EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT dated as of September 7, 1999, is
made by Cypress Bioscience, Inc. ("Cypress"), a Delaware corporation having its
principal place of business and chief executive office at 4350 Executive Drive,
San Diego, California, 92121, and PRP, Inc. ("PRP"), a Delaware corporation
having its principal place of business and chief executive office at 4350
Executive Drive, San Diego, California, 92121, (Cypress and PRP, individually
and collectively the "Borrower"), in favor of Transamerica Business Credit
Corporation, a Delaware corporation (the "Lender"), having its principal office
at 9399 West Higgins Road, Suite 600, Rosemont, Illinois 60018 and having an
office at 76 Batterson Park Road, Farmington, Connecticut 06032.
WHEREAS, the Borrower has requested that the Lender make a Loan to the
Borrower; and
WHEREAS, the Lender has agreed to make such Loan on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the
Lender to extend credit, the Borrower hereby agrees with the Lender as follows:
SECTION 1. DEFINITIONS.
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As used herein, the following terms shall have the following meanings,
and shall be equally applicable to both the singular and plural forms of the
terms defined:
Agreement shall mean this Loan and Security Agreement together with
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all schedules and exhibits hereto, as amended, supplemented, or otherwise
modified from time to time.
Applicable Law shall mean the laws of the State of Illinois (or any
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other jurisdiction whose laws are mandatorily applicable notwithstanding the
parties' choice of Illinois law) or the laws of the United States of America,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
Business Day shall mean any day other than a Saturday, Sunday, or
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public holiday or the equivalent for banks in New York City or San Diego,
California.
Cash Equivalents means (i) securities issued, guaranteed or insured by
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the United States or any of its agencies with maturities of not more than one
year from the date acquired; (ii) certificates of deposit with maturities of not
more than one year from the date acquired, issued by any U.S. federal or state
chartered commercial bank of recognized standing which has capital and
unimpaired surplus in excess of $100,000,000; (iii) investments in money market
funds registered under the Investment Company Act of 1940; (iv) mutual funds, at
least 90% of the assets of which constitute Cash Equivalents of the kinds
described in clauses (i) - (iii) of this definition; and (v) other instruments,
commercial paper or investments acceptable to the Lender in its sole discretion.
Closing Date means the date on which the initial Loan is made
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hereunder.
Code shall have the meaning specified in Section 8(d).
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Collateral shall have the meaning specified in Section 2.
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Collateral Access Agreement shall mean any landlord waiver, mortgagee
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waiver, bailee letter, or similar acknowledgement of any warehouseman or
processor in possession of any Collateral.
Contingent Obligation means any direct, indirect, contingent or non-
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contingent guaranty or obligation for the indebtedness of another Person, except
endorsements in the ordinary course of business.
Effective Date shall mean the date on which all of the conditions
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specified in Section 3.3 shall have been satisfied.
Event of Default shall mean any event specified in Section 7.
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Financial Statements shall have the meaning specified in Section 6.1.
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Fresenius shall mean collectively Fresenius Hemotechnology, Inc. and
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Fresenius Aktiengesellschaft, or any of its subsidiaries or affiliates.
Fresenius Agreements shall mean collectively the Master Agreement
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between Borrower and Fresenius dated March 4, 1999 and the other "Transaction
Documents" (as defined therein).
GAAP shall mean generally accepted accounting principles in the United
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States of America, as in effect from time to time.
Loans shall mean the loans and financial accommodations made by the
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Lender to the Borrower in accordance with the terms of this Agreement and any
Note delivered hereunder.
Loan Documents shall mean, collectively, this Agreement, the Notes,
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the Intellectual Property Security Agreement, and all other present and future
documents, agreements, certificates, instruments, and opinions delivered by the
Borrower under, in connection with or relating to this Agreement, or any other
present or future instrument or agreement between Lender and Borrower, as each
of the same may be amended, modified, extended, restated or supplemented from
time to time.
Material Adverse Change shall mean, with respect to any Person, a
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material adverse change in the business, operations, results of operations,
assets, liabilities, or financial condition of such Person taken as a whole.
Material Adverse Effect shall mean, with respect to any Person, a
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material adverse effect on the business, operations, results of operations,
assets, liabilities, or financial condition of such Person taken as a whole.
Note shall mean each Promissory Note, in substantially the form
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attached hereto, made by the Borrower in favor of the Lender, as amended,
supplemented, or otherwise modified from time to time.
Obligations shall mean and include all loans (including the Loans),
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advances, debts, liabilities, obligations, covenants and duties owing by
Borrower to Lender of any kind or nature, present or future, whether or not
evidenced by the Note or any note, guaranty or other instrument, whether or not
arising under or in connection with, this Agreement, any other Loan Document or
any other present or future instrument or agreement, whether or not for the
payment of money, whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment, purchase, discount or otherwise), whether absolute
or contingent, due or to become due, now due or hereafter arising and however
acquired (including without limitation all loans previously made by Lender to
Borrower). The term includes, without limitation, all interest (including
interest accruing on or after an bankruptcy, whether or not an allowed claim),
charges, expenses, commitment, facility, closing and collateral management fees,
letter of credit fees, reasonable attorneys' fees, taxes and any other sum
properly chargeable to Borrower under this Agreement, the other Loan Documents
or any other present or future agreement between Lender and Borrower.
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Permitted Liens shall mean such of the following, whether now or
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hereafter existing, as to which no enforcement, collection, execution, levy, or
foreclosure proceeding shall have been commenced and be continuing: (a) liens
for taxes, assessments, and other governmental charges or levies or the claims
or demands of landlords, carriers, warehousemen, mechanics, laborers,
materialmen, and other like Persons arising by operation of law in the ordinary
course of business for sums which are not yet due and payable, or liens which
are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP; (b) deposits or pledges to secure the payment of
worker's compensation, unemployment insurance, or other social security benefits
or obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business; (c) licenses, restrictions, or covenants for or on
the use of the Collateral which do not materially impair either the use of the
Collateral in the operation of the business of the Borrower or the value of the
Collateral; (d) attachment or judgment liens that do not constitute an Event of
Default; (e) a lien on any item of equipment created substantially
simultaneously with the acquisition of such equipment for the purpose of
financing such acquisition, provided that such lien shall attach only to the
equipment acquired and the proceeds thereof and Borrower's books relating to the
foregoing (f) liens in favor of licensees (including Fresenius) of intellectual
property licensed by the Borrower, whether on an exclusive or a non-exclusive
basis in the ordinary course of business; (g) liens in favor of licensors of
intellectual property licensed to the Borrower in the ordinary course of
business; (h) liens in favor of lessees (including Fresenius) of real or
personal property leased or subleased by the Borrower in the ordinary course of
business; (i) liens in favor of lessors of real or personal property licensed to
the Borrower in the ordinary course of business pursuant to operating or capital
leases; (j) liens in favor of depository institutions and securities
intermediaries constituting rights of set-off of a customary nature or bankers'
or brokers' liens with respect to amounts or investment property on deposit,
whether arising by operation of law or by contract, in connection with
arrangements entered into with banks and securities intermediaries in the
ordinary course of business; (k) liens in favor of Silicon Valley Bank ("Bank")
existing on the date hereof on certain collateral (including goods and
equipment) pursuant to a Loan and Security Agreement between Borrower and Bank
dated March 5, 1998, as amended, provided such indebtedness does not exceed
$105,000, and (l) liens incurred in the extension, renewal or refinancing of the
indebtedness secured by liens described in (e) or (k) above, provided that any
extension, renewal or refinancing lien is limited to the property encumbered by
the existing lien and the principal amount of the indebtedness secured thereby
does not increase.
Person shall mean any individual, sole proprietorship, partnership,
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limited liability partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
entity, party, or government (including any division, agency, or department
thereof), and the successors, heirs, and assigns of each, including, but not
limited to IMRE Europe, Ltd. and IMRE Services, Inc.
Receivable shall have the meaning set forth in Section 8(e).
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Schedule shall mean Schedule A hereto containing certain information
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pertaining to the Borrower.
Solvent means, with respect to any Person, that as of the date as to
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which such Person's solvency is measured:
(a) the fair saleable value of its assets is in excess of the total
amount of its liabilities (including contingent liabilities as valued in
accordance with GAAP) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able generally to meet its debts as they mature.
Taxes shall have the meaning specified in Section 5.5.
