EXHIBIT 10.1
LOAN AGREEMENT
This LOAN AND SECURITY AGREEMENT dated as of the Effective Date, among
SILICON VALLEY BANK ("Bank"), whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ with a loan production office located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
#▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (all notices or demands to Bank should be sent
to both Bank addresses) and ATS MEDICAL, INC. ("AMI") and ATS MEDICAL SALES,
INC. ("AMSI") (AMI and AMSI are individually and collectively, and jointly and
severally, referred to herein as "Borrower"), with an address for both AMI and
AMSI of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, provides the terms on
which Bank will lend to Borrower and Borrower will repay Bank. The parties agree
as follows:
1. ACCOUNTING AND OTHER TERMS
Accounting terms not determined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 PROMISE TO PAY.
Borrower promises to pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 REVOLVING ADVANCES.
(a) Bank will make Revolving Advances not exceeding (i) the lesser of
(A) the Committed Revolving Line or (B) the Borrowing Base. Amounts borrowed
under this Section may be repaid and reborrowed during the term of this
Agreement.
(b) To obtain a Revolving Advance, Borrower must notify Bank by
facsimile or telephone by 2:00 p.m. Pacific time on the Business Day the
Revolving Advance is proposed to be made. Borrower must promptly confirm the
notification by delivering to Bank the Payment/Advance Form, in the form
attached hereto as Exhibit B. Bank will credit Revolving Advances to Borrower's
deposit account. Bank may make Revolving Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if any such Revolving Advances are necessary to meet Obligations
which have become due. Bank may rely on any telephonic notice given by a person
whom Bank believes is a Responsible Officer or such Person's designee, and
Borrower hereby indemnifies Bank for any loss Bank suffers due to any such
reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Revolving Advances and related Obligations are immediately
payable.
(d) Bank's obligation to lend the undisbursed portion of the Obligations
will terminate if, in Bank's commercially reasonable discretion, there has been
a material adverse change in the general affairs, results of operation,
condition (financial or otherwise) or the prospect of repayment of the
Obligations, or there has been any material adverse deviation by Borrower from
the most recent business plan of Borrower presented to and accepted by Bank
prior to the execution of this Agreement.
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2.1.2 OMITTED.
2.1.3 OMITTED.
2.1.4 OMITTED.
2.1.5 EQUIPMENT ADVANCES.
(a) Through January 28, 2005 (the "Equipment Availability End Date"),
Bank will make advances ("Equipment Advance" and, collectively, "Equipment
Advances") not exceeding the Committed Equipment Line. Subject to subsection "d"
below, the Equipment Advances may only be used to finance or refinance Eligible
Equipment purchased on or after 90 days before the date of each Equipment
Advance and may not exceed 100% of the equipment invoice excluding taxes,
shipping, warranty charges, freight discounts and installation expense, provided
that software licenses, leasehold improvements and other soft costs may
constitute up to but not exceed 25% of the aggregate Equipment Advances. Each
Equipment Advance must be for a minimum of $50,000.
(b) Interest accrues from the date of each Equipment Advance at the rate
in Section 2.3(a) and is payable monthly until the Equipment Availability End
Date occurs. Equipment Advances outstanding on the Equipment Availability End
Date are payable in 36 equal monthly installments of principal, plus accrued
interest, on the 25th of each month following the Equipment Availability End
Date until January 25, 2008 (the "Equipment Maturity Date"), on which date all
remaining principal and accrued interest shall be paid in full. Equipment
Advances when repaid may not be reborrowed.
(c) To obtain an Equipment Advance, Borrower must notify Bank (the
notice is irrevocable) by facsimile no later than 2:00 p.m. Pacific time 1
Business Day before the day on which the Equipment Advance is to be made. The
notice in the form of Exhibit B (Payment/Advance Form) must be signed by a
Responsible Officer or designee and include a copy of the invoice for the
Equipment being financed.
(d) Notwithstanding subsections "a" and "c" above, if an Equipment
Advance is to be made immediately upon the closing hereof, for purposes of such
Equipment Advance only, (i) the Equipment Advance may be used to finance or
refinance Eligible Equipment purchased (y) on or after 180 days before the date
of such Equipment Advance and (z) Eligible Equipment not yet purchased but to be
purchased before the Equipment Availability End Date, and (ii) the notice
required by subsection "c" shall specify the amount of Equipment Advances that
are being requested for Eligible Equipment that has not yet been purchased. If
Borrower receives Equipment Advances with respect to Eligible Equipment not yet
purchased, pursuant to "z" above, then upon each purchase of such Eligible
Equipment Borrower shall immediately provide a copy of the invoice for such
Equipment to Bank, and if on the Equipment Availability End Date the Equipment
Advances exceed the cost (computed in accordance with subsection "a" above) of
Eligible Equipment which Borrower has purchased and for which Borrower has
provided Bank with invoices, then Borrower shall immediately pay the amount of
such excess to Bank.
(e) If Borrower shall pay all or any portion of the Equipment Advances
prior to its due date, or if all or any portion of the Equipment Advances is
declared due and payable prior to its due date as a result of an Event of
Default, then Borrower shall pay Bank a fee with respect to each such prepaid or
accelerated amount equal to 1% of said amount. The foregoing fee shall not be
charged with respect to a prepayment that results from the replacement of the
Term Loan with a new facility from another division of the Bank, provided that
no Event of Default then exists.
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2.1.6 OMITTED.
