EXHIBIT 10.27
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT is entered into as of December 25,
1998 (this "Loan Agreement") between IDENTIX INCORPORATED, a Delaware
corporation (herein called "Borrower"), and IMPERIAL BANK (herein called
"Bank"). This Loan Agreement amends, restates and supercedes in its entirety the
Prior Loan Agreement (as hereinafter defined).
RECITALS
A. Borrower and Bank entered into a certain Security and Loan Agreement
dated as of August 29, 1997, as the same was amended by that certain First
Amendment to the Security and Loan Agreement and Addendum Thereto dated as of
December 22, 1997, that certain Second Amendment to the Security and Loan
Agreement and Addendum Thereto and Waiver dated as of July 6, 1998, that certain
extension letter dated August 28, 1998 and that certain extension and
modification letter dated November 4, 1998 (collectively, the "Prior Loan
Agreement"), pursuant to which Bank agreed to extend and make loans available to
Borrower upon the terms and conditions contained therein.
B. Borrower and Bank desire to amend and restate the Prior Loan Agreement
in its entirety to, among other things, increase the amount of its commitment
thereunder, amend certain provisions relating to advances under said commitment
and modify certain covenants and reporting requirements of the Borrower, all as
more fully set forth herein.
C. Bank has agreed to continue to make and maintain the Revolving
Commitment as described in this Loan Agreement, but only upon the terms and
subject to the conditions hereinafter set forth and in reliance on the
representations and warranties set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants hereinafter set forth, and intending to be legally bound, the parties
hereby agree as follows:
1. Definitions. As used in this Loan Agreement and unless otherwise
defined herein, all initially capitalized terms shall have the meanings set
forth on Exhibit A attached hereto and incorporated herein by this reference.
2. Commitment.
A. Revolving Commitment. Subject to all the terms and conditions
of this Loan Agreement and prior to the termination of its commitment as
hereinafter provided, Bank hereby agrees to make loans (each a "Revolving Loan")
to Borrower, from time to time and in such amounts as Borrower shall request
pursuant to this Section 2.A., up to an aggregate principal amount outstanding
under the Revolving Loan Account not to exceed the lesser of: (1) the sum of (a)
eighty percent (80.0%) of Eligible Accounts due from Domestic Account Debtors
and Foreign Account Debtors plus (b) eighty percent (80.0%) of Eligible Accounts
due from ANADAC plus (c) the lesser of thirty-five percent (35.0%) of Eligible
Inventory or $1,000,000.00 (as the same may be adjusted from time to time as
provided for under Section 9.B. hereof, collectively, the "Borrowing Base") or
(2) $10,000,000.00 (the "Revolving Commitment"). If at any time or for any
reason, the outstanding principal amount of the Revolving Loan Account is
greater than the lesser of: (x) the Borrowing Base or (y) the Revolving
Commitment, Borrower shall immediately pay to Bank, in cash, the amount of such
excess. Any commitment of Bank, pursuant to the terms of this Loan Agreement, to
make Revolving Loans shall expire on the Revolving
1.
Maturity Date, subject to Bank's right to renew said commitment in its sole and
absolute discretion at Borrower's request. Any such renewal of the Revolving
Commitment shall not be binding upon Bank unless it is in writing and signed by
an officer of Bank. The outstanding principal balance of the Revolving Loan
Account may be prepaid in whole or in part at any time without penalty. Provided
that no Event of Default has occurred and is continuing, all or any portion of
the Revolving Loans advanced by Bank which are repaid by Borrower shall be
available for reborrowing in accordance with the terms hereof. Borrower promises
to pay to Bank the entire outstanding unpaid principal balance (and all accrued
unpaid interest thereon) of the Revolving Loan Account on or before December 24,
1999 ("Revolving Maturity Date").
(1) Revolving Loans. The amount of each Revolving Loan made by Bank
to Borrower hereunder shall be debited to the loan ledger account of Borrower
maintained by Bank for the Revolving Commitment (herein called the "Revolving
Loan Account") and Bank shall credit the Revolving Loan Account with all loan
repayments in respect thereof made by Borrower. When Borrower desires to obtain
a Revolving Loan, Borrower shall notify Bank (which notice shall be signed by an
officer of Borrower and shall be irrevocable) in accordance with Section 3
hereof, to be received no later than 3:00 p.m. Pacific time one (1) Banking Day
before the day on which the Revolving Loan is to be made. Revolving Loans may
only be used for short-term working capital requirements, the issuance of
letters of credit and the purchase of foreign exchange futures contracts.
