Exhibit 99.1
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ORCHID BIOSCIENCES, INC.
LOAN AND SECURITY AGREEMENT
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This LOAN AND SECURITY AGREEMENT is entered into as of December 23, 2002, by and
between ORCHID BIOSCIENCES, INC. ("Borrower") and COMERICA BANK-CALIFORNIA
("Bank").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank desires
to extend credit to Borrower. This Loan and Security Agreement ("this
Agreement") sets forth the terms on which Bank will advance credit to Borrower,
and Borrower will repay the amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1. Definitions. Unless otherwise defined herein, all capitalized
terms used in this Agreement shall have the definitions set forth in Exhibit A.
Any term used in the Code, and not defined herein, shall have the meaning given
to the term in the Code.
1.2. Accounting Terms. Any accounting term not specifically defined in
Exhibit A shall be construed in accordance with GAAP, and all calculations shall
be made in accordance with GAAP. The term "financial statements" shall include
the accompanying notes and schedules.
2. ADVANCES AND TERMS OF PAYMENT.
2.1. Credit Extensions.
(a) Promise to Pay. Borrower promises to pay to Bank, in lawful
money of the United States of America, the entire unpaid principal amount of all
Credit Extensions from time to time made by Bank to Borrower, together with
interest on the unpaid principal amount of each of such Credit Extensions at
rates in accordance with the terms hereof.
(b) Advances.
(i) Amount. Subject to and upon the terms and conditions of
this Agreement (1) Borrower may request Advances in an aggregate outstanding
principal amount not to exceed at any time the lesser of (A) the Committed
Revolving Line, or (B) the Borrowing Base, and (2) amounts borrowed pursuant to
this Section 2.1(b) may be repaid and reborrowed at any time prior to the
Revolving Maturity Date, at which time all Advances under this Section 2.1(b)
shall become and be immediately due and payable. Borrower may prepay any
Advances without penalty or premium.
(ii) Form of Request. Whenever Borrower desires an Advance,
Borrower shall notify Bank by facsimile transmission or telephone no later than
3:00 p.m., Pacific time, on the Business Day that the Advance is to be made.
Each such notification shall be promptly confirmed by a written Loan Advance
Request in or substantially in the form of Exhibit C. Bank is authorized to make
Advances under this Agreement based upon instructions received from a
Responsible Officer of Borrower or a designee of such a Responsible Officer, or
without instructions if, in Bank's discretion, such Advances are necessary to
pay and satisfy any Obligations which have become due and remain unpaid. Bank
shall be entitled to rely on any telephonic notice given by any Person whom Bank
reasonably believes to be a Responsible Officer of Borrower or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
losses suffered by Bank as a result of any such reliance. Bank shall credit the
amount of each Advance made under this Section 2.1(b) to Borrower's deposit
account with Bank.
2.2. Overadvances. If the aggregate principal amount of all outstanding
Advances shall at any time exceed the lesser of the Committed Revolving Line or
the Borrowing Base then in effect, Borrower shall immediately pay to Bank, in
cash, the entire amount of such excess.
2.3. Mandatory Prepayments.
(a) If Borrower or any of its Subsidiaries shall at any time
receive Net Cash Proceeds from any Asset Sale, then the entire amount of the Net
Cash Proceeds from such Asset Sale shall be paid to Bank immediately upon
receipt by Borrower or any of its Subsidiaries, and such Net Cash Proceeds shall
be applied by Bank towards prepayment of unpaid principal of all outstanding
Advances, and the balance (if any) of such Net Cash Proceeds shall be credited
to Borrower's deposit account with Bank.
(b) If Borrower or any of its Subsidiaries shall at any time
receive Net Issuance Proceeds from any issuance of Equity Interests of Borrower
or any of its Subsidiaries, then the entire amount of such Net Issuance Proceeds
shall be paid to Bank immediately upon receipt by Borrower or any of its
Subsidiaries, and such Net Insurance Proceeds shall be applied by Bank towards
prepayment of unpaid principal of all outstanding Advances, and the balance (if
any) of such Net Insurance Proceeds shall be credited to Borrower's deposit
account with Bank.
(c) If any Change in Control shall at any time occur, then,
immediately upon the occurrence of such Change in Control, the Committed
Revolving Line and the Commitment of Bank thereunder shall terminate in full,
and the entire principal of each of the Advances then remaining unpaid, all of
the unpaid interest accrued thereon, all of the unpaid fees occurred hereunder
and all other Obligations owing under this Agreement or any of the other Loan
Documents shall become due and payable.
(d) Nothing in paragraph (a) or paragraph (c) of this Section 2.3
shall be construed as a consent of Bank for, or be deemed to permit, any Asset
Sale or Change in Control not otherwise permitted by this Agreement.
2.4. Revolving Maturity Date. The Committed Revolving Line and the
Commitment of Bank hereunder shall terminate in full on the Revolving Maturity
Date, and there shall become and be absolutely and unconditionally due and
payable on the Revolving Maturity Date, and Borrower hereby promises to pay to
Bank on the Revolving Maturity Date, the entire principal of each of the
Advances then remaining unpaid, all of the unpaid interest accrued thereon, all
of the unpaid fees accrued hereunder and all other unpaid sums and other
Obligations owing to Bank under this Agreement or any of the other Loan
Documents.
2.5. Interest Rates; Payments; and Calculations.
(a) Interest Rates. Except as set forth in Section 2.5(b), each of
the Advances shall bear interest, on the outstanding daily balance thereof, at a
variable rate equal to the sum of the Prime Rate plus the Applicable Margin.
(b) Late Fee; Default Rate. If any payment of any of the
Obligations of Borrower or any of its Subsidiaries shall not be made within ten
(10) days after the date on which such payment shall have first become due and
payable, Borrower shall pay Bank a late fee equal to the lesser of (i) 5% of the
amount of such unpaid payment, or (ii) the maximum amount permitted to be
charged under applicable law. All of the Obligations of Borrower or of any of
its Subsidiaries shall bear interest, from and after the occurrence and during
the continuance of any Event of Default, at a rate equal to five percent (5%)
above the sum of the Prime Rate plus the Applicable Margin. During the
continuation of any Events of Default, interest accrued on the Advances and
other Obligations shall become due and payable on demand and on the first
calendar day of each month.
(c) Payments. Interest accrued on the Advances and other
Obligations shall be due and payable in arrears (i) monthly on the first
calendar day of each month during the term hereof, and (ii) on the earlier to
occur of the termination of the Committed Revolving Line or the date on which
all of the Obligations shall become due and payable hereunder (whether by
acceleration or otherwise). Bank shall, at its option, charge such interest, all
Bank Expenses and all (if any) Periodic Payments against any of Borrower's
deposit accounts or against the Committed Revolving Line, in which case those
amounts shall thereafter accrue interest at the rate then applicable hereunder.
Any interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder.
(d) Computation. In the event that the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased, effective as of the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a 360 day year for the actual
number of days elapsed.
2.6. Crediting Payments. So long as no Events of Default are
continuing, but subject always to Section 4.3, Bank shall credit a wire transfer
of funds, check or other item of payment to such deposit account or Obligation
of Borrower or any of its Subsidiaries as Borrower specifies. So long as any
Event of Default is continuing, the receipt by Bank of any wire transfer of
funds, check or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is in immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained in any of the Loan
Documents, any wire transfer or payment received by Bank after 12:00 noon,
Pacific time, shall be deemed to have been received by Bank as of the opening of
business on the immediately following Business Day. Whenever any payment to Bank
under any of the Loan Documents would otherwise become due and payable (except
by reason of acceleration) on a date that is not a Business Day, such payment
shall instead become due and payable on the next Business Day, and additional
interest and fees, as the case may be, shall accrue and be payable for the
period of such extension.
2.7. Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. On the Closing Date, a facility fee of $60,000,
which shall be fully earned and nonrefundable;
(b) Commitment Fees. Commitment fees (collectively, "Commitment
Fees") on the Unused Commitment Amount from time to time in effect during the
period commencing on the date hereof and ending on the termination of the
Committed Revolving Line and Bank's Commitment thereunder. The Commitment Fees
shall be payable by Borrower to Bank in arrears for each calendar quarter ending
after the date hereof, and (i) shall be computed on the Unused Commitment Amount
in effect on each day during each calendar quarter at the annual rate equal to
0.33%, and (ii) shall be payable in arrears on the first day of each calendar
quarter, beginning January 1, 2003, and on the termination in full of Bank's
Commitment under the Committed Revolving Line; and
(c) Bank Expenses. On the Closing Date, all Bank Expenses incurred
through the Closing Date, and, after the Closing Date, all Bank Expenses, as and
when such Bank Expenses become due and payable by Borrower in accordance with
the terms of this Agreement and the other Loan Documents.
2.8. Term. This Agreement shall become effective on the Closing Date
and, subject to Section 12.7, shall continue in full force and effect for so
long as any Obligations remain outstanding or Bank has any obligations of any
kind to make any Credit Extensions or other extensions of credit of any kind
under this Agreement or any of the other Loan Documents. Notwithstanding the
foregoing, Bank shall have the right to terminate all of its obligations to make
Credit Extensions under this Agreement immediately, and without notice, upon the
occurrence and during the continuance of any Event of Default.
3. CONDITIONS OF CREDIT EXTENSIONS.
3.1. Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension under this Agreement is subject to
the condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, each of the following:
(a) this Agreement, duly executed and delivered by Borrower;
(b) the Guaranty Agreement, the Security Agreement and the Pledge
Agreement, each duly executed and delivered by each of Borrower and its
Subsidiaries;
(c) the English Charge Over Shares, duly executed and delivered by
Borrower; and the English Deed of Guarantee and Indemnity and the English
Debenture, each duly executed and delivered by the UK Subsidiary;
(d) evidence satisfactory to Bank that Borrower and its Restricted
Subsidiaries have taken all such steps as shall be required by Bank to implement
the lock box arrangements described in Section 4.3, and that Borrower and its
Restricted Subsidiaries have, except as otherwise expressly permitted by Bank,
duly and properly complied with the provisions set forth in Section 4.3.
(e) with respect to each Restricted Deposit Account, a Deposit
Account Control Agreement, each in form and substance reasonably satisfactory to
Bank, duly executed and delivered by the Person or Persons with which such
Restricted Deposit Account is held and maintained;
(f) an officer's certificate of Borrower with respect to its
Governing Documents and with respect to incumbency and resolutions authorizing
the execution, delivery and performance by Borrower of this Agreement and each
of the other Loan Documents to which the Borrower is or is to become a party,
all as contemplated hereby;
(g) an officer's certificate of each Subsidiary of Borrower with
respect to its Governing Documents and with respect to incumbency and
resolutions authorizing the execution, delivery and performance by such
Subsidiary of each of the Loan Documents to which such Subsidiary is or is to
become a party, all as contemplated hereby;
(h) financing statements (Form UCC-1) from each of Borrower and
its Subsidiaries;
(i) each of the Treasury Management Service Agreement, the
Agreement to Provide Insurance, and the Automatic Debit Authorization, each duly
executed and delivered by Borrower and the Restricted Subsidiaries;
(j) payment of the fees and Bank Expenses then due specified in
Section 2.7;
(k) current SOS Reports indicating that, except for Permitted
Liens, there are no other security interests or Liens of record in the
Collateral;
(l) an audit of the Collateral, the results of which shall be
satisfactory to Bank;
(m) current financial statements of Borrower and its Subsidiaries,
including audited statements for Borrower's most recently ended fiscal year,
together with an unqualified opinion, in accordance with Section 6.2;
(n) the Common Stock Purchase Warrant, duly executed and delivered
by Borrower;
(o) the Equipment Lien Subordination Agreement, duly executed and
delivered by Borrower and each of the Person or Persons holding all or any part
of the GECC Debt;
(p) the legal opinion, dated the Closing Date and addressed to
Bank, from special counsel to Borrower, in or substantially in the form of
Exhibit T, and otherwise in form and substance satisfactory to Bank;
(q) the Closing Date Certificate, in or substantially in the form
of Exhibit S, duly executed and delivered by Borrower; and
(r) such other agreements, instruments and documents or
certificates (including, without limitation, certificates of legal existence and
good standing), and completion of such other matters, as Bank in its discretion
may reasonably deem necessary or appropriate.
3.2. Conditions Precedent to Each of the Credit Extensions. The
obligation of Bank to make each Credit Extension under this Agreement, including
the initial Credit Extension, is further subject to the satisfaction of each of
the following additional conditions:
(a) timely receipt by Bank of a Loan Advance Request, as provided
in Section 2.1;
(b) timely receipt by Bank of a Borrowing Base Certificate,
certified by a Responsible Officer of Borrower, and setting forth all such true,
accurate and complete information regarding the Accounts and Eligible Accounts
as of the Borrower's close of business on the Business Day immediately preceding
the day of such new Credit Extension as shall permit Bank to determine the
Borrowing Base as of such immediately preceding Business Day; and
(c) the representations and warranties of Borrower contained in
Section 5 shall be true, correct and complete in all material respects on and as
of the date of such Loan Advance Request and on the effective date of each
Credit Extension as though made at and as of each such date, and no Event of
Default shall have occurred and be continuing, or shall exist after giving
effect to such Credit Extension (provided, however, that the representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such other date). The making of each
Credit Extension shall be deemed to be a representation and warranty by Borrower
on the date of such Credit Extension as to the accuracy of the facts referred to
in this Section 3.2.
4. CREATION OF SECURITY INTERESTS.
4.1. Grant of Security Interests. Upon the terms contained in this
Agreement, the Security Agreement, the Pledge Agreement and the other Collateral
Documents, Borrower grants and pledges to Bank, and each of the other Credit
Parties from time to time party thereto shall grant and pledge to Bank,
continuing security interests and Liens in the Collateral to secure prompt
repayment of any and all Obligations and to secure prompt performance by each of
Borrower and its Subsidiaries of each of its covenants and duties under the Loan
Documents. Except as set forth in Section 5.11 of the Disclosure Schedule, such
security interests and Liens shall constitute valid, first-priority security
interests and Liens in the presently existing Collateral, and will constitute
valid, first-priority security interests and Liens in later-acquired Collateral.
Notwithstanding any termination of the Committed Revolving Line and the Bank's
Commitment thereunder, Bank's Liens on the Collateral shall remain in effect for
so long as any Obligations of Borrower or any of its Subsidiaries shall remain
outstanding. The Obligations of Borrower under the Security Agreement, the
Pledge Agreement and the other Collateral Documents are supplemental and in
addition to the Obligations of Borrower under this Agreement.
4.2. Perfection of Security Interests. Borrower authorizes, and
shall cause each of the other Credit Parties from time to time party to any
Collateral Documents to authorize, Bank to file at any time financing
statements, continuation statements and amendments thereto that describe the
Collateral and to describe the Collateral as all assets of each Credit Party of
the kind pledged under the Collateral Documents and which contain any other
information required by the Code for the sufficiency of filing office acceptance
of any financing statement, continuation statement or amendment, including
whether such Credit Party is an organization, the type of organization and any
organizational identification number issued to such Credit Party, if applicable.
