Exhibit 10.36
Silicon Valley Bank
Loan and Security Agreement
Borrower: APPLIED IMAGING CORP.
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Date: September 28, 2001
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK, COMMERCIAL FINANCE DIVISION ("Silicon"), whose address is
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and the borrower named above
(the "Borrower"), whose chief executive office is located at the above address
("Borrower's Address"). The Schedule to this Agreement (the "Schedule") shall
for all purposes be deemed to be a part of this Agreement, and the same is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 Loans. Silicon will make loans to Borrower (the "Loans"), in amounts
determined by Silicon * up to the amounts (the "Credit Limit") shown on the
Schedule, provided no Default or Event of Default has occurred and is
continuing, and subject to deduction of any Reserves for accrued interest and
such other Reserves as Silicon deems proper from time to time *.
* in its good faith business judgment
1.2 Interest. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Silicon may, in its discretion, charge interest to
Borrower's Deposit Accounts maintained with Silicon. Regardless of the amount of
Obligations that may be outstanding from time to time, Borrower shall pay
Silicon minimum monthly interest during the term of this Agreement in the amount
set forth on the Schedule (the "Minimum Monthly Interest").
1.3 Overadvances. If at any time or for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding amount of any Overadvance, on demand, at a
rate equal to the interest rate which would otherwise be applicable to the
Overadvance, plus an additional 2% per annum.
1.4 Fees. Borrower shall pay Silicon the fee(s) shown on the Schedule, which
are in addition to all interest and other sums payable to Silicon and are not
refundable.
1.5 Letters of Credit. At the request of Borrower, Silicon may, in its sole
discretion, issue or arrange for the issuance of letters of credit for the
account of Borrower, in each case in form and substance satisfactory to Silicon
in its sole discretion (collectively, "Letters of Credit"). The aggregate face
amount of all outstanding Letters of Credit from time to time shall not exceed
the amount shown on the Schedule (the "Letter of Credit Sublimit"), and shall be
reserved against Loans which would otherwise be available hereunder. Borrower
shall pay all bank charges (including * charges of Silicon) for the issuance of
Letters of Credit, together with such additional fee as Silicon's letter of
credit department shall charge in connection with the issuance of the Letters of
Credit. Any payment by Silicon under or in connection with a Letter of Credit
shall constitute a Loan hereunder on the date such payment is made. Each Letter
of Credit shall have an expiry date no later than thirty days prior to the
Maturity Date. Borrower hereby agrees to indemnify, save, and hold Silicon
harmless
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from any loss, cost, expense, or liability, including payments made by Silicon,
expenses, and reasonable attorneys' fees incurred by Silicon arising out of or
in connection with any Letters of Credit. Borrower agrees to be bound by the
regulations and interpretations of the issuer of any Letters of Credit
guarantied by Silicon and opened for Borrower's account or by Silicon's
interpretations of any Letter of Credit issued by Silicon for Borrower's
account, and Borrower understands and agrees that Silicon shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto. Borrower understands that
Letters of Credit may require Silicon to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect
to any loss, cost, expense, or liability incurred by Silicon under any Letter of
Credit as a result of Silicon's indemnification of any such issuing bank. The
provisions of this Loan Agreement, as it pertains to Letters of Credit, and any
other present or future documents or agreements between Borrower and Silicon
relating to Letters of Credit are cumulative.
* customary
2. SECURITY INTEREST.
2.1 Security Interest. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Silicon a security interest in
all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located: All Inventory, Equipment, Receivables, and
General Intangibles, including, without limitation, all of Borrower's Deposit
Accounts, and all money, and all property now or at any time in the future in
Silicon's possession (including claims and credit balances), and all proceeds
(including proceeds of any insurance policies, proceeds of proceeds and claims
against third parties), all products and all books and records related to any of
the foregoing (all of the foregoing, together with all other property in which
Silicon may now or in the future be granted a lien or security interest, is
referred to herein, collectively, as the "Collateral"). *
* Anything in the foregoing to the contrary notwithstanding, the Collateral
shall not include the capital stock of Applied Imaging International Ltd., a
company organized under the laws of England, owned by Borrower.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.
In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:
3.1 Corporate Existence and Authority. Borrower, if a corporation, is and
will continue to be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Borrower is and will continue
to be qualified and licensed to do business in all jurisdictions in which any
failure to do so * have a material adverse effect on Borrower. The execution,
delivery and performance by Borrower of this Agreement, and all other documents
contemplated hereby (i) have been duly and validly authorized, (ii) are
enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (iii) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.
* could reasonably be expected to
3.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Silicon 30 days' prior written notice before changing its
name or doing business under any other name. Borrower has complied, and will in
the future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 Place of Business; Location of Collateral. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business, and Collateral is located, only at the
locations set forth on the Schedule *. Borrower will give Silicon at least 30
days prior written notice before opening any additional place of business,
changing its chief executive office, or moving any of the Collateral to a
location other than Borrower's Address or one of the locations set forth on the
Schedule *.
* (other than demonstration units of Inventory with an aggregate value of not
more than $500,000 located
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(on a transitory basis) with customers of Borrower, with Borrower's salesforce,
or at tradeshows)
3.4 Title to Collateral; Permitted Liens. * Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. Silicon now has, and will
continue to have, a first-priority perfected and enforceable security interest
in all of the Collateral, subject only to the Permitted Liens, and Borrower will
at all times defend Silicon and the Collateral against all claims of others.
None of the Collateral now is or will be affixed to any real property in such a
manner, or with such intent, as to become a fixture **. Borrower is not and will
not become a lessee under any real property lease pursuant to which the lessor
may obtain any rights in any of the Collateral and no such lease now prohibits,
restrains, impairs or will prohibit, restrain or impair Borrower's right to
remove any Collateral from the leased premises. Whenever any Collateral is
located upon premises in which any third party has an interest (whether as
owner, mortgagee, beneficiary under a deed of trust, lien or otherwise),
Borrower shall, whenever requested by Silicon, use its best efforts to cause
such third party to execute and deliver to Silicon, in form acceptable to
Silicon, such waivers and subordinations as Silicon shall specify, so as to
ensure that Silicon's rights in the Collateral are, and will continue to be,
superior to the rights of any such third party. Borrower will keep in full force
and effect, and will comply with all the terms of, any lease of real property
where any of the Collateral now or in the future may be located.
* Except as otherwise permitted by this Agreement,
** (other than customary leasehold improvements in Borrower's Santa Clara, CA
and League City, TX locations)
3.5 Maintenance of Collateral. Borrower will maintain the Collateral in good
working condition, and Borrower will not use the Collateral for any unlawful
purpose. Borrower will immediately advise Silicon in writing of any material
loss or damage to the Collateral.
3.6 Books and Records. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 Financial Condition, Statements and Reports. All financial statements
now or in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect the financial condition of
Borrower, at the times and for the periods therein stated. Between the last date
covered by any such statement provided to Silicon and the date hereof, there has
been no material adverse change in the financial condition or business of
Borrower. Borrower is now and will continue to be solvent.
3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Silicon in
writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral. Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.
3.9 Compliance with Law. Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to Borrower, including, but not limited to, those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, and all environmental matters.
3.10 Litigation. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which *
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry
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on its business in substantially the same manner as it is now being conducted.