2.1.7 OMITTED.
2.2 OVERADVANCES.
If Borrower's aggregate Obligations under Section 2.1.1 exceed the lesser
of either (i) the Committed Revolving Line or (ii) the Borrowing Base, Borrower
must immediately pay Bank the excess.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. (i) Revolving Advances accrue interest on the
outstanding principal balance at a per annum rate of 1.0 percentage points above
the Prime Rate, but in no event less than 5.25% per annum; and (ii) Equipment
Advances accrue interest on the outstanding principal balance at a per annum
rate of 1.50 percentage points above the Prime Rate, but in no event less than
5.75% per annum. After an Event of Default has occurred and while it is
continuing, Obligations accrue interest at five (5) percentage points above the
rate effective immediately before the Event of Default. The interest rate
increases or decreases when the Prime Rate changes. Interest is computed on a
360 day year for the actual number of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is payable on
the 25th day of each month. Interest due on the Equipment Advances is payable on
the 25th day of each month. Bank may debit any of Borrower's deposit accounts
including Account Number _____________________________ for principal and
interest payments owing or any amounts Borrower owes Bank. Bank will promptly
notify Borrower when it debits Borrower's accounts. These debits are not a
set-off. Payments received after 2:00 p.m. Pacific time are considered received
at the opening of business on the next Business Day. When a payment is due on a
day that is not a Business Day, the payment is due the next Business Day and
additional fees or interest accrue.
2.4 FEES.
(a) Facility Fee. Borrower shall pay to Bank a fee of $30,000 (in
aggregate for both AMI and AMSI), which is fully earned on the Closing Date, but
shall be payable $15,000 concurrently herewith and $15,000 on the earlier of (i)
the first anniversary of the Closing Date or (ii) the occurrence of an Event of
Default. Said fee shall be in addition to interest and to all other amounts
payable hereunder and shall not be refundable.
(b) Bank Expenses. Borrower shall pay to the Bank all Bank Expenses
(including reasonable attorneys' fees and expenses) incurred through and after
the Closing Date.
(c) Unused Line Fee. In the event, in any fiscal quarter (or portion
thereof at the beginning and end of the term of the Committed Revolving Line),
the average daily principal balance of the Revolving Advances (in aggregate for
both AMI and AMSI) outstanding during such quarter (or such portion thereof) is
less than $6,000,000, then Borrower shall pay Bank an unused line fee in an
amount equal to 0.375% per annum on the difference between $6,000,000 and the
average daily principal balance of such Revolving Advances outstanding during
such quarter (or portion thereof), computed on the basis of a 360-day year. The
unused line fee shall be computed and paid quarterly, in arrears, on the first
day of the following quarter.
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2.5 SEPARATE LOANS.
At Bank's discretion, Credit Extensions shall be made separately to AMI
and AMSI based on the Collateral of each, but the Borrowing Base and the Credit
Extension maximums set forth herein (e.g., the Committed Revolving Line amount
and the Committed Equipment Line amount) shall apply for both AMI and AMSI
combined.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject to the
condition precedent that it receive the agreements, documents and fees it
requires. Without limitation upon the foregoing, Bank's obligation to make the
initial Credit Extension is subject to Borrower's satisfaction of the following
conditions:
(a) Borrower shall have effected the lockbox or blocked account
arrangement as provided for in Section 6.9 hereof.
(b) AMI and AMSI shall each have signed and delivered to Bank a Negative
Pledge Agreement in form and substance acceptable to Bank.
(c) Each of AMI and AMSI shall have executed and delivered to Bank a
guaranty of all the Obligations of the other, in form and substance acceptable
to Bank.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension (except to the extent they relate expressly to an earlier date,
in which case such representations and warranties shall continue to be true as
of the date expressed, and except for exceptions which are disclosed in writing
to Bank and approved in writing by Bank) and no Event of Default may have
occurred and be continuing, or result from the Credit Extension. Each Credit
Extension is Borrower's representation and warranty on that date that the
representations and warranties of Section 5 remain true.
3.3 CONDITIONS PRECEDENT TO INITIAL REVOLVING ADVANCE.
Bank's obligation to make the initial Revolving Advance is subject to Bank
completing an audit, satisfactory to Bank, of Borrower's collateral at
Borrower's expense.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority
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security interest in the Collateral. If this Agreement is terminated, Bank's
lien and security interest in the Collateral will continue until Borrower fully
satisfies its Obligations.
4.2 OMITTED.
4.3 AUTHORIZATION TO FILE.
Borrower authorizes Bank to file financing statements without notice to
Borrower, with all appropriate jurisdictions, as Bank deems appropriate in its
commercially reasonable discretion, in order to perfect or protect Bank's
interest in the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and in good standing in its
state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could reasonably be expected to cause a Material
Adverse Change.
5.2 COLLATERAL.
Each Borrower has good title to its respective Collateral, free of Liens
except Permitted Liens or such Borrower has Rights to each asset that is
Collateral. Borrower has no other deposit account, other than the deposit
accounts described in the Schedule. The Accounts are bona fide, existing
obligations, and the service or property has been performed or delivered to the
account debtor or its agent for immediate shipment to and unconditional
acceptance by the account debtor. The Eligible Inventory is not in the
possession of any third party bailee (such as at a warehouse). Borrower has no
notice of any actual or imminent Insolvency Proceeding of any account debtor
whose accounts are an Eligible Account in any Borrowing Base Certificate. All
Inventory is in all material respects of good and marketable quality, free from
material defects. Borrower is the sole owner of the Intellectual Property,
except for non-exclusive licenses granted to its customers in the ordinary
course of business and Intellectual Property which is leased or licensed to
Borrower. Each Patent is valid and enforceable and no part of the Intellectual
Property has been judged invalid or unenforceable, in whole or in part, except
to the extent that Borrower has determined in its good faith business judgment
that such Patent or Intellectual Property is no longer of material value to the
business of Borrower, and no claim has been made that any part of the
Intellectual Property violates the rights of any third party, except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Change.
5.3 LITIGATION.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers, threatened by
or against Borrower or any Subsidiary in which a likely adverse decision could
reasonably be expected to cause a Material Adverse Change.
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5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 SOLVENCY.
The fair saleable value of Borrower's assets as a going concern (including
goodwill minus disposition costs) exceeds the fair value of its liabilities; the
Borrower is not left with unreasonably small capital after the transactions in
this Agreement; and Borrower is able to pay its debts (including trade debts) as
they mature.
5.6 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 FULL DISCLOSURE.