Any such financing statements may be signed by Bank on behalf of each Credit
Party, as provided in the Code, and may be filed at any time in any
jurisdiction. Borrower shall from time to time execute and deliver, and shall
cause each of the other Credit Parties from time to time party to any Collateral
Documents to execute and deliver, to Bank, at the request of Bank, all
Negotiable Collateral and other documents that Bank may reasonably request, in
form satisfactory to Bank, to perfect and continue perfected Bank's security
interests and Liens in the Collateral and in order to consummate fully all of
the transactions contemplated under the Loan Documents. Each Credit Party shall
have possession of its property and assets constituting Collateral, except where
expressly otherwise provided in the Loan Documents or where Bank chooses to
perfect its security interests by possession in addition to the filing of a
financing statement. Where Collateral is in possession of a third-party bailee,
Borrower shall take such steps, and shall cause each of the other Credit Parties
from time to time party to any Collateral Documents to take such steps, as Bank
reasonably requests for Bank to (a) obtain an acknowledgment, in form and
substance satisfactory to Bank, of the bailee that the bailee holds such
Collateral for the benefit of Bank, and (b) without limitation of the provisions
contained in Section 4.3 and Section 6.8, obtain "control" of any Collateral
consisting of investment property, deposit accounts, letter-of-credit rights or
electronic chattel paper (as such items and the term "control" are defined in
Revised Article 9 of the Code) by causing the securities intermediary or
depositary institution or issuing bank to execute a control agreement in form
and substance satisfactory to Bank. Borrower shall not, and shall not cause or
permit any of the other Credit Parties to, create any chattel paper without
placing a legend on the chattel paper acceptable to Bank indicating that Bank
has a security interest in the chattel paper.
4.3. Lock Box Arrangements; etc.
(a) All Obligations of Borrower and its Restricted Subsidiaries
shall be on a "remittance basis" in accordance with the provisions of this
Section 4.3. Borrower shall, at its sole cost and expense, establish and
maintain, and shall cause each of its Restricted Subsidiaries to establish and
maintain (and Bank, at Bank's option, may establish and maintain at Borrower's
cost and expense):
(i) a United States Post Office lock box (the "Lock
Box"), to which Bank shall have exclusive access and control.
Borrower irrevocably authorizes Bank, and shall cause each of its
Restricted Subsidiaries irrevocably to authorize Bank, to remove
contents from the Lock Box at any time and from time to time, for
disposition in accordance with the terms of this Agreement and the
other Loan Documents. Borrower agrees to notify all account
debtors and other Persons at any time obligated to Borrower that
all payments to Borrower (other than payments by electronic funds
transfer) shall be remitted, for the account of Borrower, to the
Lock Box, and Borrower shall include a like statement on all of
its invoices; and
(ii) a non-interest bearing deposit account with
Bank which shall be titled as designated by Bank (the "Cash
Collateral Account"), to which Bank shall have exclusive access
and control. Borrower shall notify all account debtors and other
Persons at any time obligated to Borrower that all payments to
Borrower by electronic funds transfer shall be remitted to the
Cash Collateral Account, and Borrower shall include a like
statement on all of its invoices. Borrower shall execute and
deliver, and shall cause each of its Restricted Subsidiaries to
execute and deliver, all such documents and authorizations as
shall from time to time be required by Bank in order to establish
and maintain the Lock Box and the Cash Collateral Account.
(b) All items and other amounts which shall from time to time be
remitted to the Lock Box or the Cash Collateral Account, or otherwise delivered
by or for the benefit of Borrower or any of its Subsidiaries to Bank on account
of partial or full payment of, or with respect to, any Collateral, shall: [(i)
be deposited in the Cash Collateral Account; (ii) be applied by Bank to the
payment of the Obligations, whether then due or not, in such order as Bank shall
from time to time determine in its sole discretion; (iii) if any contingent
Obligations are then outstanding, the balance (if any) remaining in the Cash
Collateral Account shall, to the extent of the aggregate amount of such
contingent Obligations, be held by Bank in such Cash Collateral Account as
security for payment of such contingent Obligations; and (iv) the balance (if
any) remaining after application in accordance with clause (ii) and clause (iii)
of this paragraph (b) shall be credited to Borrower's Deposit Accounts or other
accounts with Bank in accordance with Borrower's instructions.]
(c) Borrower agrees that Bank shall not be liable for any loss or
damage which Borrower may suffer as a result of Bank's processing of items or
Bank's exercise of any other rights or remedies under this Agreement or any of
the other Loan Documents, including, without limitation, any indirect, special
or consequential damages, losses of revenues or profits, or any claims, demands
or actions by any other Person or Persons arising out of or in connection with
the processing of items or the exercise by Bank of any other rights or remedies
under this Agreement or any of the other Loan Documents; provided, however, that
nothing in this paragraph (c) shall operate to exculpate Bank from
responsibility for actual losses or actual damages (but not indirect, special or
consequential losses or damages) which Borrower may suffer as a direct result of
Bank's gross negligence or willful misconduct.
4.4. Rights to Inspect; etc.
(a) Borrower shall, and shall cause each of its Subsidiaries to,
permit Bank or any of Bank's representatives, upon reasonable notice at
reasonable times during ordinary business hours, to visit and inspect any of the
offices and properties of Borrower or of any of its Subsidiaries, discuss
financial matters relating to Borrower or any of its Subsidiaries with any
officers of Borrower or of any of its Subsidiaries and with Borrower's
independent public accountant (and Borrower hereby irrevocably authorizes its
independent public accountant to discuss Borrower's financial matters with Bank
or any of Bank's representatives), and examine and make abstracts or photocopies
from any of the books or other corporate records of Borrower or of any of its
Subsidiaries. Borrower also acknowledges and agrees that Bank (through any of
Bank's officers, employees or agents) shall also have the right, upon reasonable
prior notice, from time to time during Borrower's usual business hours, to
check, test and appraise the Collateral, to audit the Accounts of Borrower and
its Subsidiaries and to other perform other Collateral audits in order to verify
the financial condition of Borrower and of each of its Subsidiaries or otherwise
to verify the amount, condition of, or any other matter relating to, all or any
part of the Collateral.
(b) All of the reasonable out-of-pocket costs and expenses
incurred or sustained by Bank in connection with the conduct of any such
inspections, examinations, Collateral checks, testing, appraisals and Account
audits and other Collateral audits shall be for the account of Borrower;
provided, however, that Borrower shall not be obligated to reimburse Bank for
the out-of-pocket costs and expenses of more than two (2) such Collateral
appraisals, audits and inspections per fiscal year conducted by or on behalf of
Bank while no Events of Default are continuing. All of such costs and expenses
incurred or sustained by Bank while Events of Default are continuing shall be
for the account of Borrower.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank as follows:
5.1. Due Organization and Qualification. Each of Borrower and its
Subsidiaries is a corporation, limited liability company or (as the case may be)
other organization duly existing under the laws of the jurisdiction of its
organization and qualified and licensed to do business in each state, country
and other jurisdiction in which the conduct of its business or its ownership of
property requires that it be so qualified, except where the failure to do so
could not reasonably be expected to cause a Material Adverse Effect.
5.2. Due Authorization; No Conflict. The execution, delivery and
performance by each Credit Party of each of the Loan Documents to which it is or
is to become a party, all as contemplated hereby, have been duly authorized, are
not in conflict with and do not constitute a breach of any provision contained
in the Governing Documents of any Credit Party, and do not and will not
constitute an event of default under any material agreement by which any of the
Credit Parties is or may become bound or affected. None of the Credit Parties is
in default under any agreement by which it is bound, except to the extent such
default could not reasonably be expected to cause a Material Adverse Effect.
5.3. Collateral. Each of Borrower and the other Credit Parties
from time to time party to any of the Collateral Documents has rights in or the
power to transfer its property constituting Collateral, and its title to its
property constituting Collateral is free and clear of all Liens, adverse claims,
and restrictions on transfer or pledge, except for Permitted Liens. All
Collateral is located solely in the Collateral States. The Eligible Accounts are
bona fide existing obligations. The property or services giving rise to such
Eligible Accounts have been delivered or rendered to the account debtor or its
agent for immediate shipment to and unconditional acceptance by the account
debtor. Neither Borrower nor any of its Subsidiaries has received notice of the
actual or imminent Insolvency Proceeding of any account debtor whose accounts
are included in any Borrowing Base Certificate as an Eligible Account. All
Inventory is in all material respects of good and merchantable quality, free
from all material defects, except for Inventory for which adequate reserves have
been made. Except as set forth in Section 5.12 of the Disclosure Schedule, none
of the Collateral is maintained or invested with any Person other than Bank or
Bank's affiliates.
5.4. Intellectual Property. Each of Borrower and its Subsidiaries
is the sole owner of its property and assets constituting Intellectual Property,
except for licenses granted by Borrower or any of its Subsidiaries to its
customers in the ordinary course of business. Each of the Copyrights, Trademarks
and Patents owned by Borrower or any of its Subsidiaries is valid and
enforceable, and no part of the Intellectual Property has been judged invalid or
unenforceable, in whole or in part, and no claim has been made to Borrower or
any of its Subsidiaries that any part of the Intellectual Property violates the
rights of any third party, except to the extent such claim could not reasonably
be expected to cause a Material Adverse Effect. Except as set forth in Section
5.4 of the Disclosure Schedule, the rights of Borrower and its Subsidiaries as
licensees of intellectual property do not give rise to more than ten percent
(10%) of consolidated gross revenues of Borrower and its Subsidiaries in any
given month, including, without limitation, revenues derived from the sale,
licensing, rendering or disposition of any product or service.
5.5. Names; Location of Chief Executive Offices. Except as
disclosed in Section 5.5 of the Disclosure Schedule, none of Borrower or its
Subsidiaries has done business under any names other than the name of such
Credit Party specified on the signature pages to the Guaranty Agreement, and its
exact legal name is as set forth in the signature pages to the Guaranty
Agreement. The chief executive office of each of Borrower and its Subsidiaries
is located in the Chief Executive Office State identified in Section 5.5 of the
Disclosure Schedule.
5.6. Litigation. Except as set forth in Section 5.6 of the
Disclosure Schedule, there are no actions or proceedings pending by or against
Borrower or any of its Subsidiaries before any court or administrative agency in
which a likely adverse decision could reasonably be expected to have a Material
Adverse Effect.
5.7. No Material Adverse Change in Financial Statements. All
consolidating and consolidated financial statements relating to Borrower and its
Subsidiaries from time to time delivered by Borrower or any of its Subsidiaries
to Bank fairly present in all material respects the consolidating and
consolidated financial condition of Borrower and its Subsidiaries as of the
respective dates thereof and the consolidating and consolidated results of
operations of Borrower and its Subsidiaries for the respective periods then
ended. There has not been a material adverse change in the consolidating or in
the consolidated financial condition of Borrower and its Subsidiaries since the
date of the most recent of such financial statements submitted to Bank.
5.8. Solvency; Payment of Debts. Each of Borrower and its
Subsidiaries is able to pay its debts (including trade debts) as they mature;
the fair saleable value of assets (including goodwill minus disposition costs)
of Borrower and its Subsidiaries exceeds the fair value of their liabilities;
and Borrower and its Subsidiaries are not left with unreasonably small capital
after the transactions contemplated by this Agreement.
5.9. Compliance with Laws and Regulations. Borrower and its
Subsidiaries have met the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. No event has occurred resulting
from the failure by Borrower or its Subsidiaries to comply with ERISA that is
reasonably likely to result in the incurring of any liability that could
reasonably be expected to have a Material Adverse Effect. None of Borrower or
its Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940.
None of Borrower or its Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations T and U
of the Board of Governors of the Federal Reserve System). Each of Borrower and
its Subsidiaries has complied in all material respects with all the provisions
of the Federal Fair Labor Standards Act. Each of Borrower and its Subsidiaries
is in compliance with all applicable environmental laws, regulations and
ordinances, except where the failure to comply could not reasonably be expected
to have a Material Adverse Effect. None of Borrower or its Subsidiaries has
violated any statutes, laws, ordinances or rules applicable to it, violation of
which could reasonably be expected to have a Material Adverse Effect. Each of
Borrower and its Subsidiaries has filed or caused to be filed all tax returns
required to be filed, and has paid, or has made adequate provision for the
payment of, all taxes reflected therein, except those being contested in good
faith with adequate reserves under GAAP or where the failure to file such
returns or to pay such taxes could not reasonably be expected to have a Material
Adverse Effect.
5.10. Corporate Structure; Subsidiaries; etc.
(a) Section 5.10 of the Disclosure Schedule identifies, as of the
Closing Date, each direct or indirect Subsidiary of Borrower, each Subsidiary
Guarantor, and each Inactive Subsidiary. Section 5.10 of the Disclosure Schedule
identifies, with respect to each of Borrower's Subsidiaries identified in
Section 5.10 of the Disclosure Schedule, as of the Closing Date: (i) the State
or other jurisdiction of organization of each such Person; (ii) the number of
authorized and outstanding shares or other units of each class of Capital Stock
and all other Equity Interests of each such Person; and (iii) with respect to
each Subsidiary of Borrower, (A) each Person which owns or controls (whether
legally or beneficially) any of the Capital Stock or other Equity Interests of
each such Subsidiary, and (B) the number of shares or units of each class or
kind of Capital Stock or other Equity Interests so owned or controlled by each
such Person.
(b) Except as otherwise disclosed in Section 5.10 of the
Disclosure Schedule, none of the Inactive Subsidiaries engages in any business
activities, owns any assets or property, or has any Indebtedness or other
liabilities (other than Obligations).
(c) No Credit Party is an "investment company" or a "company
controlled by an investment company," within the meaning of the Investment
Company Act of 1940, as amended. No Credit Party is a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935.
5.11. Existing Indebtedness; Liens; etc.
(a) The Indebtedness of each of Borrower and its Subsidiaries as
of the Closing Date is identified in Section 5.11(a) of the Disclosure Schedule
(the "Existing Indebtedness"). With respect to each item of Existing
Indebtedness identified in Section 5.11(a) of the Disclosure Schedule, the
outstanding principal amount of which is $75,000 or more on or as of the Closing
Date, Borrower has delivered or otherwise made available to Bank a true and
complete copy of each instrument evidencing or governing such Existing
Indebtedness or pursuant to which such Existing Indebtedness was issued or
secured (including each amendment, consent, waiver or other instrument executed
and/or delivered in respect thereof), as the same is in effect on or as of the
Closing Date. Except as otherwise disclosed in Section 5.11(a) of the Disclosure
Schedule, neither Borrower nor any of its Subsidiaries is in default in the
payment of any Existing Indebtedness, which payments, in the aggregate, exceed
$75,000, or in default or breach, in any material respect, in the performance of
any other material obligation under any instrument evidencing or governing any
Existing Indebtedness (in an aggregate amount exceeding $75,000) or pursuant to
which any such Existing Indebtedness (in an aggregate amount exceeding $75,000)
was issued or secured.
