EXHIBIT 10.20(c)
LOAN AND SECURITY AGREEMENT
by and between
ATHEROGENICS, INC.,
as Borrower
and
SILICON VALLEY BANK,
as Bank
MARCH 6, 2002
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT dated March 6, 2002, between
SILICON VALLEY BANK ("Bank"), whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and having a loan production office at
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and
ATHEROGENICS, INC., a corporation organized and in good standing in
the State of Georgia ("Borrower"), whose address is ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ provides the terms on which Bank
will lend to Borrower and Borrower will repay Bank. The parties agree
as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be
construed following GAAP. Calculations and determinations must be
made following GAAP. The term "financial statements" includes the
notes and schedules. The terms "including" and "includes" always
mean "including (or includes) without limitation," in this or any
Loan Document.
2 LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay.
Borrower promises to pay Bank the unpaid principal amount of
all Credit Extensions and interest on the unpaid principal amount of
the Credit Extensions.
2.1.1 Revolving Advances.
(a) Bank will make Advances not exceeding the Committed
Revolving Line subject to the terms set forth herein. Amounts borrowed
under this Section may be repaid and reborrowed at any time and from
time to time during the term of this Agreement, prior to the occurrence
and continuance of any Event of Default. All Advances shall be
evidenced by the Revolving Promissory Note to be executed and delivered
by Borrower to Bank on the Closing Date and shall be repaid in
accordance with the terms of the Revolving Promissory Note.
(b) Notwithstanding anything provided herein or in any of the
Loan Documents to the contrary, in the event that at any time prior to
the Revolving Maturity Date, a material failure of the Borrower's
AGI-1067 compound ("Compound") in either phase II or phase III of the
clinical studies related to the Compound occurs, including, without
limitation, a discontinuation of any trial or clinical study, a material
change in any trial or clinical study design, or the failure to
demonstrate significant statistical benefits along primary endpoints of
any trial or clinical study, which results in Borrower terminating the
trial or ceasing development of AGI-1067, then in such event, Bank shall
no longer have any obligation to make any Advance to Borrower and all
outstanding Advances, along with all accrued interest thereon and any
other Obligations related to the Committed Revolving Line shall
automatically be due and payable upon demand, unless prior to such
demand no Event of Default shall have occurred and be continuing
hereunder and Borrower shall make the Certificate of Deposit Assignment
in favor of Bank.
(c) To obtain an Advance, Borrower must notify Bank by facsimile
or telephone by 3:00 p.m. Eastern time on the Business Day the Advance
is to be made. Borrower must promptly confirm the notification by
delivering to Bank the Payment/Advance Request Form attached as
Exhibit B (the "Payment/Advance Form"). Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this
Agreement based on instructions from a Responsible Officer or his or
her designee or without instructions if the Advances are necessary to
meet Obligations which have become due. Bank may rely on any telephone
notice given by a person whom Bank reasonably believes is a Responsible
Officer or designee. Borrower will indemnify Bank for any loss Bank
suffers due to such reliance.
(d) The Committed Revolving Line terminates on the Revolving
Maturity Date, when all Advances are immediately payable.
(e) Bank's obligation to lend the undisbursed portion of the
Obligations will terminate if, in Bank's sole but reasonable discretion,
there has been a material adverse change in the general affairs,
management, results of operation, condition (financial or otherwise) or
the prospect of repayment of the Obligations, or there has been any
material adverse deviation by Borrower from the most recent business
plan of Borrower presented to and accepted by Bank prior to the
execution of this Agreement.
2.1.2 Equipment Advances.
(a) Through December __, 2002 (the "Equipment Availability End
Date"), Bank will make advances (each an "Equipment Advance" and,
collectively, the "Equipment Advances") not exceeding the Committed
Equipment Line. The Equipment Advances may only be used to finance or
refinance Equipment purchased on or after one hundred eighty (180) days
before the date of each Equipment Advance. Eligible Equipment may
include equipment purchases made more than one hundred eighty (180) days
before each Equipment Advance at depreciated book value. Equipment
Advances may not exceed one hundred percent (100%) of the equipment
invoice, excluding taxes, shipping, warranty charges, freight discounts
and installation expense. Other Equipment may constitute up to twenty
percent (20%) of the aggregate Equipment Advances. Each Equipment
Advance must be for a minimum of One Hundred Thousand Dollars
($100,000). The number of Equipment Advances is limited to six (6).
To obtain an Equipment Advance, Borrower will deliver to Bank a
completed supplement in substantially the form attached as Exhibit C
("Loan Supplement"), copies of invoices for the Equipment being
financed, together with a UCC Financing Statement, if requested by Bank,
covering the Equipment described on the Loan Supplement, and such
additional information as Bank may request at least four (4) Business
Days before the proposed funding date (the "Funding Date"). If
Borrower satisfies the conditions of each Equipment Advance specified
herein, Bank will disburse such Equipment Advance by internal transfer
to Borrower's deposit account with Bank on the Funding Date.
(b) Bank's obligation to lend the undisbursed portion of the
Committed Equipment Line will terminate if, in Bank's sole but
reasonable discretion, there has been a material adverse change in the
general affairs, management, results of operation, condition (financial
or otherwise) or the prospect of repayment of the Obligations , whether
or not arising from transactions in the ordinary course of business, or
there has been any material adverse deviation by Borrower from the most
recent business plan of Borrower presented to and accepted by Bank
prior to the execution of this Agreement.
2.2 Interest Rate, Payments, Prepayments.
(a) Interest Rate.
(i) In accordance with the Revolving Promissory Note,
Advances accrue interest on the outstanding principal balance at the
Prime Rate, plus one and one half of one percent (1.5%) per annum;
provided that at all times during which Borrower's Liquidity is less
than two and one half (2.5) times the outstanding amount of all Credit
Extensions or Borrower maintains less than six (6) months Remaining
Months Liquidity, as determined pursuant to the financial statements to
be delivered to Bank pursuant to Section 6.2(a), then the unpaid
Principal Sum at all such times shall automatically and without notice
to Borrower bear interest at the Prime Rate, plus two percent (2%) per
annum. The rate of interest charged shall change immediately and
contemporaneously with any change in the Prime Rate.