No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading in
light of the circumstances in which such statements were made, with it being
recognized by Bank that the projections and forecasts provided by Borrower in
good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results.
5.9 AMSI SUBSIDIARY.
AMSI is a wholly owned, direct, subsidiary of AMI.
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6. AFFIRMATIVE COVENANTS
Borrower will do all of the following for so long as Bank has an
obligation to lend, or there are outstanding Obligations (other than contingent
indemnification Obligations):
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its legal existence and good standing and the legal
existence and good standing of all Subsidiaries' in the applicable jurisdiction
of formation and maintain qualification in each applicable jurisdiction in which
the failure to so qualify would reasonably be expected to cause a material
adverse effect on Borrower's business or operations. Borrower will comply, and
have each Subsidiary comply, with all laws, ordinances and regulations to which
such party is subject to the extent that noncompliance therewith could have a
material adverse effect on Borrower's business or operations or could reasonably
be expected to cause a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) as soon as available, but no
later than 30 days after the last day of each month, a company prepared
consolidated balance sheet, income statement, and cash flow statement covering
Borrower's consolidated operations during the period certified by a Responsible
Officer and in a form acceptable to Bank; (ii) as soon as available, but no
later than 120 days after the last day of Borrower's fiscal year, audited
consolidated financial statements prepared under GAAP, consistently applied,
together with an unqualified opinion on the financial statements from an
independent certified public accounting firm reasonably acceptable to Bank;
(iii) a prompt report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of $500,000 or more; (iv) budgets, sales projections, operating
plans or other financial information Bank reasonably requests; and (v) prompt
notice of any material change in the composition of the Intellectual Property
which is of material value to the business of Borrower, including any subsequent
ownership right of Borrower in or to any Copyright, Patent or Trademark not
shown in any intellectual property security agreement between Borrower and Bank
or knowledge of an event that materially adversely affects the value of the
Intellectual Property.
(b) Within 30 days after the last day of each month, Borrower will
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
the form of Exhibit C, with aged (by invoice date) listings of accounts
receivable and accounts payable. (For emphasis, and not by way of limitation on
the fact that the covenants of "Borrower" contained in this Agreement are to be
construed as obligations of each of AMI and AMSI, AMI and AMSI shall each
provide such a Borrowing Base Certificate.)
(c) Within 30 days after the last day of each month, Borrower will
deliver to Bank with the monthly financial statements a Compliance Certificate
signed by a Responsible Officer in the form of Exhibit D.
(d) Allow Bank to audit Borrower's Collateral at Borrower's expense.
Such audits may be conducted (i) within 90 days of the Closing Date, (ii) once
every twelve months thereafter, and (iii) at such more frequent times as the
Bank may from time to time determine.
(e) At least 30 days prior to the end of each fiscal year, Borrower will
deliver to Bank consolidated annual operating budgets (including income
statements, balance sheets and cash flow statements, by month) for the following
fiscal year.
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(f) Within 30 days of filing, Borrower will deliver to Bank copies of
all quarterly and annual tax returns filed by AMI, AMSI and ATS Medical France
SARL.
(g) In addition to the other items provided for in this Section 6.2,
Borrower shall provide Bank with such other information as Bank shall from time
to time specify in its good faith business judgment, including, without
limitation, board reports, booking/backlog reports, and projections.
6.3 INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices as they exist at execution of
this Agreement. Borrower must promptly notify Bank of all returns, recoveries,
disputes and claims, that involve more than $250,000.
6.4 TAXES.
Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments (other than taxes
and assessments which Borrower is contesting in good faith, with adequate
reserves maintained in accordance with GAAP) and will deliver to Bank, on
demand, appropriate certificates attesting to the payment.
6.5 INSURANCE.
Borrower will keep its business and the Collateral insured for risks and
in amounts standard for Borrower's industry, and as Bank may reasonably request.
Insurance policies will be in a form, with companies, and in amounts that are
satisfactory to Bank in Bank's reasonable discretion. All property policies will
have a lender's loss payable endorsement showing Bank as an additional loss
payee and all liability policies will show the Bank as an additional insured and
provide that the insurer must give Bank at least 20 days notice before canceling
its policy. At Bank's request, Borrower will deliver certified copies of
policies and evidence of all premium payments. Proceeds payable under any policy
will, at Bank's option, be payable to Bank on account of the Obligations, except
that, provided no Default or Event of Default has occurred and is continuing,
Bank shall release to Borrower insurance proceeds with respect to Equipment or
Inventory provided that the same do not exceed $250,000 per occurrence of
insured loss or an aggregate of $500,000 per 12 month period, which shall be
utilized by Borrower for the replacement of the Equipment or Inventory with
respect to which the insurance proceeds were paid.
6.6 PRIMARY ACCOUNTS.
On and after September 1, 2004, Borrower will maintain all of its banking
and investment account relationships with or through Bank, except that until
November 1, 2004, Borrower may keep up to 10% (in amount) of such account
relationships other than with or through Bank.
6.7 FINANCIAL COVENANTS.
Borrower will maintain at all times, on a consolidated basis:
(i) LIQUIDITY RATIO. A ratio of (y) unrestricted cash (and
equivalents) of Borrower on deposit with Bank plus Borrower's Eligible Accounts,
(z) divided by Current Liabilities, of equal to or greater than 2.25 to 1.00.
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(ii) TANGIBLE NET WORTH. A Tangible Net Worth of at least the
following amounts for the following periods:
The Closing Date through September 30, 2004 $52,000,000
October 1, 2004 through December 31, 2004 $49,000,000
January 1, 2005 through March 31, 2005 $46,000,000
April 1, 2005 through June 30, 2005 $44,000,000
July 1, 2005 and thereafter $42,000,000
6.8 INTELLECTUAL PROPERTY
Except for Intellectual Property which Borrower has determined, in its
good faith business judgment, is no longer of material value to the business of
Borrower, Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements and (ii) not allow any Intellectual Property to be
abandoned, forfeited or dedicated to the public without Bank's written consent.