(a) Letter of Credit Usage and Sublimit. Subject to the
availability of the Revolving Commitment and in reliance on the representations
and warranties of Borrower set forth herein, at any time and from time to time
from the date hereof through the Banking Day immediately prior to the Revolving
Maturity Date, Bank shall issue for the account of Borrower such standby and
commercial letters of credit ("Letters of Credit") as Borrower may request,
which request shall be made by delivering to Bank a duly executed letter of
credit application on Bank's standard form; provided, however, that the
outstanding and undrawn amounts under all such Letters of Credit (i) shall not
at any time exceed $3,000,000.00 and (ii) shall be deemed to constitute
Revolving Loans for the purpose of calculating availability under the Revolving
Commitment. Unless Borrower shall have deposited with Bank cash collateral in an
amount sufficient to cover all undrawn amounts under each such Letter of Credit
and Bank shall have agreed in writing, no Letter of Credit shall have an
expiration date that is later than the Revolving Maturity Date, subject to
Bank's right to extend the expiration date of each such Letter of Credit beyond
the Revolving Maturity Date in its sole and absolute discretion. All Letters of
Credit shall be in form and substance acceptable to Bank in its sole discretion
and shall be subject to the terms and conditions of Bank's form application and
letter of credit agreement. Borrower will pay any standard issuance and other
fees that Bank notifies Borrower will be charged for issuing and processing
Letters of Credit for Borrower.
(b) Foreign Exchange Usage and Sublimit. Subject to the
availability of the Revolving Commitment and in reliance on the representations
and warranties of Borrower set forth herein, at any time and from time to time
from the date hereof through the Banking Day immediately prior to the Revolving
Maturity Date, Bank shall arrange the purchase by Borrower of foreign exchange
futures contracts ("Exchange Contracts") as Borrower may request, which request
shall be made by delivering to Bank a duly executed exchange contract
application on Bank's standard form; provided, however, that the maximum
aggregate notional contract amount under all such Exchange Contracts shall not
at any time exceed $1,500,000.00; provided, further, that up to $150,000.00,
representing ten percent (10%) of the maximum aggregate notional contract amount
under all such Exchange Contracts, shall be deemed to constitute outstanding
Revolving Loans for the purpose of calculating availability under the Revolving
Commitment. Unless Borrower shall have deposited with Bank cash collateral in an
amount sufficient to cover all undrawn amounts under each such Exchange Contract
and Bank shall have agreed in writing, no Exchange Contract shall have a due
date that is later than the Revolving Maturity Date subject to Bank's right to
extend the due date of each such Exchange Contract beyond the Revolving Maturity
Date in its sole and absolute discretion. All Exchange Contracts shall be in
form and substance acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form exchange
2.
contract application. Borrower will pay any standard issuance and other fees
that Bank notifies Borrower will be charged for issuing and processing Exchange
Contracts for Borrower. After and during the continuance of an Event of Default,
Bank may, in its sole and absolute discretion, terminate any or all of the
Exchange Contracts. Borrower agrees to indemnify and hold harmless Bank from and
against all loss, costs and expense associated with any such termination of any
Exchange Contract.
(2) Interest Payments on Revolving Loans. Borrower further promises to
pay to Bank from the date of the advance of the initial Revolving Loan through
the Revolving Maturity Date, on or before the tenth (10th) day of each month,
interest on the average daily unpaid balance of the Revolving Loan Account
during the immediately preceding month at a rate of interest equal to one-half
of one percent (0.50%) per annum in excess of the rate of interest which Bank
has announced as its prime lending rate (the "Prime Rate"), which shall vary
concurrently with any change in the Prime Rate. Interest shall be computed at
the above rate on the basis of the actual number of days during which the
principal balance of the Revolving Loan Account is outstanding divided by 360,
which shall for interest computation purposes be considered one (1) year.
(a) Reduction in Interest Rate. Notwithstanding any of the
provisions contained in Section 2.A.(2) above, provided that no Event of Default
has occurred and is continuing, if on March 31, 1999 Borrower is in compliance
with all of the financial covenants set forth in Section 10 hereof, then
beginning on April 1, 1999, Bank agrees to reduce the rate of interest accruing
on the unpaid balance of the Revolving Loan Account to a rate of interest per
annum equal to the Prime Rate.
3. Loan Requests. Requests for Revolving Loans hereunder shall be in
writing duly executed by Borrower in a form satisfactory to Bank and shall
contain a certification setting forth the matters referred to in Section 2,
which shall disclose that Borrower is entitled to the amount and type of Loan
being requested. Bank is hereby authorized to charge Borrower's deposit account
with Bank for all sums due Bank under this Loan Agreement.
4. Delivery of Payments. Payment to Bank of all amounts due hereunder
shall be made at its Santa ▇▇▇▇▇ Valley Regional office, or at such other place
as may be designated in writing by Bank from time to time. If any payment date
fall on a day that is not a day that Bank is open for the transaction of
business ("Banking Day"), the payment due date shall be extended to the next
Banking Day.