(ii) Equipment Advances accrue interest on the outstanding
principal balance at a per annum rate equal to the greater of (i) a
fixed rate equal to the Prime Rate as of the Funding Date, plus Three
Percent (3%) or (ii) Seven and One Half of One Percent (7.5%);
(iii) After and during the continuance of an Event of
Default, Obligations accrue interest at five percent (5%) above the
rate effective immediately before the Event of Default. The interest
rate on the Committed Revolving Line increases or decreases when the
Prime Rate changes. Interest is computed on a 360 day year for the
actual number of days elapsed.
(b) Payments.
(i) Interest due on the Committed Revolving Line is payable
in accordance with the Revolving Promissory Note.
(ii) Borrower will repay the Equipment Advances in Thirty
Three (33) equal installments of principal and interest commencing on
the first Business Day of the month following the Funding Date (or
commencing on the Funding Date if the Funding Date is the first Business
Day of the month) with respect to such Equipment Advance and continuing
thereafter on the first Business Day of each calendar month (each a
"Payment Date"). All unpaid principal and interest is due and payable
in full on the last Payment Date with respect to such Equipment Advance.
Unless the Funding Date is the first Business Day of the month, in
addition to the payments described above, Borrower shall pay to Bank on
the Funding Date an amount equal to the Equipment Advance multiplied by
a daily rate of 0.05% for the number of days from the Funding Date to
the first Payment Date for such Equipment Advance.
(iii) Bank may debit any of Borrower's deposit accounts
including Account Number ________________ for principal and interest
payments owing or any other amounts Borrower owes Bank under any of the
Loan Documents when due. Bank will promptly notify Borrower when it
debits Borrower's accounts. These debits are not a set-off. Payments
received after 3:00 p.m. Eastern time are considered received at the
opening of business on the next Business Day. When a payment is due
on a day that is not a Business Day, the payment is due the next
Business Day and additional interest accrues.
(c) Permitted Prepayment of Equipment Advances. Borrower may
voluntarily prepay all or any portion of any Equipment Advance upon not
less than thirty (30) Business Days notice to Bank, provided any such
prepayment is accompanied by a prepayment fee equal to (i) three percent
(3%) of the amount of principal prepaid if the prepayment occurs within
the first twelve (12) months from the date of the Equipment Advance;
(ii) two percent (2%) of the amount of principal prepaid if the
prepayment occurs on or after the first twelve (12) months, and prior
to the twenty fourth (24th) month from the date of the Equipment
Advance; and (iii) one percent (1%) of the amount of principal prepaid
at all times on or after the first twenty four (24) months from the date
of the Equipment Advance and prior to the maturity date thereof. In
addition to the above prepayment fee, at the time of any such
prepayment, Borrower must pay, on the date of the prepayment (A) all
unpaid accrued interest to the date of the prepayment; and (B) all other
sums, if any, that shall have become due and payable hereunder with
respect to this Agreement.
2.3 Fees.
Borrower will pay:
(a) Facility Fees. Fully earned, nonrefundable fees in the
amount of (i) Twenty Five Thousand Dollars ($25,000) with respect to
the Committed Revolving Line, and (ii) Twenty Five Thousand Dollars
($25,000) with respect to the Committed Equipment Line.
(b) Bank Expenses. All Bank Expenses (including reasonable
attorneys' fees and reasonable expenses) incurred through and after
the date of this Agreement, are payable when due.
(c) Non-Use Fee. A fully earned, nonrefundable fee in the
amount of (i) Ten Thousand Dollars ($10,000) if Bank does not make any
Advance by March 5, 2003; and (ii) an additional Five Thousand Dollars
($5,000) if Bank does not make any Advance by March 5, 2004.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension.
Bank's obligation to make the initial Credit Extension is subject
to the
condition precedent that Bank shall have received, in form and
substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(c) the Revolving Promissory Note, the Equipment
Term Note, the negative pledge agreement covering intellectual property;
(d) financing statements (Forms UCC-1);
(h) insurance certificate;
(i) payment of the fees and Bank Expenses then due
specified in Section 2.3 hereof; and
(j) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions.
Bank's obligations to make each Credit Extension, including the
initial Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form and/or Loan
Supplement; and
(b) the representations and warranties in Section 5 must be
true on the date of the Payment/Advance Form and on the effective date
of each Credit Extension and no Event of Default may have occurred and
be continuing, or result from the Credit Extension. Each Credit
Extension is Borrower's representation and warranty on that date that
the representations and warranties of Section 5 remain true.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest.
Borrower grants Bank a continuing security interest in all
presently existing and later acquired Collateral to secure all
Obligations and performance of each of Borrower's duties under the Loan
Documents. Except for Permitted Liens, any security interest will be a
first priority security interest in the Collateral. Bank upon the
occurrence and during the continuance of any Event of Default, may
place a "hold" on any deposit account of Borrower maintained with Bank.
If this Agreement is terminated, Bank's lien and security interest in
the Collateral will continue until Borrower fully satisfies its
Obligations. Bank acknowledges and agrees that upon written request of
Borrower it will release its lien on the Collateral, provided that prior
to any such release becoming effective, Borrower makes the Certificate
of Deposit Assignment described in Section 4.2 hereof in favor of Bank
and Bank and Borrower each acknowledge and agree that at all times
thereafter, all references in the Loan Agreement to the "Collateral"
shall be deemed to mean the Certificate of Deposit pledged to Bank
pursuant to the Certificate of Deposit Assignment.