(b) Section 5.11(b) of the Disclosure Schedule identifies all of
the Liens (i) upon any Intellectual Property of Borrower or of any of its
Subsidiaries, or (ii) upon any property of Borrower or of any of its
Subsidiaries that secure Existing Indebtedness or other obligations or
liabilities of Borrower or of any of its Subsidiaries and that are in existence
on or as of the Closing Date.
(c) Section 5.11(c) of the Disclosure Schedule identifies all
Indebtedness of Borrower or of any of its Subsidiaries which is required to be
repaid or prepaid in full or in part on (or within eighteen (18) months after)
the Closing Date, in each case, showing the aggregate principal amount thereof
so to be prepaid or prepaid, the names of the respective holders thereof, and
the names of any Persons which directly or indirectly guaranteed any such
Indebtedness.
(d) There is no understanding or agreement of any kind (whether
written or oral) of Borrower or any of its Subsidiaries with any holder or
holders of any GECC Debt providing for or otherwise requiring the payment (or,
as the case may be repurchase or acquisition) of GECC Debt otherwise than in
accordance with the payment schedule described in Section 5.11(d) of the
Disclosure Schedule.
(e) None of the GECC Debt is secured by any security interests or
other Liens on any property of Borrower or any of its Subsidiaries, other than
security interests and Liens on property and assets described in Section 5.11(e)
of the Disclosure Schedule.
(f) None of the Subsidiaries of Borrower (i) is directly or
indirectly liable or obligated for, or has otherwise incurred any Indebtedness
with respect to, any GECC Debt, or (ii) has granted to any Person or Persons any
security interests or Liens of any kind to secure any GECC Debt.
(g) Section 5.11(g) of the Disclosure Schedule identifies each
Investment of Borrower or of any of its Subsidiaries that is owned or held or is
outstanding or in effect on or as of the Closing Date, other than (i)
Investments by Borrower in any Equity Interests of any of its Subsidiaries, and
(ii) Investments by any Subsidiaries of Borrower in any Equity Interests of any
other Subsidiaries of Borrower.
5.12. Deposit Accounts; etc.
(a) Section 5.12 of the Disclosure Schedule identifies each of the
Deposit Accounts and other similar accounts of every kind maintained by Borrower
or any of its Subsidiaries on or as of the Closing Date with any bank or other
financial institution or with any mutual fund, securities broker, investment
banking firm or other Person (collectively, "Existing Deposit Accounts").
Section 5.12 of the Disclosure Schedule sets forth: (i) the name or other
designation of each account identified therein; (ii) the and address of the
institution or other Person with which each such account is maintained; and
(iii) the name, address, telephone number and facsimile number of the contact
person with each such institution or other Person. Section 5.12 of the
Disclosure Schedule also identifies each of the Existing Deposit Accounts which
is to be closed by the Borrower and its Subsidiaries, all in accordance with
Section 6.8 of this Agreement. The Borrower has furnished to Bank accurate
information regarding the account number of each of the Existing Deposit
Accounts.
(b) None of the Borrower or any of its Subsidiaries owns, controls
or maintains any Deposit Accounts or any other similar accounts, except the
Existing Deposit Accounts identified in Section 5.12 of the Disclosure Schedule.
(c) Section 5.12 of the Disclosure Schedule also identifies each
of the Existing Deposit Accounts which is required to be made subject to a
Deposit Account Control Agreement, all as provided by Section 6.8 (all of the
Existing Deposit Accounts so identified being herein collectively called
"Restricted Deposit Accounts").
(d) Section 5.12 of the Disclosure Schedule also identifies each
of the Existing Deposit Accounts which not required to be made subject to a
Deposit Account Control Agreement (all of the Existing Deposit Accounts so
identified being herein collectively called "Unrestricted Deposit Accounts").
(e) The aggregate amount of all of the unrestricted cash and cash
equivalents owned by Borrower and its Restricted Subsidiaries (on a consolidated
basis) on and as of the Closing Date is as set forth in Section 5.12 of the
Disclosure Schedule.
5.13. Title to Real Properties; etc. All real property owned or
leased by Borrower or by any of its Subsidiaries as of the Closing Date, and the
nature of the interest therein, is identified in Section 5.13 of the Disclosure
Schedule. Each of Borrower and its Subsidiaries has good record and marketable
title in fee simple to, or valid leasehold interests in, all real property
necessary or used in the ordinary conduct of its businesses, including all real
property identified in Section 5.13 to the Disclosure Schedule or in the
financial statements referred to in Section 5.7. None of such real property is
subject to any Liens, except for Permitted Liens.
5.14. Transactions with Affiliates. Section 5.14 of the Disclosure
Schedule identifies: (a) all (if any) Indebtedness of Borrower or of any of its
Subsidiaries to any Affiliate of Borrower on or as of the Closing Date, material
contractual obligations of Borrower or of any of its Subsidiaries to any
Affiliate of Borrower on or as of the Closing Date, and Investments in Borrower
or in any of its Subsidiaries owned, held or controlled by any Affiliate of
Borrower on or as of the Closing Date; and (b) all (if any) Indebtedness of any
Affiliate of Borrower to Borrower or to any of its Subsidiaries on or as of the
Closing Date, material contractual obligations of any Affiliate of Borrower to
Borrower or to any of its Subsidiaries on or as of the Closing Date, and
Investments in any Affiliate of Borrower owned, held or controlled by Borrower
or by any of its Subsidiaries on or as of the Closing Date. For purposes of this
Section 5.13, the term "Affiliate of Borrower" shall not mean or include any
Subsidiary of Borrower.
5.15. Government Consents. Each of Borrower and its Subsidiaries
has obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all governmental
authorities that are necessary for the continued operation of the business of
each of Borrower and its Subsidiaries as currently conducted, except where the
failure to do so could not reasonably be expected to cause a Material Adverse
Effect.
5.16. Full Disclosure. No representation, warranty or other
statement made by Borrower or by any of its Subsidiaries in any of the Loan
Documents or in any certificates or other written statements furnished to Bank,
taken together with all such certificates and written statements furnished to
Bank, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in any of the
Loan Documents or in any such certificates or statements not misleading, it
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not to be viewed as
facts, and that actual results during the period or periods covered by any such
projections and forecasts may differ from the projected or forecasted results.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees with Bank that, from and after the date
hereof and until the Committed Revolving Line, the Commitment and all other
obligations of Bank to make extensions of credit under any of the Loan Documents
shall have terminated in full, and until all of the Obligations of Borrower and
its Subsidiaries shall have been paid in full, Borrower shall, and shall cause
each of its Subsidiaries to, do all of the following:
6.1. Good Standing and Government Compliance. Each of Borrower and
its Subsidiaries shall maintain its corporate existence and good standing in its
Credit Party State, shall maintain qualification and good standing in each
jurisdiction in which the failure to so qualify could reasonably be expected to
have a Material Adverse Effect, and shall furnish to Bank the organizational
identification number issued to it by the authorities of the Credit Party State
in which it is organized, if applicable. Borrower shall meet, and shall cause
each of its Subsidiaries to meet, the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA, except where the failure
to meet such requirements could not reasonably be expected to have a Material
Adverse Effect. Borrower shall, and shall cause each of its Subsidiaries to,
comply in all material respects with all applicable Environmental Laws and
maintain all material permits, licenses and approvals required thereunder where
the failure to do so could reasonably be expected to have a Material Adverse
Effect. Borrower shall, and shall cause each of its Subsidiaries to, comply with
all statutes, laws, ordinances and government rules and regulations to which it
is subject, and Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, in force all licenses, approvals and agreements, the
loss of which or failure to comply with which could reasonably be expected to
have a Material Adverse Effect.
6.2. Financial Statements; Reports; Certificates.
(a) Borrower shall deliver to Bank: (i) as soon as available,
but in any event within 30 days after the end of each calendar month,
consolidated and consolidating balance sheets and income statements covering
operations of Borrower and its Subsidiaries during such period, in a form
reasonably acceptable to Bank and certified by a Responsible Officer of
Borrower; (ii) as soon as available, but in any event within 90 days after the
end of Borrower's fiscal year, audited consolidated and consolidating financial
statements of Borrower prepared in accordance with GAAP, consistently applied,
together with an opinion which is unqualified (or otherwise consented to in
writing by Bank) on such financial statements of an independent certified public
accounting firm reasonably acceptable to Bank; (iii) as soon as available,
copies of all statements, reports and notices sent or made available generally
by Borrower to its security holders or to any holders of any Subordinated Debt
and all reports of Borrower on Forms 10-K and 10-Q filed with the Securities and
Exchange Commission; (iv) promptly upon receipt of notice thereof, a report of
any legal action pending or threatened against Borrower or any of its
Subsidiaries that could result in damages or costs to Borrower or any of its
Subsidiaries of $100,000 or more; and (v) such budgets, sales projections,
operating plans and other financial information generally prepared by Borrower
or any of its Subsidiaries in the ordinary course of business as Bank may
reasonably request from time to time.
(b) By 3:00 p.m., Pacific time, on each Business Day, Borrower
shall deliver to Bank a Borrowing Base Certificate certified by a Responsible
Officer of Borrower, and in or substantially in the form of Exhibit D hereto.
Each such Borrowing Base Certificate shall contain all such true, accurate and
complete information regarding the Accounts and Eligible Accounts as of the
Borrower's close of business on the immediately preceding Business Day as shall
permit Bank to determine the Borrowing Base as of such immediately preceding
Business Day. The Borrowing Base Certificate furnished to Bank on the first
Business Day of each week shall be accompanied by agings of Accounts and
accounts payable in detail reasonably satisfactory to Bank.
(c) Within 30 days after the last day of each calendar month,
Borrower shall deliver to Bank, with the monthly financial statements, (i) a
Compliance Certificate, certified by a Responsible Officer of Borrower, and in
or substantially in the form of Exhibit E hereto, (ii) a Borrowing Base
Certificate, certified by a Responsible Officer of Borrower, as of the last day
of such calendar month, together with agings of Accounts and accounts payable in
detail reasonably satisfactory to Bank, and (iii) statements comparing the
actual financial performance of Borrower and its Subsidiaries for such calendar
month and for that part of the fiscal year ending with such calendar month to
the projected financial performance for each of such fiscal periods set forth in
the annual business plan and budget furnished to Bank pursuant to paragraph (e)
of this Section 6.2.
(d) As soon as possible, and, in any event, within 3 calendar
days after first becoming aware of the occurrence or existence of any Event of
Default hereunder, a written statement of a Responsible Officer of Borrower
setting forth details of the Event of Default and the action which Borrower or
any of its Subsidiaries has taken or proposes to take with respect thereto.
(e) Not later than December 16, 2002, Borrower shall deliver
to Bank a copy of Borrower's annual business plan and budget for Borrower's 2003
fiscal year, including projected consolidated and consolidating statements of
operations and of cash flows of Borrower and its Subsidiaries for such 2003
fiscal year, all as approved by Borrower's Board of Directors.
(f) If the Liquidity Ratio as of the last Business Day of any
calendar week shall be less than 1.50:1.00, then Borrower shall deliver to Bank,
within three (3) Business Days, after the last day of such calendar week, a cash
use schedule, certified by a Responsible Officer of Borrower, (i) showing
projected cash receipts and cash disbursements for Borrower and its Subsidiaries
for the next four (4) consecutive calendar weeks, and (ii) setting forth such
other financial information as Bank may from time to time request.
(g) As provided by Section 4.4, Bank shall have the right from
time to time after the Closing Date to audit Accounts of Borrower and its
Subsidiaries and appraise Collateral, and all reasonable costs and expenses
incurred or sustained by Bank in connection with any such audits or appraisals
shall be for the account of Borrower as and to the extent provided by Section
4.4(b).
6.3. Inventory. Borrower shall keep, and shall cause each of its
Subsidiaries to keep, all Inventory in good and merchantable condition, free
from all material defects, except for Inventory for which adequate reserves have
been made.
6.4. Taxes. Borrower shall make, and shall cause each of its
Subsidiaries to make, due and timely payment or deposit of all material federal,
state, local and other governmental taxes, assessments or contributions required
of it by law, including, but not limited to, laws concerning income taxes,
F.I.C.A., F.U.T.A. and state disability, and Borrower shall execute and deliver
to Bank, on demand, proof satisfactory to Bank indicating that Borrower and its
Subsidiaries have made such payments or deposits and any appropriate
certificates attesting to the payment or deposit thereof; provided that
Borrower, or (as the case may be) its Subsidiaries, need not make any such
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower and its Subsidiaries.
6.5. Insurance.
(a) Borrower, at its expense, shall keep, and shall cause each
of its Subsidiaries to keep, all of the Collateral insured against loss or
damage by fire, theft, explosion, sprinklers, and all other hazards and risks,
and in such amounts, as ordinarily insured against by other owners in similar
businesses conducted in the locations where business of Borrower or of its
Subsidiaries is from time to time conducted. Borrower shall also maintain, and
shall cause each of its Subsidiaries to maintain, liability and other insurance
in amounts and of a type that are customary to businesses similar to business of
Borrower or of its Subsidiaries.
(b) All of such policies of insurance shall be in such form,
with such insurers, and in such amounts, as shall be reasonably satisfactory to
Bank. All policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee, and each liability insurance policy shall show Bank as an additional
insured and specify that the insurer must give at least 20 days prior notice to
Bank before canceling its policy for any reason. Upon Bank's request, Borrower
shall deliver to Bank certified copies of the policies of insurance and evidence
of all premium payments. If no Event of Default has occurred and is continuing,
proceeds payable under any casualty policy will, at Borrower's option, be
payable to Borrower or (as the case may be) its Subsidiary to replace the
property subject to the claim, provided that any such replacement property shall
be deemed Collateral in which Bank has been granted a first-priority security
interest upon the terms contained in the Loan Documents. If any Event of Default
has occurred and is continuing, all proceeds payable under any such policy
shall, at Bank's option, be payable to Bank to be applied on account of the
Obligations.
6.6. Financial Covenants. Borrower shall at all times maintain the
following financial ratios and covenants:
(a) Minimum Consolidated Revenues. The Consolidated Revenues
of Borrower and its Subsidiaries for each successive fiscal period of three (3)
consecutive calendar months ending on the last day of each of each calendar
month, beginning November 30, 2002, shall not be less than ninety percent (90%)
of the projections of such Consolidated Revenues for each such fiscal period
that have been approved by Borrower's Board of Directors and delivered to Bank
by a Responsible Officer of Borrower prior to the Closing Date. (b) Maximum Cash
Burn. The Consolidated Cash Burn of Borrower and its Subsidiaries for each
fiscal quarter of Borrower identified in the table below shall not be a deficit
(i.e., a negative number) that is greater than the deficit Consolidated Cash
Burn identified in the table below opposite such fiscal quarter:
Fiscal Quarter Ending Consolidated Cash Burn
12/31/02 ($6,700,000)*
03/31/03 ($5,300,000)
06/30/03 ($4,600,000)
09/30/03 ( $700,000)
12/31/03 ( $1.00)
-----------
*Parentheses indicates a deficit or negative number.