Borrower will promptly inform Silicon in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or against
Borrower involving any single claim of ** or more, or involving ***
or more in the aggregate.
*could reasonably be expected to
** $75,000
*** $150,000
3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. RECEIVABLES.
4.1 Representations Relating to Receivables. Borrower represents and
warrants to Silicon as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made, (i)
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business, and (ii)
meet the Minimum Eligibility Requirements set forth in Section 8 below.
4.2 Representations Relating to Documents and Legal Compliance. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and endorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.
4.3 Schedules and Documents relating to Receivables. Borrower shall deliver
to Silicon transaction reports and loan requests, schedules of all Receivables,
and schedules of collections, all on Silicon's standard forms; provided,
however, that Borrower's failure to execute and deliver the same shall not
affect or limit Silicon's security interest and other rights in all of
Borrower's Receivables, nor shall Silicon's failure to advance or lend against a
specific Receivable affect or limit Silicon's security interest and other rights
therein. Loan requests received after 12:00 Noon will not be considered by
Silicon until the next Business Day *. Together with each such schedule, or
later if requested by Silicon, Borrower shall furnish Silicon with copies (or,
at Silicon's request, originals) of all contracts, orders, invoices, and other
similar documents, and all original shipping instructions, delivery receipts,
bills of lading, and other evidence of delivery, for any goods the sale or
disposition of which gave rise to such Receivables, and Borrower warrants the
genuineness of all of the foregoing. Borrower shall also furnish to Silicon an
aged accounts receivable trial balance in such form and at such intervals as
Silicon shall request. In addition, Borrower shall deliver to Silicon the
originals of all instruments, chattel paper, security agreements, guarantees and
other documents and property evidencing or securing any Receivables, immediately
upon receipt thereof and in the same form as received, with all necessary
indorsements, all of which shall be with recourse. Borrower shall also provide
Silicon with copies of all credit memos ** within two days after the date
issued.
*unless Silicon, in its sole discretion, determines otherwise
** in excess of $25,000
4.4 Collection of Receivables. Borrower shall have the right to collect all
Receivables, unless and until a Default or an Event of Default has occurred *.
Borrower shall hold all payments on, and proceeds of, Receivables in trust for
Silicon, and Borrower shall immediately deliver all such payments and proceeds
to Silicon in their original form, duly endorsed in blank, to be applied to the
Obligations in such order as Silicon shall determine. Silicon may, in its
discretion, require that all proceeds of Collateral be deposited by Borrower
into a lockbox account, or such other "blocked account" as Silicon may specify,
pursuant to a blocked account agreement in such form as Silicon may specify. **
Silicon or its designee may, at any time, notify Account Debtors that the
Receivables have been assigned to Silicon.
*and is continuing
**After the occurrence and during the continuation of an Event of Default,
4.5. Remittance of Proceeds. All proceeds arising from the disposition of any
Collateral shall be delivered, in kind, by Borrower to Silicon in the original
form in which received by Borrower not later than the following Business Day
after receipt by Borrower, to be applied to the Obligations in such order as
Silicon shall determine;
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provided that, if no Default or Event of Default has occurred *, Borrower shall
not be obligated to remit to Silicon the proceeds of the sale of worn out or
obsolete equipment disposed of by Borrower in good faith in an arm's length
transaction for an aggregate purchase price of ** or less (for all such
transactions in any fiscal year). Borrower agrees that it will not commingle
proceeds of Collateral with any of Borrower's other funds or property, but will
hold such proceeds separate and apart from such other funds and property and in
an express trust for Silicon. Nothing in this Section limits the restrictions on
disposition of Collateral set forth elsewhere in this Agreement.
* and is continuing
** $50,000
4.6 Disputes. Borrower shall notify Silicon promptly of all disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit. Silicon may, at any time after the
occurrence * of an Event of Default, settle or adjust disputes or claims
directly with Account Debtors for amounts and upon terms which Silicon considers
advisable in its reasonable credit judgment and, in all cases, Silicon shall
credit Borrower's Loan account with only the net amounts received by Silicon in
payment of any Receivables.
*and during the continuation
4.7 Returns. Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower in the ordinary course of
its business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to Silicon). In the event any attempted return occurs
after the occurrence * of any Event of Default, Borrower shall (i) hold the
returned Inventory in trust for Silicon, (ii) segregate all returned Inventory
from all of Borrower's other property, (iii) conspicuously label the returned
Inventory as Silicon's property, and (iv) immediately notify Silicon of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Silicon's request deliver such
returned Inventory to Silicon.
*and during the continuation
4.8 Verification. Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.
4.9 No Liability. Silicon shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall Silicon be deemed to be responsible for any of Borrower's obligations
under any contract or agreement giving rise to a Receivable. Nothing herein
shall, however, relieve Silicon from liability for its own gross negligence or
willful misconduct.
5. ADDITIONAL DUTIES OF BORROWER.
5.1 Financial and Other Covenants. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.
5.2 Insurance. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require, and Borrower shall provide evidence of such insurance to
Silicon, so that Silicon is satisfied that such insurance is, at all times, in
full force and effect. All such insurance policies shall name Silicon as an
additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such
insurance, Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its sole discretion, except that, provided no Default
or Event of Default has occurred and is continuing, Silicon shall release to
Borrower insurance proceeds with respect to * Equipment totaling less than
$100,000, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid **. Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Silicon may, but is
not obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Silicon copies of all reports made to insurance companies.
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* (a)
** ; and (b) lost shipments of Inventory totaling less than $25,000 in the
aggregate at any one time, which shall be utilized by Borrower for the
replacement of the shipment of Inventory with respect to which the insurance
proceeds were paid
5.3 Reports. Borrower, at its expense, shall provide Silicon with the written
reports set forth in the Schedule, and such other written reports with respect
to Borrower (including budgets, sales projections, operating plans and other
financial documentation), as Silicon shall from time to time reasonably specify.
5.4 Access to Collateral, Books and Records. At reasonable times, and on *
one Business Day's notice, Silicon, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit **, but Silicon shall have
the right to disclose any such information to its auditors, regulatory agencies,
and attorneys, and pursuant to any subpoena or other legal process. The
foregoing inspections and audits shall be at Borrower's expense and the charge
therefor shall be $700 per person per day (or such higher amount as shall
represent Silicon's then current standard charge for the same), plus reasonable
out of pocket expenses. Borrower will not enter into any agreement with any
accounting firm, service bureau or third party to store Borrower's books or
records at any location other than Borrower's Address, without first obtaining
Silicon's written consent, which may be conditioned upon such accounting firm,
service bureau or other third party agreeing to give Silicon the same rights
with respect to access to books and records and related rights as Silicon has
under this Loan Agreement. *** Borrower waives the benefit of any
accountant-client privilege or other evidentiary privilege precluding or
limiting the disclosure, divulgence or delivery of any of its books and records
(except that Borrower does not waive any attorney-client privilege).