4.2 Certificate of Deposit Collateral.
(a) In the event that an Event of Default occurs (except with
respect to an Event of Default occurring under Sections 8.1, 8.5, 8.8
or 8.9), Borrower may cure such Event of Default by immediately granting
Bank a first priority security interest in one or more certificates of
deposit owned by Borrower and issued by Bank in an aggregate face amount
equal to not less than one hundred and five percent (105%) of the then
outstanding Obligations (the "Certificate of Deposit") by executing and
delivering to Bank (i) an Assignment of Certificate of Deposit in
substantially the form attached hereto as Exhibit E and (ii) such other
financing statements, documents and instruments reasonably required by
Bank and its counsel to grant Bank a first priority security interest in
the Certificate of Deposit (the "Certificate of Deposit Assignment").
(b) Borrower may also at anytime prior to the occurrence and
during the continuance of an Event of Default, elect to provide the
Certificate of Deposit Assignment as provided for in Sections 2.1.1(b)
and 4.1 hereof.
(c) In all cases, if at any time after making the Certificate of
Deposit Assignment, the Certificate of Deposit does not equal or exceed
one hundred and five percent (105%) of the outstanding Obligations,
Borrower shall immediately either increase the Certificate of Deposit
or make a payment on the Obligations in an amount equal to the
difference between one hundred five percent (105%) of the outstanding
Obligations and the face amount of the Certificate of Deposit. Failure
to make such payment or increase the Certificate of Deposit shall be
deemed without notice to be an Event of Default under this Agreement.
(d) With respect to any Assignment of Certificate of Deposit
given to Bank in accordance with Section 4.1 of this Agreement, such
Assignment of Certificate of Deposit will remain in force and effect
until the Obligations have been repaid in full and there is no further
commitment on the part of the Bank to make any further Credit Extensions
to the Borrower under any of the Loan Documents.
(e) With respect to any Assignment of Certificate of Deposit
given to Bank in accordance with subsection (a) of this Section in order
to waive an Event of Default, such Assignment of Certificate of Deposit
will remain in force and effect until the earlier of the date that
(i) the Obligations have been repaid in full and there is no further
commitment on the part of the Bank to make any further Credit Extensions
to the Borrower under any of the Loan Documents, or (ii) the Event of
Default which gives rise to the delivery of the Assignment of
Certificate of Deposit has been waived in writing by Bank or cured to
the satisfaction of Bank in its sole, but reasonable discretion.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Authorization.
Borrower is duly existing and in good standing in the state of
Georgia and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its
ownership of property requires that it be qualified, except where the
failure to do so could not reasonably be expected to cause a Material
Adverse Change. Borrower and each Subsidiary's exact legal name is as
set forth on the first page of this Agreement. The execution, delivery
and performance of the Loan Documents have been duly authorized, and do
not conflict with Borrower's formation documents, nor constitute an
event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which, or by
which it is bound, in which the default could reasonably be expected to
cause a Material Adverse Change.
5.2 Collateral.
Borrower has good title to the Collateral, free of Liens except
Permitted Liens. The Accounts are bona fide, existing obligations, and
the service or property has been performed or delivered to the account
debtor or its agent for immediate shipment to and unconditional
acceptance by the account debtor. All Inventory is in all material
respects of good and marketable quality, free from material defects.
Borrower is the sole owner of the Intellectual Property, except for
licenses granted to its customers in the ordinary course of business.
Each Patent 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 that any part of the Intellectual Property
violates the rights of any third party, except to the extent such claim
could not reasonably be expected to cause a Material Adverse Change.
5.3 Litigation.
There are no actions or proceedings pending or, to the knowledge
of Borrower's Responsible Officers, threatened by or against Borrower
or any Subsidiary in which a likely adverse decision could reasonably
be expected to cause a Material Adverse Change.
5.4 No Material Adverse Change in Financial Statements.
The consolidated financial statements for Borrower, and any
Subsidiary, delivered to Bank fairly present in all material respects
Borrower's consolidated financial condition and Borrower's consolidated
results of operations as of the respective dates of such financial
statements. There has not been any Material Adverse Change since the
date of the most recent consolidated financial statements submitted to
Bank.
5.5 Solvency.
The fair salable value of Borrower's assets (including goodwill
minus disposition costs) exceeds the fair value of its liabilities; the
Borrower is not left with unreasonably small capital after the
transactions in this Agreement or any of the Loan Documents; and
Borrower is able to pay its debts (including trade debts) as they
mature.
5.6 Regulatory Compliance.
Borrower is not an "investment company" or a company "controlled"
by an "investment company" under the Investment Company Act. Borrower
is not engaged as one of its important activities in extending credit
for margin stock (under Regulations T and U of the Federal Reserve
Board of Governors). Borrower has complied in all material respects
with the Federal Fair Labor Standards Act. Borrower has not violated
any laws, ordinances or rules, the violation of which could reasonably
be expected to cause a Material Adverse Change. None of Borrower's or
any Subsidiary's properties or assets has been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous Persons,
in disposing, producing, storing, treating, or transporting any
hazardous substance other than legally. Borrower and each Subsidiary
has timely filed all required tax returns and paid, or made adequate
provision to pay, all material taxes, except those being contested in
good faith with adequate reserves under GAAP. Borrower and each
Subsidiary has obtained all consents, approvals and authorizations of,
made all declarations or filings with, and given all notices to, all
government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not
reasonably be expected to cause a Material Adverse Change.
5.7 Subsidiaries.
Borrower does not own any stock, partnership interest or other
equity securities except for Permitted Investments.
5.8 Full Disclosure.
No written representation, warranty or other statement of Borrower
in any certificate or written statement given to Bank to induce Bank to
enter into this Agreement or pursuant to this Agreement (taken together
with all such written certificates and written statements to Bank)
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the
certificates or statements not misleading. It being recognized by Bank
that the projections and forecasts provided by Borrower in good faith
and based upon reasonable assumptions are not viewed as facts and that
actual results during the period or periods covered by such projections
and forecasts may differ from the projected and forecasted results.
