Exhibit 10.1
Form 8-K
Viking Systems, Inc.
File No. 000-49636
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LOAN AND SECURITY AGREEMENT
VIKING SYSTEMS, INC.
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TABLE OF CONTENTS
Page
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1 ACCOUNTING AND OTHER TERMS..............................................4
2 LOAN AND TERMS OF PAYMENT..............................................4
2.1 Promise to Pay...................................................4
2.2 Overadvances.....................................................4
2.3 Interest Rate, Payments..........................................4
2.4 Fees.............................................................5
3 CONDITIONS OF LOANS....................................................5
3.1 Conditions Precedent to Initial Credit Extension.................5
3.2 Conditions Precedent to all Credit Extensions....................5
4 CREATION OF SECURITY INTEREST..........................................5
4.1 Grant of Security Interest.......................................5
5 REPRESENTATIONS AND WARRANTIES.........................................5
5.1 Due Organization and Authorization...............................6
5.2 Litigation.......................................................6
5.3 Regulatory Compliance............................................6
5.4 Investments in Subsidiaries......................................6
5.5 Full Disclosure..................................................6
6 AFFIRMATIVE COVENANTS..................................................6
6.1 Government Compliance............................................7
6.2 Financial Statements, Reports, Certificates......................7
6.3 Taxes............................................................7
6.4 Insurance........................................................7
6.5 Primary Accounts.................................................8
6.6 Further Assurances...............................................8
7 NEGATIVE COVENANTS.....................................................8
7.1 Dispositions.....................................................8
7.2 Changes in Business, Ownership, Management or Locations of
Collateral.....................................................8
7.3 Mergers or Acquisitions..........................................8
7.4 Indebtedness.....................................................8
7.5 Encumbrance......................................................9
7.6 Distributions; Investments.......................................9
7.7 Transactions with Affiliates.....................................9
7.8 Subordinated Debt................................................9
7.9 Compliance.......................................................9
8 EVENTS OF DEFAULT......................................................9
8.1 Payment Default..................................................9
8.2 Covenant Default.................................................9
8.3 Material Adverse Change..........................................10
8.4 Attachment.......................................................10
8.5 Insolvency.......................................................10
8.6 Other Agreements.................................................10
8.7 Judgments........................................................10
8.8 Misrepresentations...............................................10
8.9 Pledge Agreement.................................................10
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9 BANKS RIGHTS AND REMEDIES..............................................11
9.1 Rights and Remedies..............................................11
9.2 Remedies Cumulative..............................................11
9.3 Bank Expenses....................................................11
9.4 Bank's Liability for Collateral..................................12
9.5 Remedies Cumulative..............................................12
9.6 Demand Waiver....................................................12
10 NOTICES................................................................12
11 CHOICE OF LAW VENUE AND JURY TRIAL WAIVER..............................12
12 GENERAL PROVISIONS.....................................................12
12.1 Successors and Assigns...........................................13
12.2 Indemnification..................................................13
12.3 Time of Essence..................................................13
12.4 Severability of Provision........................................13
12.5 Amendments in Writing, Integration...............................13
12.6 Counterparts.....................................................13
12.7 Survival.........................................................13
12.8 Confidentiality..................................................13
12.9 Attorneys' Fees, Costs and Expenses..............................14
13 DEFINITIONS............................................................14
13.1 Definitions......................................................14
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This LOAN AND SECURITY AGREEMENT ("Agreement") dated as of the Effective
Date, between SILICON VALLEY BANK (`Bank"), whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ with a loan production office located at ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and VIKING SYSTEMS, INC.
("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.
Amounts borrowed under this Section may be repaid and reborrowed during the term
of this Agreement.
(b)To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 12:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. 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 believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to such reliance.
(c)The Committed Revolving Line terminates on the Revolving Maturity Date,
when all Advances are immediately payable.
(d)Bank's obligation to lend the undisbursed portion of the Obligations
will terminate if, in Bank's sole 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.
2.2 Overadvances.
If Borrower's Obligations under Section 2.1.1 exceed the Committed
Revolving Line, Borrower must immediately pay in cash to Bank the excess.