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SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. The Borrower hereby
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assigns and grants to the Lender a continuing general, lien on, and security
interest in, all the Borrower's right, title, and interest in and to the
collateral described in the next sentence (the "Collateral") to secure the
payment and performance of
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all the Obligations, subject only to Permitted Liens. Collateral means
Receivables, Investment Property, Inventory, Equipment, and Other Property and
all additions and accessions thereto and substitutions and replacements therefor
and improvements thereon, and all proceeds (whether cash or other property) and
products thereof, including, without limitation, all proceeds of insurance
covering the same and all tort claims in connection therewith, and all records,
files, computer programs and files, data and writings relating to the foregoing,
and all equipment containing the foregoing.
Notwithstanding the foregoing, the assignment and grant of a security interest
as provided herein shall not extend to (a) any government licenses or permits to
the extent such assignment or grant would violate any governmental statute, law,
rule, regulation or order, or (b) any contracts or licenses of intellectual
property which by their terms would be breached by the assignment or grant of
such security interest or with respect to which the assignment or granting of a
security interest would violate any governmental statute, law, rule, regulation
or order (it being understood and agreed, however, that notwithstanding the
foregoing, all rights to payment for money due or to become due pursuant to any
such contract or license and any and all proceeds of such contract or license
shall be subject to the security interests created pursuant to this Agreement).
Equipment means all machinery, equipment, furniture, fixtures,
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conveyors, tools, materials, storage and handling equipment, hydraulic presses,
cutting equipment, computer equipment and hardware, including central processing
units, terminals, drives, memory units, printers, keyboards, screens,
peripherals and input or output devices, molds, dies, stamps, vehicles, and
other equipment of every kind and nature and wherever situated now or hereafter
owned by Borrower or in which Borrower may have any interest as lessee or
otherwise (to the extent of such interest), together with all additions and
accessions thereto, all replacements and all accessories and parts therefor, all
manuals, blueprints, know-how, warranties and records in connection therewith,
all rights against suppliers, warrantors, manufacturers, sellers or others in
connection therewith, and together with all substitutes for any of the
foregoing; and
Inventory means all present and future goods intended for sale, lease
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or other disposition by Borrower including, without limitation, all raw
materials, work in process, finished goods and other retail inventory, goods in
the possession of outside processors or other third parties, goods consigned to
Borrower to the extent of its interest therein as consignee, materials and
supplies of any kind, nature or description which are or might be used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of any such goods, and all documents of title or documents
representing the same; and
Investment Property means any and all investment property of Borrower,
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including all securities, whether certificated or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or otherwise, wherever
located, and whether now existing or hereafter acquired or arising; and
Other Property means all present and future instruments, documents,
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documents of title, securities, bonds, notes, promissory notes, drafts,
acceptances, letters of credit and rights to receive proceeds of letters of
credit, deposit accounts, chattel paper, certificates, insurance policies,
insurance proceeds, leases, computer tapes, causes of action, judgments, claims
against third parties, leasehold rights in any personal property, books,
ledgers, files and records, general intangibles (including without limitation,
all contract rights, tax refunds, rights to receive tax refunds, patents, patent
applications, copyrights (registered and unregistered), royalties, licenses,
permits, franchise rights, authorizations, customer lists, rights of
indemnification, contribution and subrogation, computer programs, discs and
software, trade secrets, computer service contracts, trademarks, trade names,
service marks and names, logos, goodwill, deposits, choses in action, designs,
blueprints, plans, know-how, telephone numbers and rights thereto, credits,
reserves, and all forms of obligations whatsoever now or hereafter owing to
Borrower), all property at any time in the possession or under the control of
Lender, and all security given by Borrower to Lender pursuant to any other loan
document or agreement; and
Receivables means all present and future accounts and accounts
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receivable, together with all security therefor and guaranties thereof and all
rights and remedies relating thereto, including any right of stoppage in
transit.
SECTION 3. THE CREDIT FACILITY.
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SECTION 3.1. Borrowings. The Lender, subject to the terms and
conditions of this Agreement, agrees to make a Loan to Borrower in three
drawdowns, at Borrower's request, in a principal amount not to exceed
$5,000,000. Notwithstanding anything herein to the contrary, the Lender shall
be obligated to make such Loan only after the Lender, in its good faith business
judgment, determines that the applicable conditions for
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borrowing contained in Sections 3.3 and 3.4 are satisfied. The timing and
financial scope of Lender's obligation to make Loans hereunder are limited as
set forth in a commitment letter executed by Lender and Borrower, dated as of
July 23, 1999 and attached hereto as Exhibit A (the "Commitment Letter").
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SECTION 3.2. Application of Proceeds. The Borrower shall use the
proceeds of the Loans for its general working capital purposes.
SECTION 3.3. Conditions to Initial Loan.
(a) The obligation of the Lender to make the initial Loan is subject
to the Lender's receipt of the following, on or before the Closing Date, each
dated the date of the initial Loan or as of an earlier date acceptable to the
Lender, in form and substance satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-11) listing all
effective Uniform Commercial Code financing statements naming the Borrower
as debtor and all tax lien, judgment, and litigation searche for the
Borrower as the Lender shall deem necessary or desirable;
(ii) acknowledgment copies of Uniform Commercial Code financi statements
(naming the Lender as secured party and the Borrower as debtor), duly filed
in all jurisdictions that the Lender deems necessary or desirable to perfect
and protect the security interests created hereunder, and evidence that all
other filings, registrations and recordings have been made in the
appropriate governmental offices, and all other action has been taken, which
shall be necessary to create, in favor of the Lender, a perfected first
priority Lien on the Collateral (subject to Permitted Liens), to the extent
a perfected first priority Lien on the Collateral can be created by filing a
Uniform Commercial Code financing statement or taking the other Required
Actions described in Section 5.9 below;
(iii) a Note duly executed by the Borrower evidencing the amount
of such Loan;
(iv) an Intellectual Property Security Agreement, in form and substance
satisfactory to the Lender and its counsel, duly executed by the Borrower,
specifically identifying and granting to the Lender a security interest in
all of the Borrower's intellectual property ;
(v) if requested by the Lender, a Collateral Access Agreement duly
executed by the lessor or mortgagee, as the case may be, of each premises
where the equipment Collateral is located;
(vi) a Notice of Security Interest, in form and substance satisfactory
to the Lender and its counsel, to each financial institution at which any
deposit accounts of Borrower are maintained except a notice of security
interest will not be required or sent to financial institutions in the U.K.,
provided that such financial institutions do not contain at any time
balances for the Borrower in excess of the equivalent of $40,000 U.S.
dollars;
(vii) the warrants described in the Commitment Letter, if any;
(viii) certificates of insurance required under Section 5.4 of this
Agreement together with loss payee endorsements for all such policies naming
the Lender as lender loss payee and as an additional insured;
(ix) a certificate of the Secretary or an Assistant Secretary of the
Borrower ("Secretary's Certificate") certifying (A) that attached to the
Secretary's Certificate is a true, complete, and accurate copy of the
resolutions of the Board of Directors of the Borrower (or a unanimous
consent of directors in lieu thereof) authorizing the execution, delivery,
and performance of this Agreement, the other Loan Documents, and the
transactions contemplated
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hereby and thereby, and that such resolutions have not been amended or
modified since the date of such certification and are in full force
and effect; (B) the incumbency, names, and true signatures of the
officers of the Borrower authorized to sign the Loan Documents to
which it is a party; (C) that attached to the Secretary's Certificate
is a true and correct copy of the Articles or Certificate of
Incorporation of the Company, as amended, which Articles or
Certificate of Incorporation have not been further modified, repealed
or rescinded and are in full force and effect; (D) that attached to
the Secretary's Certificate of the Borrower is a true and correct copy
of the Bylaws, as amended, which Bylaws of the Company have not been
further modified, repealed or rescinded and are in full force and
effect; and (E) that attached to the Secretary's Certificate is a
valid Certificate of Good Standing issued by the Secretary of the
State of the Borrower's state of incorporation;
(xi) the opinion of counsel for the Borrower covering such
matters incident to the transactions contemplated by this Agreement as
the Lender may reasonably require;
(xii) evidence of the consent or authorization of, filing with
or other act by or in respect of any governmental agency or authority
or any other Person required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement,
or the other Loan Documents or the consummation of the transactions
contemplated hereby or thereby; and
(xiii) such other documents, agreements and instruments as the
Lender deems necessary in its reasonable discretion in connection with
the transactions contemplated hereby.