6.9 PROCEEDS OF COLLATERAL.
Borrower shall deposit or cause to be deposited all proceeds of Collateral
into a lockbox account or such other "blocked account" as Bank may specify,
pursuant to a lockbox and/or blocked account agreement in such form as Bank may
specify in its good faith business judgment. The lockbox arrangement shall be
established through the Bank.
6.10 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld, for so long as Bank has an
obligation to lend or there are any outstanding Obligations (other than
contingent indemnification Obligations):
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers (i) of Inventory in the ordinary
course of business; (ii) of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business; (iii) of worn-out or obsolete Equipment which is not the subject of
an Equipment Advance; (iv) Accounts, which are not Eligible Accounts because the
account debtor has not paid them within 90 days of invoice date, in connection
with the collection or compromise thereof in the ordinary course of business; or
(v) sales of Permitted Investments not otherwise prohibited hereunder or under
the other Loan Documents. To the extent any Collateral is sold or otherwise
disposed of as permitted by this Section 7.1, such Collateral shall be sold or
otherwise disposed of free and clear of the Liens created by this Agreement,
provided no Default or Event of Default shall have occurred and be continuing,
and Bank shall take any actions reasonably requested by Borrower in order to
give effect to the foregoing.
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7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its management or AMI's ownership of
greater than 25% (other than by the sale of Borrower's equity securities in a
public offering or to venture capital investors so long as Borrower identifies
the venture capital investors prior to the closing of the investment) or, except
as permitted in Section 7.3, have AMSI become other than a wholly owned, direct,
subsidiary of AMI. Borrower will not, without at least 30 days prior written
notice, relocate its chief executive office or add any new offices or business
locations in which Borrower maintains or stores over $100,000 in Borrower's
assets or property.
7.3 MERGERS OR ACQUISITIONS.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except for mergers or acquisitions involving
Borrower where all of the following conditions are satisfied: (i) in the case of
a merger, the Borrower is the surviving corporation in the merger, (ii) the
acquisition, or the other party to the merger, is in the same or related lines
of business to that of the Borrower, (iii) the transaction will not, in Bank's
good faith business judgment, adversely affect the Collateral or Bank's security
interest therein or the Borrower's financial condition, and both before and
after giving effect to such transaction Borrower is and will be in compliance
with all financial covenants, (iv) no Default or Event of Default exists or will
occur as a result of the transaction, (v) at the closing of the transaction
there are no Obligations outstanding under the Committed Revolving Line, and
(vi) the aggregate of the consideration paid by Borrower for all such
transactions after the date hereof does not exceed $5,000,000. If a merger or
acquisition occurs pursuant to the foregoing exception to the prohibition
against mergers and acquisitions, then Bank shall not be required to make any
Credit Extensions under the Committed Revolving Line until Borrower has supplied
Bank, and Bank shall have had a reasonable opportunity to review, such financial
and other information concerning the transaction as Bank shall request in order
to confirm the satisfaction of the foregoing conditions to such exception.
Notwithstanding the foregoing, AMSI may merge or consolidate into AMI as long as
no Default or Event of Default exists prior thereto or arises therefrom, and a
Subsidiary (other than AMSI) may merge or consolidate into another Subsidiary or
into Borrower as long as no Default or Event of Default exists prior thereto or
arises therefrom.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 ENCUMBRANCE.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens and as
permitted under Section 7.1, or permit the first priority lien status of Bank
regarding the Collateral to change, subject only to Permitted Liens as may be
applicable, and with respect to Collateral no longer owned by Borrower pursuant
to Section 7.1.
7.6 DISTRIBUTIONS; INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any Investment
in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Pay any dividends
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or make any distribution or payment or redeem, retire or purchase any capital
stock, provided that AMI may redeem or repurchase for cash, at fair value, the
capital stock of AMI (or options to purchase capital stock) from any employee of
Borrower upon the death, disability, retirement or other termination of such
employee, if (i) no Default or Event of Default shall have occurred and be
continuing or shall result from the same, and (ii) the total amount paid and/or
distributed in all of the foregoing transactions shall not exceed $100,000 in
any fiscal year of AMI.
7.7 TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower's business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a nonaffiliated Person, provided that the foregoing
restrictions shall not apply to (i) redemptions or repurchases of Borrower's
stock otherwise permitted under Section 7.6, or (ii) employment arrangements
(including arrangements made with respect to bonuses) entered into in the
ordinary course of business with members of the Board of Directors and officers
of Borrower.
7.8 SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower's
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.
8. EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations within 3 days after their
due date. During such additional 3 day period the failure to cure such payment
default is not an Event of Default hereunder (but no Credit Extension will be
made during the cure period);
8.2 COVENANT DEFAULT.
If Borrower does not perform any obligation in Sections 6.2, 6.7 or 6.9,
or violates any covenant in Section 7.
If Borrower does not perform or observe any other material term, condition
or covenant in this Agreement, any Loan Documents, or in any agreement between
Borrower and Bank and as to any default under a term, condition or covenant that
can be cured, has not cured the default
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within 10 days after it occurs, or if the default cannot be cured within 10 days
or cannot be cured after Borrower's attempts within 10 day period, and the
default may be cured within a reasonable time, then Borrower has an additional
period (of not more than 30 days) to attempt to cure the default. During the
additional time, the failure to cure the default is not an Event of Default (but
no Credit Extensions will be made during the cure period).
8.3 MATERIAL ADVERSE CHANGE.
If there (i) occurs a material adverse change in the business, operations,
or condition (financial or otherwise) of the Borrower, or (ii) is a material
impairment of the prospect of repayment of any portion of the Obligations or
(iii) is a material impairment of the value or priority of Bank's security
interests in the Collateral (any of the foregoing is referred to herein as a
"Material Adverse Change").
8.4 ATTACHMENT.
If any material portion of Borrower's assets is attached, seized, levied
on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period).
8.5 INSOLVENCY.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed).
8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third party
that gives the third party the right to accelerate any Indebtedness exceeding
$250,000 or that could cause a Material Adverse Change.