5. Late Charge. If any interest payment, principal payment or principal
balance payment required hereunder is not received by Bank on or before ten (10)
days from the date in which such payment becomes due, Borrower shall pay to
Bank, a late charge equal to the lesser of (a) five percent (5.0%) of the amount
of such unpaid payment, in addition to said unpaid payment or (b)the maximum
amount permitted to be charged by applicable law, until remitted to Bank;
provided; however, nothing contained in this Section 5, shall be construed as
any obligation on the part of Bank to accept payment of any past due payment or
less than the total unpaid principal balance of the Revolving Loan Account
following the Revolving Maturity Date. All payments shall be applied first to
any late charges due hereunder, next to accrued interest then payable and the
remainder, if any, to reduce any unpaid principal due under the Revolving Loan
Account.
6. Default Interest. From and after the Revolving Maturity Date or such
earlier date as all sums owing under the Revolving Loan Account becomes due and
payable by acceleration or otherwise, or upon the occurrence of an Event of
Default, at the option of Bank all sums owing under the Revolving Loan Account
shall bear interest until paid in full at a rate equal to the lesser of (a) five
percent (5.0%) per annum in excess of the then applicable interest rate provided
for in Section 2.A.(2) hereof or (b) the maximum amount permitted to be charged
by applicable law, until all obligations hereunder are repaid in full or the
Event of Default is waived or cured to the satisfaction of Bank, as applicable.
3.
7. Representations and Warranties. Borrower represents and warrants to
Bank: (a) That Borrower is a corporation, duly organized and existing in the
State of its incorporation and the execution, delivery and performance of each
of the Loan Documents are within Borrower's corporate powers, have been duly
authorized and are not in conflict with law or the terms of any charter, by-law
or other incorporation papers, or of any indenture, agreement or undertaking to
which Borrower is a party or by which Borrower is bound or affected: (b)
Borrower is, and at the time the Collateral becomes subject to Bank's security
interest will be, the true and lawful owner of and has, and at the time the
Collateral becomes subject to Bank's security interest will have, good and clear
title to the Collateral, subject only to Bank's rights therein and to Permitted
Liens; (c) Each Account is, and at the time the Account comes into existence
will be, a true and correct statement of a bona fide indebtedness incurred by
the debtor named therein in the amount of the Account for either merchandise
sold or delivered (or being held subject to Borrower's delivery instructions)
to, or services rendered, performed and accepted by, the account debtor; (d)
That there are and will be no defenses, counterclaims, or setoffs which may be
asserted against the Accounts from time to time represented by Borrower to be
Eligible Accounts, except as permitted in the definition thereof; (e) Any and
all financial information, including information relating to the Collateral,
submitted by Borrower to Bank, whether previously or in the future, is and will
be true and correct; (f) There is no litigation or other proceeding pending or
threatened against or affecting Borrower, and Borrower is not in default. with
respect to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority; (g) (i) The consolidated and consolidating
balance sheets of Borrower dated as of September 30, 1998, and the related
consolidated and consolidating profit and loss statements for Borrower's fiscal
year then ended, copies of which have heretofore been delivered to Bank by
Borrower, and all other statements and data submitted in writing by Borrower to
Bank in connection with Borrower's request for credit are true and correct, and
said balance sheet and profit and loss statement accurately present the
financial condition of Borrower as of the date thereof and the results of the
operations of Borrower for the period covered thereby, and have been prepared in
accordance with GAAP, (ii) since such date, there have been no material adverse
changes in the financial condition of Borrower, and (iii) Borrower has no
knowledge of any liabilities, contingent or otherwise, which are not reflected
in said balance sheet, and Borrower has not entered into any special commitments
or substantial contracts which are not reflected in said balance sheet, other
than in the ordinary and normal course of its business, which may have a
Material Adverse Effect upon its financial condition, operations or business as
now conducted; (h) Borrower has no liability for any delinquent local, state or
federal taxes, and, if Borrower has contracted with any government agency, it
has no liability for renegotiation of profits; and (i) Borrower, as of the date
hereof, possesses all necessary Trademarks, trade names, Copyrights, Patents,
patent rights, and licenses to conduct its business as now operated, without any
known conflict with valid Trademarks, trade names, Copyrights, Patents, patent
rights and license rights of others; and (j) Borrower and its Subsidiaries have
reviewed the areas within their operations and business which could be adversely
affected by, and have developed or are developing a program to address on a
timely basis, the Year 2000 Problem and have made related appropriate inquiry of
material suppliers and vendors, and based on such review and program, the Year
2000 Problem will not have a Material Adverse Effect upon its financial
condition, operations or business as now conducted.