* at least
** equivalent to those steps it takes to safeguard its own confidential
financial information
*** With respect to Silicon,
5.5 Negative Covenants. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon's prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity *; (ii)
acquire any assets, except in the ordinary course of business * +; (iii) enter
into any other transaction outside the ordinary course of business **; (iv) sell
or transfer any Collateral, except for the sale of finished Inventory in the
ordinary course of Borrower's business, and except for the sale of obsolete or
unneeded Equipment in the ordinary course of business ***; (v) store any
Inventory or other Collateral with any warehouseman or other third party; (vi)
sell any Inventory on a sale-or-return, guaranteed sale, consignment, or other
contingent basis ++; (vii) make any loans of any money or other assets ****;
(viii) incur any debts, outside the ordinary course of business, which would
have a material, adverse effect on Borrower or on the prospect of repayment of
the Obligations; (ix) guarantee or otherwise become liable with respect to the
obligations of another party or entity *****; (x) pay or declare any dividends
on Borrower's stock (except for dividends payable solely in stock of Borrower);
(xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any
of Borrower's stock ******; (xii) make any change in Borrower's capital
structure which would have a material adverse effect on Borrower or on the
prospect of repayment of the Obligations; or (xiii) *******; or (xiv) dissolve
or elect to dissolve. Transactions permitted by the foregoing provisions of this
Section are only permitted if no Default or Event of Default would occur as a
result of such transaction. ********
* ; provided, however, that that a subsidiary of Borrower may merge or
consolidate into another subsidiary of Borrower or (upon Silicon's receipt of
all applicable lien searches relative to such subsidiary, the results of which
shall be satisfactory to Silicon) into Borrower
+ ; provided further that Borrower may acquire intellectual property assets
(free and clear of liens) from Borrower's subsidiaries and enter into services
agreements with Borrower's subsidiaries relating thereto
** except as otherwise permitted by other provisions of this Agreement
***, and except for: (A) the issuance of non-exclusive licenses and similar
arrangements for the use of the property of Borrower in the ordinary course of
business; and (B) Permitted Exclusive Assay Provider Licenses
++ ; provided, however, that Borrower may make contingent sales of Inventory
in an aggregate amount not to exceed $500,000 at any one time outstanding, so
long as no Receivables arise, and no revenue is recognized, from such contingent
sales
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****, except: (A) loans existing as of the date hereof that are shown on the
Schedule; and (B) loans consisting of (1) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business; provided the aggregate amount of such loans under this subclause
(vii)(B)(1) do not exceed $200,000 at any one time outstanding and (2) loans to
employees, officers or directors relating to the purchase of equity securities
of Borrower pursuant to employee stock purchase plans or agreements approved by
Borrower's Board of Directors; provided the aggregate amount of such loans under
this subclause (vii) (B)(2) do not exceed $100,000 at any one time outstanding;
and (C) debt obligations received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers arising in the
ordinary course of business; and (D) debt obligations consisting of notes
receivable of, or prepaid royalties and other credit extensions to, customers
who are not Affiliates, in the ordinary course business; provided the aggregate
amount of such debt obligations under this subclause (vii)(D) do not exceed
$100,000 at any one time outstanding
*****, except for Borrower's limited guaranty in favor of National
Westminster Bank PLC in respect of the obligations of Applied Imaging
International Limited, to the extent that the total amount recoverable from
Borrower in respect of such limited guaranty is limited to Five Hundred Thousand
Pounds Sterling ((pound)500,000) or equivalent amounts in other applicable
currency at the applicable rate of exchange
******, except for the repurchases of stock from the cancellation of
indebtedness and from former employees or directors of Borrower under the terms
of applicable repurchase or similar agreements between Borrower and such
employees or directors all in an aggregate amount not to exceed $100,000 while
this Agreement is in effect
******* [intentionally omitted]
******** Borrower agrees that it shall not, while this Agreement is in
effect, transfer funds, assets or any Collateral to any of Borrower's
subsidiaries and affiliates, other than cash funds of up to $600,000 in the
aggregate.
5.6 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Silicon, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Silicon may deem them reasonably necessary in order
to prosecute or defend any such suit or proceeding.
5.7 Further Assurances. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may deem
reasonably necessary or useful in order to perfect and maintain Silicon's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 Maturity Date. This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the "Maturity Date"), subject to Section 6.3
below.
6.2 Early Termination. This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrower, effective three Business Days after written
notice of termination is given to Silicon; or (ii) by Silicon at any time after
the occurrence * of an Event of Default, without notice, effective immediately.
If this Agreement is terminated by Borrower or by Silicon under this Section
6.2, Borrower shall pay to Silicon a termination fee in an amount equal to **,
provided that no termination fee shall be charged if the credit facility
hereunder is replaced with a new facility from another division of Silicon
Valley Bank. The termination fee shall be due and payable on the effective date
of termination and thereafter shall bear interest at a rate equal to the highest
rate applicable to any of the Obligations.
* and during the continuation
** $20,000
6.3 Payment of Obligations. On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all
-7-
Obligations have been paid and performed in full; provided that, without
limiting the fact that Loans are subject to the discretion of Silicon, Silicon
may, in its sole discretion, refuse to make any further Loans after termination.
No termination shall in any way affect or impair any right or remedy of Silicon,
nor shall any such termination relieve Borrower of any Obligation to Silicon,
until all of the Obligations have been paid and performed in full. Upon payment
and performance in full of all the Obligations and termination of this
Agreement, Silicon shall promptly deliver to Borrower termination statements,
requests for reconveyances and such other documents as may be required to fully
terminate Silicon's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect; or (b) Borrower shall fail to pay
when due any Loan or any interest thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any time shall exceed
the Credit Limit *; or (d) Borrower shall fail to comply with any of the
financial covenants set forth in the Schedule or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured; or (e) Borrower
shall fail to perform any other non-monetary Obligation, which failure is not
cured within 5 Business Days after the date due; or (f) any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within 10 days after the
occurrence of the same; or (g) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure period or waived in writing by the holder of the Permitted Lien; or (h)
Borrower breaches any material contract or obligation, which has or may
reasonably be expected to have a material adverse effect on Borrower's business
or financial condition; or (i) Dissolution, termination of existence, insolvency
or business failure of Borrower; or appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower or
any guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, which is not cured
by the dismissal thereof within ** 30 days after the date commenced; or (k)
revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations or any attempt to do any of the foregoing, or
commencement of proceedings by any guarantor of any of the Obligations under any
bankruptcy or insolvency law; or (l) revocation or termination of, or limitation
or denial of liability upon, any pledge of any certificate of deposit,
securities or other property or asset of any kind pledged by any third party to
secure any or all of the Obligations, or any attempt to do any of the foregoing,
or commencement of proceedings by or against any such third party under any
bankruptcy or insolvency law; or (m) Borrower makes any payment on account of
any indebtedness or obligation which has been subordinated to the Obligations
other than as permitted in the applicable subordination agreement, or if any
Person who has subordinated such indebtedness or obligations terminates or in
any way limits his subordination agreement; or (n) without the prior written
consent of Silicon ***; or (o) Borrower shall generally not pay its debts as
they become due ****, or Borrower shall conceal, remove or transfer any part of
its property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (p) there shall be a
material adverse change in Borrower's business or financial condition. Silicon
may cease making any Loans hereunder during any of the above cure periods, and
thereafter if an Event of Default has occurred *****.