6 AFFIRMATIVE COVENANTS
Borrower will do all of the following for so long as Bank has an
obligation to make any Credit Extension, or there are outstanding
Obligations:
6.1 Government Compliance.
Borrower will maintain its and all Subsidiaries' legal existence
and good standing as a Registered Organization in only its current state
of incorporation and maintain qualification in each jurisdiction in
which the failure to so qualify would reasonably be expected to cause a
material adverse effect on Borrower's business or operations. Borrower
will comply, and have each Subsidiary comply, with all laws, ordinances
and regulations to which it is subject, noncompliance with which could
have a material adverse effect on Borrower's business or operations or
would reasonably be expected to cause a Material Adverse Change.
6.2 Financial Statements, Reports, Certificates.
(a) Borrower will deliver to Bank: (i) within five (5) days of
filing, copies of all statements, reports and notices made available to
Borrower's security holders or to any holders of Subordinated Debt and
all reports on Form 10-K, 10-Q and 8-K filed with the SEC; (ii) on the
Closing Date and within thirty (30) days of the end of each of the
Borrower's fiscal years, a copy of the quarterly projections of the
Borrower for the then current fiscal year approved by the Borrower's
Board of Directors; (iii) a prompt report of any legal actions pending
or threatened against Borrower or any Subsidiary that could result in
damages or costs to Borrower or any Subsidiary of $250,000 or more;
(iv) budgets, sales projections, operating plans or other financial
information Bank reasonably requests; and (v) prompt notice of any
material change in the composition of the Intellectual Property,
including any subsequent ownership right of Borrower in or to any
Copyright, Patent or Trademark or knowledge of an event that materially
adversely affects the value of the Intellectual Property.
Notwithstanding anything provided herein or in any Loan Document to the
contrary, at all times in which Borrower shall fail to maintain
(i) Liquidity equal or greater to two and one half (2.5) times the
outstanding Obligations, or (ii) six (6) months Remaining Months
Liquidity, based on the quarterly financial statements to be provided
to Bank pursuant to Section 6.2(a)(i) above, Borrower shall deliver to
Bank as soon as available, but no later than thirty (30) days after the
end of each month, a company prepared consolidated balance sheet and
income statement covering Borrower's consolidated operations during the
period in a form acceptable to Bank, accompanied by the Compliance
Certificate described in Section 6.2(b) and the financial covenants set
forth in Section 6.7 shall be measured as of the end of each month
during any such period.
(b) All reports on Form 10-K, 10-Q and 8-K and all financial
statements delivered to Bank pursuant to Section 6.2(a) above shall be
accompanied by a Compliance Certificate signed by a Responsible Officer
in the form of Exhibit D.
6.3 Inventory; Returns.
Borrower will keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between Borrower and
its account debtors will follow Borrower's customary practices as they
exist at execution of this Agreement. Borrower must promptly notify
Bank of all returns, recoveries, disputes and claims, that involve more
than $100,000.
6.4 Taxes.
Borrower will make, and cause each Subsidiary to make, timely
payment of all material federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting in good
faith, with adequate reserves maintained in accordance with GAAP) and
will deliver to Bank, on demand, appropriate certificates attesting to
the payment.
6.5 Insurance.
Borrower will keep its business and the Collateral insured for
risks and in amounts standard for Borrower's industry, and as Bank may
reasonably request. Insurance policies will be in a form, with
companies, and in amounts that are satisfactory to Bank in Bank's
reasonable discretion. All property policies will have a lender's loss
payable endorsement showing Bank as an additional loss payee and all
liability policies will show the Bank as an additional insured and
provide that the insurer must give Bank at least twenty (20) days
notice before canceling its policy. At Bank's request, Borrower will
deliver certified copies of policies and evidence of all premium
payments. Proceeds payable under any policy will, at Bank's option, be
payable to Bank on account of the Obligations.
6.6 Primary Accounts.
Borrower will maintain its primary depository and operating
accounts with Bank and shall maintain account balances in such accounts
at all times equal to an aggregate of at least Fifteen Million Dollars
($15,000,000).
6.7 Financial Covenants.
Borrower will maintain as of the last day of each of Borrower's
fiscal quarters (subject to being measured monthly pursuant to
Section 6.2(a) hereof):
(a) Liquidity. Borrower shall maintain Liquidity equal
to the sum of (i) two (2) times the outstanding Obligations and (but
not additive) (ii) four (4) months Remaining Months Liquidity.
(b) Maximum Cumulative Quarterly Losses. Borrower's
maximum Cumulative Quarterly Losses shall not exceed the projected
cumulative quarterly losses approved by Borrower's Board of Directors
and delivered to Bank prior to the Closing Date by more than twenty
percent (20%).
6.8 Registration of Intellectual Property Rights.
Borrower will register with the United States Patent and
Trademark Office or the United States Copyright Office its Copyrights,
Patents and Trademarks and additional Copyright, Patent and Trademark
rights developed or acquired by Borrower, other than those which are
immaterial to Borrower's business, including revisions or additions
with any product before the sale or licensing of the product to any
third party. Borrower will (i) protect, defend and maintain to the
extent permitted under any license relating to such Intellectual
Property the validity and enforceability of the Intellectual Property
and promptly advise Bank in writing of material infringements and
(ii) not allow any Intellectual Property material to Borrower's
business to be abandoned, forfeited or dedicated to the public without
Bank's written consent.
6.9 Further Assurances.
Borrower will execute any further instruments and take further
action as Bank reasonably requests to perfect or continue Bank's
security interest in the Collateral or to effect the purposes of this
Agreement.