(b) The security interests in the Collateral granted in favor of the
Lender under this Agreement shall have been duly perfected and shall constitute
first priority liens, except for Permitted Liens , to the extent a perfected
first priority lien can be created by filing a Uniform Commercial Code financing
statement or taking the other Required Actions described in Section 5.9 below.
SECTION 3.4 Condition to Additional Loans. The obligation of the
Lender to make each additional Loan is subject to the Lender's receipt of a Note
duly executed by the Borrower evidencing the amount of such Loan on or before
the funding date of such Loan.
SECTION 3.5. Additional Conditions Precedent. The obligation of the
Lender to make each Loan (including the initial Loan) is subject to the
satisfaction of the following additional conditions precedent:
(a) There shall be no pending or, to the knowledge of the Borrower
after due inquiry, threatened litigation, proceeding, inquiry, or other action
(i) seeking an injunction or other restraining order, damages, or other relief
with respect to the transactions contemplated by this Agreement or the other
Loan Documents or thereby or (ii) which affects or could affect the business,
prospects, operations, assets, liabilities, or condition (financial or
otherwise) of the Borrower, except, in the case of clause (ii), where such
litigation, proceeding, inquiry, or other action could not reasonably be
expected to have a Material Adverse Effect in the judgment of the Lender;
(b) all representations and warranties contained in this Agreement and
the other Loan Documents shall be true and correct in all material respects on
and as of the date of such Loan as if then made, other than representations and
warranties that expressly relate solely to an earlier date, in which case they
shall have been true and correct as of such earlier date;
(c) no Event of Default or event which with the giving of notice or
the passage of time, or both, would constitute an Event of Default shall have
occurred and be continuing or would result from the making of the requested Loan
as of the date of such request; and
(d) the Borrower shall be deemed to have hereby reaffirmed and
ratified all security
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interests, liens, and other encumbrances heretofore granted by the Borrower to
the Lender.
SECTION 3.6. Interest Rate; Repayment. The interest rate applicable to
each Loan made by the Lender hereunder, and the repayment date for such Loan,
are as set forth in the Note evidencing such Loan.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
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SECTION 4.1. Good Standing; Qualified to do Business. The Borrower (a)
is duly organized, validly existing, and in good standing under the laws of the
State of its organization, (b) has the power and authority to own its properties
and assets and to transact the businesses in which it is presently, or proposes
to be, engaged, and (c) is duly qualified and authorized to do business and is
in good standing in every jurisdiction in the United States in which the failure
to be so qualified could have a Material Adverse Effect on (i) the Borrower,
(ii) the Borrower's ability to perform its obligations under the Loan Documents,
or (iii) the rights of the Lender hereunder.
SECTION 4.2. Due Execution, etc. The execution, delivery, and
performance by the Borrower of each of the Loan Documents to which it is a party
are within the powers of the Borrower, do not contravene the organizational
documents, if any, of the Borrower, and do not (a) violate any law or
regulation, or any order or decree of any court or governmental authority, (b)
conflict with or result in a breach of, or constitute a default under, any
material indenture, mortgage, or deed of trust or any material lease, agreement,
or other instrument binding on the Borrower or any of its properties, or (c)
require the consent, authorization by, or approval of or notice to or filing or
registration with any governmental authority or other Person, except as may be
set forth in the Schedule and except as has been obtained. This Agreement is,
and each of the other Loan Documents to which the Borrower is or will be a
party, when delivered hereunder or thereunder, will be, the legal, valid, and
binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by general principles of equity.
SECTION 4.3. Solvency; No Liens. The Borrower is Solvent and will be
Solvent upon the completion of all transactions contemplated to occur hereunder
(including, without limitation, the Loan to be made on the Effective Date); the
security interests granted herein constitute and shall at all times constitute
the first and only liens on the Collateral other than Permitted Liens, to the
extent a perfected first priority lien can be created by filing a Uniform
Commercial Code financing statement or taking the other Required Actions
described in Section 5.9 below; and the Borrower is, or will be at the time
additional Collateral is acquired by it, the absolute owner of the Collateral
with full right to pledge, sell, consign, transfer, and create a security
interest therein, free and clear of any and all claims or liens in favor of any
other Person other than Permitted Liens.
SECTION 4.4. No Judgments, Litigation. No judgments are outstanding
against the Borrower nor is there now pending or, to the best of the Borrower's
knowledge, threatened any litigation, contested claim, or governmental
proceeding by or against the Borrower except judgments and pending or threatened
litigation, contested claims, and governmental proceedings which would not, in
the aggregate, have a Material Adverse Effect on the Borrower except as may be
set forth in the Schedule.
SECTION 4.5. No Defaults. Except as may be set forth in the Schedule
(1) the Borrower is not in default or has not received a notice of default under
any material contract, lease, or commitment to which it is a party or by which
it is bound; and (2) the Borrower knows of no dispute regarding any contract,
lease, or commitment which could reasonably be expected to have a Material
Adverse Effect on the Borrower.
SECTION 4.6. Collateral Locations. The address of the principal place
of business and chief executive office of Borrower is, and the books and records
of Borrower and all of its chattel paper and records relating to Collateral are
maintained exclusively in the possession of Borrower at, the address of Borrower
specified in the heading of this Agreement. Borrower has places of business, and
Collateral is located, only at such address and at the addresses set forth in
the Schedule and at any additional locations reported to the Lender as
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provided in Section 5.7 as to which the Lender has taken all necessary action to
perfect and protect its security interests in the Collateral at any such
locations.
SECTION 4.7. Corporate and Trade Names; Federal Tax ID. During the
past five years, Borrower has not been known by or used any other corporate,
trade or fictitious name except for its name as set forth on the signature page
of this Agreement and the other names specified in the Schedule. The Borrower's
Federal Tax ID number is as set forth in the Schedule.
SECTION 4.8. No Events of Default. No Event of Default has occurred
and is continuing nor has any event occurred which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default.
SECTION 4.9. No Limitation on Lender's Rights. Except as permitted
herein, none of the Collateral is subject to contractual obligations that may
restrict or inhibit the Lender's rights or abilities to sell or dispose of the
Collateral or any part thereof after the occurrence of an Event of Default.
SECTION 4.10. Perfection and Priority of Security Interest. This
Agreement creates a valid and, upon completion of all required filings of
financing statements, perfected, and first priority and exclusive, security
interest in the Collateral, except for any Permitted Liens, securing the payment
of all the Obligations, to the extent a perfected first priority lien can be
created by filing a Uniform Commercial Code financing statement or taking the
other Required Actions described in Section 5.9 below.
SECTION 4.11. Intellectual Property. Set forth in the Schedule is a
complete and accurate list of all patents, trademarks, trade names, service
marks and copyrights (registered and unregistered), and all applications
therefor and licenses thereof, of Borrower. Borrower owns or licenses all
material patents, trademarks, service-marks, logos, tradenames, trade secrets,
know-how, copyrights, or licenses and other rights with respect to any of the
foregoing, which are necessary or advisable for the operation of its business as
presently conducted or proposed to be conducted. To the best of its knowledge
after due inquiry, Borrower has not infringed any patent, trademark, service-
mark, tradename, copyright, license or other right owned by any other Person by
the sale or use of any product, process, method, substance, part or other
material presently contemplated to be sold or used, where such sale or use would
reasonably be expected to have a Material Adverse Effect and no claim or
litigation is pending, or to the best of Borrower's knowledge, threatened
against or affecting Borrower that contests its right to sell or use any such
product, process, method, substance, part or other material.
SECTION 4.12. Consents and Filings. No consent, authorization or
approval of, or filing with or other act by, any shareholders of Borrower or any
governmental authority or other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement
or any other Loan Document, the consummation of the transactions contemplated
hereby or thereby or the continuing operations of Borrower following such
consummation, except (i) those that have been obtained or made, (ii) the filing
of financing statements under the Code and (iii) any necessary filings with U.S.
Copyright Office and the U.S. Patent and Trademark Office.
SECTION 4.13. Year 2000 Compliance. The Borrower has (i) initiated a
review and assessment of all areas within its business and operations (including
those affected by suppliers and vendors) that could be adversely affected by the
"Year 2000 Problem" (that is, the risk that computer applications used by the
Borrower (or its suppliers and vendors) may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and timeline for addressing the
Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in
accordance with that timetable. The Borrower reasonably believes that all
computer applications (including those of its suppliers and vendors) that are
material to its business and operations will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure
to do so could not reasonably be expected to have Material Adverse Effect.