*provided, however, if an Overadvance results directly from a change by
Silicon of either the amount of Reserves or of the Minimum Eligibility
Requirements, then if Borrower fails to pay such Overadvance within 1 Business
Day of such Overadvance occurring
**45
***, (1) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended) becomes, after the
-8-
date of this Agreement, the "beneficial owner" (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended), directly or indirectly, of
more than 30% of the total voting power of all classes of capital stock then
outstanding of Borrower entitled to vote in the election of directors, or (2) a
majority of the members of the Board of Directors of Borrower shall not
constitute Continuing Directors
**** (it being acknowledged that Borrower may, in good faith, pay its trade
obligations subject to generally acceptable, commercially reasonable business
practices)
***** and is continuing
7.2 Remedies. Upon the occurrence of any Event of Default, and at any time *
thereafter, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b) Accelerate
and declare all or any part of the Obligations to be immediately due, payable,
and performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (c) Take possession of
any or all of the Collateral wherever it may be found, and for that purpose
Borrower hereby authorizes Silicon without judicial process to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as Silicon deems it reasonably necessary in order to
complete the enforcement of its rights under this Agreement or any other
agreement; provided, however, that should Silicon seek to take possession of any
of the Collateral by Court process, Borrower hereby irrevocably waives: (i) any
bond and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover possession
thereof; and (iii) any requirement that Silicon retain possession of, and not
dispose of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or all of the Collateral and make it available to
Silicon at places designated by Silicon which are reasonably convenient to
Silicon and Borrower, and to remove the Collateral to such locations as Silicon
may deem advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Silicon shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Silicon deems reasonable, or on Silicon's premises, or elsewhere and
the Collateral need not be located at the place of disposition. Silicon may
directly or through any affiliated company purchase or lease any Collateral at
any such public disposition, and if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower's name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Silicon's sole discretion,
to grant extensions of time to pay, compromise claims and settle Receivables and
the like for less than face value; (h) Offset against any sums in any of
Borrower's general, special or other Deposit Accounts with Silicon; and (i)
Demand and receive possession of any of Borrower's federal and state income tax
returns and the books and records utilized in the preparation thereof or
referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities
and obligations incurred by Silicon with respect to the foregoing shall be added
to and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of Silicon's rights and remedies, from and
after the occurrence ** of any Event of Default, the interest rate applicable to
the Obligations shall be increased by an additional four percent per annum.
* during the continuation
** and during the continuation
7.3 Standards for Determining Commercial Reasonableness. Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least * days prior to the sale, and, in the case of a public sale,
notice of the sale is published at least * days before
-9-
the sale in a newspaper of general circulation in the county where the sale is
to be conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in
cash or by cashier's check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Silicon may (but is not obligated to) direct
any prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Silicon shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
* ten
7.4 Power of Attorney. Upon the occurrence * of any Event of Default, without
limiting Silicon's other rights and remedies, Borrower grants to Silicon an
irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or agents) at
any time, at its option, but without obligation, with or without notice to
Borrower, and at Borrower's expense, to do any or all of the following, in
Borrower's name or otherwise, but Silicon agrees to exercise the following
powers in a commercially reasonable manner: (a) Execute on behalf of Borrower
any documents that Silicon may, in its sole discretion, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
present and future agreements; (b) Execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of Silicon's Collateral or in which Silicon has an interest; (c) Execute
on behalf of Borrower, any invoices relating to any Receivable, any draft
against any Account Debtor and any notice to any Account Debtor, any proof of
claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or
other lien, or assignment or satisfaction of mechanic's, materialman's or other
lien; (d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into Silicon's
possession; (e) Endorse all checks and other forms of remittances received by
Silicon; (f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (g)
Grant extensions of time to pay, compromise claims and settle Receivables and
General Intangibles for less than face value and execute all releases and other
documents in connection therewith; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give Silicon the same rights of access and other rights with respect
thereto as Silicon has under this Agreement; and (k) Take any action or pay any
sum required of Borrower pursuant to this Agreement and any other present or
future agreements. Any and all reasonable sums paid and any and all reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be payable on demand, and shall bear interest at a rate equal
to the highest interest rate applicable to any of the Obligations. In no event
shall Silicon's rights under the foregoing power of attorney or any of Silicon's
other rights under this Agreement be deemed to indicate that Silicon is in
control of the business, management or properties of Borrower.
* and during the continuation
7.5 Application of Proceeds. All proceeds realized as the result of any sale
of the Collateral shall be applied by Silicon first to the reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due upon
any of the Obligations, and third to the principal of the Obligations, in such
order as Silicon shall determine in its sole discretion. Any surplus shall be
paid to Borrower or other persons legally entitled thereto; Borrower shall
remain liable to Silicon for any deficiency. If, Silicon, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Silicon shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the Obligations until the actual receipt by Silicon of the cash
therefor.
7.6 Remedies Cumulative. In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar
-10-
Silicon from subsequent exercise or partial exercise of any other rights or
remedies. The failure or delay of Silicon to exercise any rights or remedies
shall not operate as a waiver thereof, but all rights and remedies shall
continue in full force and effect until all of the Obligations have been fully
paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable.
--------------
"Affiliate" means, with respect to any Person, a relative, partner,
---------
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Silicon is open for business.
------------
"Code" means the Uniform Commercial Code as adopted and in effect in the
----
State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
----------
"Continuing Director" means (a) any member of the Board of Directors who was
-------------------
a director (or comparable manager) of Borrower on the date of this Agreement,
and (b) any individual who becomes a member of the Board of Directors after the
date of this Agreement if such individual was appointed or nominated for
election to the Board of Directors by a majority of the Continuing Directors,
but excluding any such individual originally proposed for election in opposition
to the Board of Directors in office at the date of this Agreement in an actual
or threatened election contest relating to the election of the directors (or
comparable managers) of Borrower (as such terms are used in Rule 14a-11 under
the Securities Exchange Act of 1934, as amended) and whose initial assumption of
office resulted from such contest or the settlement thereof.
"Default" means any event which with notice or passage of time or both,
-------
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
---------------
"Dot Com Account Debtor" means an Account Debtor that, in Silicon's sole
----------------------
discretion, is an internet based company.
"Eligible Inventory" means Inventory which Silicon, in its sole judgment,
------------------
deems eligible for borrowing, based on such considerations as Silicon may from
time to time deem appropriate. Without limiting the fact that the determination
of which Inventory is eligible for borrowing is a matter of Silicon's
discretion, Inventory which does not meet the following requirements will not be
deemed to be Eligible Inventory: Inventory which (i) consists of * finished
goods, in good, new and salable condition, which is not perishable, not obsolete
or unmerchantable, and is not comprised of work in process, packaging materials
or supplies; (ii) meets all applicable governmental standards; (iii) has been
manufactured in compliance with the Fair Labor Standards Act; (iv) conforms in
all respects to the warranties and representations set forth in this Agreement;
(v) is at all times subject to Silicon's duly perfected, first priority security
interest; and (vi) is situated at a one of the locations set forth on the
Schedule.