7 NEGATIVE COVENANTS
Borrower will not do any of the following without Bank's prior
written consent, for so long as Bank has an obligation to make Credit
Extensions or there are any outstanding Obligations:
7.1 Dispositions.
Convey, sell, lease, transfer or otherwise dispose of
(collectively "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, except for
Transfers (i) of Inventory in the ordinary course of business; (ii) of
licenses and similar arrangements for the use of the property of
Borrower or its Subsidiaries in the ordinary course of business;
(iii) of worn-out or obsolete Equipment, (iv) which in the aggregate do
not exceed $100,000, or (v) to any Subsidiary of Borrower, provided that
at the time of any such Transfer, such Subsidiary has been added to this
Agreement and each Loan Document as a co-obligor and grants to Bank a
perfected first priority Lien on its assets (other than any intellectual
property), pursuant to a joinder agreement in form and substance
satisfactory to Bank and its counsel.
7.2 Changes in Business, Ownership, Management or Business Locations.
Engage in or permit any of its Subsidiaries to engage in any
business other than the businesses currently engaged in by Borrower or
reasonably related thereto or have a change in its ownership of greater
than twenty five percent (25%) (other than by the sale of Borrower's
equity securities in a public offering or to venture capital investors
so long as Borrower identifies and advises Bank of the venture capital
investors prior to the closing of the investment). Borrower will not,
without at least thirty (30) days prior written notice, change its
state of formation, relocate its chief executive office or add any new
offices or business locations.
7.3 Mergers or Acquisitions.
Merge or consolidate, or permit any of its Subsidiaries to merge
or consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock
or property of another Person, except where (i) no Event of Default has
occurred and is continuing or would result from such action during the
term of this Agreement and (ii) such transaction would not result in a
decrease of more than twenty five percent (25%) of Tangible Net Worth.
A Subsidiary may merge or consolidate with or into another Subsidiary or
with or into Borrower.
7.4 Indebtedness.
Create, incur, assume, or be liable for any Indebtedness, or
permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance.
Create, incur, or allow any Lien on any of its property, or assign
or convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries to do so, except for
Permitted Liens, or permit any Collateral not to be subject to the
first priority security interest granted here, subject to Permitted
Liens.
7.6 Distributions; Investments.
Directly or indirectly acquire or own any Person, or make any
Investment in any Person, other than Permitted Investments, or permit
any of its Subsidiaries to do so. Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital stock,
provided, however, that prior to the occurrence and continuance of any
Event of Default, Borrower may pursuant to its stock option plans and
agreements, warrant agreements and Reload Common Stock Rights Agreement
make such payments or redemptions.
7.7 Transactions with Affiliates.
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for the transaction
described on Schedule 7.7, alternative minimum tax loans to officers of
Borrower authorized by its Board of Directors 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 nonaffiliated Person.
7.8 Subordinated Debt.
Make or permit any payment on any Subordinated Debt, except under
the terms of the Subordinated Debt, or amend any provision in any
document relating to the Subordinated Debt without Bank's prior written
consent.
7.9 Compliance.
Become an "investment company" or a company controlled by an
"investment company," under the Investment Company Act of 1940 or
undertake as one of its important activities extending credit to
purchase or carry margin stock, or use the proceeds of any Credit
Extension for that purpose; fail to meet the minimum funding
requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation,
if the violation could reasonably be expected to have a material
adverse effect on Borrower's business or operations or would reasonably
be expected to cause a Material Adverse Change, or permit any of its
Subsidiaries to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 Payment Default.
If Borrower fails to pay any of the Obligations within three (3)
Business Days of when due;
8.2 Covenant Default.
If Borrower does not perform any obligation in Section 6 or
violates any covenant in Section 7; or if Borrower does not perform or
observe any other material term, condition or covenant in this
Agreement, any Loan Documents, or in any agreement between Borrower and
Bank and as to any default under a term, condition or covenant that can
be cured, has not cured the default within ten (10) days after it
occurs, or if the default cannot be cured within ten (10) days or cannot
be cured after Borrower's attempts within ten (10) day period, and the
default may be cured within a reasonable time, then Borrower has an
additional period (of not more than thirty (30) days) to attempt to cure
the default. During the additional time, the failure to cure the
default is not an Event of Default (but no Credit Extensions will be
required to be made during the cure period);
8.3 Material Adverse Change.
If there (i) occurs a material adverse change in the business,
operations, or condition (financial or otherwise) of the Borrower, or
(ii) is a material impairment of the prospect of repayment of any
portion of the Obligations or (iii) is a material impairment of the
value or priority of Bank's security interests in the Collateral
((i) - (iii) each being a "Material Adverse Change").
8.4 Attachment.
If any material portion of Borrower's assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in ten (10) days, or if
Borrower is enjoined, restrained, or prevented by court order from
conducting a material part of its business or if a judgment or other
claim becomes a Lien on a material portion of Borrower's assets, or if
a notice of lien, levy, or assessment is filed against any of Borrower's
assets by any government agency and not paid within ten (10) days after
Borrower receives notice. These are not Events of Default if stayed or
if a bond is posted pending contest by Borrower (but no Credit
Extensions will be required to be made during the cure period);
8.5 Insolvency.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and
not dismissed or stayed within 30 days (but no Credit Extensions will
be required to be made before any Insolvency Proceeding is dismissed);
8.6 Other Agreements.
If there is a default in any agreement between Borrower and a
third party that gives the third party the right to accelerate any
Indebtedness exceeding $250,000 or that could reasonable be expected to
cause a Material Adverse Change;
8.7 Judgments.
If a money judgment(s) in the aggregate of at least $100,000 is
rendered against Borrower and is unsatisfied and unstayed for 10 days
(but no Credit Extensions will be required to be made before the
judgment is stayed or satisfied);
8.8 Misrepresentations.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty
or representation in this Agreement or in any writing delivered to Bank
or to induce Bank to enter this Agreement or any Loan Document; or
8.9 Subsidiaries.
Any circumstance described in Sections 8.3, 8.4, 8.5 or 8.7 occurs
to any Subsidiary of Borrower.