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least $250,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied).
8.8 MISREPRESENTATIONS.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
8.9 GUARANTY.
Any guaranty of any Obligations ceases for any reason to be in full force
or any Guarantor does not perform any obligation under any guaranty of the
Obligations, or any material misrepresentation or material misstatement exists
now or later in any warranty or
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representation in any guaranty of the Obligations or in any certificate
delivered to Bank in connection with the guaranty, or any circumstance described
in Sections 8.4, 8.5 or 8.7 occurs to any Guarantor.
9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event
of Default described in Section 8.5 occurs all Obligations are immediately due
and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
(g) Dispose of the Collateral according to the Code; and
(h) Exercise control over deposit accounts or securities accounts for
which account control agreements have been entered into by Bank, Borrower and
the subject financial institution or broker (which action Bank shall take only
when an Event of Default occurs and continues).
Bank will use commercially reasonable efforts to give Borrower notice of: (i)
action by Bank declaring the Obligations to be immediately due and payable under
Section 7.1(a) above, within a reasonable time following any such action, (ii)
action by Bank under Section 7.1(e) above, within a reasonable time following
any such action, and (iii) sale or other disposition of the Collateral under
Section 7.1(f), (g) or (h) above, to the extent required under applicable law.
Notwithstanding the foregoing, Bank shall have no liability or obligation to
Borrower for any inadvertent failure to give any such notice.
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9.2 POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or ▇▇▇▇ of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may exercise the power of attorney to sign Borrower's name on any
documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred. Bank's
appointment as Borrower's attorney in fact, and all of Bank's rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank's obligation to provide Credit Extensions
terminates.
9.3 ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, Bank may notify any Person
owing Borrower money of Bank's security interest in the funds and verify the
amount of the Account. After an Event of Default has occurred and while it is
continuing, Borrower must collect all payments in trust for Bank and, if
requested by Bank, immediately deliver the payments to Bank in the form received
from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent, and Bank shall give written notice to Borrower of
the same promptly after making any such payment or taking any such action that
is material. Any amounts paid by Bank are Bank Expenses and immediately due and
payable, bearing interest at the then applicable rate and secured by the
Collateral. No payments by Bank are deemed an agreement to make similar payments
in the future or Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices and the Code, it is not
liable for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other person. Except to the
extent the Bank may be liable for any damages caused by its failure to comply
with reasonable banking practices and the Code, Borrower bears all risk of loss,
damage or destruction of the Collateral.
9.6 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.
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9.7 DEMAND WAIVER.
Except to the extent expressly provided for in this Agreement and the
other Loan Documents, Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
10. NOTICES
All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. A party may change its notice address by giving the other party
written notice. Any notice that Bank is required or desires to provide to AMSI
shall be deemed given upon providing such notice to AMI or AMSI.
11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the nonexclusive jurisdiction
of the State and Federal courts in Santa ▇▇▇▇▇ County, California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
A Person seeking to be indemnified under this Section 12.2 shall notify
Borrower of any event requiring indemnification within a reasonable time
following such Person's receipt of notice of commencement of any action or
proceeding giving rise to a claim for indemnification hereunder, provided that
(i) there shall be no obligation to so notify Borrower if an Event of
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Default has occurred and is continuing, and (ii) neither Bank nor any such
Person shall have any liability or obligation for any inadvertent failure to
provide such notice, and (iii) no failure to provide such notice shall affect
Borrower's obligation to provide indemnity hereunder. In such a proceeding, such
Person shall use commercially reasonable efforts to keep Borrower reasonably
informed of its defense and any settlement of any such action or proceeding and
negotiations to settle or otherwise resolve any claim, provided that (i) such
Person shall have the exclusive right to decide to accept or reject any
settlement offer, and (ii) there shall be no obligation to keep Borrower so
informed if an Event of Default has occurred and is continuing, and (iii)
neither Bank nor any such Person shall have any liability or obligation for any
inadvertent failure to keep Borrower so informed, and (iv) no failure to keep
Borrower so informed shall affect Borrower's obligation to provide indemnity
hereunder.
12.3 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other provision
in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by Borrower
and Bank. This Agreement represents the entire agreement about this subject
matter, and supersedes prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the Loan Documents.
12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or
purchasers written agreement to the terms of this provision), (iii) as required
by law, regulation, subpoena, or other order, (iv) as required in connection
with Bank's examination or audit and (v) as Bank considers appropriate
exercising remedies under this Agreement. Confidential information does not
include information that either: (a) is in the public domain or in Bank's
possession when disclosed to Bank, or becomes part of the public domain after
disclosure to Bank; or (b) is
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disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.
12.9 ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Bank arising out of the
Loan Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.
12.10 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.
13. DEFINITIONS
13.1 DEFINITIONS.
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"BORROWER'S BOOKS" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.
"BORROWING BASE" is (a) 75% of Eligible Accounts of AMI and AMSI plus (b)
the lesser of (i) 25% of the value of Eligible Inventory of AMI and AMSI
calculated at the lower of cost or market and determined on a first-in,
first-out basis, (ii) $1,000,000, and (iii) 25% of Eligible Accounts of AMI and
AMSI; as determined and confirmed by Bank from Borrower's most recent Borrowing
Base Certificate; provided, however, that Bank may lower the percentages of the
Borrowing Base after performing an audit of Borrower's Collateral for the
reasons given in a written notice to Borrower.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
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"CAPITALIZED PRODUCT DEVELOPMENT COSTS" are all costs associated with the
development of Borrower's product, including, but not limited to software, that
are not recorded as an expense and have been classified as an asset account.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Uniform Commercial Code, as applicable.
"COLLATERAL" is the property described on Exhibit A.
"COMMITTED EQUIPMENT LINE" is an aggregate of Credit Extensions of up to
$2,500,000.
"COMMITTED REVOLVING LINE" is an aggregate of Credit Extensions of up to
$6,000,000.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"COPYRIGHTS" are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"CREDIT EXTENSION" is each Revolving Advance, Equipment Advance, or any
other extension of credit by Bank for Borrower's benefit.