8. Negative Covenants. Borrower agrees that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or the
commitment of Bank hereunder is in effect, neither Borrower, nor any of its
subsidiaries ("Subsidiaries") will, without the prior written consent of Bank:
A. Make any substantial change in the character of its business as now
conducted;
B. Create, incur, assume or permit to exist any Indebtedness other
than loans from Bank except obligations now existing as shown in the financial
statements referenced in Section 7.(g)(i), excluding those being refinanced by
Bank, Subordinated Debt, Permitted Indebtedness, and previously disclosed and
Bank approved indebtedness to Crestar Bank not to exceed $10,000,000.00 entered
into by Borrower's wholly owned subsidiary, ANADAC; or sell or transfer, either
with or without recourse, any accounts or notes receivable or any monies due or
to become due;
4.
C. Create, incur, assume or permit to exist any mortgage, pledge,
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
Permitted Liens and liens in favor of Bank, excluding any mortgage, pledge,
encumbrance, lien entered into by Borrower's wholly owned subsidiary, ANADAC;
D. Sell, lease, dispose of or grant a security interest in any of
the Collateral other than to Bank (other than the disposing of such Collateral
in the ordinary and normal course of its business as now conducted or other
assets which are obsolete or otherwise considered surplus), or execute any
financing statements covering the Collateral in favor of any secured party or
Person other than Bank. Notwithstanding the foregoing, upon delivery of prior
notice to Bank and the subsequent receipt of Bank's approval, Borrower may lease
certain Collateral, as approved by Bank, to its vendors and Bank agrees to
execute a financing statement evidencing the release of its security interest in
such leased Collateral.
E. Make (1) any loans or advances to any Person or other entity
other than in the ordinary and normal course of its business as now conducted
(provided that such loans or advances are not made to any Person or entity which
is controlled by or under common control with Borrower) or (2) any investment in
the securities of any Person or other entity other than the United States
Government. Notwithstanding the foregoing, Borrower may make (a) loans or
advances (with normal trade terms) in the form of any product of Borrower sold
to its Subsidiaries in the ordinary and normal course of its business as now
conducted, (b) loans or advances to its wholly-owned Subsidiaries up to the
aggregate amount of $1,500,000.00 at any one time outstanding; provided,
however, if any loans or advances are made in excess of $500,000.00 to any one
Subsidiary, said Subsidiary shall execute and deliver to Bank a guaranty of the
Revolving Commitment, in form and substance satisfactory to Bank and (c)
investments of up to $500,000.00 in a joint venture between Borrower and Sylvan
Learning Systems, Inc.
F. (1) Purchase or otherwise acquire all or substantially all of the
assets or business of any Person or other entity; or (2) liquidate, dissolve,
merge or consolidate, or commence any proceedings therefore; or (3) except in
the ordinary and normal course of its business as now conducted, sell
(including, without limitation, the selling of any property or other asset
accompanied by the leasing back of the same) any assets including any fixed
assets, any property, or other assets necessary for the continuance of its
business as now conducted. Notwithstanding the foregoing, Borrower may proceed
with any acquisition (as described above) (a) so long as no Event of Default has
occurred and is continuing or would exist after giving effect to such
transaction and (b) upon consummating such transaction, Borrower remains in
compliance with all of the financial covenants set forth in Section 10 hereof;
G. (1) Declare or pay any dividend or make any other distribution on
any of its capital stock now outstanding or hereafter issued; or (2) purchase,
redeem or retire any of such stock other than in dividends or distributions
payable in Borrower's or any such Subsidiary's capital stock, except for the
repurchase of Borrower's capital stock from officers, directors, employees or
consultants of Borrower upon termination of their employment with or rendering
of service to Borrower; and
H. Sell, transfer, assign, mortgage, pledge, license, lease, grant a
security interest in, or otherwise encumber any of its Intellectual Property,
other than licenses or leases of its intellectually property granted in the
ordinary and normal course of its business as now conducted.
9. Affirmative Covenants. Borrower affirmatively covenants that so long
as any loans, obligations or liabilities remain outstanding or unpaid to Bank or
the commitment of Bank hereunder is in effect, it will:
A. Furnish Bank from time to time such financial statements and
information as Bank may reasonably request and inform Bank immediately upon the
occurrence of a material adverse change therein;
5.