SECTION 4.14. Taxes. Borrower has properly completed and timely filed
all income
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tax returns it is required to file, and all Taxes, assessments, fees and other
governmental charges for periods beginning prior to the date of this Agreement
have been timely paid (or, if not yet due or being disputed in good faith,
adequate reserves therefor have been established in accordance with GAAP) and
Borrower has no liability for Taxes in excess of the amounts so paid or reserves
so established. No deficiencies for Taxes have been claimed, proposed or
assessed by any taxing or other governmental agency or authority against
Borrower and no notice of any tax lien has been filed. There are no pending or
(to the best knowledge of Borrower) threatened audits, investigations or claims
for or relating to any liability for Taxes and there are no matters under
discussion with any governmental agency or authority which could result in an
additional material liability for Taxes.
SECTION 4.15. Financial Statements. Borrower has provided to the
Lender complete and accurate Financial Statements, which have been prepared in
accordance with GAAP (except for the absence of footnotes and subject to normal
year-end adjustments with respect to unaudited financial statements)
consistently applied throughout the periods involved and fairly present the
financial position and results of operations of Cypress and its consolidated
subsidiaries for each of the periods covered, subject, in the case of any
quarterly financial statements, to normal year-end adjustments and the absence
of notes. Except for reimbursement obligations relating to a $200,000 letter of
credit issued in favor of the landlord of the Redmond, Washington premises,
Borrower has no Contingent Obligation or liability for Taxes, unrealized losses,
unusual forward or long-term commitments or long-term leases, which is not
reflected in such Financial Statements or the footnotes thereto. Since the last
date covered by such Financial Statements, there has been no sale, transfer or
other disposition by Borrower of any material part of its business or property
and no purchase or other acquisition of any business or property (including any
capital stock of any other Person) material in relation to the financial
condition of Borrower at said date other than the sale, transfer or other
disposition of assets in the ordinary course of business. Since said date, (i)
there has been no change, occurrence, development or event which has had or
could reasonably be expected to have a Material Adverse Effect and (ii) none of
the capital stock of Borrower has been redeemed, retired, purchased or otherwise
acquired for value by Borrower.
SECTION 4.16. Accuracy and Completeness of Information. All data,
reports, and information heretofore, contemporaneously, or hereafter furnished
by or on behalf of the Borrower in writing to the Lender or for purposes of or
in connection with this Agreement or any other Loan Document, or any transaction
contemplated hereby or thereby, are or will be true and accurate in all material
respects on the date as of which such data, reports, and information are dated
or certified and not incomplete by omitting to state any material fact necessary
to make such data, reports, and information not misleading at such time. There
are no facts now known to the Borrower which individually or in the aggregate
would reasonably be expected to have a Material Adverse Effect and which have
not been specified herein, in the Financial Statements, or in any certificate,
opinion, or other written statement previously furnished by the Borrower to the
Lender.
SECTION 5. COVENANTS OF THE BORROWER.
-------------------------
SECTION 5.1. Existence, etc. The Borrower shall: (a) retain its
existence and its current yearly accounting cycle, (b) maintain in full force
and effect all licenses, bonds, franchises, leases, trademarks, patents,
contracts, and other rights necessary or desirable to the profitable conduct of
its business unless the failure to do so could not reasonably be expected to
have a Material Adverse Effect on the Borrower, (c) subject to Section 5.18
below, continue in, and limit its operations to, the same general lines of
business as those presently conducted by it, and (d) comply with all applicable
laws and regulations of any federal, state, or local governmental authority,
except for such laws and regulations the violations of which would not, in the
aggregate, have a Material Adverse Effect on the Borrower.
SECTION 5.2. Notice to the Lender. As soon as possible, and in any
event within five days after the Borrower learns of the following, the Borrower
will give written notice to the Lender of the following:
(a) any proceeding instituted or threatened to be instituted by or
against the Borrower in any federal, state, local, or foreign court or before
any commission or other regulatory body (federal, state, local, or
9
foreign) involving a sum, together with the sum involved in all other similar
proceedings, in excess of $100,000 in the aggregate,
(b) any contract that is terminated or amended and which has had or
could reasonably be expected to have a Material Adverse Effect on the Borrower,
(c) the occurrence of any Material Adverse Change with respect to the
Borrower;
(d) the occurrence of any Event of Default or event or condition
which, with notice or lapse of time or both, would constitute an Event of
Default, together with a statement of the action which the Borrower has taken or
proposes to take with respect thereto;
(e) of any discovery or determination by Borrower that any computer
application (including those of its suppliers and vendors) that is material to
its business and operations will not be Year 2000 compliant on a timely basis,
except to the extent that such failure could not reasonably be expected to have
a Material Adverse Effect;
(f) of any material damage to, the destruction of or any other
material loss to any Collateral owned or used by Borrower other than any such
Collateral with a net book value (individually or in the aggregate) less than
$50,000 or any condemnation, confiscation or other taking, in whole or in part,
or any event that otherwise diminishes so as to render impracticable or
unreasonable the use of such Collateral owned or used by Borrower together with
the amount of the damage, destruction, loss or diminution in value; and
(g) of the opening of any new bank account or other deposit account,
and any new securities account.
SECTION 5.3. Maintenance of Books and Records. Borrower shall (i)
maintain books and records (including computer records) pertaining to the
Collateral in such detail, form and scope as is customary for companies in
similar businesses in similar situations and (ii) provide the Lender and its
agents access to the premises of Borrower at any time and from time to time,
during normal business hours and upon reasonable notice under the circumstances,
and at any time on and after the occurrence and during the existence of an Event
of Default, or event or condition which, with notice or lapse of time or both,
would constitute an Event of Default, for the purposes of (A) inspecting and
verifying the Collateral, (B) inspecting and copying (at Borrower's expense) any
and all records pertaining thereto, and (C) discussing the affairs, finances and
business of Borrower with any officer or director of Borrower or with Borrower's
accountants. Borrower shall reimburse the Lender for the reasonable travel and
related expenses of the Lender's employees or, at the Lender's option, of such
outside accountants or examiners as may be retained by the Lender to verify or
inspect Collateral, records or documents of Borrower on a regular basis or for a
special inspection if the Lender deems the same appropriate. Absent an Event of
Default, Lender's examinations shall be limited to 2 days per annum and a
maximum cost of $600 per diem. Said limitations shall not apply if there is an
Event of Default hereunder. If, in connection herewith, the Lender's own
employees are used, Borrower shall also pay therefor $600 per person per day (or
such other amount as shall represent the Lender's then current standard charge
for the same) subject to the limitation above as to pre default costs, or, if
outside examiners or accountants are used, Borrower shall also pay the Lender,
subject to the limitation above as to pre default costs, such reasonable sum as
the Lender may be obligated to pay as fees therefor.
SECTION 5.4. Insurance. Borrower shall maintain public liability
insurance, business interruption insurance, third party property damage
insurance and replacement value insurance on its assets (including the
Collateral) under such policies of insurance, with such insurance companies, in
such amounts and covering such risks as are at all times reasonably satisfactory
to the Lender in its commercially reasonable judgment, all of which policies
covering the Collateral shall name the Lender as an additional insured and
lender loss payee in case of loss, and contain other provisions as the Lender
may reasonably require to protect fully the Lender's interest in the Collateral
and any payments to be made under such policies.
SECTION 5.5. Taxes. The Borrower will pay, when due, all taxes,
assessments,
10
claims, and other charges ("Taxes") lawfully levied or assessed against the
Borrower or the Collateral other than taxes that are being diligently contested
in good faith by the Borrower by appropriate proceedings promptly instituted and
for which an adequate reserve is being maintained by the Borrower in accordance
with GAAP. If any Taxes remain unpaid after the date fixed for the payment
thereof, or if any lien shall be claimed therefor, then, without notice to the
Borrower, but on the Borrower's behalf, the Lender may pay such Taxes, and the
amount thereof shall be included in the Obligations.
SECTION 5.6. Borrower to Defend Collateral Against Claims; Fees on
Collateral. The Borrower will defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein.