6.7. Identification of Subsidiaries; Provision of Collateral.
(a) If and whenever any direct or indirect Subsidiary of
Borrower shall be created, formed or acquired by Borrower or by any of its
Subsidiaries at any time after the date hereof, Borrower shall:
(i) furnish promptly to Bank a written
notice identifying such Subsidiary and setting forth with
respect to such Subsidiary all of the information required by
Section 5.10 with respect to the Subsidiaries of Borrower as
of the Closing Date; and
(ii) promptly comply with, and cause such
Subsidiary to comply with, the applicable terms of paragraph
(b) of this Section 6.7.
(b) Promptly after the consummation of any acquisition or the
creation, formation or acquisition of any new Subsidiary of Borrower, Borrower
shall:
(i) in the case of any acquisition of Equity
Interests of any such Subsidiary by Borrower or by any of its
Subsidiaries, whether in connection with the creation,
formation or acquisition of a Subsidiary or otherwise: (A)
deliver or cause to be delivered to Bank in pledge all of the
stock certificates representing such Equity Interests, such
Equity Interests to be held by Bank in pledge in accordance
with the terms of the Pledge Agreement, or (as the case may
be) otherwise comply with the terms of the Pledge Agreement
applicable to the creation and perfection of security
interests in such Equity Interests; and (B) cause such
Subsidiary to execute and deliver to Bank (1) joinder
agreements in form and substance reasonably satisfactory to
Bank upon the terms of which such Subsidiary shall become a
party to and bound by each of the Guaranty Agreement, the
Security Agreement and the Pledge Agreement, the effect of
which shall be that, as of the date set forth in such joinder
agreements, such Subsidiary shall become a party to each such
instrument and be bound by the terms thereof, and (2) such UCC
financing statements and other Security Instruments as shall
be required by Bank to perfect the security interests and
Liens in Collateral being pledged and assigned by such
Subsidiary pursuant to the Security Agreement and the Pledge
Agreement;
(ii) in the case of any acquisition of
property (other than Equity Interests) by Borrower or by any
of its Subsidiaries, deliver or cause to be delivered to Bank,
duly executed by the Persons acquiring such property, such UCC
financing statements and other Security Instruments as shall
be required by Bank to perfect the security interests and
Liens in the property so acquired; and
(iii) in each such case, comply with all of
the other applicable provisions of Section 6.9. and provide to
Bank all such other documentation, including, without
limitation, one or more opinions of counsel reasonably
satisfactory to the Bank, Governing Documents, and
resolutions, as Bank shall reasonably deem necessary or
advisable in connection with such acquisition of property or
the creation, formation or acquisition of such Subsidiary.
6.8. Deposit Accounts; Banking Arrangements; etc.
(a) Neither Borrower nor any of its Subsidiaries shall, at any
time or times after the Closing Date, except as and to the extent otherwise
expressly permitted by Bank from time to time, open or maintain any Deposit
Accounts (including any securities, investment or other similar accounts) with
any banks or other financial institutions, except for (i) Deposit Accounts with
Bank or with affiliates of Bank, and (ii) the Existing Deposit Accounts.
(b) Borrower shall, and shall cause each of its Subsidiaries
to, close each Existing Deposit Account which is identified for closure in the
table below and transfer all Cash and other Investments of Borrower and its
Subsidiaries from each such closed account to Deposit Accounts with Bank or with
affiliates of Bank, each such closure and transfer to be completed by the
Closure Date identified in the table below opposite each such Existing Deposit
Account. Each Existing Deposit Account identified in the tables set forth below
in this paragraph (b) is identified by reference to the "Account Name" of such
Existing Deposit Account set forth in Section 5.12 of the Disclosure Schedule.
Account Name Financial Institution Closure Date
Orchid: PNC Operating Account PNC 90th day after Closing Date
Gene Screen: PNC-GS Operating PNC 120th day after Closing Date
Lifecodes: PNC-LC Operating PNC 120th day after Closing Date
Orchid: PNC Investment Account PNC 90th day after Closing Date
Gene Screen: PNC-GS Investment PNC 120th day after Closing Date
Lifecodes: PNC-LC Investment PNC 120th day after Closing Date
First Union Central Clearing First Union 120th day after Closing Date
Each of the Existing Deposit ) Each of these
Accounts identified in ) Existing Deposit
Section 5.12 of the ) Accounts is to be
Disclosure Schedule under the caption: ) closed by
"Other miscellaneous locations ) the 30th day after
operating accounts:" ) the Closing Date.
The following Existing Deposit Accounts may be maintained by the Borrower and
its Subsidiaries after the Closing Date, but the Borrower and its Subsidiaries
shall not cause or permit the aggregate of all balances of all of such Existing
Deposit Accounts at any time to exceed $200,000:
-------------------------------------------------------------------------
Account Name Financial Institution
-------------------------------------------------------------------------
Orchid: PNC Fringe Account PNC
Orchid: CIGNA Account Fleet
Lifecodes: PNC-LC Draw Fees PNC
First Union Stamford: Sweep First Union
-------------------------------------------------------------------------
(c) It is the express intention and agreement of Borrower and
Bank that Bank shall at all times have a perfected first-priority security
interest and Lien upon each material Deposit Account from time to time
maintained by Borrower or any of its Subsidiaries with any Person or Persons. In
order to give effect to this express intention and agreement, Borrower hereby
agrees, and hereby agrees to cause each of its Subsidiaries, to: (i) establish,
and at all times after the Closing Date maintain, with Bank or with affiliates
of Bank all such demand deposit accounts and other banking and transaction
accounts as Bank shall from time to time request; and (ii) at all times from and
after the Closing Date make subject to a Deposit Account Control Agreement, in
or substantially in the form attached hereto as Exhibit O, each Restricted
Deposit Account held or maintained by Borrower or any of its Subsidiaries with
any bank or other financial institution or with any mutual fund, securities
broker, investment banking firm or other Person.
(d) Borrower shall furnish to Bank, not later than February
28, 2003, evidence satisfactory to Bank that (i) the Irrevocable Standby Letter
of Credit No. RA1EJ8, dated June 19, 2002, in the amount of $2,681,843.85,
issued for the account of Borrower by UBS PaineWebber Inc. (the "UBS L/C"), has
been duly and properly surrendered for cancellation and replaced by a standby
letter of credit issued by Bank for the account of Borrower, and (ii) all Cash
and other collateral securing the obligations of Borrower under or with respect
to the UBS L/C have been transferred to Bank to secure the Obligations of
Borrower to Bank under or with respect to the standby letter of credit so issued
by Bank. Until such Cash and other collateral is so transferred to Bank,
Borrower shall be permitted to maintain in its Existing Deposit Accounts with
UBS PaineWebber Inc. Cash and other collateral required to secure such
obligations under the UBS L/C.
6.9. Further Assurances.
(a) Borrower shall from time to time, and shall cause each of
its Subsidiaries from time to time to, make, execute, endorse, acknowledge, file
and/or deliver to Bank such vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments
(collectively, "Additional Security Documents") and take such further steps
relating to the Collateral covered by any of the Collateral Documents as Bank
may from time to time reasonably require. Furthermore, Borrower shall cause to
be delivered to Bank such opinions of counsel and other related documents as may
be reasonably requested from time to time by Bank. In addition, Borrower shall,
and shall cause each of its Subsidiaries to, promptly execute and deliver such
further instruments and promptly take such further action as shall be requested
by Bank from time to time in order to effect the purposes of this Agreement and
the other Loan Documents.
(b) Borrower understands and agrees that time is of the
essence of the covenants of Borrower under Section 6.7, Section 6.8 and this
Section 6.9, and, accordingly, Borrower covenants that it shall, and shall cause
each of its Subsidiaries to, comply in all material respects with each request
or requirement of Bank made pursuant to Section 6.7, Section 6.8 or this Section
6.9, each such request or requirement to be complied with promptly but, in any
event, within fourteen (14) days after the date on which Borrower shall have
first received from Bank written notice of such request or requirement.
6.10. Completion of Liquidity Events.
(a) Borrower (i) shall complete, or (as the case may be) shall
cause one or more of its Subsidiaries to complete, one or more Liquidity Events
in one or more closings on or prior to March 31, 2003, and (ii) shall cause the
conditions set forth in paragraph (b) of this Section 6.10 to be satisfied with
respect to such Liquidity Events.
(b) By March 31, 2003, Borrower shall cause each of the
following conditions to be satisfied with respect to such Liquidity Events:
(i) upon consummation of the Liquidity
Events in one or more closings, Borrower shall have actually
received, for its own account (A) directly, from one or more
Financing Events or Asset Sales completed by Borrower, and/or
(B) indirectly, from one or more of its Subsidiaries, upon
completion by such Subsidiaries of Asset Sales, cash proceeds
in an aggregate amount equal to not less than $5,000,000;
(ii) there shall have been delivered to Bank
true, correct and complete copies of all Financing Event
Documents and all documents governing any Asset Sales, and all
of the material terms and conditions of all of such documents
shall be reasonably satisfactory in form and substance to Bank
(it is understood that if the material terms and conditions of
the documents governing the Turtle Asset Sale are consistent
in all material respects with the terms and conditions of the
Turtle Letter of Intent, then for purposes of this clause
(ii), the material terms and conditions of the documents
governing the Turtle Asset Sale shall be deemed to be
reasonably satisfactory in form and substance to the Bank);
(iii) all material conditions precedent to
the consummation of each (if any) of the Financing Events, as
set forth in the Financing Event Documents, shall have been
satisfied;
(iv) all material conditions precedent to
the consummation of each (if any) of the Asset Sales, as set
forth in the agreements and other documents governing the
same, shall have been satisfied; and
(v) the Net Issuance Proceeds of each (if
any) Financing Event shall have been deposited by Borrower in
a Deposit Account with Bank, and the Net Sales Proceeds of
each (if any) Asset Sale shall have been deposited in a
Deposit Account with Bank by Borrower or (as the case may be)
by its Subsidiaries.
6.11. Landlord Lien Waivers. Borrower agrees to use, and to
cause each of its Subsidiaries to use, best efforts to obtain a Landlord Lien
Waiver in or substantially in the form of Exhibit R, or otherwise reasonably
satisfactory to Bank in form and substance with respect to each Real Estate
Lease which is outstanding on the Closing Date or which is negotiated,
completed, renewed or extended by the Borrower or by any of its Subsidiaries at
any time or from time to time after the Closing Date, but only if: (a) the
aggregate amount of all of the rental payments required by the terms of such
Real Estate Lease shall exceed $200,000 during any fiscal year of Borrower; and
(b) such Real Estate Lease relates to the lease, rental or occupancy of real
property located in any of the following states of the United States: Maryland;
New Jersey; North Carolina; Texas; or Virginia.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees with Bank that, from and after the date
hereof and until the Committed Revolving Line, the Commitment and all other
obligations of Bank to make extensions of credit under any of the Loan Documents
shall have terminated in full, and until all of the Obligations of Borrower and
its Subsidiaries shall have been paid in full, Borrower shall not, and shall not
cause or permit any of its Subsidiaries to, do any of the following:
7.1. Dispositions. Convey, sell, lease, license, transfer or
otherwise dispose of (collectively, "Transfer"), or cause or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, other
than Permitted Transfers.
7.2. Changes in Name, Location or Chief Executive Office;
Changes in Business; Changes in Fiscal Year; Change in Control. Change its name
or its Credit Party State, or relocate its chief executive office, without, in
each such case, 30 days prior written notification to Bank; engage in any
business, or permit any of its Subsidiaries to engage in any business, other
than business reasonably related or incidental to the businesses currently
engaged in by Borrower or by any of its Subsidiaries; change its fiscal year
end; enter into or undertake any transaction, arrangement or agreement (whether
a consolidation, merger, sale of Equity Interests, reorganization or otherwise)
that will result or could reasonably be expected to result in a Change in
Control.
7.3. Mergers; Acquisitions. Merge or consolidate, or cause or
permit any of its Subsidiaries to merge or consolidate, with or into any other
business organization (other than mergers or consolidations of any Subsidiary of
Borrower into another Subsidiary of Borrower or into Borrower); or acquire, or
cause or permit any of its Subsidiaries to acquire, all or any substantial part
of any of the Equity Interests or property and assets of any other Person;
except: (a) Permitted Investments; and (b) other acquisitions by Borrower and
its Subsidiaries; provided, however, that (i) at the time of completion of each
of such other acquisitions, no Event of Default shall be continuing or shall
occur after giving effect thereto, and (ii) the aggregate fair market value of
all property (including cash and Equity Interests) paid or to be paid by
Borrower and its Subsidiaries in connection with all of the other acquisitions
completed in compliance with clause (b) of this Section 7.3 shall not exceed
$100,000 (determined for Borrower and all of its Subsidiaries on a consolidated
basis).
7.4. Indebtedness. Create, incur, assume, guarantee or be or
remain liable with respect to any Indebtedness, or cause or permit any of its
Subsidiaries so to do, except for Permitted Indebtedness; or prepay, repurchase
or redeem, or otherwise repay prior to the scheduled maturity thereof, any
Indebtedness (including any GECC Debt) of Borrower or of any of its
Subsidiaries; or amend, restate or otherwise modify any instruments or documents
evidencing or governing any such Indebtedness (including any GECC Debt), or take
any other action of any kind (whether direct or indirect), as a result of which
Borrower or any of its Subsidiaries shall become obligated to make any such
prepayment, repurchase, redemption or other repayment. The limitations on
prepayment of Indebtedness set forth in this Section 7.4 shall not be applicable
to any prepayment of any of the Obligations of Borrower or any of its
Subsidiaries to Bank.
7.5. Encumbrances. Create, incur, assume or allow any Liens
with respect to any of its property, or assign or otherwise convey any rights to
receive income, including the sale of any Accounts, or cause or permit any of
its Subsidiaries so to do, except for Permitted Liens; or covenant with any
other Person that Borrower or any of its Subsidiaries in the future will refrain
from creating, incurring, assuming or allowing any Liens with respect to any of
the property of Borrower or any of its Subsidiaries. Without limiting the
foregoing provisions of this Section 7.5, Borrower further covenants and agrees
with Bank that Borrower shall not, and shall not cause or permit any of its
Subsidiaries to, create, incur or assume, or otherwise permit to exist, any
Liens upon any Intellectual Property of Borrower or of any of its Subsidiaries,
whether such Intellectual Property is now owned or shall at any time hereafter
be created or acquired.