"CURRENT ASSETS" are amounts that under GAAP should be included on that
date as current assets on Borrower's consolidated balance sheet.
"CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
"DEFAULT" shall mean any event or occurrence which with the passing of
time or the giving of notice or both would become an Event of Default hereunder.
"EFFECTIVE DATE" is the date Bank executes this Agreement.
"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5;
but Bank may change eligibility standards for the reasons given in a written
notice to Borrower. Unless Bank agrees otherwise in writing, Eligible Accounts
will not include:
(a) Accounts that the account debtor has not paid within 90 days
of invoice date;
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(b) Accounts for an account debtor, 50% or more of whose Accounts
have not been paid within 90 days of invoice date;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose
total obligations to Borrower exceed 25% of all Accounts, for the amounts that
exceed that percentage, unless the Bank approves in writing;
(e) [Omitted];
(f) Accounts for which the account debtor is a federal, state or
local government entity or any department, agency, or instrumentality, unless
Borrower has complied with the Assignments of Claim Act or comparable statute or
ordinance, if required from such government entity, department, agency or
instrumentality in order for a security interest in such Accounts to be
enforceable or perfected, or for Bank to be able to enforce collection of such
Accounts directly from such account debtor;
(g) Accounts owed to an account debtor to which Borrower is
obligated, but only up to the amount owed (sometimes called "contra" accounts,
accounts payable, customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in
which goods are consigned, sales guaranteed, sale or return, sale on approval,
▇▇▇▇ and hold, or other terms if account debtor's payment may be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or
makes any claim and Bank believes there may be a basis for dispute (but only up
to the disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
"ELIGIBLE EQUIPMENT" shall mean new or used computer equipment, office
equipment, lab and test equipment, and office furnishings, against which Bank
holds a first-priority perfected security interest and that meet all of
Borrower's representations and warranties in Section 5.
"ELIGIBLE INVENTORY" means Inventory owned by Borrower which Bank, in its
good faith business judgment, deems eligible for borrowing. Without limiting the
fact that the determination of which Inventory is eligible for borrowing is a
matter of Bank's good faith business judgment, the following are the minimum
requirements for Inventory to be Eligible Inventory: the Inventory must (i)
consist of raw materials or finished goods, in good, new and salable condition,
not be perishable, not be obsolete or unmerchantable, and not be comprised of
work in process, packaging materials or supplies; (ii) meet all applicable
governmental standards; (iii) have been manufactured in compliance with the Fair
Labor Standards Act; (iv) meet all of Borrower's representations and warranties
set forth in Section 5; (v) be at all times subject to Bank's duly perfected,
first priority security interest; and (vi) be situated at Borrower's premises at
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
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"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"EQUIPMENT ADVANCE" is defined in Section 2.1.5(a).
"EQUIPMENT AVAILABILITY END DATE" is defined in Section 2.1.5(a).
"EQUIPMENT MATURITY DATE" is defined in Section 2.1.5(b).
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"GAAP" is generally accepted accounting principles.
"GUARANTOR" is any present or future guarantor of the Obligations.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTELLECTUAL PROPERTY" is:
(a) Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created, acquired
or held;
(c) All design rights which may be available to Borrower now or later
created, acquired or held;
(d) Any claims for damages (past, present or future) for infringement of
any of the rights above, with the right, but not the obligation, to ▇▇▇ and
collect damages for use or infringement of the intellectual property rights
above;
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
"INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
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"INVESTMENT" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties or third party suretyship obligations in favor of Bank executed by
Borrower or other Persons, as applicable, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"MASK WORKS" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"MATERIAL ADVERSE CHANGE" is described in Section 8.3.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"PATENTS" are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other
Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the Schedule
and all extensions and renewals thereof;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Schedule and existing on the Closing Date;
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard & Poor's
Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., and (iii) Bank's certificates of
deposit issued maturing no more than 1 year after issue;
(c) extensions of trade credit in the ordinary course of business and
consistent with past practices;
(d) loans and advances to employees, officers and directors in
connection with the purchase or retention of shares of capital stock of Borrower
by such employees, officers and directors in an aggregate principal amount not
to exceed $100,000 at any time outstanding,
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provided there is a concurrent payment to Borrower in consideration for such
shares, equal to the amount loaned or advanced by Borrower;
(e) loans and advances to employees, in the ordinary course of business
in an aggregate principal amount not to exceed $100,000 at any time outstanding;
(f) Investments (including debt obligations) received in connection with
the bankruptcy or reorganization of suppliers and customers and in settlement of
delinquent obligations of and other disputes with, customers and suppliers
arising in the ordinary course of business;
(g) promissory notes acquired in connection with the dispositions of
assets permitted under Section 7.1;
(h) acquisitions permitted under Section 7.3; and
(i) additional Investments in an aggregate amount not exceeding $500,000
outstanding at any one time.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;
(d) Non-exclusive licenses or sublicenses granted in the ordinary course
of Borrower's business and, with respect to any licenses where Borrower is the
licensee, any interest or title of a licensor or under any such license or
sublicense, if the licenses and sublicenses permit granting Bank a security
interest;
(e) Leases or subleases entered into in the ordinary course of
Borrower's business, including in connection with Borrower's leased premises or
leased property;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;
(g) Liens in respect of property or assets of Borrower imposed by law
which were incurred in the ordinary course of business, such as carriers',
warehousemen's, and mechanics' Liens, statutory landlord's Liens, and other
similar Liens arising in the ordinary course of business, which (y) do not in
the aggregate materially detract from the value of such property or assets or
materially impair the use thereof in the operation of the business of Borrower
and (z) which are not delinquent;
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(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances with respect
to real estate and not interfering in any material respect with the ordinary
conduct of the business of Borrower;
(i) banker's Liens, rights of setoff and similar Liens incurred on
deposits made in the ordinary course of business;
(j) Liens arising from (i) judgments or attachments (or securing of
appeal bonds with respect thereto) in an aggregate amount of less than $250,000
provided that the same have no priority over any of the security interests of
Bank in any of the Collateral (including, without limitation, with respect to
future advances) as determined by Bank in its commercially reasonable discretion
or (ii) judgments (or securing of appeal bonds with respect thereto) in
circumstances not constituting an Event of Default under Section 8.7, provided
that no cash or property (other than proceeds of insurance payable by reason of
such judgments, decrees or attachments) is deposited or delivered to secure any
such judgment, or any appeal bond in respect thereof, the fair market value of
which exceeds $250,000 and provided further that the same have no priority over
any of the security interests of Bank in any of the Collateral (including,
without limitation, with respect to future advances) as determined by Bank in
its commercially reasonable discretion; and
(k) Liens imposed by law incurred in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security provided that the same have no priority over any of the security
interests of Bank in any of the Collateral (including, without limitation, with
respect to future advances).