The Borrower will not permit any notice creating or otherwise relating to liens
on the Collateral or any portion thereof to exist or be on file in any public
office other than Permitted Liens. The Borrower shall promptly pay, when
payable, all transportation, storage, and warehousing charges and license fees,
registration fees, assessments, charges, permit fees, and taxes (municipal,
state, and federal) which may now or hereafter be imposed upon the ownership,
leasing, renting, possession, sale, or use of the Collateral, other than taxes
on or measured by the Lender's income and fees, assessments, charges, and taxes
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP.
SECTION 5.7. Change of Location, Structure, or Identity. The Borrower
will give Lender at least 10 days prior written notice of any change of
Borrower's chief executive office or of the opening of any additional place of
business. The Borrower will not move or permit the movement of any item of
Collateral from the locations specified in the Schedule, except that the
Borrower may keep Collateral at other locations within the United States
provided that the Borrower has delivered to the Lender (i) prior written notice
thereof and (ii) duly executed financing statements and other agreements and
instruments (all in form and substance satisfactory to the Lender) necessary or,
in the opinion of the Lender, desirable to perfect and maintain in favor of the
Lender a first priority security interest in the Collateral. Notwithstanding
anything to the contrary in the immediately preceding sentence, the Borrower may
keep any Collateral consisting of motor vehicles or rolling stock or other goods
which are mobile and which are of a type normally used in more than one
jurisdiction at any location in the United States.
SECTION 5.8. Use of Collateral; Licenses; Repair. The Collateral shall
be operated by competent, qualified personnel in connection with the Borrower's
business purposes, for the purpose for which the Collateral was designed and in
accordance with applicable operating instructions, laws, and government
regulations, and the Borrower shall use every reasonable precaution to prevent
loss or damage to the Collateral from fire and other hazards. The Borrower shall
procure and maintain in effect all orders, licenses, certificates, permits,
approvals, and consents required by federal, state, or local laws or by any
governmental body, agency, or authority in connection with the delivery,
installation, use, and operation of the Collateral.
SECTION 5.9. Further Assurances. The Borrower will, promptly upon
request by the Lender, execute and deliver or use its best efforts to obtain any
document reasonably required by the Lender (including, without limitation,
warehouseman or processor disclaimers, mortgagee waivers, landlord disclaimers,
or , subject to the Permitted Liens, subordination agreements with respect to
the Obligations and the Collateral), give any notices, execute and file any
financing statements, mortgages, or other documents (all in form and substance
satisfactory to the Lender), mark any chattel paper, deliver any instruments to
the Lender, and take any other actions that are necessary or, in the opinion of
the Lender, desirable to perfect or continue the perfection and the first
priority of the Lender's security interest in the Collateral, to protect the
Collateral against the rights, claims, or interests of any Persons, or to effect
the purposes of this Agreement, in all cases subject to Permitted Liens,
provided that Borrower shall be required to take the following actions with
respect to perfection of Lender's lien on the Collateral: (i) the filing of
Uniform Commercial Code financing statements under the Code, (ii) delivery of a
Notice of Security Interest to each financial institution located in the United
States at which any deposit accounts of Borrower are maintained, (iii) the
making of all necessary filings with the U.S. Copyright Office and the U.S.
Patent and Trademark Office, and (iv) the delivery to Lender of any documents or
certificates of title issued with respect to any property included in the
Collateral, and any promissory notes, letters of credit or instruments related
to or
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otherwise in connection with any property included in the Collateral
(collectively, the "Required Actions"). The Borrower hereby authorizes the
Lender to file one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Collateral without the signature of
the Borrower where permitted by law. A carbon, photographic, or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law. To the extent required under this Agreement, the
Borrower will pay all costs reasonably incurred in connection with any of the
foregoing.
SECTION 5.10. No Disposition of Collateral. The Borrower will not in
any way hypothecate or create or permit to exist any lien, security interest,
charge, or encumbrance on or other interest in any of the Collateral, except for
the lien and security interest granted hereby and Permitted Liens. In the event
the Collateral, or any part thereof, is sold, transferred, assigned, exchanged,
or otherwise disposed of in violation of this Agreement, the security interest
of the Lender shall continue in such Collateral or part thereof notwithstanding
such sale, transfer, assignment, exchange, or other disposition, and the
Borrower will hold the proceeds thereof in a separate account for the benefit of
the Lender. Following such a sale, the Borrower will transfer such proceeds to
the Lender in kind.
SECTION 5.11. No Limitation on Lender's Rights. The Borrower will not
enter into any contractual obligations which may restrict or inhibit the
Lender's rights or ability to sell or otherwise dispose of the Collateral or any
part thereof.
SECTION 5.12. Protection of Collateral. Upon the occurrence and during
the continuance of an Event of Default, the Lender shall have the right at any
time to make any payments and do any other acts the Lender may deem necessary to
protect its security interests in the Collateral, including, without limitation,
the rights to satisfy, purchase, contest, or compromise any encumbrance, charge,
or lien which, in the reasonable judgment of the Lender, appears to be prior to
or superior to the security interests granted hereunder, subject to Permitted
Liens, and appear in, and defend any action or proceeding purporting to affect
its security interests in, or the value of, any of the Collateral. The Borrower
hereby agrees to reimburse the Lender for all payments made and expenses
incurred under this Agreement including reasonable fees, expenses, and
disbursements of attorneys and paralegals (including the allocated costs of in-
house counsel) acting for the Lender, including any of the foregoing payments
under, or acts taken to protect its security interests in, any of the
Collateral, which amounts shall be secured under this Agreement, and agrees it
shall be bound by any payment made or act taken by the Lender hereunder absent
the Lender's gross negligence or willful misconduct. The Lender shall have no
obligation to make any of the foregoing payments or perform any of the foregoing
acts.
SECTION 5.13. Delivery of Items. The Borrower will (a) promptly (but
in no event later than three Business Days) after its receipt thereof, deliver
to the Lender any documents or certificates of title issued with respect to any
property included in the Collateral, and any promissory notes, letters of credit
or instruments related to or otherwise in connection with any property included
in the Collateral, which in any such case come into the possession of the
Borrower, or shall cause the issuer thereof to deliver any of the same directly
to the Lender, in each case with any necessary endorsements in favor of the
Lender and (b) deliver to the Lender as soon as available copies of any and all
press releases and other similar communications issued by the Borrower.
SECTION 5.14. Solvency. The Borrower shall be and remain Solvent at
all times.
SECTION 5.15. Intellectual Property. Borrower shall do and cause to be
done all things necessary to preserve, maintain and keep in full force and
effect all of its registrations of trademarks, service marks and other marks,
trade names and other trade rights, patents, copyrights and other intellectual
property in accordance with prudent business practices, except to the extent
that the failure to preserve or maintain any of the foregoing would not
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, Borrower agrees, promptly, and in any event not
later than 60 days after the date hereof, to file an application to register any
of its currently unregistered copyrightable software and computer programs and
other materials that Borrower determines in its best judgment should be
registered with the U.S. Copyright Office in Washington, D.C. (the "Copyright
Office") and to promptly provide Lender with evidence of such filing. Borrower
will, upon request, on an ongoing basis, promptly file an application to
register any future unregistered copyrightable
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software and computer programs and other materials with the Copyright Office.
SECTION 5.16. Fundamental Changes. The Borrower shall not (a) amend or
modify its name, unless the Borrower delivers to the Lender thirty days prior to
any such proposed amendment or modification written notice of such amendment or
modification and within ten days before such amendment or modification delivers
executed Uniform Commercial Code financing statements (in form and substance
satisfactory to the Lender) or (b) merge or consolidate with any other entity or
make any material adverse change, which change results from a single transaction
or series of related transactions, but not from the sale of newly issued
securities to investors, in its capital structure, in each case without the
Lender's prior written consent which shall not be unreasonably withheld other
than (i) issuances of new equity, (ii) corporate partnering agreements entered
into in the ordinary course of business, and (iii) acquisitions to the extent
permitted by Section 5.23 below.
SECTION 5.17. Contingent Obligations. Borrower will not, directly or
indirectly, incur, assume, or suffer to exist any Contingent Obligation,
excluding (i) indemnities given in connection with this Agreement or the other
Loan Documents in favor of the Lender or in connection with the sale of
inventory or other asset dispositions permitted hereunder or in connection with
the licensing of intellectual property or products in the ordinary course of
business and (ii) guaranties in favor of Fresenius under or in connection with
the Fresenius Agreements, except Contingent Obligations and other similar third
party credit support relating to obligations of vendors and suppliers of
Borrower in respect of transactions entered into in the normal course of
business, provided that the aggregate amount of any such guarantees and other
similar third party credit support shall not exceed $100,000 at any time
outstanding, and provided further that no Default or Event of Default shall
exist either immediately prior to or after giving effect to the making of the
foregoing guarantees or the entering into any third party credit support
transactions.