7.6. Restricted Payments; etc. Make any Restricted Payments,
or cause or permit any of its Subsidiaries to make any Restricted Payments;
except payments by Borrower to any former employee of Borrower or of any of its
Subsidiaries in connection with the repurchase of Equity Interests of Borrower
from any such Person; provided, however, that (a) at the time of the making of
each such payment, no Event of Default shall be continuing or shall occur after
giving effect thereto, and (b) the aggregate fair market value of all property
(including cash) paid or to be paid by Borrower and its Subsidiaries in
connection with all of such repurchases shall not exceed $100,000 (determined
for Borrower and all of its Subsidiaries on a consolidated basis).
7.7. Investments. Directly or indirectly acquire or own, or
make any Investments in or to any Person, or cause or permit any of its
Subsidiaries so to do, except for Permitted Investments.
7.8. Restrictions on Subsidiary Distributions. Enter into or
cause or permit to exist any consensual encumbrance or restriction on the
ability of any Subsidiary of Borrower to (a) make any dividends or other
distributions in respect of any Equity Interests of such Subsidiary, (b) pay any
Indebtedness owed by such Subsidiary to Borrower or any of its Subsidiaries, (c)
make any Investments in Borrower or any of its Subsidiaries, or (d) transfer any
of its property to Borrower or any of its Subsidiaries.
7.9. Transactions with Affiliates. Directly or indirectly
enter into or permit to exist any material transaction with any Affiliate of
Borrower, or cause or permit any of its Subsidiaries to do so; except for
agreements and transactions that are in the ordinary course of Borrower's
business, upon fair and reasonable terms that are no less favorable to Borrower
than would be obtained in an arm's length transaction with a non-affiliated
Person. For purposes of this Section 7.8, the term "Affiliate" shall not mean or
include any of the Subsidiaries of Borrower.
7.10. Subordinated Debt; etc. Amend, modify or otherwise
change, or consent or agree to any amendment, modification, waiver or other
change to, any of the terms governing any GECC Debt or Subordinated Debt; except
any such amendment, modification, waiver or other change which would (a) extend
the maturity or reduce the amount of any payment of principal thereof, (b)
reduce the rate or extend the date for payment of interest thereon, or (c) relax
or eliminate any covenant or other restriction applicable to Borrower or any of
its Subsidiaries.
7.11. Inventory and Equipment. Store, or cause or permit any
of its Subsidiaries to store, any Inventory or Equipment with any bailee,
warehouseman or other similar third party, unless, promptly (and, in any event,
within thirty (30) days) after Bank so requests, the third party shall be
notified of Bank's security interests and Liens, and Bank (a) shall receive an
acknowledgment from the third party that it is holding or will hold the
Inventory or Equipment for Bank's benefit, or (b) is in possession of the
warehouse receipt, where negotiable, covering such Inventory or Equipment.
Except for Inventory sold in the ordinary course of business, and, except for
such other locations as Bank may approve in writing, Borrower shall keep, and
shall cause each of its Subsidiaries to keep, its Inventory and Equipment only
at the locations set forth in the Perfection Certificates delivered by Borrower
to Bank prior to the Closing Date, and at such other locations of which Borrower
gives Bank prior written notice and as to which Bank files Security Instruments
where needed to perfect its security interests and liens in such Inventory and
Equipment.
7.12. No Investment Company. Become or be controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for any such
purpose.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an "Event of
Default" under this Agreement:
8.1. Payment Default. If Borrower or any of its Subsidiaries
shall fail to pay any of its Obligations to Bank punctually when due;
8.2. Covenant Default.
(a) If Borrower or any of its Subsidiaries shall fail to
perform any of the covenants contained in Article 6 of this Agreement, violate
any of the covenants contained in Article 7 of this Agreement, or fail to
perform, comply with or observe any of the covenants contained in Section 11 of
the Guaranty Agreement; or
(b) If Borrower or any of its Subsidiaries shall fail or
neglect to perform, comply with or observe any other term, provision, condition
or covenant contained in this Agreement, any of the other Loan Documents or any
other present or future agreements between Borrower or any of its Subsidiaries
and Bank and, as to any default under any such other term, provision, condition
or covenant that can be cured, shall fail to cure such default within 30 days
after Borrower or (as the case may be) any of its Subsidiaries shall receive
notice thereof or after any officer of Borrower or any of its Subsidiaries shall
become aware thereof; provided, however, that if the default cannot by its
nature be cured within the 30-day period or cannot, after diligent attempts by
Borrower and its Subsidiaries, be cured within such 30-day period, and such
default is likely to be cured within a reasonable time, then Borrower and its
Subsidiaries shall have an additional reasonable period (which shall not, in any
case, exceed 30 days) to attempt to cure such default, and, within such
additional reasonable time period, Bank shall have no obligations to make any
Credit Extensions until such default is cured or remedied;
8.3. Defective Perfection. If Bank shall receive, at any time
following the Closing Date, any SOS Report indicating that, except for Permitted
Liens, Bank's security interests and Liens in all or any part of the Collateral
are not prior to all other security interests or Liens of record reflected in
the report;
8.4. Material Adverse Change. If there shall occur at any time
after the Closing Date: (a) any material adverse change in the business,
operations, property or condition (financial or otherwise) of Borrower and its
Subsidiaries, taken as a whole; or (b) any material impairment of the prospects
for repayment of all or any portion of the Advances or other Obligations of
Borrower or any of its Subsidiaries; or (c) any material impairment of the
ability of Borrower or any of its Subsidiaries to perform, comply with or
observe any of its material covenants or other agreements under any of the Loan
Documents; or (d) any substantial impairment of the validity or enforceability
of (i) any of the Loan Documents, (ii) any of the Obligations of Borrower or any
of its Subsidiaries, (iii) any of the rights or remedies of Bank under any of
the Loan Documents, or (iv) any of the security interests and Liens of Bank in
all or any substantial part of the Collateral; or (e) any material impairment of
the priority or value of all or any substantial part of the Collateral;
8.5. Attachment. If any material portion of the assets of Borrower
or of any of its Subsidiaries shall be attached, seized, subjected to a writ or
distress warrant, or shall be levied upon, or shall come into the possession of
any trustee, receiver or Person acting in a similar capacity, and such
attachment, seizure, writ or distress warrant or levy shall not be removed,
discharged or rescinded within 30 days, or if Borrower or any of its
Subsidiaries shall be enjoined, restrained or in any way prevented by court
order from continuing to conduct all or any material part of its business
affairs, or if a judgment or other claim shall become a Lien upon any material
portion of the assets of Borrower or of any of its Subsidiaries, or if a notice
of Lien, levy or assessment shall be filed of record with respect to any of the
assets of Borrower or of any of its Subsidiaries by any governmental authority,
or any department, agency or instrumentality thereof, or by any state, county,
municipal, or other governmental agency, and the same shall not be paid within
thirty (30) days after Borrower or any of its Subsidiaries shall receive notice
thereof; provided, however, that none of the foregoing shall constitute an Event
of Default where such action or event is stayed or an adequate bond shall be
posted pending a good faith contest by Borrower or its Subsidiaries (provided
that Bank shall have no obligations to made any Credit Extensions during such
cure period);
8.6. Insolvency. If Borrower or any of its Subsidiaries (other
than any Inactive Subsidiaries) shall become insolvent, or if any Insolvency
Proceeding shall be commenced by Borrower or by any of its Subsidiaries, or if
any Insolvency Proceeding shall be commenced against Borrower or any of its
Subsidiaries and shall not be dismissed or stayed within 45 days (provided that
Bank shall have no obligations to make any Credit Extensions prior to the
dismissal of any such Insolvency Proceeding);
8.7. Other Agreements. If there shall be, at any time after the
Closing Date, any default or other failure to perform in any agreement to which
Borrower or any of its Subsidiaries shall from time to time be a party with any
Person or Persons (other than Bank), and either (a) as a result of any such
default or failure, any such Person or Persons shall have any rights, whether or
not exercised, (i) to accelerate the maturity of any Indebtedness of Borrower or
of any of its Subsidiaries in an amount in excess of $75,000, or (ii) to
exercise remedies as secured parties or lienholders with respect to any property
of Borrower or any of its Subsidiaries constituting collateral for any such
Indebtedness, or (b) any such default or failure could reasonably be expected to
have a Material Adverse Effect;
8.8. Subordinated Debt. If Borrower or any of its Subsidiaries
shall make any payment on account of, or any payment or other distribution on
account of the redemption, repurchase or other acquisition for value of, any
Subordinated Debt, except as and to the limited extent that any such payment
shall, at the time it is to be made, be expressly permitted by the terms of any
subordination agreement entered into with Bank;
8.9. Judgments. If any judgment or judgments for the payment of
money in an amount, individually or in the aggregate, in excess of $75,000 shall
be rendered against Borrower or any of its Subsidiaries and shall remain
unsatisfied and unstayed for a period of more than forty-five (45) days
(provided that Bank shall have no obligations to make any Credit Extensions
prior to the satisfaction or stay of any such judgments);
8.10. Misrepresentations. If any material misrepresentation or
material misstatement shall at any time or from time to time be made or shall
otherwise occur or exist in any warranty or representation set forth in this
Agreement or any of the other Loan Documents or in any Borrowing Base
Certificate, Compliance Certificate or other certificate delivered to Bank by
any Responsible Officer of Borrower or of any of its Subsidiaries pursuant to
this Agreement or any of the other Loan Documents or to induce Bank to enter
into this Agreement or any of the other Loan Documents or to make any Credit
Extensions.
8.11. Guaranty. If any of the Guaranties shall cease for any
reason to be in full force and effect, or any of the Borrower's Subsidiaries
shall fail to perform any of its Obligations under any of the Guaranties or any
of the Collateral Documents securing any of the Guaranties (collectively, the
"Guaranty Documents"), or any event of default shall occur under any of the
Guaranty Documents or any guarantor shall revoke or purport to revoke any of the
Guaranties, or any material misrepresentation or material misstatement shall at
any time or from time to time be made or shall otherwise occur or exist in any
warranty or representation set forth in any of the Guaranty Documents or in any
certificate delivered to Bank in connection with any of the Guaranty Documents,
or if any of the circumstances described in Sections 8.3 through 8.9 shall occur
with respect to any of the Subsidiary Guarantors; or
8.12. Change in Control. Any Change in Control shall at any time
occur, or any "Change of Control" or any other similar event under and as
defined in any instruments governing any Indebtedness of Borrower or of any of
its Subsidiaries shall at any time occur.
9. BANK'S RIGHTS AND REMEDIES.
9.1. Rights and Remedies. Upon the occurrence and during the
continuance of any Event of Default, Bank may, at its election, without notice
of its election and without demand, do any one or more of the following, all of
which are irrevocably authorized by Borrower:
(a) declare all of the Obligations of Borrower, whether
evidenced by this Agreement, any of the other Loan Documents, or otherwise,
immediately due and payable (provided that, upon the occurrence of any Event of
Default described in Section 8.6, all of the Obligations of Borrower shall
become immediately due and payable without any action by Bank);
(b) demand that Borrower (i) deposit cash with Bank in an
amount equal to the aggregate undrawn amount of all (if any) letters of credit
at any time issued by Bank for the account of Borrower or any of its
Subsidiaries, as collateral security for the repayment of any future drawings
under such letters of credit, and (ii) pay in advance all letter of credit fees
scheduled to be paid or payable over the remaining term of all (if any) of such
letters of credit, and Borrower shall promptly deposit and pay such amounts;
(c) cease advancing money or extending credit to or for the
benefit of Borrower or any of its Subsidiaries under this Agreement, any other
Loan Documents or under any other agreements between Borrower or any of its
Subsidiaries and Bank;
(d) settle or adjust disputes and claims directly with account
debtors of Borrower or any of its Subsidiaries for amounts, upon terms and in
whatever order that Bank reasonably considers advisable;
(e) make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interests and Liens in the
Collateral. Borrower agrees to assemble the Collateral, if Bank so requires, and
to make the Collateral available to Bank as Bank may designate. Borrower
authorizes Bank to enter any of the premises where any Collateral is located, to
take and maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge or Lien which, in
Bank's determination, appears to be prior or superior to its security interests
and Liens and to pay all expenses incurred in connection therewith. With respect
to any of Borrower's owned premises, Borrower hereby grants Bank an irrevocable
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
(f) set off and apply to any of the Obligations of Borrower
any and all (i) balances and deposits of Borrower held by Bank, and (ii)
Indebtedness at any time owing to or for the credit or the account of Borrower
held by Bank;
(g) ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) all or any part of the Collateral. Bank is hereby granted irrevocable
licenses and other rights, solely pursuant to the provisions of this Section
9.1, to use, without any charge, Borrower's labels, patents, copyrights, rights
of use of any names, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to any
Collateral, in completing production of, advertising for sale, and selling any
Collateral, and, in connection with Bank's exercise of its rights under this
Section 9.1, Borrower's rights under all licenses and all franchise agreements
shall inure to Bank's benefit;
(h) sell all or any part of the Collateral at either a public
or private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including Borrower's
premises) as Bank determines is commercially reasonable, and apply any proceeds
to any of the Obligations in whatever manner or order Bank deems appropriate.
Bank may sell all or any part of the Collateral without giving any warranties as
to the Collateral. Bank may specifically disclaim any warranties of title or the
like. This procedure shall not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral. If Bank sells any of the
Collateral upon credit, Borrower shall be credited only with payments actually
made by the purchaser, received by Bank, and applied to the Indebtedness of the
purchaser. If the purchaser fails to pay for any Collateral, Bank may resell the
Collateral, and Borrower shall be credited with the proceeds of the sale;
(i) Bank may credit bid and purchase at any public sale;
(j) apply for the appointment of any receiver, trustee,
liquidator or conservator of all or any part of the Collateral, without notice,
and without regard to the adequacy of any other security or Collateral for any
of the Obligations, and without regard to the solvency of Borrower, any of its
Subsidiaries any guarantor or any other Person liable for any of the
Obligations; and
(k) Borrower shall in any event remain liable for any
deficiency that exists after disposition of all or any part of the Collateral as
provided above, and such deficiency shall be paid immediately to Bank by
Borrower.
Bank may comply with any applicable state, federal or foreign law requirements
in connection with any disposition of any Collateral and compliance will not be
considered adversely to affect the commercial reasonableness of any sale of any
Collateral.
9.2. Power of Attorney. Borrower hereby irrevocably appoints Bank
(and each of Bank's designated officers or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interests and Liens in the Accounts; (b)
endorse Borrower's name on any checks or other forms of payment or security that
may come into Bank's possession; (c) sign Borrower's name on any invoice or ▇▇▇▇
of lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) during the continuation of any Event of Default: (i) dispose of any
Collateral; (ii) make, settle and adjust all claims under and decisions with
respect to Borrower's policies of insurance; (iii) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; and (iv) transfer all or
any part of the Collateral into the name of Bank or a third party to the extent
permitted under the California Uniform Commercial Code; and (e) file, in its
sole discretion, one or more financing or continuation statements and amendments
thereto relative to any of the Collateral without the signature of Borrower
where permitted by law. The appointment of Bank as Borrower's attorney in fact,
and each and every one of Bank's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations of Borrower and its
Subsidiaries have been fully repaid and performed, and all of Bank's obligations
to provide Advances, other Credit Extensions and any other extensions of credit
or other financial accommodations to Borrower or any of its Subsidiaries under
this Agreement or any of the other Loan Documents shall have terminated.