* raw materials or
"Eligible Receivables" means Receivables arising in the ordinary course of
--------------------
Borrower's business from the sale of goods or rendition of services, which
Silicon, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Silicon may from time to time deem appropriate. Without
limiting the fact that the determination of which Receivables are eligible for
borrowing is a matter of Silicon's discretion, the following (the "Minimum
-------
Eligibility Requirements") are the minimum requirements for a Receivable to be
------------------------
an Eligible Receivable: (i) the Receivable must not be outstanding for more than
* days from its invoice date, (ii) the Receivable must not represent progress
▇▇▇▇▇▇▇▇, or be due under a fulfillment or requirements contract with the
Account Debtor, (iii) the Receivable must not be subject to any contingencies
(including Receivables arising from sales on consignment, guaranteed sale or
other terms pursuant to which payment by the Account Debtor may be conditional)
**, (iv) the Receivable must not be owing from an Account Debtor with whom
Borrower has any dispute (whether or not relating to the particular Receivable),
(v) the Receivable must not be owing from an Affiliate of Borrower, (vi) the
Receivable must not be owing from an Account Debtor which is subject to any
insolvency or bankruptcy proceeding, or whose financial condition is not
acceptable to Silicon, or which, fails or goes out of a material portion of its
business, (vii) the Receivable must not be owing from the United States or any
department, agency or instrumentality thereof (unless there has been compliance,
to Silicon's satisfaction, with the United States Assignment of Claims Act),
(viii) the Receivable must not be owing from an Account Debtor located outside
the United States or Canada (unless pre-approved by Silicon in its discretion in
writing, or backed by a letter of credit satisfactory to Silicon, or FCIA
insured satisfactory to Silicon), (ix) the Receivable must not be owing from an
Account Debtor to whom Borrower is or
-11-
may be liable for goods purchased from such Account Debtor or otherwise ***.
Receivables owing from one Account Debtor will not be deemed Eligible
Receivables to the extent they exceed 25% of the total Receivables outstanding.
In addition, if more than 50% of the Receivables owing from an Account Debtor
are outstanding more than * days from their invoice date (without regard to
unapplied credits) or are otherwise not eligible Receivables, then all
Receivables owing from that Account Debtor will be deemed ineligible for
borrowing. Silicon may, from time to time, in its discretion, revise the Minimum
Eligibility Requirements, upon written notice to Borrower.
* 120
** other than a sale contingent on the subject goods conforming with
Borrower's normal (non-customized) performance criteria
*** unless and in which case the portion of such Receivable equal to the
amounts owed to such Account Debtor shall be ineligible under this clause (ix),
(x) the Receivable must not be owing from a Dot Com Account Debtor, (xi) the
Receivable must not arise from the sale or license of Embedded Software either
(A) in a transaction separate than the sale or other disposition of the goods in
which the Embedded Software is embedded (the "Underlying Goods"), or (B) in the
same transaction as the sale or other disposition of the Underlying Goods but
the sale or license of the Embedded Software is billed, or accounted for within
the same ▇▇▇▇, by Borrower separately from the sale or other disposition of the
Underlying Goods, and (xii) the Receivable must not be owing by an Account
Debtor as to whom Borrower has recognized or can recognize deferred revenue,
unless and in which case the portion of such Receivable that is equal to the
Applicable Deferred Revenue Percentage (as defined below) of such deferred
revenue amount shall be ineligible under this clause (xii). For purposes of the
foregoing clause (xii), the term "Applicable Deferred Revenue Percentage" means,
as of any date of determination, (A) 65% so long as no Default or Event of
Default has occurred and is continuing, and (B) 100% if a Default or Event of
Default has occurred and is continuing
"Embedded Software" means a computer program embedded in goods and any
-----------------
supporting information provided in connection with a transaction relating to the
program if (i) the program is associated with the goods in such a manner that it
customarily is considered part of the goods, or (ii) by becoming the owner of
the goods, a person acquires a right to use the program in connection with the
goods. Embedded Software does not include a computer program embedded in goods
that consist solely of the medium in which the program is embedded.
"Equipment" means all of Borrower's present and hereafter acquired
---------
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Event of Default" means any of the events set forth in Section 7.1 of this
----------------
Agreement.
"General Intangibles" means all general intangibles of Borrower, whether now
-------------------
owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against Silicon, rights to purchase or sell
real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation life insurance, key
man insurance, credit insurance, liability insurance, property insurance and
other insurance), tax refunds and claims, computer programs, discs, tapes and
tape files, claims under guaranties, security interests or other security held
by or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
---------
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
all raw materials, work in process, finished goods and goods in transit), and
all materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.
-12-
"Obligations" means all present and future Loans, advances, debts,
-----------
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Silicon in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest
charges and any other sums chargeable to Borrower under this Agreement or under
any other present or future instrument or agreement between Borrower and
Silicon.
"Permitted Exclusive Assay Provider Licenses" means exclusive licenses
-------------------------------------------
granted by Borrower, in the ordinary course of Borrower's business, to assay
providers (including without limitation DAKO Corporation and its affiliates) or
the customers of such assay providers relative to the specific image analysis
applications for the assays provided by such assay providers; it being expressly
acknowledged and agreed that the underlying proprietary technology of Borrower
(including without limitation the so-called "MDS(TM)" system), as opposed to
such specific image analysis applications that function by use of such
technology, shall not be the subject of any exclusive license granted by
Borrower.
"Permitted Liens" means the following: (i) purchase money security interests
---------------
in specific items of Equipment; (ii) leases of specific items of Equipment;
(iii) liens for taxes not yet payable *; (iv) additional security interests and
liens consented to in writing by Silicon, which consent shall not be
unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods **. Silicon will have
the right to require, as a condition to its consent under subparagraph (iv)
above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
* or liens for taxes being contested in good faith by appropriate
proceedings for which adequate reserves have been established and are maintained
provided such liens do not have priority over any security interest of Silicon
--------
**; and (ix) liens on assets acquired by Borrower in accordance with Section
5.5 hereof, provided such liens would otherwise be permitted pursuant to clauses
(i) or (ii) of the definition of Permitted Liens
"Person" means any individual, sole proprietorship, partnership, joint
------
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter acquired
-----------
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, securities accounts, investment
property, documents and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, all merchandise returned
to or repossessed by Borrower, and all rights of stoppage in transit and all
other rights or remedies of an unpaid vendor, lienor or secured party.
"Reserves" means, as of any date of determination, such amounts as Silicon
--------
may from time to time establish and revise in good faith reducing the amount of
Loans, Letters of Credit and other financial accommodations which would
otherwise be available to Borrower under the lending formula(s) provided in the
Schedule: (a) to reflect events, conditions, contingencies or risks which, as
determined by Silicon in good faith, do or may affect (i) the Collateral or any
other property which is security for the Obligations or its value (including
without limitation any increase in delinquencies of Receivables), (ii) the
assets, business or prospects of Borrower or any Guarantor, or (iii) the
security interests and other rights of Silicon in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect Silicon's
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower or any Guarantor to Silicon is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in
-13-
respect of any state of facts which Silicon determines in good faith constitutes
an Event of Default or may, with notice or passage of time or both, constitute
an Event of Default.
Other Terms. All accounting terms used in this Agreement, unless otherwise
-----------
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 Interest Computation. In computing interest on the Obligations, all
checks, and other items of payment received by Silicon (including proceeds of
Receivables and payment of the Obligations in full) shall be deemed applied by
Silicon on account of the Obligations three Business Days after receipt by
Silicon of immediately available funds *, and, for purposes of the foregoing,
any such funds received after 12:00 Noon on any day shall be deemed received on
the next Business Day. Silicon shall not, however, be required to credit
Borrower's account for the amount of any item of payment which is unsatisfactory
to Silicon in its sole discretion, and Silicon may charge Borrower's loan
account for the amount of any item of payment which is returned to Silicon
unpaid.