B. Permit representatives of Bank to conduct an audit of Borrower's
books and records relating to the Collateral and make extracts therefrom, with
results satisfactory to Bank, provided that Bank shall use its best efforts to
not interfere with the conduct of Borrower's business, and to the extent
possible to arrange for verification of the Accounts directly with the account
debtors obligated thereon or otherwise, all under reasonable procedures
acceptable to Bank and at Borrower's sole expense; provided further that, prior
to an Event of Default, Borrower shall not be responsible for the expense of
more than two (2) such audits in any fiscal year. Borrower hereby acknowledges
and agrees that upon completion of any such audit. Bank shall have the right to
adjust the Borrowing Base percentages, in its sole and reasonable discretion,
based on its review of the results of such Collateral audit;
C. Promptly notify Bank of any attachment or other legal process
levied against any of the Collateral and any information received by Borrower
relative to the Collateral, including the Accounts, the account debtors or other
Persons obligated in connection therewith, which may in any way affect the value
of the Collateral or the rights and remedies of Bank in respect thereto;
D. Reimburse Bank upon demand for any and all legal costs, including
reasonable attorneys' fees, and other expenses incurred in collecting any sums
payable by Borrower under the Revolving Loan Account or any other obligation
secured hereby, enforcing any term or provision of this Loan Agreement or
otherwise or in the checking, handling and collection of the Collateral and the
preparation and enforcement of any agreement relating thereto;
E. Notify Bank of each location and of each office of Borrower at
which records of Borrower relating to the Accounts are kept;
F. Provide, maintain and deliver to Bank policies insuring the
Collateral against loss or damage by such risks and in such amounts, forms and
companies as Bank may require (to the extent customarily maintained by
businesses similar to Borrower) and with loss payable to Bank, and, in the event
Bank takes possession of the Collateral, the insurance policy or policies and
any unearned or returned premium thereon shall at the option of Bank become the
sole property of Bank, such policies and the proceeds of any other insurance
covering or in any way relating to the Collateral, whether now in existence or
hereafter obtained, being hereby assigned to Bank;
G. In the event the unpaid balance of the Revolving Loan Account
shall exceed the maximum amount of outstanding loans to which Borrower is
entitled under Section 2 hereof, as applicable, Borrower shall immediately pay
to Bank for credit to such Loan Account the amount of such excess;
H. Maintain and preserve all rights, franchises and other authority
adequate and necessary for the conduct of its business and maintain and preserve
its existence in the state of its incorporation and any other state(s) in which
Borrower conducts its business, except with respect to such other state(s),
where the failure to do so would not have a Material Adverse Effect;
I. Maintain public liability, property damage and workers
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses. Borrower shall provide evidence of property
insurance in amounts and types acceptable to Bank, and certificates naming Bank
as a loss payee;
J. Pay and discharge, before the same becomes delinquent and
penalties accrue thereon, all taxes, assessments and governmental charges upon
or against it or any of its properties, and any of its other liabilities at any
time existing, except to the extent and so long as: (1) the same are being
contested in good faith and by appropriate proceedings in such manner as not to
cause any Material Adverse Effect or the loss of any
6.
right of redemption from any sale thereunder; and (2) it shall have set aside on
its books reserves (segregated to the extent required by GAAP);
K. Maintain a standard and modern system of accounting in accordance
with GAAP on a basis consistently maintained; permit Bank's representatives to
have access to, and to examine its properties, books and records at all
reasonable times; provided that Bank shall use its best efforts to not interfere
with the conduct of Borrower's business;
L. Maintain its properties, equipment and facilities in good order
and repair;
M. Maintain its primary banking and operating and depository accounts
with Bank;
N. Prior to allowing any of Borrower's raw materials, work in
process, finished goods inventory and property, plant and equipment to be
transported to or be held at any contract manufacturer, warehouse or other
location (other than with bona fide distributors and retail accounts), Borrower
shall provide notice to Bank and Borrower shall have complied with such filing
and notice requirements as shall, in Bank's opinion, assure Borrower's and
Bank's priority in such property over creditors of such contract manufacturer,
warehouseman or operator of such other location, including, without limitation,
making filings under California Commercial Code (S)2326, providing notice under
California Commercial Code (S)9114 and making filings and publications as
required under California Civil Code (S)3440.1 and (S)3440.5 All such filings,
notices and publications shall be in form and substance satisfactory to Bank;
and
O. Borrower shall perform all acts reasonably necessary to ensure
that (1) Borrower, its Subsidiaries and any business in which Borrower holds a
substantial interest and (2) all customers, suppliers and vendors that are
material to Borrower's business, become Year 2000 Compliant in a timely manner.
Such acts shall include, without limitation, performing a comprehensive review
and assessment of all of Borrower's systems and adopting a detailed plan, with
an itemized budget, for the remediation, monitoring and testing of such systems.
If requested by Bank, Borrower shall within ten (10) business days deliver a
statement to Bank summarizing the Year 2000 exposure, program or progress of
Borrower and its Subsidiaries or other evidence of Borrower's compliance with
the terms of this Section 9.0. certified by an officer of Borrower.