2.3 Interest Rate, Payments.
(a) Interest Rate. Advances accrue interest on the outstanding principal
balance at a per annum rate of 1 percentage points above the Prime Rate. After
an Event of Default, Obligations accrue interest at 5 percent above the rate
effective immediately before the Event of Default. The interest rate increases
or decreases when the Prime Rate changes. Interest is computed on a 360 day year
for the actual number of days elapsed.
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(b)Payments. Interest due on the Committed Revolving Line is payable on the
13th of each month. Bank may debit any of Borrower's deposit accounts including
Account Number 3300420621 for principal and interest payments owing or any
amounts Borrower owes Bank. Bank will promptly notify Borrower when it debits
Borrower's accounts. These debits are not a set-off. Payments received after
12:00 noon Pacific Time are considered received at the opening of business on
the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional interest shall
accrue.
2.4 Fees.
Borrower will pay:
(a)Facility Fee. A fully earned, non-refundable Facility Fee of $2,000 due
on the Effective Date; and
(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.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension.
Bank's obligation to make the initial Credit Extension is subject to the
condition precedent that it receive the agreements, documents and fees it
requires.
3.2 Conditions Precedent to all Credit Extensions.
Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a)timely receipt of any Payment/Advance Form; and
(b)the representations and warranties in Section 5 must be materially true
on the date of the Payment/Advance Form and on the effective date of each Credit
Extension 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 security interest in the Collateral to secure all
Obligations and performance of each of Borrower's duties under the Loan
Documents. Bank's security interest is a first priority security interest in the
Collateral. Bank may place a "hold" on the certificate of deposit pledged as
Collateral.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
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5.1 Due Organization and Authorization.
Borrower and each Subsidiary is duly existing and in good standing in its
state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change. Borrower has not
changed its state of formation or its organizational structure or type or any
organizational number (if any) assigned by its jurisdiction of formation.
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 Litigation.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers, threatened by
or against Borrower or any Subsidiary in which a likely adverse decision could
reasonably be expected to cause a Material Adverse Change.
5.3 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.
5.4 Investments in Subsidiaries.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.5 Full Disclosure.
No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. 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
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Borrower will do all of the following for so long as Bank has an obligation
to lend, or there are outstanding Obligations:
6.1 Government Compliance.
Borrower will maintain its and all Subsidiaries' legal existence and good
standing in its jurisdiction of formation 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) as soon as available, but no later
than 30 days after the last day of each month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during the period certified by a Responsible Officer and in a form acceptable to
Bank; (ii) within 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, 10-0 and 8-K filed with the
Securities and Exchange Commission; (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 $100,000 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 not shown in any
intellectual property security agreement between Borrower and Bank or knowledge
of an event that materially adversely affects the value of the Intellectual
Property.
(b) Within 30 days after the last day of each month, Borrower will deliver
to Bank with the monthly financial statements a Compliance Certificate signed by
a Responsible Officer in the form of Exhibit C.
(c) Allow Bank to audit Borrower's Collateral at Borrower's expense. Such
audits will be conducted no more often than every year unless an Event of
Default has occurred and is continuing.
6.3 Taxes.
Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments and will deliver to
Bank, on demand, appropriate certificates attesting to the payment.
6.4 Insurance.
Borrower will keep its business and the Collateral insured for risks and in
amounts, as Bank may reasonably request. Insurance policies will be in a form,
with companies, and in amounts that are satisfactory to Bank in Bank's
reasonable discretion. All property policies will have a lender's loss payable
endorsement showing Bank as an additional loss payee and all liability policies
will show the Bank as an additional insured and provide that the insurer must
give Bank at least 20 days notice before canceling its policy. At Bank's
request, Borrower will deliver certified copies of policies and evidence of all
premium payments. Proceeds payable under any policy will, at Bank's option, be
payable to Bank on account of the Obligations. [If no Event of Default has
occurred and is continuing, proceeds payable under any casualty policy, at
Borrower's option, be payable to Borrower to replace the property subject to the
claim, provided that such replacement property shall be deemed Collateral in
which Bank has been granted a first priority security interest. In an Event of
Default has occurred and is continuing, then, at Bank's option, proceeds payable
under any policy will be payable to Bank on account of the Obligations].
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6.5 Primary Accounts.
Borrower will maintain its primary banking and investment account
relationships with Bank, such relationships shall include Borrower maintaining
deposit and investment account balances in accounts at or through Bank
representing at least 85% of all such account balances of Borrower at any and
all financial institutions.