*(except with respect to wire transfers (including Automated Clearing House
(ACH) and Electronic Funds Transfers (EFT) payments) which shall be deemed
applied by Silicon on account of the Obligations the same Business Day as deemed
received by Silicon)
9.2 Application of Payments. All payments with respect to the Obligations
may be applied, and in Silicon's sole discretion reversed and re-applied, to the
Obligations, in such order and manner as Silicon shall determine in its sole
discretion.
9.3 Charges to Accounts. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.
9.4 Monthly Accountings. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within thirty days after each
account is rendered, describing the nature of any alleged errors or admissions.
9.5 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Silicon or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party *. Notices to Silicon shall be directed to the
Commercial Finance Division, to the attention of the Division Manager or the
Division Credit Manager. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, or at the expiration of
one Business Day following delivery to the private delivery service, or two
Business Days following the deposit thereof in the United States mail, with
postage prepaid **.
*or by facsimile (if to Borrower at (▇▇▇) ▇▇▇-▇▇▇▇ or if to Silicon at (408)
654-9589)
**Notices may be supplemented by electronic mail; however, such electronic
mail shall not be in lieu of the notice procedure provided for above.
9.6 Severability. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
9.7 Integration. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and Silicon and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
-----------------
understandings, representations or agreements between the parties which are not
--------------------------------------------------------------------------------
set forth in this Agreement or in other written agreements signed by the parties
--------------------------------------------------------------------------------
in connection herewith.
----------------------
9.8 Waivers. The failure of Silicon at any time or times to require Borrower
to strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and Silicon shall not waive or
diminish any right of Silicon later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Silicon shall be deemed to have been
waived
-14-
by any act or knowledge of Silicon or its agents or employees, but only by a
specific written waiver signed by an authorized officer of Silicon and delivered
to Borrower. Borrower waives demand, protest, notice of protest and notice of
default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by Silicon on which
Borrower is or may in any way be liable, and notice of any action taken by
Silicon, unless expressly required by this Agreement.
9.9 No Liability for Ordinary Negligence. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Silicon, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon, but nothing herein shall relieve Silicon* from
liability for its own gross negligence or willful misconduct.
*, nor any of its directors, officers, employees, agents, attorneys or any
other Person affiliated with or representing Silicon,
9.10 Amendment. The terms and provisions of this Agreement may not be waived
or amended, except in a writing executed by Borrower and a duly authorized
officer of Silicon.
9.11 Time of Essence. Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement.
9.12 Attorneys Fees and Costs. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
its rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise represent Silicon
in any litigation relating to Borrower. In satisfying Borrower's obligation
------------------------------------
hereunder to reimburse Silicon for attorneys fees, Borrower may, for
--------------------------------------------------------------------
convenience, issue checks directly to Silicon's attorneys, Levy, Small & ▇▇▇▇▇▇,
--------------------------------------------------------------------------------
but Borrower acknowledges and agrees that Levy, Small & ▇▇▇▇▇▇ is representing
------------------------------------------------------------------------------
only Silicon and not Borrower in connection with this Agreement. If either
---------------------------------------------------------------
Silicon or Borrower files any lawsuit against the other predicated on a breach
of this Agreement, the prevailing party in such action shall be entitled to
recover its reasonable costs and attorneys' fees, including (but not limited to)
reasonable attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment. All attorneys' fees and
costs to which Silicon may be entitled pursuant to this Paragraph shall
immediately become part of Borrower's Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate * applicable to
any of the Obligations. **
* otherwise
** Borrower and Silicon hereby agree that the $15,000 deposit paid by
Borrower to Silicon pursuant to that certain proposal letter, dated as of August
22, 2001, between Silicon and Borrower, shall be applied (in accordance with
such proposal letter) to Silicon's fees, costs, and expenses incurred in
connection with or relating to such proposal letter and this Agreement.
9.13 Benefit of Agreement. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Silicon; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Silicon, and any prohibited assignment
shall be void. No consent by Silicon to any assignment shall release Borrower
from its liability for the Obligations.
9.14 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.
9.15 Limitation of Actions. Any claim or cause of action by Borrower against
Silicon, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Loan Agreement, or any other
present or future document or agreement, or any other transaction contemplated
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by Silicon, its
directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action
-15-
Silcon Valley Bank Loan and Security Agreement
------------------------------------------------------------------
or proceeding in a court of competent jurisdiction by the filing of a
complaint within * after the first act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based, and the service of a
summons and complaint on an officer of Silicon, or on any other person
authorized to accept service on behalf of Silicon, within thirty (30) days
thereafter. Borrower agrees that such ** period is a reasonable and sufficient
time for Borrower to investigate and act upon any such claim or cause of action.
The ** period provided herein shall not be waived, tolled, or extended except by
the written consent of Silicon in its sole discretion. This provision shall
survive any termination of this Loan Agreement or any other present or future
agreement.
* two years
** two-year
9.16 Paragraph Headings; Construction. Paragraph headings are only used in
this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Silicon or Borrower under any rule
of construction or otherwise.
9.17 Governing Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa ▇▇▇▇▇ County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.18 Mutual Waiver of Jury Trial. BORROWER AND SILICON EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
[Signature page immediately follows]
-16-
Silcon Valley Bank Loan and Security Agreement
----------------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
Borrower:
APPLIED IMAGING CORP.
By /s/ ▇▇▇▇ ▇▇▇▇
------------------------------------------
President or Vice President
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
Secretary or Ass't Secretary
Silicon:
SILICON VALLEY BANK
By ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
Title Account Manager
--------------------------------------
-15-
Silcon Valley Bank Schedule to Loan and Security Agreement
----------------------------------------------------------------------
Silicon Valley Bank
Schedule to
Loan and Security Agreement
Borrower: APPLIED IMAGING CORP.
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Date: September 28, 2001
This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.
================================================================================
1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of a total
of $2,000,000 at any one time outstanding
(the "Maximum Credit Limit"), or the sum of
(a) and (b) below (the "Borrowing Base"):
(a) up to 80% of the amount of
Borrower's Eligible Receivables (as
defined in Section 8 above), plus
(b) an amount not to exceed, as of any
date of determination, the lowest of:
(1) up to 20% of the value of
Borrower's Eligible Inventory (as
defined in Section 8 above),
calculated at the lower of cost or
market value and determined on a
first-in, first-out basis; or
(2) $500,000; or
(3) 40% of the aggregate amount of
Borrower's Eligible Receivables;
provided, however, that the amount
-------- -------
of credit availability under the
foregoing clause (b) shall be
deemed to equal zero ($-0-) unless
and until (y) Borrower irrevocably
notifies Silicon in writing that
Borrower desires credit
availability under such clause
(b), and (z) Silicon conducts an
---
updated audit and FLV appraisal of
Borrower's Inventory and the
results thereof shall be
satisfactory to Silicon in its
discretion; provided further that,
-------- -------
as of any date of determination,
all Loans based on the credit
availability under the foregoing
clause (b) need to be supported
-1-
Silcon Valley Bank Schedule to Loan and Security Agreement
-----------------------------------------------------------------------
by a net orderly liquidation value of
such Inventory based on an appraisal
satisfactory to Silicon.
Cash Management Services and Reserves.