9 BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies.
When an Event of Default occurs and continues Bank may, without
further notice or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if
an Event of Default described in Section 8.5 occurs all Obligations are
immediately due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's
benefit under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, on terms and in any order that Bank considers
advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower
will assemble the Collateral if Bank requires and make it available as
Bank designates. Bank may enter premises where the Collateral is
located, take and maintain possession of any part of the Collateral,
and pay, purchase, contest, or compromise any Lien which appears to be
prior or superior to its security interest and pay all expenses
incurred. Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank's rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of
Borrower with Bank or its Affiliate it holds, or (ii) any amount held
by Bank owing to or for the credit or the account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell the Collateral. Bank is
granted a non-exclusive, royalty-free license or other right to use,
without charge, Borrower's labels, Copyrights, rights of use of any
name, trade names, Trademarks, service marks, and advertising matter,
or any similar property constituting the Collateral, in completing
production of, advertising for sale, and selling any Collateral and,
in connection with Bank's exercise of its rights under this Section,
Borrower's rights under all licenses and all franchise agreements
constituting Collateral inure to Bank's benefit, it being understood
and agreed that nothing in this Section shall be deemed to create a
security interest in any intellectual property described in this
Section; and
(g) Dispose of the Collateral according to the Code.
9.2 Power of Attorney.
Effective only when an Event of Default occurs and continues,
Borrower irrevocably appoints Bank as its lawful attorney to:
(i) endorse Borrower's name on any checks or other forms of payment or
security; (ii) sign Borrower's name on any invoice or ▇▇▇▇ of lading
for any Account or drafts against account debtors, (iii) make, settle,
and adjust all claims under Borrower's insurance policies; (iv) settle
and adjust disputes and claims about the Accounts directly with account
debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as
the Code permits. Bank may exercise the power of attorney to sign
Borrower's name on any documents necessary to perfect or continue the
perfection of any security interest regardless of whether an Event of
Default has occurred. Bank's appointment as Borrower's attorney in
fact, and all of Bank's rights and powers, coupled with an interest,
are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.
9.3 Accounts Collection.
When an Event of Default occurs and continues, Bank may notify
any Person owing Borrower money of Bank's security interest in the funds
and verify the amount of the Account, and Borrower must collect all
payments in trust for Bank and, if requested by Bank, immediately
deliver the payments to Bank in the form received from the account
debtor, with proper endorsements for deposit.
9.4 Bank Expenses.
If Borrower fails to pay any amount or furnish any required proof
of payment to third persons, Bank may make all or part of the payment or
obtain insurance policies required in Section 6.5, and take any action
under the policies Bank deems prudent. Any amounts paid by Bank under
this Agreement are Bank Expenses and immediately due and payable,
bearing interest at the then applicable rate and secured by the
Collateral. No payments by Bank are deemed an agreement to make similar
payments in the future or Bank's waiver of any Event of Default.
9.5 Bank's Liability for Collateral.
If Bank complies with reasonable banking practices and the Code,
it is not liable for: (a) the safekeeping of the Collateral; (b) any
loss or damage to the Collateral; (c) any diminution in the value of
the Collateral; or (d) any act or default of any carrier, warehouseman,
bailee, or other person. Except as provided in the preceding sentence,
Borrower bears all risk of loss, damage or destruction of the
Collateral.
9.6 Remedies Cumulative.
Bank's rights and remedies under this Agreement, the Loan
Documents, and all other agreements are cumulative. Bank has all
rights and remedies provided under the Code, by law, or in equity.
Bank's exercise of one right or remedy is not an election, and Bank's
waiver of any Event of Default is not a continuing waiver. Bank's delay
is not a waiver, election, or acquiescence. No waiver is effective
unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.
9.7 Demand Waiver.
Borrower waives demand, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on
which Borrower is liable.
10 NOTICES
All notices or demands by any party about this Agreement or any
other related agreement must be in writing and be personally delivered
or sent by an overnight delivery service, by certified mail, postage
prepaid, return receipt requested, or by telefacsimile to the addresses
set forth at the beginning of this Agreement, or by telefacsimile to
Borrower at (▇▇▇) ▇▇▇-▇▇▇▇ or Bank at (▇▇▇) ▇▇▇-▇▇▇▇, with a copy of all
notices to Borrower to Long ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Attention ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ and with a copy of all notices to Bank to ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇. All notices given
by telefacsimile shall be followed by a copy given by a second means as
provided above. A party may change its notice address by giving the
other party written notice.
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Georgia law governs the Loan Documents without regard to
principles of conflicts of law. Borrower and Bank each submit to the
exclusive jurisdiction of the State and Federal courts in the State of
Georgia provided, however, that if for any reason the Bank can not avail
itself of the courts of the State of Georgia, the Borrower and Bank each
submit to the jurisdiction of the State and Federal Courts in Santa
▇▇▇▇▇ County, California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND
ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES
TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH
ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 Successors and Assigns.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement
or any rights under it without Bank's prior written consent which may
be granted or withheld in Bank's discretion. Prior to an Event of
Default, Bank will request Borrower's prior consent, which will not be
unreasonably withheld, delayed or conditioned to any sale, transfer or
participation of all or any part of, or any interest under this
Agreement and after the occurrence and during the continuance of an
Event of Default Bank has the right, without the consent of, or notice
to, Borrower, to sell, transfer, negotiate, or grant participation in
all or any part of, or any interest in, Bank's obligations, rights and
benefits under this Agreement.
12.2 Indemnification.
Borrower will indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: (a) all obligations, demands,
claims, and liabilities asserted by any other party in connection with
the transactions contemplated by the Loan Documents; and (b) all losses
arising out of any Loan Document or Bank Expenses incurred, or paid by
Bank from, following, or consequential to transactions between Bank and
Borrower (including reasonable attorneys fees and expenses actually
incurred), 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 of all obligations in
this Agreement.
12.4 Severability of Provision.
Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5 Amendments in Writing, Integration.
All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about
this subject matter, and supersedes prior negotiations or agreements.
All prior agreements, understandings, representations, warranties, and
negotiations between the parties about the subject matter of this
Agreement merge into this Agreement and the Loan Documents.
