing and shall be accompanied by the
following:
(1) A list of the Financed
Equipment being purchased.
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11
(2) For each piece of Financed
Equipment being purchased, the
name and address of the vendor,
the invoice number, the serial
number of the equipment, the
total purchase price, and the
net purchase price (as defined
above); and
(3) A copy of the invoice
relating to the Financed
Equipment.
Silicon will prepare a UCC-1 Financing
Statement incorporating the list of the
Financed Equipment and will send the
completed UCC-1 to Borrower for
signature. Borrower, in turn, agrees to
return forthwith the signed UCC-1 to
Silicon for filing with the appropriate
governmental office.
Loans shall be repaid as follows:
For each Disbursement Period,
Borrower shall at the time of the
making of the first Loan in each
Period notify Silicon in writing
whether it elects to begin
amortizing the Loans made in
each Period in the month
immediately following the making
of each Loan ("Immediate
Amortization") or to begin
amortization of all Loans made
in each Disbursement Period at
the end of such Disbursement
Period ("Delayed Amortization").
Once Borrower has elected
Immediate Amortization or
Delayed Amortization, Borrower
may not change its election for
such Disbursement Period. If
Borrower fails to notify Silicon
in writing of whether it has
elected Immediate Amortization
or Delayed Amortization at the
time of the making of the first
Loan for each Disbursement
Period, then the Immediate
Amortization method shall be
presumed for all Loans made in
such Disbursement Period.
If Immediate Amortization
applies to a Disbursement Period,
each Loan made during such Period
shall be repaid as follows: (i)
if the "Fixed Rate" is selected
(as provided below), then
principal and interest shall be
paid in 48 equal monthly
installments of principal and
interest, commencing on first day
of the month following the making
of such Loan and continuing on
the first day of each of the
succeeding 47 months, until such
Loan and related interest are
paid in full; (ii) if the
"Floating Rate" is selected (as
provided below), then the
principal amount of such Loan
shall be paid in 48 equal monthly
installments of principal,
commencing on first day of the
month following the making of
such Loan and continuing on the
first day of each of the
succeeding 47 months, until paid
in full, and accrued interest
shall be paid monthly on the
first day of each month.
If Delayed Amortization applies
to a Disbursement Period, the
aggregate amount of the Loans
made during each Disbursement
Period and outstanding on the
last day of such Disbursement
Period shall be repaid as
follows: (i) if the "Fixed Rate"
is selected (as provided below),
then the principal and interest
relating to the aggregate amount
of all such Loans shall be paid
in 48 equal monthly installments
of principal and interest,
commencing on January 1, 1997,
with respect to the First
Disbursement Period, and July 1,
1997, with respect to the Second
Disbursement Period, and
continuing on the first day of
each succeeding month, until the
aggregate amount of such
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12
Loans and related interest are
paid in full; (ii) if the
"Floating Rate" is selected (as
provided below), then the
aggregate principal amount of
such Loans shall be paid in 48
equal monthly installments of
principal, commencing on January
1, 1997, with respect to the
First Disbursement Period, and
July 1, 1997, with respect to the
Second Disbursement Period, and
continuing on the first day of
each of the succeeding 47 months,
until paid in full, and accrued
interest shall be paid monthly on
the first day of each month.
Notwithstanding the foregoing,
all outstanding Loans and all
other outstanding Obligations
shall be due and payable on the
Maturity Date.
INTEREST RATE (Section 1.2): If Immediate Amortization applies to a
Disbursement Period, the interest rate
applicable to the Loans for such
Disbursement Period is determined as
follows: Borrower shall elect, by
written notice to Silicon delivered on or
before the making of the first Loan in
the First Disbursement Period and on or
before the making of the first Loan in
the Second Disbursement Period, whether
Loans disbursed during such periods will
bear interest at the Floating Rate or the
Fixed Rate, and such election shall
remain in effect for all Loans made
during such Disbursement Period until
they are repaid in full. In the event
Borrower fails to give written notice to
Silicon of whether Borrower elects the
Floating Rate or the Fixed Rate by said
date, the interest rate in effect shall
be the Floating Rate. Borrower
understands that if it elects the Fixed
Rate option, the Fixed Rate for each Loan
will be based on the Fixed Rate as in
effect on the date of the making of such
Loan.
If Delayed Amortization applies to a
Disbursement Period, Loans relating to
such Disbursement Period shall bear
interest at the "Floating Rate" (as
defined below) during such Disbursement
Period. On and after the end of such
Disbursement Period, the interest rate
applicable to such Loans shall be
determined as follows: Borrower shall
elect, by written notice to Silicon
delivered on or before the last day of
the First Disbursement Period and on or
before the last day of the Second
Disbursement Period, whether Loans
disbursed during such periods will bear
interest at the Floating Rate or the
Fixed Rate, and such election shall
remain in effect for such Loans until
they are repaid in full. In the event
Borrower fails to give written notice to
Silicon of whether Borrower elects the
Floating Rate or the Fixed Rate by said
date, the interest rate in effect shall
be the Floating Rate.
As used herein, "Floating Rate" shall
mean: A rate equal to the "Prime Rate"
in effect from time to time plus 0.50%
per annum. "Prime Rate" means the rate
announced from time to time by Silicon as
its "prime rate;" it is a base rate upon
which other rates charged by Silicon are
based, and it is not necessarily the best
rate available at Silicon. The interest
rate applicable to the Obligations shall
change on each date there is a change in
the Prime Rate.