6.6 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
For so long as Bank has an obligation to lend or there are any outstanding
Obligations, Borrower shall not, without Bank's prior written consent (which
shall be a matter of its good faith business judgment), do any of the following:
7.1 Dispositions.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers (i) of Inventory in the ordinary
course of business; (ii) of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business; or (iii) of worn-out or obsolete Equipment or (iv) other Transfers
which in the aggregate do not exceed $50,000 in any fiscal year.
7.2 Changes in Business, Ownership, Management or Locations of Collateral.
Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its ownership or management of greater than
25% (other than by the sale of Borrower's equity securities in a public offering
or to venture capital investors so long as Borrower identifies the venture
capital investors prior to the closing of the investment). Borrower will not,
without at least 30 days prior written notice, relocate its chief executive
office, change its state of formation (including reincorporation), change its
organizational number or name or add any new offices or business locations (such
as warehouses) in which Borrower maintains or stores over $5,000 in Collateral.
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
25% of Tangible Net Worth. A Subsidiary may merge or consolidate into another
Subsidiary 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.
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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 [except for repurchases of stock from
former employees or directors of Borrower under the terms of applicable
repurchase agreements in an aggregate amount not to exceed [$50,000] in the
aggregate in any fiscal year, provided that no Event of Default has occurred, is
continuing or would exist after the repurchase].
7.7 Transactions with Affiliates.
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower's business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a nonaffiliated Person.
7.8 Subordinated Debt.
Make or permit any payment on any Subordinated Debt, except under the terms
of the Subordinated Debt, or amend any provision in any document relating to the
Subordinated Debt without Bank's prior written consent.
7.9 Compliance.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower's
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 Payment Default.
If Borrower fails to pay any of the Obligations within 3 days after their
due date, however, during such period no Credit Extensions will be made;
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under Sections 6.2 or 6.7
or violates any of the covenants contained in Section 7 of this Agreement, or
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(b) If Borrower fails or neglects to perform, keep, or observe any other
material term, provision, condition, covenant, or agreement contained in this
Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Borrower be cured within such
ten (10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed thirty (30) days) to attempt to cure such default, and within
such reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Credit Extensions will be made
during such cure period);
8.3 Material Adverse Change.
If there (i) occurs a material adverse change in the business, operations,
or financial condition 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 (the foregoing being defined as a "Material Adverse Change").
8.4 Attachment.
If any material portion of Borrower's assets is attached, seized, levied
on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);
8.5 Insolvency.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 Other Agreements.
If there is a default in any agreement between Borrower and a third party
that gives the third party the right to accelerate any Indebtedness exceeding
$100,000 or that could cause a Material Adverse Change;
8.7 Judgments.
If a money judgment(s) in the aggregate of at least $50,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied); or
8.8 Misrepresentations.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
8.9 Pledge Agreement.
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If there is a default under that certain Pledge Agreement between Pledgor
and Bank of even date herewith.
9 BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies.
When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit under
this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors for
amounts, on terms and in any order that Bank considers advisable; notify any
Person owing Borrower money of Bank's security interest in the funds and verify
the amount of the Account. 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;
(d) Make any payments and do any acts it considers necessary or reasonable
to protect its security interest in the Collateral. Borrower will assemble the
Collateral if Bank requires and make it available as Bank designates. Bank may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank's rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower it
holds, or (ii) any amount held by Bank owing to or for the credit or the account
of Borrower;
(f)Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral; 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 Borrowers 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 Borrowers 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.
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9.3 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 0, and take any action under the policies
Bank deems prudent. Any amounts paid by Bank are Bank Expenses and immediately
due and payable, bearing interest at the then applicable rate and secured by the
Collateral. No payments by Bank are deemed an agreement to make similar payments
in the future or Bank's waiver of any Event of Default.
9.4 Bank's Liability for Collateral.
If Bank complies with reasonable banking practices and Section 9-207 of 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 above, Borrower bears all risk of loss, damage or destruction
of the Collateral.
9.5 Remedies Cumulative.
Banks 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.
9.6 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. A party may change its notice address by giving the other party
written notice.