9.3. Accounts Collection. At any time after the occurrence and
during the continuation of an Event of Default, Bank may notify any Person owing
funds to Borrower of Bank's security interests and Liens in such funds and
verify the amount of such Account. Borrower shall collect all amounts owing to
Borrower for Bank, receive in trust all payments as Bank's trustee, and
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.
9.4. Bank Expenses. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following after reasonable notice to Borrower: (a) make payment of the same or
any part thereof; (b) set up such reserves under the Committed Revolving Line as
Bank deems necessary to protect Bank from the exposure created by such failure;
or (c) obtain and maintain insurance policies of the type discussed in Section
6.5 of this Agreement, and take any action with respect to such policies as Bank
deems prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5. Bank's Liability for Collateral. Bank has no obligation to
clean up or otherwise prepare all or any part of the Collateral for sale. All
risk of loss, damage or destruction of the Collateral shall be borne by Borrower
and its Subsidiaries.
9.6. No Obligation to Pursue Others. Bank has no obligation to
attempt to satisfy any of the Obligations by collecting all or any part of the
Obligations from any other Person liable for them, and Bank may release, modify
or waive any collateral provided by any other Person to secure any of the
Obligations, all without affecting Bank's rights against Borrower or any of its
Subsidiaries. Borrower waives any right it may have to require Bank to pursue
any other Person for any of the Obligations.
9.7. Remedies Cumulative. Bank's rights and remedies under this
Agreement, the other Loan Documents and all other agreements shall be
cumulative. Bank shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Bank
of any one right or remedy shall be deemed an election, and no waiver by Bank of
any Event of Default on the part of Borrower or any of its Subsidiaries shall be
deemed a continuing waiver. No delay by Bank shall constitute a waiver, election
or acquiescence by it. No waiver by Bank shall be effective unless made in a
written document signed by or on behalf of Bank and then shall be effective only
in the specific instance and for the specific purpose for which it was given.
Borrower expressly agrees that this Section 9.7 may not be waived or modified by
Bank by course of performance, conduct, estoppel or otherwise.
9.8. Demand; Protest. Borrower irrevocably waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees at any time held by Bank on which Borrower may in any way
be liable.
10. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party hereto relating to this Agreement, any of the other Loan Documents or
any other agreements entered into in connection herewith shall be in writing and
(except for financial statements and other informational documents which may be
sent by first-class mail, postage prepaid) shall be personally delivered or sent
by a recognized overnight delivery service, or by certified mail, postage
prepaid, return receipt requested, or by telefacsimile, to Borrower or to Bank,
as the case may be, at its addresses set forth below:
If to Borrower: Orchid BioSciences, Inc.
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Lasser ▇▇▇▇▇▇▇, L.L.C.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to Bank: Comerica Bank-California
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
▇▇▇▇▇, State of California. BANK AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH OF THEM,
AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM
MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY COURSE
OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF
THEM. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT
OR RELINQUISHED BY BANK OR BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY
EACH OF THEM.
12. GENERAL PROVISIONS.
12.1. Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of each
of the parties hereto and shall bind all Persons who become bound as debtors to
this Agreement; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the continuing right, without the consent of or any notice to Borrower, but
subject always to the terms and provisions relating to confidentiality set forth
in Section 12.8 of this Agreement, to sell, transfer, negotiate or grant
participations in all or any part of, or any interests in, any of the Advances
or other Credit Extensions, any of the Obligations of Borrower or any of its
Subsidiaries or any of Bank's obligations, rights and benefits under this
Agreement or any of the other Obligations.
12.2. Indemnification. Borrower shall defend, indemnify and
hold harmless Bank and its officers, employees and agents against: (a) all
obligations, demands, claims and liabilities claimed or asserted by any other
Person in connection with the transactions contemplated by this Agreement,
except if and to the extent that such obligations, demands, claims and
liabilities have been caused by Bank's gross negligence or willful misconduct;
and (b) all losses or Bank Expenses in any way suffered, incurred or paid by
Bank, its officers, employees and agents as a result of or in any way arising
out of, following, or consequential to transactions between Bank and Borrower or
any of its Subsidiaries, whether under this Agreement, any of the other Loan
Documents or otherwise (including, without limitation, reasonable attorneys fees
and expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
12.3. Time of Essence. Time is of the essence for the
performance by Borrower of all of its Obligations set forth in this Agreement
and the other Loan Documents.
12.4. Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
12.5. Amendments in Writing; Integration. All amendments to
this Agreement must be in writing. All prior agreements, understandings,
representations, warranties and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the other Loan Documents.
12.6. Counterparts. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same Loan
and Security Agreement.
12.7. Survival. All covenants, representations and warranties
made in this Agreement shall continue in full force and effect so long as any of
the Obligations of Borrower or any of its Subsidiaries shall remain outstanding.
The Obligations of Borrower to indemnify Bank with respect to the expenses,
damages, losses, costs and liabilities described in Section 12.2 shall survive
until all applicable statute of limitations periods with respect to actions that
may be brought against Bank have run.
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12.8. Confidentiality. In handling any confidential
information, Bank and all employees and agents of Bank shall exercise the same
degree of care that Bank exercises with respect to its own proprietary
information of the same types to maintain the confidentiality of any non-public
information thereby received or received pursuant to this Agreement, except that
disclosure of such information may be made (a) to the subsidiaries or affiliates
of Bank in connection with their present or prospective business relations with
Borrower, (b) to prospective transferees or purchasers of any interest in the
Advances, other Credit Extensions or any of the other Obligations, provided that
they have entered into a comparable confidentiality agreement in favor of
Borrower and have delivered a copy to Bank, (c) as required by law, regulation,
rule or order, subpoena, judicial order or similar order, (d) as may be required
in connection with the examination, audit or similar investigation of Bank, and
(e) as Bank may determine in its own discretion in connection with the
enforcement of any remedies hereunder. Confidential information hereunder shall
not include any information that either: (i) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (ii) is
disclosed to Bank by any third party, provided Bank does not have actual
knowledge that such third party is prohibited from disclosing such information.
12.9. Delivery by Telecopier. Delivery of the signature pages
to this Agreement by telecopier shall be as effective as delivery of manually
executed counterparts of this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
**Signature Page to Loan and Security Agreement Follows**
IN WITNESS WHEREOF, the parties hereto have caused this LOAN AND
SECURITY AGREEMENT to be executed as of the date first above written.
ORCHID BIOSCIENCES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Assistant Secretary
COMERICA BANK-CALIFORNIA
By: /s/ ▇▇▇▇▇▇ ▇. Hana
------------------------------
Name: ▇▇▇▇▇▇ ▇. Hana
Title: Vice President
**Signature Page to Loan And Security Agreement**
EXHIBIT A
DEFINITIONS:
"Accounts" means all presently existing and hereafter arising accounts, contract
rights, and all other forms of obligations owing to Borrower or to any of its
Subsidiaries arising out of the sale or lease of goods, the licensing, sale or
other transfer of any Intellectual Property of Borrower or of any of its
Subsidiaries, or the rendering of services by Borrower or by any of its
Subsidiaries, and any and all credit insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower or any
of its Subsidiaries and all Credit Party Books relating to any of the foregoing.
"Additional Security Documents" has the meaning specified in Section 6.9.
"Advance" or "Advances" means a cash advance or cash advances under the
Committed Revolving Line.
"Affiliate" means, with respect to any Person, any Person that owns or controls
directly or indirectly such Person, any Person that controls or is controlled by
or is under common control with such Person, and each of such Person's senior
executive officers, directors, and partners.
"Agreement to Provide Insurance" means the Agreement to Provide Insurance, in or
substantially in the form of Exhibit G, to be executed and delivered to Bank by
Borrower and each of its Restricted Subsidiaries.
"Applicable Margin" means a percentage, per annum, determined in accordance with
the Pricing Grid below by reference to each of the following items as of the
last day of and for each fiscal quarter of Borrower ending on or after December
31, 2002: (a) the Liquidity Ratio as of the last day such fiscal quarter; (b)
the Consolidated EBITDA of Borrower and its Subsidiaries for such fiscal
quarter; and (c) the Consolidated Debt Service Coverage Ratio ("DSC Ratio") as
of the last day of such fiscal quarter:
=============================================================================================
PRICING GRID
---------------------------------------------------------------------------------------------
If Liquidity And Consolidated Then Applicable
Ratio EBITDA or DSC Margin
is Ratio is is
---------------------------------------------------------------------------------------------
Consolidated
EBITDA (less than)0
(less than) 1.50: 1.00 or DSC Ratio 2.50%
(less than) 1:50: 1.00
---------------------------------------------------------------------------------------------
Consolidated
(greater than or equal to) 1.50: 1.00 EBITDA (less than)0 2.00%
or DSC Ratio
(less than) 1:50: 1.00
---------------------------------------------------------------------------------------------
(less than) 1.50: 1.00 (less than or equal to) 1.50:1.00 1.00%
---------------------------------------------------------------------------------------------
(greater than or equal to) 1.50: 1.00 (greater than or equal to) 1.50:1.00 0.50%
---------------------------------------------------------------------------------------------
The "Applicable Margin" shall be determined by reference to the Liquidity Ratio,
Consolidated EBITDA and DSC Ratio as of the last day of and for each fiscal
quarter of Borrower ending on or after December 31, 2002 on the basis of the
information for each such fiscal quarter set forth in the financial statements
and Compliance Certificate for such fiscal quarter required to be delivered by
Borrower to Bank pursuant to Section 6.2. No change in the Applicable Margin
shall be effective until the third Business Day after the date on which Bank
shall have received from Borrower the applicable financial statements and
Compliance Certificate for any fiscal quarter pursuant to Section 6.2
calculating such new Liquidity Ratio, Consolidated EBITDA and DSC Ratio. If
Borrower shall fail to deliver to Bank the applicable financial statements and
Compliance Certificate for any fiscal quarter within three (3) Business Days
after the same or required under Section 6.2, then the Applicable Margin shall
be 2.50% from and after the expiration of such period of three (3) Business Days
and until the third Business Day after the date on which Bank shall have
received from Borrower the financial statements and Compliance Certificate for
such fiscal quarter. Anything in this Agreement express or implied to the
contrary notwithstanding, at all times after the Closing Date and until the
Compliance Certificate and related financial statements for the fiscal quarter
of Borrower ending December 31, 2002 shall have been delivered to Bank, the
Applicable Margin shall at all times be 2.50%.
"Asset Sale" means any direct or indirect sale (including any sale of all or any
part of any Subsidiary of Borrower by or through the issue or sale of any Equity
Interests of such Subsidiary, and also including any sale pursuant to a sale and
leaseback transaction), whether in a single transaction or in a series of
related transactions, by Borrower or by any of its Subsidiaries of any
businesses or property of Borrower or of any of its Subsidiaries, whether now
owned or from time to time hereafter created, arising or acquired, including
Equity Interests (including Equity Interests of any such Subsidiaries);
provided, however, that the term "Asset Sale" shall not include any Permitted
Transfers.
"Automatic Debit Authorization" means the Automatic Debit Authorization, in or
substantially in the form of Exhibit H, to be executed and delivered to Bank by
Borrower and each of its Restricted Subsidiaries.
"Bank Expenses" means any and all reasonable costs and expenses (including
reasonable attorneys' fees and expenses, whether generated in-house or by
outside counsel) incurred in connection with the preparation, negotiation,
administration, and enforcement of any of the Loan Documents; reasonable
Collateral audit fees; and Bank's reasonable attorneys' fees and expenses
(whether generated in-house or by outside counsel) incurred in amending,
enforcing or defending any of the Loan Documents (including fees and expenses of
appeal), incurred before, during and after any Insolvency Proceeding, whether or
not suit is brought.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.
ss.101, et seq.), as amended from time to time.
"Bingo Asset Sale" means the sale by Borrower to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc. of the
Orchid Life Sciences business unit of Borrower (except for that portion of such
business unit specific to performing in the facilities of Borrower and its
Affiliates (a) services for others, and (b) genotyping). The material terms and
condition of the Bingo Asset Sale are set forth in the Asset Purchase Agreement,
dated on or about December 19, 2002, between ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc. and Borrower.
"Borrowing Base" means, as at any date of determination, an amount equal to
eighty percent (80%) of the Eligible Accounts, as determined by Bank with
reference to the then most recent Borrowing Base Certificate delivered by
Borrower to Bank.
"Borrowing Base Certificate" means a Borrowing Base Certificate, in or
substantially in the form of Exhibit D or otherwise in form satisfactory to
Bank, to be duly executed by a Responsible Officer of Borrower.
"Business Day" means any day that is not a Saturday, Sunday or other day on
which banks in the State of California are authorized or required to close.
"Capital Stock" means (a) in the case of any corporation, any corporate capital
stock of any class or series, (b) in the case of any association or other
business entity, any shares, interests, participations, rights or other
equivalents (howsoever designated) of corporate capital stock, and (c) in the
case of any partnership or limited liability company, partnership or membership
interests (whether general or limited).
"Cash" means unrestricted cash and cash equivalents.
"Cash Collateral Account" has the meaning specified in Section 4.3.
"Change in Control" shall mean any transaction in which any "person" or "group"
(within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient number
of shares of all classes of Stock then outstanding of Borrower ordinarily
entitled to vote in the election of directors, empowering such "person" or
"group" to elect a majority of the Board of Directors of Borrower, who did not
have such power before such transaction.
"Chief Executive Office State" means, in relation to Borrower or any of its
Subsidiaries, the State of the United States or (as the case may be) the foreign
country where the chief executive office of such Person is located.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code, as amended or supplemented
from time to time.
"Collateral" means any and all of the property of Borrower and its Subsidiaries
described on Exhibit B attached hereto and all Negotiable Collateral to the
extent not described on Exhibit B, except to the extent that (a) any such
property is nonassignable by its terms without the consent of another party (but
only to the extent such prohibition on transfer is enforceable under applicable
law, including, without limitation, Sections 9406 and 9408 of the Code), or (b)
the granting of a security interest therein is contrary to applicable law,
provided that upon the cessation of any such restriction or prohibition, such
property shall automatically become part of the Collateral.
"Collateral Documents" means, collectively, the Security Agreement, the Pledge
Agreement, the English Charge Over Shares, the English Debenture, the Additional
Security Documents, all other instruments executed and delivered to Bank on the
Closing Date or from time to time thereafter pursuant to Section 3.1, Section
6.7 or Section 6.9, and all other Security Instruments executed and/or delivered
from time to time pursuant to any of the foregoing.