10. Financial Covenants and Information. All financial covenants and
financial information referenced herein shall be interpreted and prepared in
accordance with GAAP as used in the United States of America applied on a basis
consistent with previous years for the operations of Borrower, excluding its
Subsidiaries. Compliance with the financial covenants shall be calculated and
monitored on a monthly basis, except as shall be expressly stated to the
contrary. Borrower affirmatively covenants that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or any
commitment is outstanding hereunder, it will, on a consolidating basis using
Identix, Identix Australia Pty Limited (Fingerscan), and Biometric Applications
and Technology, Inc. (BA&T) operations only, excluding all other subsidiaries:
A. At all times, maintain a Minimum Tangible Net Worth of not less
than (1) $11,000,000.00 through the month ending May 31, 1999 and
(2)$12,000,000.00 beginning with the month ending June 30, 1999. As used herein,
"Tangible Net Worth" shall mean the sum of all assets, excluding any value for
goodwill, Trademarks, Patents, Copyrights, organization expense, investments in
its Subsidiaries, in-process technology, Accounts due from its Subsidiaries
(excluding Accounts due from sale of any product of Borrower to ANADAC in the
ordinary and normal course of its business as now conducted which are less than
90 days from the applicable invoice date) and other similar intangible items,
less all liabilities, plus Subordinated Debt;
7.
B. At all times maintain a Maximum Ratio of Total Liabilities to
Tangible Net Worth not to exceed 1.25 to 1.00. As used herein "Total
Liabilities" means all liabilities, excluding Subordinated Debt and deferred
revenues;
C. At all times maintain a Minimum Quick Ratio of not less than 1.00
to 1.00. As used herein "Quick Ratio" means the sum of all cash plus Accounts
(excluding Accounts due from its Subsidiaries, but including Accounts due from
sale of any product of Borrower to ANADAC in the ordinary and normal course of
its business as now conducted which are less than 90 days from the applicable
invoice date) divided by current liabilities less deferred revenue;
D. Measured on a quarterly basis on the last day of each fiscal
quarter, have an operating after-tax profitability of at least $1.00;
E. As soon as it is available, but not later than twenty-five (25)
days after and as of the end of each month, deliver to Bank an internally-
prepared consolidated and consolidating financial statement consisting of a
balance sheet and profit and loss statement, in form satisfactory to Bank, and a
Compliance Certificate in the form of Exhibit B attached hereto and incorporated
herein by this reference, certified by an officer of Borrower;
F. As soon as it is available, but not later than forty-five (45)
days after and as of the end of each of the first three fiscal quarters of each
fiscal year of Borrower, a copy of its quarterly 10-Q report for each such
quarter, as filed with the Securities Exchange Commission.
G. As soon as it is available, but not later than ninety (90) days
after the end of Borrower's fiscal year, deliver to Bank (1) unqualified copies
of Borrower's consolidated financial statements together with changes in
financial position audited by an independent certified public accountant
selected by Borrower but acceptable to Bank and (2) a copy of its annual 10-K
report, as filed with the Securities Exchange Commission;
H. So long as any amounts remain outstanding and unpaid under the
Revolving Loan Account, on a 1) monthly basis as of the month end and as soon as
it is available, but not later than ten (10) days after the end of each month,
deliver to Bank, in such form and detail as Bank may require, statements showing
aging of the Accounts, Borrower's accounts payable, and inventory report
together with a Borrowing Base Certificate in the form of Exhibit C attached
hereto and incorporated herein by this reference (the "Borrowing Base
Certificate"), certified by an officer of Borrower; provided, however, if the
amounts outstanding and unpaid under the Revolving Loan Account exceed
$5,000,000.00, Borrower shall be required to provide the aging of the Accounts
and Borrower's accounts payable on a semi-monthly (twice monthly) basis per 1)
above and in addition 2) as of the end of each mid-month (15th) and as soon as
it is available, but not later than the 25th of each month. In addition, if the
amounts that have been advanced under the Borrowing Base for Eligible Inventory
exceed $500,000.00, Borrower shall be required to provide the inventory report
on a semi-monthly basis per 1) and 2) above. Notwithstanding the foregoing, if
Borrower has not provided to Bank statements showing aging of the Accounts,
Borrower's accounts payable, and inventory report for the most recent month then
ended, then as a condition to any request for a Revolving Loan, Borrower shall
have delivered to Bank said aging statements as well as a Borrowing Base
Certificate covering the most recent month then ended at least twenty (20) days
prior to the date of Borrower's request for an advance for said Revolving Loan;
I. As soon as it is available, but not later than twenty-five (25)
days following the close of Borrower's acquisition of IDT Holdings, Inc. and
Identicator, deliver to Bank revised consolidating and consolidated financial
projections;
8.