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Orange 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
12.1 Successors and Assigns.
This Agreement binds and is for the benefit of the successors and permitted
assigns of each party. Borrower may not assign this Agreement or any rights
under it without Bank's prior written consent which may be granted or withheld
in Bank's discretion. Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank's obligations, rights and benefits under this
Agreement.
12.2 Indemnification.
Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
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 Banks subsidiaries or affiliates in
connection with their business with Borrower, (ii) to prospective transferees or
purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or
purchasers 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 considers appropriate exercising remedies
13
under this Agreement. Confidential information does not include information that
either (a) is in the public domain or in Banks 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:
"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, and partners and, for any Person that is a limited
liability company, that Persons managers and members.
"Bank Expenses" are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"Borrower's Books are all Borrowers 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.
"Code" is the California Uniform Commercial Code, as applicable.
"Collateral" is the property described on Exhibit A.
"Committed Revolving Line" is an Advance of up to $200,000.
"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.
"Credit Extension" is each Advance or any other extension of credit by Bank
for Borrower's benefit.
14
"Effective Date" is the date Bank executes this Agreement.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"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.
"Investment" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, 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.
"Material Adverse Change" is defined in Section 8.3.
"Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"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.
"Pledge Agreement" is that Pledge Agreement dated January 26, 2005 between
Pledgor and Bank.
"Pledgor" is any and present or future pledgor of the Obligations,
including ▇▇▇▇▇▇ ▇▇▇▇▇▇.
"Prime Rate" is Banks most recently announced "prime rate," even if it is
not Banks lowest rate.
"Responsible Officer" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" is September 13, 2005.
"Rights", as applied to the Collateral, means the Borrowers rights and
interests in, and powers with respect to, that Collateral, whatever the nature
of those rights, interests and powers and, in any event, including Borrowers
power to transfer rights in such Collateral to Bank.
"Schedule" is any attached schedule of exceptions.
15
"Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's
indebtedness owed to Bank and which is reflected in a written agreement in a
manner and form acceptable to Bank and approved by Bank in writing.
"Subsidiary is for any Person, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.
BORROWER:
VIKING SYSTEMS, INC.
By:
Title: ____________________________________
BANK:
SILICON VALLEY BANK
By: _________________________________
Title: ____________________________________
Effective Date: ___________________________
16
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest in
and to the following whether owned now or hereafter arising and whether the
Borrower has rights now or hereafter has rights therein and wherever located:
All goods and equipment now owned or hereafter acquired, including, without
limitation, all machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrowers custody or possession or in transit
and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles (as such definitions may be
amended from time to time according to the Code), now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower (as such definitions may be amended from time
to time according to the Code) whether or not earned by performance, and any and
all credit insurance, insurance (including refund) claims and proceeds,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
letter of credit rights, certificates of deposit, instruments and chattel paper
and electronic chattel paper now owned or hereafter acquired and Borrower's
Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
EXHIBIT B
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.
Fax To:
Date:__________________
--------------------------------------------------------------------------------
|_| LOAN PAYMENT:
Viking Systems. Inc. (Borrower)
From Account #___________________________ To Account #________________________
(Deposit Account#) (Loan Account #)
Principal $_________________________________ and/or Interest $__________________
All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects up to and including the
date of the transfer request for a loan payment, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of that date:
Authorized Signature: _____________________________ Phone Number: _____________
--------------------------------------------------------------------------------
|_| LOAN ADVANCE:
Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.
From Account #____________________________ To Account #_________________________
(Loan Account#) (Deposit Account #)
Amount of Advance $___________________
All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects up to and including the
date of the transfer request for an advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of that date:
Authorized Signature: _____________________________ Phone Number: _____________
--------------------------------------------------------------------------------
OUTGOING WIRE REQUEST
Complete only if all or a portion of funds from the loan advance above are to
be wired. Deadline for same day processing is 12:00pm, P.S.T.
Beneficiary Name: ____________________________________ Amount of Wire:$_________
Beneficiary Bank: ____________________________________ Account Number: _________
City and State: ________________________________________
Beneficiary Bank Transit (ABA) #: ___________________
Beneficiary Bank Code (Swift, Sort, Chip, etc.): _________________
(For International Wire Only)
Intermediary Bank: ________________________ Transit (ABA) #: _______________
For Further Credit to: _________________________________________________________
Special Instruction: ___________________________________________________________
By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) worn previously received and executed by me (us).