As used herein, "Fixed Rate" shall mean:
A rate equal to the "Treasury Rate" plus
4% per annum "Treasury Rate" shall mean
the most recent four-year U.S. Treasury
Note rate, at the date the Fixed Rate is
to go into effect, published in the most
current edition of the
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13
Federal Reserve Statistical Release H.15
(519), provided that if, for any reason,
such information is not available,
Silicon may base the Treasury Rate on
quotations (with whatever adjustments or
averaging it may deem necessary) of the
most recent four-year Treasury Note rate
received by Silicon from one or more
leading primary U.S. government
securities dealers selected by Silicon.
In either case, interest shall be
calculated on the basis of a 360-day year
for the actual number of days elapsed.
LOAN ORIGINATION FEE
(Section 1.3): $45,000. (The $25,000 previously paid by
Borrower shall be applied to this fee.)
MATURITY DATE
(Section 5.1): JUNE 30, 2001
PREPAYMENT FEE
(Section 5.2): In the event this Agreement is terminated
prior to the Maturity Date, while the
Fixed Rate is in effect as to any portion
of the outstanding Loans, Borrower agrees
to pay Silicon a termination fee in an
amount equal to the following percentage
of the principal amount of the Loans
which are prepaid prior to the Maturity
Date:
Date of Prepayment Percentage of Amount Prepaid
------------------ ----------------------------
Date hereof to and including December
31, 1997 3%
January 1, 1998 to and including
December 31, 1998 2%
January 1, 1999 to and including
December 31, 1999 1%
January 1, 2000 and thereafter 0%
PRIOR NAMES OF BORROWER
(Section 3.2): NONE
TRADE NAMES OF BORROWER
(Section 3.2): NONE
OTHER LOCATIONS AND ADDRESSES
(Section 3.3): 11011 North Torrey Pines Road, La Jolla,
7396 Trade Street, San Diego, CA; and
11025 North Torrey Pines Road,
Suite 100, La Jolla, CA 92037
MATERIAL ADVERSE LITIGATION
(Section 3.10): NONE
NEGATIVE COVENANTS-EXCEPTIONS
(Section 4.6): Without Silicon's prior written consent,
Borrower may do the following, provided
that, after giving effect thereto, no
Event of Default has occurred and no
event has occurred which, with notice or
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14
passage of time or both, would constitute
an Event of Default, and provided that
the following are done in compliance with
all applicable laws, rules and
regulations: (i) repurchase shares of
Borrower's stock pursuant to any employee
stock purchase or benefit plan, provided
that the total amount paid by Borrower
for such stock does not exceed $500,000
in any fiscal year; (ii) make employee
loans strictly for relocation purposes
provided that the aggregate amount of
such loans does not exceed $500,000
outstanding at any time; and (iii) enter
into joint venture transactions with
other entities relating to the
development of products which may involve
the issuance of shares of stock of
Borrower to such other entity (subject to
Section 6.1(l) hereof), provided that
such transactions do not materially
adversely affect the Borrower, provided,
further, that Borrower does not merge or
combine with such other entity as part of
such transaction, and provided, further,
that Borrower gives prior written notice
to Silicon of such transactions together
with delivering to Silicon such
documentation relating thereto as Silicon
may reasonably request.
FINANCIAL COVENANT
(Section 4.1): Borrower shall comply with the following
covenant. Compliance shall be determined
as of the end of each month.
MINIMUM CASH Borrower shall maintain "Cash" (as
defined below) in an amount not less than
167% multiplied by the following amounts
during the following periods:
Period Amount
------ ------
Date hereof through and including
June 30, 1997: $9,000,000
From and after July 1, 1997: An amount equal to the unpaid
principal balance of the Loans
For purposes of the foregoing, "Cash"
means cash on hand or on deposit in
banks, readily marketable securities
issued by the United States, readily
marketable commercial paper rated "A-1"
by Standard & Poor's Corporation (or a
similar rating by a similar rating
organization), certificates of deposit
and banker's acceptances less restricted
cash, as such term is reflected on
Borrower's audited financial statements,
including, without limitation, the amount
of restricted cash relating to Borrower's
lease obligations.
MATURITY DATE
(Section 5.1): JUNE 30, 2001
OTHER COVENANTS
(Section 4.1): Borrower shall at all times comply with
all of the following additional covenants:
1. BANKING RELATIONSHIP. At such time
that DepoTech Advanced Technology is
established as a separate legal entity,
Borrower shall cause DepoTech Advanced
Technology to open future bank accounts
and maintain its bank accounts and
primary banking relationship with
Silicon.
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2. PROVIDING SEC FILINGS/INFORMATION TO
SILICON. Without limitation of the other
terms and conditions hereof, Borrower
agrees to provide Silicon with copies of
all reports and filings made with the
Securities and Exchange Commission, if
any, within 5 days after the date such
filings are made or are otherwise due.
3. INTELLECTUAL PROPERTY. Borrower
covenants that all of Borrower's present
and future patents, patent applications,
copyrights, trade secrets, drawings,
blueprints, processes, proprietary
information, license rights and all other
intellectual property now is and will at
all times during the term hereof remain
free and clear of any and all liens,
charges, security interests,
encumbrances, licenses, and adverse
claims, voluntary and involuntary, and
that Borrower will not transfer or permit
the transfer of any of the foregoing or
any interest therein, except for the
following: (i) rights under the
Assignment Agreement dated February 9,
1994 between Research Development
Foundation and Borrower and under the
Collaboration Agreement dated March 30,
1994 between Chiron Corporation and
Borrower; (ii) licenses in the ordinary
course of business for research,
development, manufacturing and
distribution.
BORROWER:
DEPOTECH CORPORATION
BY /s/ Edward L. Erickson
-------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ Faye H. Russell
--------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY /s/ Rita Perkl
-------------------------------
TITLE Senior Vice President
---------------------------
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