J. Upon the reasonable request of Bank, deliver to Bank current
budgets, sales projections, operating plans and other financial exhibits and
information in form and substance satisfactory to Bank; and
K. Upon any officer becoming aware, deliver immediately to Bank
written notice of any pending or threatened litigation claiming, or reasonably
likely to result in, damages against Borrower in an amount in excess of
$50,000.00.
11. Loan Fee. In addition to any other amounts due or to become due,
concurrent with the execution hereof, Borrower shall deliver to Bank a loan
renewal fee in the amount of Fifty Thousand Dollars ($50,000.00).
12. Default and Remedies. The occurrence of any one or more of the
following shall constitute an "Event of Default": (a) Default be made in the
payment of any obligation by Borrower under any Loan Document; (b) Except for
any failure to pay as described in clause (a) above, breach be made in any
warranty, statement, promise, term or condition, contained herein or in any
other Loan Document and the same shall not have been cured to the satisfaction
of Bank within fifteen (15) days after Borrower shall have become aware thereof,
whether by written notice from Bank, or otherwise, (except that no cure period
shall exist for breaches in respect of Borrower's obligations under Subsections
8.E., 8.F., 8.G., 8.H., Subsections 10.A., 10.B., 10.C., 10.D., 10.E., 10.F.,
10.G., 10.H., and 10.I. of this Loan Agreement, and Sections 1 and 2 of the
General Security Agreement; and except for a five (5) day cure period shall
exist for breaches in respect of Borrower's obligations under Subsections 9.A.,
9.B., 9.C., 9.F., 9.G., 9.H., 9.I. and 9.O., and Subsections 10.J. and 10.K.);
(c) Any statement, warranty or representation made by Borrower at any time
proves false; (d) Borrower defaults in the repayment of any principal of or the
payment of any interest on any indebtedness exceeding in the aggregate principal
amount $50,000.00 or breaches or violates any term or provision of any
promissory note, loan agreement, mortgage, indenture or other evidence of such
indebtedness pursuant to which amounts outstanding in the aggregate exceed
$50,000.00 if the effect of such breach is to permit the acceleration of such
indebtedness, whether or not waived by the note holder or obligee, and such
failure shall not have been cured to Bank's satisfaction within fifteen (15)
calendar days after Borrower shall become aware thereof, whether by written
notice from Bank or otherwise, or there has in fact been an acceleration of such
indebtedness; (e) Borrower becomes insolvent or makes an assignment for the
benefit of creditors; (f) Any proceeding be commenced by Borrower under any
bankruptcy, reorganization, arrangement, readjustment of debt or moratorium law
or statute or, any such a proceeding is commenced against Borrower and is not
dismissed or stayed within thirty (30) days (provided that no Revolving Loans
will be made prior to the dismissal of such proceeding); (g) Any money judgment,
writ of attachment, garnishment, execution or other legal process be entered
against Borrower or issued against any material property of Borrower which is
not fully covered by insurance (subject to reasonable deductibles) and remains
unvacated, unbonded, unstayed or unpaid or undischarged for more than fifteen
(15) days (whether or not consecutive) or in any event later than five (5) days
prior to the date of any proposed sale thereunder, or if any assessment for
taxes against Borrower other than against any of its real property, is made by
the Federal or State government or any department thereof; or (h) Any change in
Borrower's financial condition, prospects or operations which has a Material
Adverse Effect. Upon the occurrence and during the continuance of an Event of
Default, Bank may, at its option and without demand first made and without
notice to Borrower, do any one or more of the following: (i) Terminate its
obligation to make loans to Borrower as provided in Section 2 hereof; (ii)
Declare all sums secured hereby immediately due and payable; (iii) Immediately
take possession of the Collateral wherever it may be found, using all legally
permissible means to do so, or require Borrower to assemble the Collateral and
make it available to Bank at a place designated by Bank which is reasonably
convenient to Borrower and Bank, and Borrower waives all claims for damages due
to or arising from or connected with any such taking; (iv) Proceed in the
foreclosure of Bank's security interest and sale of the Collateral in any manner
permitted by law, or provided for herein; (v) Sell, lease or otherwise dispose
of the Collateral at public or private sale, with or without having the
Collateral at the place of sale, and upon terms and in such manner as Bank may
determine, and Bank may purchase same at any such sale; (vi) Retain the
Collateral in full satisfaction of the obligations secured thereby to the extent
permitted under the Uniform Commercial Code; or (vii) Exercise any remedies of a
secured party under the Uniform Commercial Code. Prior to any such
9.
disposition, Bank may, at its option, cause any of the Collateral to be repaired
or reconditioned in such manner and to such extent as Bank may deem advisable,
and any sums expended therefor by Bank shall be repaid by Borrower and secured
hereby. Bank shall have the right to enforce one or more remedies hereunder
successively or concurrently, and any such action shall not estop or prevent
Bank from pursuing any further remedy that it may have hereunder or by law. If a
sufficient sum is not realized from any such disposition of the Collateral to
pay all obligations secured by this Loan Agreement, Borrower hereby promises and
agrees to pay Bank any deficiency.