12.6 Counterparts.
This Agreement may be executed in any number of counterparts and
by different parties on separate counterparts, each of which, when
executed and delivered, are an original, and all taken together,
constitute one Agreement.
12.7 Survival.
All covenants, representations and warranties made in this
Agreement continue in full force while any Obligations remain
outstanding. The obligations of Borrower in Section 12.2 to indemnify
Bank will survive until all statutes of limitations for actions that may
be brought against Bank have run.
12.8 Confidentiality.
In handling any confidential information, Bank will exercise the
same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made (i) to Bank's
subsidiaries or affiliates in connection with their business with
Borrower, (ii) to prospective transferees or purchasers of any interest
in the loans (provided, however, such transferees are consented to if
required under Section 12.1 and further provided, Bank shall use
commercially reasonable efforts in obtaining such prospective
transferee or purchasers agreement of the terms of this provision),
(iii) as required by law, regulation, subpoena, or other order,
(iv) as required in connection with Bank's examination or audit and
(v) as Bank in its reasonable discretion considers appropriate
exercising remedies under this Agreement. Confidential information
does not include information that either: (a) is in the public domain
or in Bank's possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (b) is disclosed to Bank by
a third party, if Bank does not know that the third party is prohibited
from disclosing the information.
12.9 Attorneys' Fees, Costs and Expenses.
In any action or proceeding between Borrower and Bank arising out of
the Loan Documents, the prevailing party will be entitled to recover its
reasonable attorneys' fees and other reasonable costs and expenses
incurred, in addition to any other relief to which it may be entitled.
13 DEFINITIONS
13.1 Definitions.
In this Agreement:
"Accounts" has the meaning set forth in the Code and includes all
existing and later arising accounts, contract rights, and other
obligations owed Borrower in connection with its sale or lease of goods
(including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all
merchandise returned or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing.
"Advance" or "Advances" is a loan advance (or advances) under the
Committed Revolving Line.
"Affiliate" of a Person is a Person that owns or controls directly
or indirectly the Person, any Person that controls or is controlled by
or is under common control with the Person, and each of that Person's
senior executive officers, directors, partners and, for any Person that
is a limited liability company, that Person's managers and members.
"Bank Expenses" are all audit fees and expenses and reasonable
costs and expenses (including reasonable attorneys' fees and expenses
actually incurred by Bank) for preparing, negotiating, administering,
defending and enforcing the Loan Documents (including appeals or
Insolvency Proceedings).
"Borrower's Books" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the
Collateral, business operations or financial condition and all computer
programs or discs or any equipment containing the information.
"Business Day" is any day that is not a Saturday, Sunday or a day
on which the Bank is closed.
"Certificate of Deposit" is defined in Section 4.2.
"Certificate of Deposit Assignment" is defined in Section 4.2.
"Closing Date" is the date of this Agreement.
"Code" is the Uniform Commercial Code, in effect in the State of
Georgia as in effect from time to time. .
"Collateral" means the property described on Exhibit A., provided
however that pursuant to the terms of this Agreement, Collateral may
include the Certificate of Deposit, or as provided in Section 4.1, may
be only the Certificate of Deposit.
"Committed Equipment Line" is a Credit Extension of up to Two
Million Five Hundred Thousand Dollars ($2,500,000).
"Committed Revolving Line" is Advances of up to Five Million
Dollars ($5,000,000).
"Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness,
lease, dividend, letter of credit or other obligation of another such as
an obligation directly or indirectly guaranteed, endorsed, co-made,
discounted or sold with recourse by that Person, or for which that
Person is directly or indirectly liable; (ii) any obligations for
undrawn letters of credit for the account of that Person; and (iii) all
obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but
"Contingent Obligation" does not include endorsements in the ordinary
course of business. The amount of a Contingent Obligation is the stated
or determined amount of the primary obligation for which the Contingent
Obligation is made or, if not determinable, the maximum reasonably
anticipated liability for it determined by the Person in good faith; but
the amount may not exceed the maximum of the obligations under the
guarantee or other support arrangement.
"Copyrights" are all copyright rights, applications or
registrations and like protections in each work or authorship or
derivative work, whether published or not (whether or not it is a trade
secret) now or later existing, created, acquired or held.
"Credit Extension" is each Advance, Equipment Advance or any other
extension of credit by Bank hereunder for Borrower's benefit.
"Cumulative Quarterly Losses" are the Borrower's aggregate Net
Cash Losses for each three (3) month period, commencing January 1, 2002.
"Equipment" has the meaning set forth in the Code and includes all
present and future machinery, equipment, tenant improvements, furniture,
fixtures, vehicles, tools, parts and attachments in which Borrower has
any interest.
"Equipment Advance" is defined in Section 2.1.2.
"Equipment Availability End Date" is defined in Section 2.1.2.
"Equipment Term Note" means that certain Equipment Term Note of
even date herewith in the principal amount of Two Million Five Hundred
Thousand Dollars ($2,500,000) from Borrower in favor of Bank, together
with all renewals, amendments, modifications and substitutions therefor.
"ERISA" is the Employment Retirement Income Security Act of 1974,
and its regulations.
"Financed Equipment" is defined in the Loan Supplement.
"GAAP" is generally accepted accounting principles.
"Indebtedness" is (a) indebtedness for borrowed money or the
deferred price of property or services, such as reimbursement and other
obligations for surety bonds and letters of credit, (b) obligations
evidenced by notes, bonds, debentures or similar instruments,
(c) capital lease obligations and (d) Contingent Obligations.
"Insolvency Proceeding" are proceedings by or against any Person
under the United States Bankruptcy Code, or any other bankruptcy or
insolvency law, including assignments for the benefit of creditors,
compositions, extensions generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"Intellectual Property" is:
(a) Copyrights, Trademarks and Patents including amendments,
renewals, extensions, and all licenses or other rights to use and all
license fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in
computer software and computer software products now or later existing,
created, acquired or held;
(c) All design rights which may be available to Borrower now
or later created, acquired or held;
(d) Any claims for damages (past, present or future) for
infringement of any of the rights above, with the right, but not the
obligation, to ▇▇▇ and collect damages for use or infringement of the
intellectual property rights above;
All Proceeds and products of the foregoing, including all
insurance, indemnity or warranty payments.