"Collateral States" means, collectively, the States of the United States and the
foreign countries where all or any part of the Collateral is located. The
Collateral States have been identified by Borrower in Perfection Certificates
prepared and completed by Borrower and its Subsidiaries and furnished by
Borrower to Bank prior to the Closing Date.
"Commitment" means, collectively, in relation to Bank at any particular time,
the obligations of Bank at such time to make Advances and other Credit
Extensions to Borrower under the Committed Revolving Line upon the terms and
subject to the conditions contained in this Agreement.
"Commitment Fees" has the meaning specified in Section 2.7(b).
"Committed Revolving Line" means the revolving credit facility in the maximum
aggregate principal amount of $10,000,000 provided by Bank to Borrower upon the
terms and subject to the conditions contained in this Agreement.
"Common Stock Purchase Warrant" means the Common Stock Purchase Warrant, in or
substantially in the form of Exhibit P, to be executed and delivered to Bank by
Borrower.
"Compliance Certificate" means a compliance certificate, in or substantially in
the form of Exhibit E or otherwise in form and substance satisfactory to Bank,
to be duly executed by a Responsible Officer of Borrower.
"Consolidated Cash Burn" means, in relation to Borrower and its Subsidiaries for
any period, the Consolidated EBITDA of Borrower and its Subsidiaries for such
period (which may be a deficit or negative number), plus the amount (if any) by
which the Consolidated Working Capital of Borrower and its Subsidiaries on the
first day of such period exceeds the Consolidated Working Capital on the last
day of such period, minus the sum of (a) the amount (if any) by which the
Consolidated Working Capital of Borrower and its Subsidiaries on the last day of
such period exceeds the Consolidated Working Capital on the first day of such
period, plus (b) the consolidated capital expenditures made in cash by Borrower
and its Subsidiaries in such period, all as determined on a consolidated basis
and in accordance with GAAP.
"Consolidated Current Assets" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Consolidated Current Liabilities" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date.
"Consolidated Debt Service" means, in relation to Borrower and its Subsidiaries
for any period, the sum (without duplication) of (a) the consolidated interest
expense of Borrower and its Subsidiaries for such period, plus (b) all regularly
scheduled payments required to be made during such period on account of any
principal of any Indebtedness of Borrower or of any of its Subsidiaries,
including the principal component of any scheduled payments in respect of
capital lease obligations, all as determined for Borrower and its Subsidiaries
for such period, on a consolidated basis and in accordance with GAAP.
"Consolidated Debt Service Coverage Ratio" means, as of the last day of any
fiscal period, the ratio of (a) the Consolidated EBITDA of Borrower and its
Subsidiaries for such period, over (b) the sum of (i) the Consolidated Debt
Service of Borrower and its Subsidiaries for such period, plus (ii) the
consolidated capital expenditures of Borrower and its Subsidiaries for such
period, other than capital expenditures made by Borrower or any of its
Subsidiaries out of the cash proceeds of any extensions of credit made to, or
any other Investments made in, Borrower or any of its Subsidiaries during such
period.
"Consolidated EBITDA" means, in relation to Borrower and its Subsidiaries for
any period, the consolidated net income (loss) of Borrower and its Subsidiaries
for such period, plus, without duplication, and only to the extent reflected as
a charge in the statement of such consolidated net income for such period, the
sum of (a) provision for income tax expense, plus (b) consolidated interest
expense, plus (c) depreciation and amortization expense (including all non-cash
amortization expense items, e.g., non-cash amortization of deferred
compensation), all as determined for Borrower and its Subsidiaries for such
period, on a consolidated basis and in accordance with GAAP.
"Consolidated Revenues" means, in relation to Borrower and its Subsidiaries for
each successive fiscal period of three (3) consecutive calendar months ending on
the last day of each calendar month, beginning November 30, 2002, the gross
revenues of Borrower and its Subsidiaries for such fiscal period, all as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital" means, in relation to Borrower and its
Subsidiaries as at any date of determination, the difference between (a) the
Consolidated Current Assets (determined exclusive of cash and cash equivalents)
of Borrower and its Subsidiaries as at such date, and (b) the Consolidated
Current Liabilities of Borrower and its Subsidiaries as at such date.
"Contingent Obligations" means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to: (a) any
Indebtedness, lease, dividend, letter of credit or other obligation or liability
of another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (b) any obligations with respect to undrawn letters of credit
issued for the account of that Person; and (c) all obligations arising under any
interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuations in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligations" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Copyrights" means any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished, and whether or not
the same also constitutes a trade secret, now or hereafter existing, created,
acquired or held.
"Credit Extension" means each Advance or other extension of credit by Bank to or
for the benefit of Borrower under this Agreement.
"Credit Parties" means, collectively, Borrower and all Subsidiary Guarantors;
and "Credit Party" means Borrower or any of the Subsidiary Guarantors.
"Credit Party Books" means, in relation to Borrower or any of its Subsidiaries,
all of such Person's books and records including: all ledgers; records
concerning its assets or liabilities, the Collateral, business operations or
financial condition; and all computer programs, or tape files, and the
equipment, containing such information.
"Credit Party State" means, in relation to Borrower or any of its Subsidiaries,
the State of the United States or (as the case may be) the foreign country or
other jurisdiction under the laws of which such Person is organized.
"Deposit Account" means any deposit, securities, investment or other similar
account at any time or from time to time maintained by Borrower or any of its
Subsidiaries with any bank or other financial institution or with any mutual
fund, securities broker, investment banking firm or other Person.
"Deposit Account Control Agreement" means a Deposit Account Control Agreement,
in or substantially in the form of Exhibit O, or otherwise in form and substance
satisfactory to Bank, to be executed and delivered to Bank with respect to each
Deposit Account maintained by Borrower or any of its Subsidiaries with any
Person or Persons (other than Bank).
"Disclosure Schedule" means the First Schedule, dated as of the Closing Date,
prepared and completed by Borrower, and delivered by Borrower to Bank in
connection with this Agreement and identified as the "Disclosure Schedule".
"Domestic Subsidiaries" means, at any time of reference, all of the direct or
indirect Subsidiaries of Borrower that are organized at such time under the laws
of any State of the United States or the District of Columbia.
"Eligible Accounts" means those Accounts that arise in the ordinary course of
business of Borrower or of any of its Restricted Subsidiaries that comply with
all of the representations and warranties to Bank set forth in Section 5.3 or in
the Collateral Documents; provided, that Bank may change the standards of
eligibility by giving Borrower 30 days prior written notice. Unless otherwise
agreed to by Bank, Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay in full (i) within
90 days of invoice date with respect to all Accounts, except Accounts
complying with subclause (ii) of this paragraph (a), and (ii) within
120 days of invoice date, in the case of (A) Accounts with respect to
which the account debtor is a governmental authority or agency of a
State of the United States (or a municipal or other local authority
within any such State), the Accounts of which account debtor have been
approved by Bank in writing, or (B) other Accounts arising under
certain contracts of an account debtor with Borrower or any of its
Domestic Subsidiaries, the Accounts of which account debtor have been
approved by Bank in writing;
(b) Accounts with respect to any account debtor, 25% of whose Accounts the
account debtor has failed to pay (i) within 90 days of invoice date,
with respect to any account debtor whose Accounts are covered by
subclause (i) of paragraph (a), and (ii) within 120 days of invoice
date with respect to any account debtor whose Accounts are covered by
subclause (ii) of paragraph (a);
(c) Accounts with respect to which the account debtor is an officer,
employee or agent of Borrower or of any of its Subsidiaries;
(d) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold, demo
or promotional, or other terms by reason of which the payment by the
account debtor may be conditional;
(e) Accounts with respect to which the account debtor is an Affiliate of
Borrower or any of its Subsidiaries;
(f) Accounts with respect to which the account debtor does not have its
principal place of business in the United States, except for Eligible
Foreign Accounts;
(g) Accounts with respect to which the account debtor is the United States
or any department, agency, or instrumentality of the United States,
except to the extent that first-priority security interests and Liens
of Bank in such Accounts shall have been duly and properly perfected in
a manner satisfactory to Bank under the Federal Assignment of Claims
Act or other applicable law;
(h) Accounts with respect to which Borrower or any of its Subsidiaries is
liable to the account debtor for goods sold or services rendered by the
account debtor to Borrower or any of its Subsidiaries, but only to the
extent of any amounts owing to the account debtor against amounts owed
to Borrower or any of its Subsidiaries;
(i) Accounts that have not yet been billed to the account debtor;
(j) Accounts with respect to any account debtor, including all Subsidiaries
and Affiliates of such account debtor, whose total obligations to
Borrower and its Subsidiaries exceed 25% of all Accounts, to the extent
all of such obligations to Borrower and its Subsidiaries exceed the
aforementioned percentage, except as approved in writing by Bank;
(k) Accounts with respect to which (i) the account debtor disputes
liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or
claim), or (ii) the account debtor is subject to any Insolvency
Proceeding, or becomes insolvent, or goes out of business; and
(l) Accounts the collection of which Bank reasonably determines, after
inquiry and consultation with Borrower, to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect to which the account
debtor does not have its principal place of business in the United States and
that are (a) supported by one or more letters of credit in an amount and of a
tenor, and issued by a financial institution, acceptable to Bank, (b) insured by
EXIM Bank, (c) generated by an account debtor with its principal place of
business in Canada, provided that the Bank has perfected its security interest
in the appropriate Canadian province, or (d) approved by Bank on a case-by-case
basis.
"English Charge Over Shares" means the Charge Over Shares, in or substantially
in the form of Exhibit L, to be executed and delivered to Bank by Borrower.
"English Debenture" means the Debenture, in or substantially in the form of
Exhibit N, to be executed and delivered to Bank by the UK Subsidiary.
"English Deed of Guarantee and Indemnity" means the Deed of Guarantee and
Indemnity, in or substantially in the form of Exhibit M, to be executed and
delivered to Bank by the UK Subsidiary.
"Environmental Laws" means all laws, rules, regulations, orders and the like
issued by any federal, state, local foreign or other governmental or
quasi-governmental authority or any agency thereof pertaining to the environment
or to any hazardous materials or wastes, toxic substances, flammable, explosive
or radioactive materials, asbestos or other similar materials.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower or any of its Subsidiaries has any interests or rights.
"Equipment Lien Subordination Agreement" means the Equipment Lien Subordination
Agreement, in or substantially in the form of Exhibit Q, to be executed and
delivered to Bank by Borrower and each of the holders of all or any part of the
GECC Debt.
"Equity Interests" means and includes Capital Stock and all warrants, options or
other rights to purchase or otherwise acquire Capital Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"Existing Deposit Accounts" has the meaning assigned in Section 5.12.
"Existing Indebtedness" has the meaning assigned in Section 5.11.
"Financing Event" means any financing pursuant to which Borrower shall issue its
Equity Interests or Subordinated Debt for cash, any such financing to be
implemented and consummated in one or more closings upon the terms and subject
to the conditions contained in Financing Event Documents.
"Financing Event Documents" means, collectively all agreements, instruments and
other documents setting forth the terms and conditions governing the issuance
and sale by Borrower for cash and for its own account, and the purchase by
investors from Borrower, of Borrower's Equity Interests or Subordinated Debt.
"Foreign Subsidiaries" means, at any time of reference, collectively, all of the
direct or indirect Subsidiaries of Borrower that are organized at such time
under the laws of any jurisdiction other than any State of the United States or
the District of Columbia.
"GAAP" means generally accepted accounting principles, consistently applied, as
in effect from time to time.
"GECC Debt" means, collectively, all Indebtedness and other obligations and
liabilities of Borrower under or in respect of (a) the Master Loan and Security
Agreement No. 7465, dated as of December 16, 1998, between Borrower and Oxford
Venture Finance, LLC (such agreement, together with all schedules and exhibits
thereto, each as amended from time to time, being herein called the "GECC Loan
Agreement"), (b) all Equipment Schedules from time to time executed and
delivered pursuant to the GECC Loan Agreement, (c) all Promissory Notes and
other agreements and instruments from time to time executed and delivered by
Borrower pursuant to the GECC Loan Agreement, and (d) any and all loans and
other extensions of credit from time to time made to Borrower under or pursuant
to the GECC Loan Agreement.
"Governing Documents" means, with respect to any Person, the certificate of
incorporation or registration (including, if applicable, certificate of change
of name), articles of incorporation or association, memorandum of association,
charter, bylaws, partnership agreement, trust agreement, joint venture
agreement, limited liability company operating or members agreement, or any one
or more similar agreements, instruments or documents constituting the
organization or formation of such Person.
"Guaranties" means, collectively, (a) the Guaranty Agreement, (b) the English
Deed of Guarantee and Indemnity, and (c) all other guaranty agreements or other
similar instruments from time to time executed and delivered to Bank by Borrower
or any of its Subsidiaries and upon the terms of which the payment of all or any
part of the Obligations shall be guaranteed.
"Guarantors" means, collectively, Borrower and all Subsidiary Guarantors.
"Guaranty Agreement" means the Guaranty Agreement, in or substantially in the
form of Exhibit I, to be executed and delivered to Bank by Borrower and each of
its Subsidiaries.
"Inactive Subsidiary" means, in relation to any direct or indirect Subsidiary of
Borrower at any particular time, any such Subsidiary that conducts no business,
holds no assets (other than insubstantial and immaterial assets), and has no
liabilities (other than insubstantial and immaterial liabilities), in each case,
as at such time. For purposes of this Agreement, any Inactive Subsidiary shall
cease to be an "Inactive Subsidiary" if and when such Subsidiary commences the
conduct of business, acquires assets (other than insubstantial and immaterial
assets), or incurs liabilities (other than insubstantial and immaterial
liabilities).
"Indebtedness" means (a) all indebtedness for borrowed money or the deferred
purchase price of property or services, including, without limitation,
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or other
similar instruments, (c) all capital lease obligations, and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against any Person
or entity under any provision of the Bankruptcy Code, as amended, or under any
other bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
relief.
"Intellectual Property" means any and all of the rights, title and interests of
Borrower or of any of its Subsidiaries in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) any and all trade secrets, and any and all intellectual property rights
in computer software and computer software products now or hereafter
existing, created, acquired or held;
(c) any and all design rights available to Borrower or any of its
Subsidiaries now or hereafter existing, created, acquired or held;
(d) all licenses and other rights to use any Copyrights, Patents or
Trademarks; and
(e) all amendments, renewals and extensions of any Copyrights, Trademarks
or Patents.
"Inventory" means all present and future inventory in which Borrower or any of
its Subsidiaries shall have any rights or interests, including merchandise, raw
materials, parts, supplies, packing and shipping materials, work in process and
finished products intended for sale or lease or to be furnished under a contract
of service, of every kind and description now or at any time hereafter owned by
or in the custody or possession, actual or constructive, of Borrower or of any
of its Subsidiaries, including any and all such inventory as shall be
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above, and all Credit Party Books relating to
any of the foregoing.