SECTION 5.18. Change in Nature of Business. Borrower will not at any
time make any material change in the lines of its business as carried on at the
date of this Agreement or enter into any new line of business; provided that
Borrower may enter businesses reasonably related or incidental to its current
lines of business.
SECTION 5.19. Sales of Assets. Borrower will not, directly or
indirectly, in any fiscal year, sell, transfer or otherwise dispose of any of
its assets, or grant any option or other right to purchase or otherwise acquire
any of its assets other than (i) equipment with an aggregate value of less than
$50,000 the proceeds of which shall be paid to the Lender and applied to the
Obligations, (ii) sales of inventory in the ordinary course of business and
(iii) licenses or sublicenses on a non-exclusive or exclusive basis of
intellectual property in the ordinary course of Borrower's business.
SECTION 5.20. Loans to Other Persons. Borrower will not at any time
make loans or advance any credit (except to trade debtors in the ordinary course
of business) to any Person in excess of $100,000 in the aggregate at any time
for all such loans, except that Borrower may make cashless advances of credit to
senior members of Borrower's management team to purchase restricted stock of
Borrower.
SECTION 5.21. Dividends, Stock Redemptions. Borrower will not,
directly or indirectly, pay any dividends or distributions on, purchase, redeem
or retire any shares of any class of its capital stock or any warrants, options
or rights to purchase any such capital stock, whether now or hereafter
outstanding ("Stock"), or make any payment on account of or set apart assets for
a sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of its Stock, or make any other distribution in
respect thereof, either directly or indirectly, whether in cash or property or
in obligations of Borrower, except for (i) repurchases or redemptions of
convertible debentures existing on the date of this Agreement either for cash or
stock (ii) dividends paid solely in stock of the Borrower, and (iii) repurchases
of stock owned by employees, directors and consultants of Borrower pursuant to
terms of employment, consulting or other stock restrictions agreements at such
time as any such employee, director or consultant terminates his or her
affiliations with the Borrower, provided that no Default or Event of Default
shall exist either immediately prior to or after giving effect to such
repurchase, and provided further that the total amount paid in connection
therewith by Borrower shall not exceed $100,000 in any consecutive 12-month
period.
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SECTION 5.22. Investments in Other Persons. Borrower will not,
directly or indirectly, at any time make or hold any investment in any Person
(whether in cash, securities or other property of any kind) other than (i)
investments in Cash Equivalents (ii) the loans and advances permitted by Section
5.20 above and (iii) investments in subsidiaries not to exceed $40,000 (except
this limitation shall not apply to PRP), in existence on the date hereof in an
amount not to exceed the amount of such investment on the date hereof.
SECTION 5.23. Acquisition of Stock or Assets. Borrower will not
acquire or commit or agree to acquire all or any stock, securities or assets of
any other Person other than (i) inventory and equipment acquired in the ordinary
course of business and (ii) rights as licensee under an exclusive license of
intellectual property.
SECTION 5.24. Partnerships; Subsidiaries; Joint Ventures; Management
Contracts. Borrower will not at any time create any direct or indirect
subsidiary, enter into any joint venture or similar arrangement (other than
joint ventures or strategic partnerships consisting of non-exclusive or
exclusive licensing of technology or products or the providing of technical
support) or become a partner in any general or limited partnership or enter into
any management contract (other than an employment contract for the employment of
an officer or employee entered into in the regular course of Borrower's
business) permitting third party management rights with respect to Borrower's
business. The Borrower shall not advance any monies, assets of any nature or
kind, stock or other capital to any of its subsidiaries or pay any dividends or
make distributions to any of its subsidiaries, including but not limited to,
IMRE Services, Inc. and IMRE Europe, Ltd. In addition, Borrower shall not
maintain any financial assets outside of the United States, except Borrower may
maintain balances outside the U.S. provided such balances do not exceed in the
aggregate the equivalent of $40,000 U.S. dollars.
SECTION 5.25. Additional Requirements. The Borrower shall take all
such further actions and execute all such further documents and instruments as
the Lender may reasonably request.
SECTION 6. FINANCIAL STATEMENTS. Until the payment and satisfaction in
--------------------
full of all Obligations, the Borrower shall deliver to the Lender the following
financial information:
SECTION 6.1. Annual Financial Statements. As soon as available, but
not later than 90 days after the end of each fiscal year of Cypress and its
consolidated subsidiaries, the consolidated balance sheet, income statement, and
statements of cash flows and shareholders equity for Cypress and its
consolidated subsidiaries (the "Financial Statements") for such year, reported
on by independent certified public accountants without an adverse qualification;
and
SECTION 6.2. Quarterly Financial Statements. As soon as available, but
not later than 45 days after the end of each of the first three fiscal quarters
in any fiscal year of Cypress and its consolidated subsidiaries, the Financial
Statements for such fiscal quarter, together with a certification duly executed
by a responsible officer of the Borrower that such Financial Statements have
been prepared in accordance with GAAP and are fairly stated in all material
respects (subject to normal year-end audit adjustments).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the following
-----------------
events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay within five (5) days of when due
any principal, interest, fee or other amount required to be paid by the Borrower
under or in connection with any Note and this Agreement;
(b) any representation or warranty made or deemed made by the Borrower
under or in connection with any Loan Document or any Financial Statement shall
prove to have been false or incorrect in any material respect when made or
deemed made;
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(c) the Borrower shall fail to perform or observe (i) any of the
terms, covenants or agreements contained in Sections 5.4, 5.7, 5.10, 5.14 or
5.16 through 5.25 hereof or (ii) any other term, covenant, or agreement
contained in any Loan Document (other than the other Events of Default specified
in this Section 7) and such failure remains unremedied for the earlier of
fifteen days from (A) the date on which the Lender has given the Borrower
written notice of such failure and (B) the date on which the Borrower knew or
should have known of such failure;
(d) any defined "Event of Default" shall occur under any other Loan
Document; or Borrower or any Person shall deny or disaffirm its obligations
under any of the Loan Documents or any Liens granted in connection therewith or
shall otherwise challenge any of its obligations under any of the Loan
Documents; or any Liens granted in any of the Collateral shall be determined to
be void, voidable or invalid, are subordinated (except as provided in Section 2
hereof) or are not given the priority contemplated by this Agreement (except for
Permitted Liens); or any Loan Document shall for any reason cease to create a
valid and perfected Lien on the Collateral purported to be covered thereby, of
first priority (except for Permitted Liens), to the extent a perfected first
priority lien can be created by filing a Uniform Commercial Code financing
statement or taking the other Required Actions described in Section 5.9 above;
(e) dissolution, liquidation, winding up, or cessation of the
Borrower's business, failure of the Borrower generally to pay its debts as they
mature, admission in writing by the Borrower of its inability generally to pay
its debts as they mature, or calling of a meeting of the Borrower's creditors
for purposes of compromising any of the Borrower's debts;
(f) the commencement by or against the Borrower of any bankruptcy,
insolvency, arrangement, reorganization, receivership, or similar proceedings
under any federal or state law and, in the case of any such involuntary
proceeding, such proceeding remains undismissed or unstayed for sixty days
following the commencement thereof, or any action by the Borrower is taken
authorizing any such proceedings;
(g) an assignment for the benefit of creditors is made by the
Borrower, whether voluntary or involuntary, the appointment of a trustee,
custodian, receiver, or similar official for the Borrower or for any substantial
property of the Borrower, or any action by the Borrower authorizing any such
proceeding;
(h) the Borrower shall default in (i) the payment of principal or
interest on any indebtedness in excess of $100,000 (other than the Obligations)
beyond the period of grace, if any, provided in the instrument or agreement
under which such indebtedness was created, and such payment default has not been
cured within any applicable grace period unless such default has been waived by
such Person; or (ii) the observance or performance of any other agreement or
condition relating to any such indebtedness or contained in any instrument or
agreement relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such indebtedness to cause, with the giving of
notice if required, such indebtedness to become due prior to its stated
maturity, and such default has not been cured within any applicable grace period
unless such default has been waived by such Person; or (iii) any loan or other
agreement under which the Borrower has received financing from Transamerica
Corporation or any of its affiliates, beyond the period of grace, it any,
provided in such loan or other agreement unless such default has been waived;
(i) the Borrower suffers or sustains a Material Adverse Change as
determined in Lender's good faith business judgment;
(j) any tax lien, other than a Permitted Lien, is filed of record
against the Borrower and is not bonded or discharged within ten Business Days;
(k) any judgment or order for the payment of money in excess of
$100,000 and not otherwise covered by applicable insurance shall be rendered
against the Borrower and such judgment or order shall not be stayed, vacated,
bonded, or discharged within sixty days;
(l) any material covenant, agreement, or obligation, as determined in
the good faith
15
business judgment of the Lender, made by the Borrower and contained in or
evidenced by any of the Loan Documents shall cease to be enforceable, or shall
be determined to be unenforceable, in accordance with its terms; or
(m) there is a change, which change results from a single transaction
or series of related transactions, but not from the sale of newly issued
securities to investors, in more than 50% of the ownership of any equity
interests of the Borrower on the closing date of such transaction or series of
related transactions or more than 50% of such interests become subject to any
contractual, judicial, or statutory lien, charge, security interest, or
encumbrance.