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"REVOLVING ADVANCE" or "REVOLVING ADVANCES" is a loan advance (or
advances) under the Committed Revolving Line.
"REVOLVING MATURITY DATE" is July 27, 2006.
"RIGHTS", as applied to the Collateral, means the Borrower's rights and
interests in, and powers with respect to, that Collateral, whatever the nature
of those rights, interests and powers and, in any event, including Borrower's
power to transfer rights in such Collateral to Bank.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"SUBSIDIARY" is for any Person, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.
-23-
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower plus Subordinated Debt minus, without duplication, (i) any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, Patents, trade and service marks and names, Copyrights and
research and development expenses except prepaid expenses, and (c) reserves not
already deducted from assets, and (ii) Total Liabilities.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
"TRADEMARKS" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
BORROWER:
ATS MEDICAL, INC. ATS MEDICAL SALES, INC.
By: ______________________________ By: _________________________________
Title: ___________________________ Title: ______________________________
BANK:
SILICON VALLEY BANK
By: ___________________________________
Title: ________________________________
Effective Date: __________________________
-24-
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest in
and to the following personal property of Borrower:
All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles now owned or hereafter
acquired, including the Intellectual Property (as defined below) only, however,
to the extent and subject to the limitations set forth in the Exclusion Clause
(as defined below);
All now existing and hereafter arising accounts, contract rights, payment
intangibles, royalties, license rights and all other forms of obligations owing
to Borrower arising out of the sale or lease of goods, the licensing of
technology or the rendering of services by Borrower, whether or not earned by
performance, and any and all credit insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, letter-of-credit rights, commercial tort claims, certificates
of deposit, instruments and chattel paper now owned or hereafter acquired and
Borrower's Books relating to the foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not include any
Intellectual Property, provided that if a judicial authority (including a U.S.
Bankruptcy Court) holds that a security interest in the underlying Intellectual
Property is necessary to have a security interest in such items that are
proceeds of the Intellectual Property consisting of payment intangibles,
accounts, license revenues, or general intangibles relating to rights to payment
arising therefrom or relating thereto, then in such circumstance, the Collateral
shall automatically, and effective as of the Closing Date, include the
Intellectual Property only to the extent necessary to permit perfection of
Bank's security interest in such proceeds, including, without limitation,
payment intangibles, accounts, license revenues, or general intangibles relating
to rights to payment (the foregoing is referred to herein collectively as the
"Exclusion Clause").
Further, Borrower and Bank are parties to that certain Negative Pledge
Agreement, whereby Borrower, in connection with Bank's loans, has agreed, among
other things, not to sell, transfer, assign, mortgage, pledge, lease, grant a
security interest in, or encumber, any of its Intellectual Property, without the
Bank's prior written consent, other than as may be permitted thereunder or
hereunder.
Exhibit A
The term "Intellectual Property" as used herein shall mean the following:
Borrower's right, title or interest, whether now owned or hereafter acquired, in
and to any intellectual property rights of Borrower of any nature or character,
including without limitation, and whether domestic or foreign, the following:
(i) any copyrights and copyright applications, whether registered or
unregistered, copyright registration and like protection in each work of
authorship and derivative work thereof, whether published or unpublished, and
whether said copyrights are statutory or arise under common law, and all rights,
claims and demands in any way related to any such copyrights or works, including
any rights to ▇▇▇ for past, present or future infringement, and any rights of
renewal and extension of copyrights; (ii) any patents, patent applications,
patent rights and like protections and any licenses relating to any of the
foregoing, and any improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part thereof and any rights to ▇▇▇ for past
present or future infringement thereof and any rights arising therefrom and
pertaining thereto; (iii) any state (including common law), federal and foreign
trademarks, service marks and trade names, and applications for registration of
such trademarks, service marks and trade names, and any licenses relating to any
of the foregoing, whether registered or unregistered and wherever registered,
any rights to ▇▇▇ for past, present or future infringement of unconsented use
thereof, all rights arising therefrom and pertaining and any reissues,
extensions and renewals thereof and the goodwill of the business of Borrower
connected with and symbolized by any of the foregoing; (iv) any trade secrets,
trade dress, trade styles, logos, other source of business identifiers,
mask-works, mask-work registrations or mask-work applications, integrated
circuit masks, software, circuit designs and documentation relating thereto, and
the goodwill of the business of Borrower connected with and symbolized by any of
the foregoing, including, without limitation, any rights to unpatented
inventions, know-how, and operating manuals, including any rights to ▇▇▇ for
past, present or future infringement or unconsented use thereof, all rights
arising therefrom and pertaining thereto, provided that with respect to any and
all of the foregoing, the term "Intellectual Property" shall not include any
proceeds thereof (other than proceeds in the direct form of Intellectual
Property) and specifically, without limitation, and regardless of any of the
foregoing, the term "Intellectual Property" shall not include any payment
intangibles, accounts, license revenues, or general intangibles relating to
rights to payment arising therefrom or relating thereto.
Exhibit A
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EXHIBIT B
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.