-------------------------------------
Borrower may use up to $500,000 (the "Cash
Management Sublimit") of Loans available
hereunder for Silicon's Cash Management
Services (as defined below) consisting of one
or more of merchant services, business credit
card, ACH and other services identified in
the cash management services agreement
related to such service (collectively, the
"Cash Management Services"). Silicon may, in
its sole discretion, reserve against Loans
which would otherwise be available hereunder
such sums as Silicon shall determine in
connection with the Cash Management Services,
and Silicon may charge to Borrower's Loan
account any amounts that may become due or
owing to Silicon in connection with the Cash
Management Services. Borrower agrees to
execute and deliver to Silicon all standard
form applications and agreements of Silicon
in connection with the Cash Management
Services, and, without limiting any of the
terms of such applications and agreements,
Borrower will pay all standard fees and
charges of Silicon in connection with the
Cash Management Services. All amounts that
Silicon pays or expends in respect of any
Cash Management Services shall constitute
Obligations hereunder. Borrower hereby agrees
to indemnify, save, and hold Silicon harmless
from any loss, cost, expense, or liability,
including payments made by Silicon, expenses,
and reasonable attorneys' fees incurred by
Silicon arising out of or in connection with
any Cash Management Services. The Cash
Management Services shall terminate on the
Maturity Date or any earlier effective date
of termination of this Agreement (or such
later date requested by Borrower as Silicon
may agree in writing in its sole discretion
if and to the extent Borrower's reimbursement
and indemnity obligations with respect to
such Cash Management Services are secured by
cash in amounts and on terms and conditions
acceptable to Silicon in its sole
discretion).
Letter of Credit Sublimit
(Section 1.5): $500,000
================================================================================
2. INTEREST.
Interest Rate (Section 1.2):
A rate equal to the "Prime Rate" in effect
from time to time, plus 2% per annum.
Interest shall be calculated on the basis of
a 360-day year
-2-
Silcon Valley Bank Schedule to Loan and Security Agreement
-----------------------------------------------------------------------
for the actual number of days elapsed. "Prime
Rate" means the rate announced from time to
time by Silicon as its "prime rate;" it is a
base rate upon which other rates charged by
Silicon are based, and it is not necessarily
the best rate available at Silicon. The
interest rate applicable to the Obligations
shall change on each date there is a change
in the Prime Rate.
Minimum Monthly
Interest (Section 1.2): $5,000 per month.
===============================================================================
3. FEES (Section 1.4):
Loan Fee: $25,000, payable concurrently herewith.
Collateral Monitoring
Fee: $1,500 per month, payable in arrears
(prorated for any partial month at the
beginning and at termination of this
Agreement).
================================================================================
4. MATURITY DATE
(Section 6.1): One year from the date of this Agreement.
================================================================================
5. FINANCIAL COVENANTS
(Section 5.1): Borrower shall comply with each of the
following covenant(s). Compliance shall be
determined as of the end of each month,
except as otherwise specifically provided
below:
Minimum Tangible
Net Worth: Borrower shall maintain a Tangible Net Worth
of not less than the sum of the following:
(i) the TNW Base Amount; plus
(ii) the TNW Capital Increase (if any).
For purposes of this Tangible Net Worth
covenant:
The term "TNW Base Amount" means, as of
any date of determination, the amount
set forth below corresponding to the
time period set forth below:
(A) during the period commencing on
the date of this Agreement and
ending on September 30, 2001,
$3,000,000;
-3-
(B) during the period commencing on October 1,
2001 and ending on October 31, 2001,
$2,300,000;
(C) during the period commencing on November
1, 2001 and ending on November 30, 2001,
$1,800,000;
(D) during the period commencing on December
1, 2001 and ending on December 31, 2001,
$2,700,000;
(E) during the period commencing on January 1,
2002 and ending on January 31, 2002,
$2,000,000; and (D) from and after February 1,
2002, $1,500,000.
The term "TNW Capital Increase" means, as of any
date of determination, the greater of (a) $-0- and
(b) 50% of all consideration (if any) received
after the date of this Agreement for equity
securities and subordinated debt of the Borrower.
In no event shall the amount of the TNW Capital
Increase be decreased.
Definitions. For purposes of the foregoing financial covenants, the
following term shall have the following meaning:
"Liabilities" shall have the meaning ascribed thereto
by generally accepted accounting principles.
"Tangible Net Worth" shall mean the excess of total
assets over total liabilities, determined in accordance
with generally accepted accounting principles, with the
following adjustments:
(A) there shall be excluded from assets: (i) notes,
accounts receivable and other obligations owing to
Borrower from its officers or other Affiliates, and
(ii) all assets which would be classified as
intangible assets under generally accepted
accounting principles, including without limitation
goodwill, licenses, patents, trademarks, trade
names, copyrights, capitalized software and
organizational costs, licenses and franchises
(B) there shall be excluded from liabilities: all
indebtedness which is subordinated to the
Obligations under a subordination agreement in form
specified by Silicon or by language in the
instrument evidencing the indebtedness which is
acceptable to Silicon in its discretion.
-4-
6. REPORTING.
(Section 5.3):
Borrower shall provide Silicon with the following:
1. Monthly Receivable agings, aged by invoice date,
within fifteen days after the end of each month.
2. Monthly accounts payable agings, aged by invoice
date, and outstanding or held check registers, if
any, within fifteen days after the end of each month.
3. (a) Weekly transaction reports (or, if more
frequently, in connection with each requested Loan,
Letter of Credit, or Cash Management Service); it
being understood that such transaction reports shall,
among other things, identify Borrower's specific
Receivables (if any) that arise from the sale or
license of Embedded Software either (i) in a
transaction separate than the sale or other
disposition of Underlying Goods, or (ii) in the same
transaction as the sale or other disposition of the
Underlying Goods but the sale or license of the
Embedded Software is billed, or accounted for within
the same ▇▇▇▇, by Borrower separately from the sale
or other disposition of the Underlying Goods; and (b)
Monthly reconciliations of Receivable agings (aged by
invoice date) and general ledger, within fifteen days
after the end of each month.
4. If Borrower is utilizing any credit availability
under clause (b) of the Borrowing Base, monthly
perpetual inventory reports for the Inventory valued
on a first-in, first-out basis at the lower of cost
or market (in accordance with generally accepted
accounting principles) or such other inventory
reports as are reasonably requested by Silicon, all
within fifteen days after the end of each month.
5. Monthly unaudited financial statements, as soon as
available, and in any event within thirty days after
the end of each month.
6. Monthly Compliance Certificates, within thirty days
after the end of each month, in such form as Silicon
shall reasonably specify, signed by the Chief
Financial Officer (or other authorized executive
officer) of Borrower, certifying that as of the end
of such month Borrower was in full compliance with
all of the terms and conditions of this Agreement,
and setting forth calculations showing compliance
with the financial covenants set forth in this
Agreement and such other information as Silicon shall
reasonably request, including, without limitation, a
statement that at the end of such month there were no
held checks.
-5-
7. Quarterly unaudited financial statements, as soon as
available, and in any event within forty-five days
after the end of each fiscal quarter of Borrower.
8. Annual operating budgets (including income
statements, balance sheets and cash flow statements,
by month) for the upcoming fiscal year of Borrower no
later than thirty days following the end of each
fiscal year of Borrower.
9. Annual financial statements, as soon as available,
and in any event within 120 days following the end of
Borrower's fiscal year, certified by independent
certified public accountants acceptable to Silicon.