SECTION 8. REMEDIES. If any Event of Default shall have occurred and
--------
be continuing:
(a) The Lender may, without prejudice to any of its other rights under
any Loan Document or Applicable Law, declare all Obligations to be immediately
due and payable (except with respect to any Event of Default set forth in
Section 7(f) hereof, in which case all Obligations shall automatically become
immediately due and payable without necessity of any declaration) without
presentment, representation, demand of payment, or protest, which are hereby
expressly waived.
(b) The Lender may take possession of the Collateral and, for that
purpose may enter, with the aid and assistance of any person or persons, any
premises where the Collateral or any part hereof is, or may be placed, and
remove the same.
(c) The obligation of the Lender, if any, to make additional Loans or
financial accommodations of any kind to the Borrower shall immediately
terminate.
(d) The Lender may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein (or in any Loan Document) or
otherwise available to it, all the rights and remedies of a secured party under
the applicable Uniform Commercial Code (the "Code") whether or not the Code
applies to the affected Collateral and also may (i) require the Borrower to, and
the Borrower hereby agrees that it will at its expense and upon request of the
Lender forthwith, assemble all or part of the Collateral as directed by the
Lender and make it available to the Lender at a place to be designated by the
Lender that is reasonably convenient to both parties and (ii) without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Lender's offices or
elsewhere, for cash, on credit, or for future delivery, and upon such other
terms as the Lender may deem commercially reasonable.
(e) The Lender may accelerate or extend the time of payment,
compromise, issue credits, or bring suit on all accounts receivable
("Receivables") and other Collateral (in the name of Borrower or the Lender) and
otherwise administer and collect the Receivables and other Collateral.
(f) The Lender may collect, receive, dispose of and realize upon any
investment property Collateral, including withdrawal of any and all funds from
any securities accounts.
(g) The Lender may (i) settle or adjust disputes or claims directly
with account debtors for amounts and upon terms which it considers advisable,
and (ii) notify account debtors on the Receivables and other Collateral that the
Receivables and Collateral have been assigned to the Lender, and that payments
in respect thereof shall be made directly to the Lender. If an Event of Default
has occurred and is continuing, Borrower hereby irrevocably authorizes and
appoints the Lender, or any Person the Lender may designate, as its attorney-in-
fact, at Borrower's sole cost and expense, to exercise, all of the following
powers, which are coupled with an interest and are irrevocable, until all of the
Obligations have been indefeasibly paid and satisfied in full in cash: (A) to
receive, take, endorse, sign, assign and deliver, all in the name of the Lender
or Borrower, any and all checks, notes, drafts, and other documents or
instruments relating to the Collateral; (B) to receive, open and dispose of all
mail addressed to Borrower and to notify postal authorities to change the
address for delivery thereof to such address as the Lender may designate; and
(C) to take or bring, in the name of the Lender or Borrower, all steps, actions,
suits or proceedings deemed by the Lender necessary or desirable to enforce or
effect collection of Receivables and other
16
Collateral or file and sign Borrower's name on a proof of claim in bankruptcy or
similar document against any obligor of Borrower.
(h) The Borrower agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to the Borrower of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Lender shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given. The
Lender may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Borrower recognizes
that the Lender may be unable to make a public sale of any or all of any
investment property Collateral, by reason of prohibitions contained in
applicable securities laws or otherwise, and expressly agrees that a private
sale to a restricted group of purchasers for investment and not with a view to
any distribution thereof shall be considered a commercially reasonable sale.
(i) Unless expressly prohibited by any licensor thereof, the Lender is
hereby granted a license to use all computer software programs, data bases,
processes, trademarks, tradenames and materials used by Borrower in connection
with its businesses or in connection with the Collateral.
(j) All cash proceeds received by the Lender in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
may, in the discretion of the Lender, be held by the Lender as collateral for,
or then or at any time thereafter applied in whole or in part by the Lender
against, all or any part of the Obligations in such order as the Lender shall
elect. Any surplus of such cash or cash proceeds held by the Lender and
remaining after the full and final payment of all the Obligations shall be paid
over to the Borrower or to such other Person to which the Lender may be required
under applicable law, or directed by a court of competent jurisdiction, to make
payment of such surplus.
(k) Notwithstanding anything contained herein to the contrary, Lender
shall exercise its rights and remedies hereunder and under any other Loan
Document subject to the rights of Fresenius under the Fresenius Agreements.
SECTION 9. MISCELLANEOUS PROVISIONS.
------------------------
SECTION 9.1. Notices. Except as otherwise provided herein, all
notices, approvals, consents, correspondence, or other communications required
or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, or certified or registered mail,
postage prepaid, if to the Lender, then to at 76 Batterson Park Road,
Farmington, Connecticut 06032, with a copy to the Lender at Riverway II, West
Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, and if to the
Borrower, then to 4350 Executive Drive, San Diego, California, 92121, or such
other address as shall be designated by the Borrower or the Lender to the other
party in accordance herewith. All such notices and correspondence shall be
effective when received.
SECTION 9.2. Headings. The headings in this Agreement are for purposes
of reference only and shall not affect the meaning or construction of any
provision of this Agreement.
SECTION 9.3. Assignments and Participations. The Borrower shall not
have the right to assign any Note or this Agreement or any interest therein
unless the Lender shall have given the Borrower prior written consent and the
Borrower and its assignee shall have delivered assignment documentation in form
and substance satisfactory to the Lender in its sole discretion. The Lender may
assign (without the consent of Borrower) to one or more Persons all or a portion
of its rights and obligations under this Agreement and the other Loan Documents
(provided that such Person, or any affiliate or subsidiary thereof, shall not be
a direct or indirect competitor of the Borrower). The Lender may sell
participations in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of any Loans);
provided, however, that the Lender's obligations under this Agreement shall
remain unchanged. The Lender may, in connection with any permitted assignment or
participation or proposed assignment or participation pursuant to this
Agreement, disclose to the assignee or participant or proposed assignee or
participant any information relating to Borrower furnished to
17
the Lender by or on behalf of Borrower. In handling any confidential information
of Borrower, Lender shall exercise the same degree of care that it exercises
with respect to its own proprietary information of the same types to maintain
the confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Lender in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower, (iii)
as required by law, regulations, rule or order, subpoena, judicial order or
similar order, (iv) as may be required in connection with an audit or similar
investigation of Lender, and (v) as Lender may deem appropriate in connection
with the exercise of any remedies hereunder. Confidential information hereunder
shall not include information that either: (a) is in the public domain or in the
knowledge or possession of Lender when disclosed to Lender, or becomes part of
the public domain after disclosure to Lender through no fault of Lender; or (b)
is disclosed to Lender by a third party, provided Lender does not have actual
knowledge that such third party is prohibited from disclosing such information.
SECTION 9.4. Amendments, Waivers, and Consents. Any amendment or
waiver of any provision of this Agreement and any consent to any departure by
the Borrower from any provision of this Agreement shall be effective only by a
writing signed by the Lender and shall bind and benefit the Borrower and the
Lender and their respective successors and assigns, subject, in the case of the
Borrower, to the first sentence of Section 9.3.