FAX TO: ▇▇▇-▇▇▇-▇▇▇▇ DATE: _____________
[ ] LOAN PAYMENT:
From Account # _____________________ To Account # __________________
(Deposit Account #) (Loan Account #)
Principal $ _______________________ and/or Interest $ ______________________
Except for exceptions thereto which have been disclosed in writing to, and
approved in writing by, Bank, all Borrower's representation and warranties
in the Loan and Security Agreement are true, correct and complete in all
material respects on the date of the telephone transfer request for an
advance, but those representations and warranties expressly referring to
another date shall be true, correct and complete in all material respects as
of the date:
AUTHORIZED SIGNATURE: ______________________ Phone Number: _________________
[ ] LOAN ADVANCE:
COMPLETE OUTGOING WIRE REQUEST SECTION BELOW IF ALL OR A PORTION OF THE
FUNDS FROM THIS LOAN ADVANCE ARE FOR AN OUTGOING WIRE.
From Account # _________________________ To Account # __________________
(Loan Account #) (Deposit Account #)
Amount of Advance $ ____________________
Except for exceptions thereto which have been disclosed in writing to, and
approved in writing by, Bank, all Borrower's representation and warranties
in the Loan and Security Agreement are true, correct and complete in all
material respects on the date of the telephone transfer request for an
advance, but those representations and warranties expressly referring to
another date shall be true, correct and complete in all material respects as
of the date:
AUTHORIZED SIGNATURE: ______________________ Phone Number: _________________
[ ] OUTGOING WIRE REQUEST
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE
TO BE WIRED.
Deadline for same day processing is 12:00pm, P.S.T.
Beneficiary Name: ___________________ Amount of Wire: $ _______________
Beneficiary Bank: ___________________ Account Number: _________________
City and Sate: ______________________
Beneficiary Bank Transit (ABA) #: ___________________ Beneficiary Bank Code
(Swift, Sort, Chip, etc.): (FOR INTERNATIONAL WIRE ONLY)
Intermediary Bank: __________________ Transit (ABA) #: _____________
For Further Credit to: _____________________________________________________
Special Instruction: _______________________________________________________
By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer
service(s), which agreements(s) were previously received and executed by me
(us).
Authorized Signature: ______________ 2nd Signature (If Required): ________
Print Name/Title: __________________ Print Name/Title: ___________________
Telephone # ________________________ Telephone # _________________________
Exhibit B
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: ATS Medical, Inc. ("AMI") or Bank: Silicon Valley Bank
ATS Medical Sales, Inc. ("AMSI") ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Commitment Amount: $6,000,000
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ________ $___________
2. Additions (please explain on reverse) $___________
3. TOTAL ACCOUNTS RECEIVABLE $___________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $___________
5. Balance of 50% over 90 day accounts $___________
6. Credit balances over 90 days $___________
7. Concentration Limits $___________
8. (Omitted) $___________
9. Governmental Accounts $___________
10. Contra Accounts $___________
11. Promotion or Demo Accounts $___________
12. Intercompany/Employee Accounts $___________
13. Other (please explain on reverse) $___________
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $___________
15. Eligible Accounts (#3 minus #14) $___________
16. LOAN VALUE OF ACCOUNTS (75% of #15) $___________
INVENTORY
16a TOTAL INVENTORY $___________
16b Inventory Deductions $___________
16c Eligible Inventory (16a minus 16b) $___________
16d LOAN VALUE OF INVENTORY $___________
(25% of #16c, not to exceed the lesser of 25% of #15 or $1MM)
BALANCES
17. Maximum Loan Amount (considering both AMI and AMSI) $___________
18. Total Funds Available [Lesser of #17 or (#16 plus #16d)] $___________
19. Present balance owing on Line of Credit $___________
20. Outstanding under Sublimits, if any Sublimits are in effect $___________
21. RESERVE POSITION (#18 minus #19 and #20) $___________
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
COMMENTS: BANK USE ONLY
ATS Medical, Inc. or ATS Medical Sales, Inc. Rec'd By: ________________
Auth. Signer
By: _________________________
Title: Date: ____________________
Verified: ________________
Auth. Signer
Date: ____________________
Exhibit C
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FROM: ______________________
The undersigned authorized officer of ______________________ ("Borrower")
certifies that under the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the "Agreement"), (i) Borrower is in complete
compliance for the period ending _______________ with all required covenants
except as noted below and (ii) all representations and warranties in the
Agreement are true and correct in all material respects on this date (except to
the extent they relate expressly to an earlier date, in which case such
representations and warranties shall continue to be true as of the date
expressed, and except for exceptions which are disclosed in writing to Bank and
approved in writing by Bank). Attached are the required documents supporting the
certification. The Officer certifies that these are prepared in accordance with
Generally Accepted Accounting Principles (GAAP) consistently applied from one
period to the next except as explained in an accompanying letter or footnotes.
The Officer acknowledges that no borrowings may be requested at any time or date
of determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined on an ongoing basis and not just at
the date this certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements + CC Monthly within 30 days Yes No
Annual (Audited) FYE within 120 days Yes No
A/R & A/P Agings Monthly within 30 days Yes No
A/R Audit Initial and Annual Yes No
Borrowing Base Certificate Monthly within 30 days Yes No
Projected Budgets December 1 of each year Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain:
Liquidity Ratio 2.25:1.00 _____:1.00 Yes No
Minimum Tangible Net Worth $________ $_________ Yes No
Have there been updates to Borrower's intellectual property, or has Borrower Yes No
obtained any registered, or commenced the registration of, any copyrights,
trademarks or patents? (If "yes," please describe.)
Exhibit D
COMMENTS REGARDING EXCEPTIONS: See Attached. {PRIVATE} BANK USE ONLY
Sincerely,
_______________________ Received by: _____________________
AUTHORIZED SIGNER
SIGNATURE Date: ____________________________
TITLE Verified: ________________________
AUTHORIZED SIGNER
DATE
Date: ____________________________
Compliance Status: Yes No
Exhibit D
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