================================================================================
7. COMPENSATION
(Section 5.5): N/A
================================================================================
8. BORROWER INFORMATION:
Prior Names of
Borrower
(Section 3.2): See Representations and Warranties of Borrower
dated August 31, 2001
Prior Trade
Names of Borrower
(Section 3.2): See Representations and Warranties of Borrower
dated August 31, 2001
Existing Trade
Names of Borrower
(Section 3.2): See Representations and Warranties of Borrower
dated August 31, 2001
Other Locations and
Addresses (Section 3.3): See Representations and Warranties of Borrower
dated August 31, 2001
Material Adverse
Litigation (Section 3.10):None
Borrower's Existing
Loans (Section 5.5(viii)):None
-6-
================================================================================
9. OTHER COVENANTS
(Section 5.1):
Borrower shall at all times comply with all of the
following additional covenants:
(1) Banking Relationship. Borrower shall at all times
maintain its primary banking relationship with
Silicon. With respect to any deposit accounts or
securities accounts maintained by Borrower at any
financial institution other than Silicon, Borrower
agrees, upon Silicon's request therefor, to cause
such other financial institution to execute and
deliver to Silicon, on Silicon's standard form
(with such changes as shall be acceptable to
Silicon in its discretion), a Deposit Account
Control Agreement or a Securities Account Control
Agreement (as the case may be) with respect to all
such accounts maintained by Borrower at such other
financial institution. Without limiting the
generality of the foregoing, within 60 days
following the date of this Agreement, Borrower
shall deliver to Silicon either (w) evidence that
Borrower has closed its deposit accounts currently
maintained with ▇▇▇▇▇ National Bank (collectively,
the "▇▇▇▇▇ Deposit Account") and transferred all
amounts on deposit therein to deposit accounts
maintained at Silicon, or (x) such a Deposit
Account Control Agreement with respect to the
▇▇▇▇▇ Deposit Account. Without limiting the
generality of the foregoing, within 30 days
following the date of this Agreement, Borrower
shall deliver to Silicon either (y) evidence that
Borrower has closed its securities accounts
currently maintained with BofA Securities
(collectively, the "BofA Securities Deposit
Account") and transferred all amounts on deposit
therein to deposit accounts maintained at Silicon,
or (z) such a Securities Account Control Agreement
with respect to the BofA Securities Deposit
Account.
(2) Subordination of Inside Debt. All present and
future indebtedness of Borrower to its officers,
directors and shareholders ("Inside Debt") shall,
at all times, be subordinated to the Obligations
pursuant to a subordination agreement on Silicon's
standard form. Borrower represents and warrants
that there is no Inside Debt presently
outstanding, except for the following: NONE. Prior
to incurring any Inside Debt in the future,
Borrower shall cause the person to whom such
Inside Debt will be owed to execute and deliver to
Silicon a subordination agreement on Silicon's
standard form.
(3) Patents, Trademarks and Copyrights. Concurrently
with the execution of this Agreement, Borrower
shall execute and deliver to Silicon, on Silicon's
standard form(s), any security
-7-
agreement(s) and other documentation which Silicon
deems necessary for filing in the United States
Patent and Trademark Office, the United States
Copyright Office, and any other governmental
office, with respect to Borrower's copyrights,
patents, trademarks and related collateral. Except
for Embedded Software, maskworks under
development, and other computer software under
development, Borrower promptly will identify to
Silicon in writing and register with the United
States Copyright Office (i) any maskworks and
computer software that generates Receivables from
the sale or licensing thereof or that is otherwise
material to the business of Borrower it has,
develops or acquires, including those in Exhibit A
to the Intellectual Property Security Agreement,
within 30 days of the date of execution and
delivery of this Agreement, and (ii) any
additional maskworks and computer software rights
developed or acquired, including significant
revisions, additions or improvements to the
maskworks or computer software or revisions,
additions or improvements which significantly
improve the functionality of the maskworks or
computer software, after the date of execution and
delivery of this Agreement before the sale or
licensing to any third party of the maskworks or
computer software or any product based on or
containing any maskworks or computer software, and
Borrower will execute such additional security
agreement(s) and other documentation which Silicon
deems necessary for filing with respect to such
additional registered copyright(s). Borrower will
promptly notify Silicon upon Borrower's filing of
any application or registration of any patent or
trademark rights with the United States Patent and
Trademark Office and Borrower will execute and
deliver any and all instruments and documents as
Bank may require to evidence or perfect Bank's
security interest in such application or
registration. Borrower will: (i) protect, defend
and maintain the validity and enforceability of
the copyrights, patents, and trademarks; (ii)
promptly advise Bank in writing of material
infringements of the copyrights, patents, or
trademarks of which Borrower is or becomes aware;
and (iii) not allow any material item of
copyrights, patents, or trademarks to be
abandoned, forfeited or dedicated to the public
without Bank's written consent. Borrower hereby
represents and warrants to Silicon that, as of the
date of execution and delivery of this Agreement,
Borrower is not the owner or exclusive licensee of
any proprietary computer software other than
Embedded Software and installation software whose
sole function is to activate the goods (or
Embedded Software embedded therein) constituting
Borrower's Inventory.
(4) Texas Landlord Agreement. Within 30 days following
the date of this Agreement, Borrower shall deliver
to Silicon a landlord
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agreement on Silicon's standard form (with such
changes thereto (if any) as shall be acceptable to
Silicon in its discretion) duly executed by the
lessor of Borrower's leased premises in or about
League City, Texas.
================================================================================
10. CONDITIONS PRECEDENT
In addition to the other conditions precedent set forth in
this Agreement, the making of the initial Loan is subject
to the following additional conditions:
(A) Silicon shall have received lien searches listing all
effective financing statements which name Borrower (or any
predecessor corporation or any tradename thereof or any
seller of assets acquired by Borrower outside of the
ordinary course of business) as debtor that are filed in
the applicable filing offices with respect to Borrower,
none of which financing statements shall cover any of the
Collateral of Borrower, except (i) Permitted Liens, (ii)
financing statements as to which Silicon has received duly
executed termination statements or partial release
statements in form and substance satisfactory to Silicon,
or (iii) as otherwise agreed in writing by Silicon. Without
limiting the generality of the foregoing, Silicon shall
have received: (y) evidence satisfactory to Silicon that
none of the assets acquired by Borrower from Vysis, Inc. in
or about July 1999 are encumbered by any security interest
evidenced or perfected by that certain UCC-1 financing
statement filed against Vysis in favor of American National
Bank and Trust Company of Chicago on 8/13/96 in Illinois as
filing number 3577244; and (z) evidence satisfactory to
Silicon that none of the assets acquired by Borrower from
Perceptive Scientific Instruments in or about July 2000 are
encumbered by any security interest evidenced or perfected
by that certain UCC-1 financing statement filed against
Perceptive Scientific Instruments in favor of City National
Bank on 4/23/97 in California as filing number 9711560534.
[Signature page immediately follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Schedule to Loan
and Security Agreement to be executed and delivered as of the date first above
written.
Borrower: Silicon:
APPLIED IMAGING CORP. SILICON VALLEY BANK
By /s/ ▇▇▇▇ ▇▇▇▇ By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
--------------------------------- -------------------------------
President or Vice President Title Account Manager
----------------------------
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
Secretary or Ass't Secretary
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