"Investment" means any beneficial ownership of (including Equity Interests or
other securities) any Person, or any loan, advance or capital contribution to
any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
"Landlord Lien Waiver" means, with respect to any Real Estate Lease, a Lien
waiver from the lessor or landlord thereunder, in or substantially in the form
attached hereto as Exhibit Q or otherwise in form and substance satisfactory to
Bank.
"Lien" means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Liquidity Event" means any Financing Event or Asset Sale.
"Liquidity Ratio" means, as of any date of determination, the ratio of (a) the
sum (i) the balance of Cash on such date, as determined for Borrower and its
Domestic Subsidiaries on a consolidated basis, plus (ii) one hundred percent
(100%) of the Accounts of Borrower and its Domestic Subsidiaries that are
Restricted Subsidiaries on and as of such date, to (b) the aggregate principal
amount of all of the Advances and other Credit Extensions outstanding in and as
of such date.
"Loan Advance Request" means the Loan Advance/Paydown Request Form, in or
substantially in the form of Exhibit C or otherwise in form satisfactory to
Bank, duly executed by a Responsible Officer of Borrower.
"Loan Documents" means, collectively, this Agreement, any note or notes from
time to time executed by Borrower and delivered to Bank, the Guaranties, the
Collateral Documents, and any other documents, instruments or agreements from
time to time executed and/or delivered to Bank by Borrower or any of its
Subsidiaries pursuant to or in connection with this Agreement, all as amended or
extended from time to time.
"Lock Box" has the meaning specified in Section 4.3.
"Material Adverse Effect" means any material adverse effect on (a) the business,
operations, property or condition (financial or otherwise) of Borrower and its
Subsidiaries, taken as a whole, or (b) the ability of Borrower and the other
Credit Parties to repay the Obligations or otherwise perform, observe or
otherwise comply with any of their other material Obligations under any of the
Loan Documents, or (c) the validity or enforceability of (i) any of the Loan
Documents, (ii) any of the Obligations of Borrower or any of its Subsidiaries,
or (iii) any of the rights or remedies of Bank under any of the Loan Documents,
(d) the validity, binding effect or priority of any of the security interests
and Liens of Bank in property constituting Collateral, or (e) the value of all
or any substantial part of the Collateral.
"Negotiable Collateral" means, collectively, all of the present and future
letters of credit of which the Borrower or any of its Subsidiaries shall be a
beneficiary, drafts, instruments (including promissory notes), securities,
documents of title, and chattel paper, and all Credit Party Books relating to
any of the foregoing.
"Net Cash Proceeds" means, in connection with any Asset Sale, the cash proceeds
(including any cash payments received by way of deferred payment pursuant to any
promissory note, receivable or otherwise, but only as and when received in cash)
of such Asset Sale, net of (a) transaction costs (including any underwriting,
brokerage or other selling commissions and legal, advisory and other fees and
expenses, including title and recording expenses, associated therewith, in each
case, actually incurred and satisfactorily documented), (b) required debt
payments (other than pursuant hereto), and (c) taxes reasonably estimated to be
payable as a result of such Asset Sale.
"Net Issuance Proceeds" means, with respect to any issuance by Borrower or any
of its Subsidiaries of any Equity Interests or Subordinated Debt of Borrower or
any of its Subsidiaries to any Person or Persons: (a) the gross cash proceeds
received by Borrower or any of its Subsidiaries from any other Person or Persons
in connection with any such issuance of any such Equity Interests or
Subordinated Debt, as and when received; minus (b) all of the transaction costs
(including legal, investment banking and other fees and disbursements) payable
or incurred by Borrower or by any of its Subsidiaries in connection therewith in
favor of any Person.
"Obligations" means, collectively, (a) all Indebtedness, principal, interest,
Bank Expenses and other amounts from time to time owing to Bank by Borrower or
any of its Subsidiaries pursuant to this Agreement, any of the other Loan
Documents or any other agreements, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of any Insolvency Proceeding, and including any
debt, liability, or obligation owing from Borrower or any of its Subsidiaries to
others that Bank may have obtained by assignment or otherwise, and (b) all other
Obligations (as that term is defined in Section 1(a) of the Guaranty Agreement)
of Borrower or of any of its Subsidiaries to Bank.
"Patents" means all patents, patent applications and like protections,
including, without limitation, improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same.
"Periodic Payments" means, collectively, all (if any) installments or other
similar recurring payments that Borrower or any of its Subsidiaries may now or
at any time hereafter become obligated to pay to Bank pursuant to the terms and
provisions of any agreement, instrument or other document now or hereafter in
existence between Borrower or any of its Subsidiaries and Bank.
"Permitted Indebtedness" means, collectively:
(a) Indebtedness of Borrower or of any of its Subsidiaries in favor of Bank
arising under this Agreement or any of the other Loan Documents;
(b) Indebtedness existing on the Closing Date and disclosed in Section 5.11
of the Disclosure Schedule;
(c) Indebtedness (including Indebtedness in the nature of capital lease
obligations) not at any time to exceed $50,000 in the aggregate (as
determined for Borrower and its Subsidiaries on a consolidated basis)
secured by Liens of the kind described in clause (c) of the defined
term "Permitted Liens"; provided such Indebtedness shall not exceed the
lesser of the cost or fair market value of the Equipment financed with
such Indebtedness;
(d) Subordinated Debt;
(e) Indebtedness to trade creditors incurred in the ordinary course of
business;
(f) extensions, refinancings and renewals of any items of Permitted
Indebtedness identified or described in any of clauses (a) through (e),
inclusive, of this definition; provided that the principal amount is
not increased or the terms modified to impose more burdensome terms
upon Borrower or any of its Subsidiaries, as the case may be; and
(g) Indebtedness of Borrower or any of its Subsidiaries arising out of
Investments of the kind described in and permitted by clause (e) of the
definition of the defined term "Permitted Investments".
"Permitted Investments" means, collectively:
(a) Investments existing on the Closing Date and disclosed in Section
5.11(g) of the Disclosure Schedule;
(b) (i) marketable direct obligations issued or unconditionally guaranteed
by the United States of America or any agency thereof or any State
thereof maturing within one (1) year from the date of acquisition
thereof, (ii) commercial paper maturing no more than one (1) year from
the date of creation thereof and currently having a rating of at least
A-2 or P-2 from either Standard & Poor's Corporation or ▇▇▇▇▇'▇
Investors Service, (iii) Bank's certificates of deposit maturing no
more than one (1) year from the date of investment therein, and (iv)
Bank's money market accounts;
(c) repurchases of Equity Interests from former employees of Borrower or of
any of its Subsidiaries; provided, however, that any Restricted
Payments made in connection therewith as shall be expressly permitted
by Section 7.6;
(d) Investments accepted in connection with Permitted Transfers;
(e) Investments of Subsidiaries in or to Restricted Subsidiaries or in or
to Borrower, and Investments by Borrower in Restricted Subsidiaries not
to exceed $50,000 in the aggregate in any fiscal year of Borrower;
(f) Investments not to exceed $50,000 in the aggregate (as determined for
Borrower and its Subsidiaries on a consolidated basis) in any fiscal
year of Borrower consisting of travel advances and employee relocation
loans and other employee loans and advances in the ordinary course of
business;
(g) Investments (including 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 of
Borrower or any of its Subsidiaries;
(h) Investments consisting of notes receivable of, or prepaid royalties and
other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business; provided that this
clause (h) shall not apply to Investments of Borrower in any
Subsidiary; and
(i) joint ventures or strategic alliances in the ordinary course of the
business of Borrower and its Subsidiaries consisting of the
non-exclusive licensing of technology, the development of technology or
the providing of technical support; provided that any cash Investments
by Borrower and its Subsidiaries do not exceed $50,000 in the aggregate
(as determined for Borrower and its Subsidiaries on a consolidated
basis) in any fiscal year of Borrower.
"Permitted Liens" means, collectively:
(a) any Liens existing on the Closing Date and disclosed in Section 5.11 of
the Disclosure Schedule or arising under this Agreement, the Collateral
Documents or any of the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental charges or
levies, either not delinquent or being contested in good faith by
appropriate proceedings and for which Borrower or any of its
Subsidiaries maintains adequate reserves; provided the same have no
priority over any of Bank's Liens;
(c) Liens not to exceed $50,000 in the aggregate (as determined for
Borrower and its Subsidiaries on a consolidated basis) (i) upon or in
any Equipment acquired or held by Borrower or any of its Subsidiaries
to secure the purchase price of such Equipment or Indebtedness incurred
solely for the purpose of financing the acquisition or lease of such
Equipment, or (ii) existing on such Equipment at the time of its
acquisition; provided that the Lien is confined solely to the property
so acquired and improvements thereon, and the proceeds from the sale or
disposition of such Equipment;
(d) Liens incurred in connection with the extension, renewal or refinancing
of the Indebtedness secured by Liens of the type described in clauses
(a) through (c) above; provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the Indebtedness being
extended, renewed or refinanced does not increase;
(e) Liens arising from judgments, decrees or attachments in circumstances
not constituting an Event of Default under Section 8.5 or Section 8.9;
(f) Liens in favor of other financial institutions arising in connection
with Deposit Accounts of Borrower or any of its Subsidiaries held at
such institutions; provided that, if and to the extent required by this
Agreement, Bank has perfected security interests in the amounts held in
such Deposit Accounts; and
(g) other Liens not described above arising in the ordinary course of
business and not having or not reasonably likely to have a Material
Adverse Effect on Borrower and its Subsidiaries, taken as a whole.
"Permitted Transfer" means the conveyance, sale, lease, license, transfer or
other disposition by Borrower or by any of its Subsidiaries of:
(a) Inventory in the ordinary course of its business;
(b) licenses and other similar arrangements for the use of any of the
property of Borrower or of any of its Subsidiaries in the ordinary
course of its business;
(c) worn-out or obsolete Equipment;
(d) other assets of Borrower or of any of its Subsidiaries which do not in
the aggregate (for Borrower and all of its Subsidiaries on a
consolidated basis) exceed $50,000 during any fiscal year of Borrower;
and
(e) the Bingo Asset Sale and the Turtle Asset Sale.
"Person" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Pledge Agreement" means the Pledge Agreement, in or substantially in the form
of Exhibit K, to be executed and delivered by Borrower and each of its
Subsidiaries.
"Prime Rate" means the variable rate of interest, per annum, most recently
announced by Bank as its "prime rate," whether or not such announced rate is the
lowest rate available from Bank.
"Real Estate Lease" means any lease, including any ground lease or space lease
or any rental or occupancy agreement (in each case, whether written or oral, and
whether express or implied), that relates to and governs or otherwise evidences
the terms and conditions for the leasing or use of, or any leasehold or other
similar interest in, any real property, and pursuant to which Borrower or any of
its Subsidiaries shall lease any Real Property, in each case, as lessee or
sublessee thereof.
"Responsible Officer" means, in relation to Borrower or any of its Subsidiaries,
any of the chief executive officer, the chief operating officer, the chief
financial officer or the controller of such Person.
"Restricted Deposit Accounts" has the meaning assigned in Section 5.12.
"Restricted Payments" means, in relation to Borrower and its Subsidiaries:
(a) any declaration or payment by Borrower or by any of its Subsidiaries of
any dividends or other distributions on account of, or any payment or
other distribution by Borrower or by any of its Subsidiaries on account
of the purchase, repurchase, redemption, retirement or other
acquisition for value of, any Capital Stock of or any other Equity
Interests in Borrower; and
(b) the making by Borrower or any of its Subsidiaries of any payment or
prepayment (whether of principal, premium, interest or any other sum)
of or on account of, or any payment or other distribution by Borrower
or any of its Subsidiaries on account of the redemption, repurchase,
defeasance or other acquisition for value of, any Subordinated Debt of
any kind whatsoever.
"Restricted Subsidiaries" means, collectively, GeneShield, Inc., GeneScreen,
Inc., and Lifecodes Corporation.
"Revolving Maturity Date" means December 22, 2003.
"Security Agreement" means the Security Agreement, in or substantially in the
form of Exhibit J, to be executed and delivered by Borrower and each of its
Subsidiaries.
"Security Instrument" means any security agreement, assignment, pledge
agreement, financing or other similar statement or notice, continuation
statement, other agreement or instrument, or any amendment or supplement to any
thereof, creating, governing or providing for, evidencing or perfecting any
security interest or Lien.
"SOS Report" means any official report from the Secretary of State of any
Collateral State, Chief Executive Office State, Credit Party State or other
applicable federal, state, local or foreign government office identifying
current security interests and Liens filed on or against all or any part of the
Collateral and Liens of record on all or any part of the Collateral as of the
date of such report.
"Subordinated Debt" means any Indebtedness, obligations or other liabilities
incurred by Borrower or by any of its Subsidiaries that are subordinated in
writing to the Obligations on terms reasonably satisfactory to Bank in form and
substance (and identified as being "Subordinated Debt" for purposes of this
Agreement by Borrower and Bank).
"Subsidiary" means, in relation to any Person, any corporation, partnership or
limited liability company or joint venture in which (a) any general partnership
interest, or (b) more than 50% of the Equity Interests of which by the terms
thereof hold ordinary voting power to elect the board of directors, managers or
trustees of the entity, at the time as of which any determination is being made,
is owned by such first Person, either directly or through an Affiliate of such
first Person.
"Subsidiary Guarantors" means, collectively, all direct or indirect Subsidiaries
of Borrower that shall from time to time be party to or otherwise bound by any
of the Guaranties.
"Trademarks" means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections.
"Transfer" has the meaning specified in Section 7.1.
"Treasury Management Service Agreement" means the Treasury Management Service
Agreement, in or substantially in the form of Exhibit F, to be duly executed and
delivered by Borrower and by each Domestic Subsidiary that is a Restricted
Subsidiary.
"Turtle Asset Sale" means the sale by Borrower of the Orchid Diagnostics
business located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, such business to
consist of those assets and operations of Borrower relating to the provision of
products and services for genetic diagnostic testing, including HLA genotyping,
disease susceptibility testing and immunogenetics, as described by Borrower on
its corporate website and in its SEC Form 10-Q filing for the period ended June
30, 2002. The material terms and conditions of the proposed Turtle Asset Sale
are set forth in that certain Letter of Intent, dated October 28, 2002, between
a third party and the Borrower (the "Turtle Letter of Intent").
"UK Subsidiary" means Orchid BioSciences Europe Limited, a private company
limited by shares incorporated under the Companies ▇▇▇ ▇▇▇▇, and a wholly-owned
Subsidiary of the Borrower.
"Unrestricted Deposit Account" has the meaning assigned in Section 5.12.
"Unused Commitment Amount" means, for any period, the average for such period of
the excess, determined daily, of the Commitment of Bank from time to time in
effect under the Committed Revolving Line during such period, over the aggregate
principal amount of all Advances from time to time outstanding during such
period.
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