13. Records Retention. Borrower authorizes Bank to destroy all invoices,
delivery receipts, reports and other types of documents and records submitted to
Bank in connection with the transactions contemplated herein at any time
subsequent to four (4) months from the time such items are delivered to Bank.
14. Attorneys' Fees. Borrower agrees to reimburse Bank for its reasonable
attorneys' fees and expenses incurred in connection with the negotiation,
preparation, execution and delivery of the Loan Documents.
15. Governing Law; Judicial Reference.
A. Governing Law. This Agreement shall be deemed to have been made
in the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
B. Judicial Reference.
(1) Other than (a)nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (b) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Loan Agreement or the other Loan Documents, which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to this Loan
Agreement gives written notice to all other parties that a controversy, dispute
or claim exists), will be settled by a reference proceeding in California in
accordance with the provisions of Section 638 et seq. of the California Code of
Civil Procedure, or their successor section ("CCP"), which shall constitute the
exclusive remedy for the settlement of any controversy, dispute or claim
concerning this Loan Agreement, including whether such controversy, dispute or
claim is subject to the reference proceeding and except as set forth above, the
parties waive their rights to initiate any legal proceedings against each other
in any court or jurisdiction other than the Superior Court in the County where
the real property, if any, is located or Santa ▇▇▇▇▇ County, if none (the
"Court"). The referee shall be a retired Judge of the Court selected by mutual
agreement of the parties, and if they cannot so agree within forty-five (45)
days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his/her representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP (S) 170.6. The referee shall (x) be requested to set the matter
for hearing within sixty (60) days after the date of selection of the referee
and (y) try any and all issues of law or fact and report a statement of decision
upon them, if possible, within ninety (90) days of the Claim Date. Any decision
rendered by the referee will be final, binding and conclusive and judgement
shall be entered pursuant to CCP (S) 644 in any court in the State of California
having jurisdiction. Any party may apply for a reference proceeding at any time
after thirty (30) days following notice to any other party of the nature of the
controversy, dispute or claim, by filing a petition for a heating and/or trial.
All discovery permitted by this Loan Agreement shall be completed no later than
fifteen (15) days before the first hearing date established by the referee. The
referee may extend such period in the event of a party's refusal to provide
requested discovery for any reason whatsoever, including, without limitation,
legal objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be
10.
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Superior Court is empowered to issue temporary and/or provisional remedies,
as appropriate.
(2) Except as expressly set forth in this Loan Agreement, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the referee,
except for trial, shall be conducted without a court reporter except that when
any party so requests, a court reporter will be used at any hearing conducted
before the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.
(3) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding that shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(4) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, (S) 1280 through (S) 1294.2 of the CCP as
amended from time to time. The limitations with respect to discovery as set
forth hereinabove shall apply to any such arbitration proceeding.
16. Miscellaneous Provisions.
A. Nothing herein shall in any way limit the effect of the
conditions set forth in any other security or other agreement executed by
Borrower, but each and every condition hereof shall be in addition thereto.
B. No failure or delay on the part of Bank, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
C. All rights and remedies existing under this Loan Agreement or any
other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
D. All headings and captions in this Loan Agreement and any related
documents are for convenience only and shall not have any substantive effect.
E. This Loan Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. Each
such agreement shall become effective upon the execution of a counterpart hereof
or thereof by
11.
each of the parties hereto and telephonic notification that such executed
counterparts has been received by Borrower and Bank.
F. This Loan Agreement is not intended to be, and shall not be
construed to create, a novation or accord and satisfaction, and, except as
otherwise provided herein, the Prior Loan Agreement is amended and restated in
full by the terms of this Loan Agreement and all obligations outstanding under
the Prior Loan Agreement are governed by the terms of this Loan Agreement.
BANK: BORROWER:
IMPERIAL BANK IDENTIX INCORPORATED,
A Delaware corporation
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------- --------------------------------
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Assistant Vice President Executive Vice President and
Chief Financial Officer
LIST OF EXHIBITS AND SCHEDULES
------------------------------
EXHIBIT A: Definitions
SCHEDULE 1 TO EXHIBIT A: List of Specific Permitted Indebtedness
SCHEDULE 2 TO EXHIBIT A: List of Specific Permitted Liens
EXHIBIT B: Compliance Certificate
EXHIBIT C: Borrowing Base Certificate
12.