Authorized Signature: _____________________ 2nd Signature (If Required):
Print Name/Title:__________________________ Print Name/Title:_________________
Telephone # _______________________________ Telephone # ______________________
Exhibit C
COMPLIANCE CERTIFICATE
To: SILICON VALLEY BANK
Credit Department
From: Viking Systems, Inc.
The undersigned authorized Officer of Viking Systems, Inc. ("Borrower"), hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement, as modified from time to time, (i) the Borrower is in
complete compliance for the period ending ______________________ of all required
conditions and terms except as noted below and (ii) all representations and
warranties in the Agreement are true and correct in all material respects on
this date. In addition, the undersigned authorized officer of Borrower certifies
that 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. Attached herewith are
the required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistent from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies" column.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Interim Financial Statements + CC Monthly within 30 days YES/NO
10K SEC Filing within 5 days of SEC filing YES/NO
10Q SEC Filing within 5 days of SEC filing YES/NO
Comments Regarding Financial Covenants:
BANK USE ONLY
Very truly yours, Received By:
________________________
Viking Systems, Inc. Date:___________________
By: _____________________________________ Reviewed By:
________________________
Name: ___________________________________ Compliance Status: Yes/No
Title: __________________________________
Schedule to Loan and Security Agreement
The exact correct corporate name of Borrower is (attach a copy of the formation
documents, e.g., articles, partnership agreement): ____________________________
Borrower's State of formation: __________________________________
Borrower has operated under only the following other names (if none, so state):
__________________________________________________
All other addresses at which the Borrower does business are as follows (attach
additional sheets if necessary and include all warehouse addresses):
__________________________________________________
Borrower has deposit accounts and/or investment accounts located only at the
following institutions:__________________________________________________
List Acct. Numbers:__________________________________________________
Liens existing on the Effective Date and disclosed to and accepted by Bank in
writing:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Investments existing on the Effective Date and disclosed to and accepted by Bank
in writing:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Subordinated Debt:
Indebtedness on the Effective Date and disclosed to and consented to by Bank in
writing:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Borrower is not subject to litigation which would have a material adverse effect
on the Borrowers financial condition, except the following (attach additional
comments, if needed):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Tax ID Number _____________________________
Organizational Number, if any: _______________________________
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: Viking Systems, Inc.
LOAN OFFICER: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
DATE: January 26, 2005
Revolving Loan Fee $2,000.00
UCC Search 400.00
UCC Filing 300.00
Documentation Fee 1,500.00
TOTAL FEE DUE $4,200.00
------------- ==========
Please indicate the method of payment:
{ } A check for the total amount is attached.
{ } Debit DDA #3300420621 for the total amount.
{ } Loan proceeds
Borrower:
By:_______________________
(Authorized Signer)
_______________________________
Silicon Valley Bank (Date)
Account Officer's Signature
CORPORATE BORROWING RESOLUTION
Borrower: Viking Systems, Inc. Bank: Silicon Valley Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
I, the Secretary or Assistant Secretary of Viking Systems, Inc. ("Borrower"),
CERTIFY that Borrower is a corporation existing under the laws of the State of
Nevada.
I certify that at a meeting of Borrower's Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.
It is resolved that any one of the following officers of Borrower, whose name,
title and signature is below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
______________________ _____________________ __________________________
______________________ _____________________ __________________________
______________________ _____________________ __________________________
______________________ _____________________ __________________________
may act for Borrower and:
Borrow Money. Borrow money from Silicon Valley Bank ("Bank").
Execute Loan Documents. Execute any loan documents Bank requires.
Grant Security. Grant Bank a security interest in any of Borrower's
assets.
Negotiate Items. Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest
and receive cash or otherwise use the proceeds.
Letters of Credit. Apply for letters of credit from Bank.
Foreign Exchange Contracts. Execute spot or forward foreign exchange
contracts.
Issue Warrants. Issue warrants for Borrower's stock.
Further Acts. Designate other individuals to request advances, pay fees
and costs and execute other documents or agreements (including documents
or agreement that waive Borrowers right to a jury trial) they think
necessary to effectuate these Resolutions.
Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.
I certify that the persons listed above are Borrower's officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.
CERTIFIED TO AND ATTESTED BY:
X _________________________________________
*Secretary or Assistant Secretary
X _________________________________________
*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.