SECTION 9.5. Interpretation of Agreement. Time is of the essence in
each provision of this Agreement of which time is an element. All terms not
defined herein or in a Note shall have the meaning set forth in the applicable
Code, except where the context otherwise requires. To the extent a term or
provision of this Agreement conflicts with any Note, or any term or provision
thereof, and is not dealt with therein with more specificity, this Agreement
shall control with respect to the subject matter of such term or provision.
Acceptance of or acquiescence in a course of performance rendered under this
Agreement shall not be relevant in determining the meaning of this Agreement
even though the accepting or acquiescing party had knowledge of the nature of
the performance and opportunity for objection.
SECTION 9.6. Continuing Security Interest. This Agreement shall create
a continuing security interest in the Collateral and shall (i) remain in full
force and effect until the indefeasible payment in full of the Obligations, (ii)
be binding upon the Borrower and its successors and assigns and (iii) inure,
together with the rights and remedies of the Lender hereunder, to the benefit of
the Lender and its successors, transferees, and assigns.
SECTION 9.7. Reinstatement. To the extent permitted by law, this
Agreement and the rights and powers granted to the Lender hereunder and under
the Loan Documents shall continue to be effective or be reinstated if at any
time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee, or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 9.8. Survival of Provisions. All representations, warranties,
and covenants of the Borrower contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance by the Borrower of the Obligations secured hereby.
SECTION 9.9. Indemnification. The Borrower agrees to indemnify and
hold harmless the Lender and its directors, officers, agents, employees, and
counsel from and against any and all costs, expenses, claims, or liability
incurred by the Lender or such Person hereunder and under any other Loan
Document or in connection herewith or therewith, unless such claim or liability
shall be due to willful misconduct or gross negligence on the part of the Lender
or such Person. In addition and without limiting the generality of the
foregoing, Borrower shall, upon demand, pay to the Lender all reasonable costs
and expenses incurred by the Lender (including the reasonable fees and
disbursements of counsel and other professionals) in connection with the
18
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents, and pay to the Lender all reasonable costs and expenses
(including the reasonable fees and disbursements of counsel and other
professionals) paid or incurred by the Lender in order to enforce or defend any
of its rights under or in respect of this Agreement, any other Loan Document or
any other document or instrument now or hereafter executed and delivered in
connection herewith, collect the Obligations or otherwise administer this
Agreement, foreclose or otherwise realize upon the Collateral or any part
thereof, 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 Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
the Lender's security interest in, the Collateral; and otherwise represent the
Lender in any litigation relating to Borrower.
SECTION 9.10. Counterparts; Signatures by Facsimile. This Agreement
may be executed in counterparts, each of which when so executed and delivered
shall be an original, but both of which shall together constitute one and the
same instrument. This Agreement and each of the other Loan Documents and any
notices given in connection herewith or therewith may be executed and delivered
by facsimile transmission all with the same force and effect as if the same was
a fully executed and delivered original manual counterpart.
SECTION 9.11. Severability. In case any provision in or obligation
under this Agreement or any Note or any other Loan Document shall be invalid,
illegal, or unenforceable in any jurisdiction, the validity, legality, and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
SECTION 9.12. Delays; Partial Exercise of Remedies. No delay or
omission of the Lender to exercise any right or remedy hereunder, whether before
or after the happening of any Event of Default, shall impair any such right or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
No single or partial exercise by the Lender of any right or remedy shall
preclude any other or further exercise thereof, or preclude any other right or
remedy.
SECTION 9.13. Entire Agreement. The Borrower and the Lender agree that
this Agreement, the Schedule hereto, and the Commitment Letter are the complete
and exclusive statement and agreement between the parties with respect to the
subject matter hereof, superseding all proposals and prior agreements, oral or
written, and all other communications between the parties with respect to the
subject matter hereof. Should there exist any inconsistency between the terms of
the Commitment Letter and this Agreement, the terms of this Agreement shall
prevail.
SECTION 9.14. Setoff. In addition to and not in limitation of all
rights of offset that the Lender may have under Applicable Law, and whether or
not the Lender has made any demand or the Obligations of the Borrower have
matured, the Lender shall have the right to appropriate and apply to the payment
of the Obligations of the Borrower all deposits and other obligations then or
thereafter owing by the Lender to or for the credit or the account of the
Borrower.
SECTION 9.15 Joint and Several Liability. If 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.
SECTION 9.16 Maximum Rate. Notwithstanding anything to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the parties
hereto hereby agree that all agreements between them under this Agreement and
the other Loan Documents, whether now existing or hereafter arising and whether
written or oral, are expressly limited so that in no contingency or event
whatsoever shall the amount paid, or agreed to be paid, to the Lender for the
use, forbearance, or detention of the money loaned to Borrower and evidenced
hereby or thereby or for the performance or payment of any covenant or
obligation contained herein or therein, exceed the maximum non-usurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the Obligations, under the laws of the
State of
19
Illinois (or the laws of any other jurisdiction whose laws may be mandatorily
applicable notwithstanding other provisions of this Agreement and the other Loan
Documents), or under applicable federal laws which may presently or hereafter be
in effect and which allow a higher maximum non-usurious interest rate than under
the laws of the State of Illinois (or such other jurisdiction), in any case
after taking into account, to the extent permitted by applicable law, any and
all relevant payments or charges under this Agreement and the other Loan
Documents executed in connection herewith, and any available exemptions,
exceptions and exclusions (the "Highest Lawful Rate"). If due to any
circumstance whatsoever, fulfillment of any provisions of this Agreement or any
of the other Loan Documents at the time performance of such provision shall be
due shall exceed the Highest Lawful Rate, then, automatically, the obligation to
be fulfilled shall be modified or reduced to the extent necessary to limit such
interest to the Highest Lawful Rate, and if from any such circumstance the
Lender should ever receive anything of value deemed interest by applicable law
which would exceed the Highest Lawful Rate, such excessive interest shall be
applied to the reduction of the principal amount then outstanding hereunder or
on account of any other then outstanding Obligations and not to the payment of
interest, or if such excessive interest exceeds the principal unpaid balance
then outstanding hereunder and such other then outstanding Obligations, such
excess shall be refunded to Borrower. All sums paid or agreed to be paid to the
Lender for the use, forbearance, or detention of the Obligations and other
indebtedness of Borrower to the Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of such indebtedness, until payment in full thereof, so that the actual
rate of interest on account of all such indebtedness does not exceed the Highest
Lawful Rate throughout the entire term of such indebtedness. The terms and
provisions of this Section shall control every other provision of this
Agreement, the other Loan Documents and all other agreements between the parties
hereto.
SECTION 9.17. WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.18. GOVERNING LAW. THE VALIDITY, INTERPRETATION, AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.
SECTION 9.19. Venue; Service of Process. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY, OR OF
THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING, (a) ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (b) THE RIGHT TO
INTERPOSE ANY NONCOMPULSORY SETOFF, COUNTERCLAIM, OR CROSS-CLAIM. THE BORROWER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS
FOR IT SPECIFIED IN SECTION 9.1 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER
JURISDICTION, SUBJECT IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH RESPECT TO
RIGHTS AND REMEDIES.
20
IN WITNESS WHEREOF, the undersigned Borrower has caused this Agreement
to be duly executed and delivered by its proper and duly authorized officer as
of the date first set forth above.
CYPRESS BIOSCIENCE, INC.
By: /s/ Carl F. Bobkoski
-----------------------------
Name: Carl F. Bobkoski
-----------------------
Title: President & COO
-----------------------
PRP, INC.
By: /s/ Carl F. Bobkoski
-----------------------------
Name: Carl F. Bobkoski
-----------------------
Title: President & COO
-----------------------
Accepted as of the
7th day of September, 1999
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ Robert D. Pomeroy, Jr.
---------------------------------
Name: Robert D. Pomeroy, Jr.
----------------------------
Title: Executive Vice President
----------------------------
21
Schedule A
to
Loan and Security Agreement
Consents and Approvals (Section 4.2):
Other Places of Business and Locations of Collateral (Section 4.6):
Prior Names of Obligor (Section 4.7):
Prior Trade Names of Obligor (Section 4.7):
Existing Trade Names of Obligor (Section 4.7):
Federal Tax ID (Section 4.7):
Registered and Unregistered Patents (Section 4.11):
Registered and Unregistered Trademarks (Section 4.11):
Registered Copyrights (Section 4.11):