"Inventory" has the meaning set forth in the Code and includes
present and future inventory in which Borrower has any interest,
including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for
sale or lease or to be furnished under a contract of service, of every
kind and description now or later owned by or in the custody or
possession, actual or constructive, of Borrower, including inventory
temporarily out of its custody or possession or in transit and including
returns on any accounts or other Proceeds from the sale or disposition
of any of the foregoing and any documents of title.
"Investment" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.
"Letter-of-credit right" means a right to payment or performance
under a letter of credit, whether or not the beneficiary has demanded
or is at the time entitled to demand payment or performance.
"Lien" is a mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Liquidity" is Borrower's unrestricted cash and cash equivalents
deposited at Bank or invested through Bank in a mutual fund account.
"Loan Documents" are, collectively, this Agreement, the Revolving
Promissory Note, the Equipment Term Note, any note, or notes or
guaranties executed by Borrower, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection
with this Agreement, all as amended, extended or restated.
"Loan Supplement" has the meaning set forth in Section 2.1.2(b)
"Material Adverse Change" has the meaning set forth in
Section 8.3.
"Net Cash Losses" shall mean Borrower's trailing three (3) month
average change in cash from operations, in accordance with GAAP, unless
the financial covenants set forth in Section 6.7 herein are being
measured monthly in accordance with Section 6.2(a) herein, in which
case, "Net Cash Losses" shall mean the then current month's change in
cash from operations.
"Obligations" are debts, principal, interest, Bank Expenses and
other amounts Borrower owes Bank now or later, including cash management
services, letters of credit and foreign exchange contracts, if any and
including interest accruing after Insolvency Proceedings begin and
debts, liabilities, or obligations of Borrower assigned to Bank.
"Other Equipment" is leasehold improvements, intangible property
such as computer software and software licenses, equipment specifically
designed or manufactured for Borrower, other intangible property, sales
tax, freight and installation expenses, limited use property and other
similar property.
"Patents" are patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.
"Permitted Indebtedness" is:
(a) Borrower's indebtedness to Bank under this Agreement or any
other Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investments" are:
(a) Investments shown on the Schedule and existing on the
Closing Date; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing
within 1 year from its acquisition, (ii) commercial paper maturing no
more than 1 year after its creation and having at least an A1/P1 rating
from either Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service,
Inc., and (iii) Bank's certificates of deposit issued maturing no more
than 1 year after issue.
"Permitted Liens" are:
(a) Liens existing on the Closing Date and shown on the Schedule
or arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government
charges or levies, either not delinquent or being contested in good
faith and for which Borrower maintains adequate reserves on its Books,
if they have no priority over any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by
Borrower or its Subsidiaries incurred for financing the acquisition of
the Equipment, or (ii) existing on equipment when acquired, if the Lien
is confined to the property and improvements and the Proceeds of the
equipment;
(d) Licenses or sublicenses granted in the ordinary course of
Borrower's business and any interest or title of a licensor or under any
license or sublicense, if the licenses and sublicenses permit granting
Bank a security interest;
(e) Leases or subleases granted in the ordinary course of
Borrower's business, including in connection with Borrower's leased
premises or leased property;
(f) Liens incurred in the extension, renewal or refinancing of
the indebtedness secured by Liens described in (a) through (c), but any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the
indebtedness may not increase.
"Person" is any individual, sole proprietorship, partnership,
limited liability company, joint venture, company association, trust,
unincorporated organization, association, corporation, institution,
public benefit corporation, firm, joint stock company, estate, entity
or government agency.
"Proceeds" has the meaning described in the Code as in effect from
time to time.
"Prime Rate" is Bank's most recently announced "prime rate," even
if it is not Bank's lowest rate.
"Registered Organization" means an organization organized solely
under the law of a single state or the United States and as to which the
state or the United States must maintain a public record showing the
organization to have been organized.
"Remaining Months Liquidity" shall mean Liquidity, minus all
outstanding Obligations divided by Net Cash Losses.
"Responsible Officer" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Sr. Director of Finance
and Administration of Borrower.
"Revolving Maturity Date" is September 5, 2004.
"Revolving Promissory Note" means that certain Revolving
Promissory Note of even date herewith in the maximum principal amount of
Five Million Dollars ($5,000,000) from Borrower in favor of Bank,
together with all renewals, amendments, modifications and substitutions,
therefor.
"Schedule" is any attached schedule of exceptions.
"Subordinated Debt" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a
written agreement in a manner and form acceptable to Bank and approved
by Bank in writing.
"Subsidiary" is for any Person, or any other business entity of
which more than 50% of the voting stock or other equity interests is
owned or controlled, directly or indirectly, by the Person or one or
more subsidiaries of the Person.
"Supporting Obligation" means a Letter-of-credit right, secondary
obligation or obligation of a secondary obligor or that supports the
payment or performance of an account, chattel paper, a document, a
general intangible, an instrument or investment property.
"Tangible Net Worth" is, on any date, the consolidated total
assets of Borrower and its Subsidiaries minus, (i) any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized
debt discount and expense, Patents, trade and service marks and names,
Copyrights and research and development expenses except prepaid
expenses, and (c) reserves not already deducted from assets, and
(ii) Total Liabilities.
"Trademarks" are trademark and servicemark rights, registered or
not, applications to register and registrations and like protections,
and the entire goodwill of the business of Borrower connected with the
trademarks.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
BORROWER:
ATHEROGENICS, INC.
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer and Secretary
BANK:
SILICON VALLEY BANK
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
SILICON VALLEY BANK
By:
Name:
Title: