LOAN AND SECURITY
AGREEMENT
THIS LOAN AND
SECURITY AGREEMENT (this “ Agreement ”)
dated as of the Effective Date between SILICON VALLEY BANK ,
a California corporation (“ Bank ”), and
HANSEN MEDICAL, INC. , a Delaware corporation (“
Borrower ”), provides the terms on which Bank shall
lend to Borrower and Borrower shall repay Bank. The parties agree
as follows:
1
ACCOUNTING AND OTHER TERMS
Accounting terms
not defined in this Agreement shall be construed following GAAP.
Calculations and determinations must be made following GAAP.
Capitalized terms not otherwise defined in this Agreement shall
have the meanings set forth in Section 13. All other terms
contained in this Agreement, unless otherwise indicated, shall have
the meaning provided by the Code to the extent such terms are
defined therein.
2 LOAN AND
TERMS OF PAYMENT
2.1 Promise to
Pay . Borrower hereby unconditionally promises to pay Bank the
outstanding principal amount of all Credit Extensions and accrued
and unpaid interest thereon as and when due in accordance with this
Agreement.
2.1.1
Revolving Advances .
(a)
Availability . Subject to the terms and conditions of this
Agreement, Bank shall make Advances not exceeding the Availability
Amount. Amounts borrowed hereunder may be repaid and, prior to the
Revolving Line Maturity Date, reborrowed, subject to the applicable
terms and conditions precedent herein.
(b)
Termination; Repayment . The Revolving Line terminates on
the Revolving Line Maturity Date, when the principal amount of all
Advances, the unpaid interest thereon, and all other Obligations
relating to the Revolving Line shall be immediately due and
payable.
2.1.2
Equipment Advances .
(a)
Availability . Subject to the terms and conditions of this
Agreement, during the Draw Period, Bank shall make advances (each,
an “ Equipment Advance ” and, collectively,
“ Equipment Advances ”) not exceeding the
Equipment Line. Equipment Advances may only be used to finance
Eligible Equipment purchased within ninety (90) days
(determined based upon the applicable invoice date of such Eligible
Equipment) before the date of each Equipment Advance, provided that
the initial Equipment Advance, to be made on or about the Effective
Date, (i) shall be used to repay all Indebtedness of Borrower
owing to Bank and GOLD HILL VENTURE LENDING 03, LP pursuant to that
certain Loan and Security Agreement with an effective date as of
August 5, 2005, and (ii) may be used to finance Eligible
Equipment purchased within on or after December 1, 2007. No
Equipment Advance may exceed 100% of the total invoice for Eligible
Equipment (excluding taxes, shipping, warranty charges, freight
discounts and installation expenses relating to such Eligible
Equipment except to the extent such are allowed to be financed
pursuant hereto as Other Equipment). No more than 50% of the
proceeds of the Equipment Line shall be used to finance Other
Equipment. Each Equipment Advance must be in an amount equal to the
lesser of One Hundred Thousand Dollars ($100,000) or the amount
that has not yet been drawn under the Equipment Line. After
repayment, no Equipment Advance may be reborrowed.
(b)
Repayment . Equipment Advances outstanding on the last day
of the Draw Period are payable in (i) 42 consecutive equal
monthly installments of principal plus (ii) monthly payments
of accrued interest, beginning on the first of each month following
the last day of the Draw Period and ending on the Equipment
Maturity Date. Notwithstanding the foregoing, all unpaid principal
and interest on each Equipment Advance shall be due on the
applicable Equipment Maturity Date
(c)
Final Payment . On the earlier to occur of the date that
Borrower repays all outstanding Equipment Advances or the date that
all outstanding Equipment Advances become due, whether by
acceleration or otherwise, Borrower will pay Bank the Final
Payment.
(d)
Prepayment Upon an Event of Loss . Borrower shall bear the
risk of any loss, theft, destruction, or damage of or to the
Financed Equipment. If, during the term of this Agreement, any item
of
Financed
Equipment becomes obsolete or is lost, stolen, destroyed, damaged
beyond repair, rendered permanently unfit for use, or seized by a
governmental authority for any reason for a period ending beyond
the Equipment Maturity Date with respect to such Financed Equipment
(an “ Event of Loss ”), then, within thirty
(30) days following such Event of Loss, Borrower shall
(i) pay to Bank on account of the Obligations all accrued
interest to the date of the prepayment, plus all outstanding
principal owing with respect to the Financed Equipment subject to
the Event of Loss; or (ii) if no Event of Default has occurred
and is continuing, at Borrower’s option, repair or replace
any Financed Equipment subject to an Event of Loss provided the
repaired or replaced Financed Equipment is of equal or like value
to the Financed Equipment subject to an Event of Loss and provided
further that Bank has a first priority perfected security interest
in such repaired or replaced Financed Equipment. Any partial
prepayment of an Equipment Advance paid by Borrower on account of
an Event of Loss shall be applied to prepay amounts owing for such
Equipment Advance in inverse order of maturity.
(e)
Prepayment . At Borrower’s option, so long as an Event
of Default has not occurred and is not continuing, Borrower shall
have the option to prepay all, but not less than all, of the
Equipment Advances made by Bank under this Agreement,
provided Borrower (a) provides written notice to Bank
of its election to exercise to prepay all such Equipment Advances
at least ten (10) days prior to such prepayment, and
(b) pays, on the date of the prepayment (i) all accrued
and unpaid interest with respect to the Equipment Advances through
the date the prepayment is made; (ii) all unpaid principal
with respect to the Equipment Advances; (iii) an amount equal
to the Final Payment, (iv) a premium equal to the Make-Whole
Premium; and (v) all other sums, if any, that shall have
become due and payable hereunder with respect to this
Agreement.
2.2
Overadvances . If, at any time, the Credit Extensions under
Section 2.1.1 exceed the lesser of either (a) the
Revolving Line or (b) the Borrowing Base, Borrower shall
immediately pay to Bank in cash such excess.
2.3 Payment of
Interest on the Credit Extensions .
(i)
Advances . Subject to Section 2.3(b), the principal
amount outstanding under the Revolving Line shall accrue interest
at a floating per annum rate equal to one percentage point (1.00%)
above the Prime Rate, which interest shall be payable monthly in
accordance with Section 2.3(f).
(ii)
Equipment Advances . Subject to Section 2.3(b), the
principal amount outstanding for each Equipment Advance shall
accrue interest at the Basic Rate, such rate to be fixed with
respect to each Equipment Advance on the date of that Equipment
Advance. Interest shall be payable monthly in accordance with
Section 2.3(f).
(b)
Default Rate . Immediately upon the occurrence and during
the continuance of an Event of Default, Obligations shall bear
interest at a rate per annum which is five percentage points above
the rate that is otherwise applicable thereto (the “
Default Rate ”). Payment or acceptance of the
increased interest rate provided in this Section 2.3(b) is not
a permitted alternative to timely payment and shall not constitute
a waiver of any Event of Default or otherwise prejudice or limit
any rights or remedies of Bank.
(c)
Adjustment to Interest Rate . Changes to the interest rate
of any Credit Extension based on changes to the Prime Rate shall be
effective on the effective date of any change to the Prime Rate and
to the extent of any such change.
(d)
360-Day Year . Interest shall be computed on the basis of a
360-day year for the actual number of days elapsed.
(e)
Debit of Accounts . Bank may debit any of Borrower’s
deposit accounts, including the Designated Deposit Account, for
principal and interest payments or any other amounts Borrower owes
Bank when due. These debits shall not constitute a
set-off.
(f)
Payments . Unless otherwise provided, interest is payable
monthly on the first calendar day of each month. Payments of
principal and/or interest received after 12:00 p.m. Pacific
time are considered received at the opening of business on the next
Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees
or interest, as applicable, shall continue to accrue.
-2-
2.4 Fees .
Borrower shall pay to Bank:
(a)
Commitment Fee . A fully earned, non-refundable annual
commitment fee of $100,000, payable on the Effective Date;
and
(b)
Due Diligence Fee . A due diligence fee of $50,000, which
Bank previously received from Borrower, such fee to be applied to
Bank Expenses incurred in connection with this Agreement and the
balance, if any, to be refunded to Borrower; and
(c)
Letter of Credit Fee . Bank’s customary fees and
expenses for the issuance or renewal of Letters of Credit, upon the
issuance, each anniversary of the issuance, and the renewal of such
Letter of Credit by Bank; and
(d)
Late Payment Fee . A late payment fee equal to five percent
(5.0%) of any scheduled payment or other amount not paid when due;
and
(e)
Make-Whole Premium . The Make-Whole Premium when due
pursuant to the terms of Section 2.1.2(d); and
(f)
Final Payment . The Final Payment when due pursuant to the
terms of Section 2.1.2(c); and
(g)
Bank Expenses . All Bank Expenses (including reasonable
attorneys’ fees and expenses for documentation and
negotiation of this Agreement) incurred through and after the
Effective Date, when due.
3.1 Conditions
Precedent to Initial Credit Extension . Bank’s obligation
to make the initial Credit Extension is subject to the condition
precedent that Borrower shall consent to or shall have delivered,
in form and substance satisfactory to Bank, such documents, and
completion of such other matters, as Bank may reasonably deem
necessary or appropriate, including, without limitation:
(a) duly
executed original signatures to the Loan Documents to which it is a
party;
(b) its
Operating Documents and a good standing certificate of Borrower
certified by the Secretary of State of the state of its
incorporation as of a date no earlier than thirty (30) days
prior to the Effective Date;
(c) duly
executed original signatures to the completed Borrowing Resolutions
for Borrower;
(d) certified
copies, dated as of a recent date, of financing statement searches,
as Bank shall request, accompanied by written evidence (including
any UCC termination statements) that the Liens indicated in any
such financing statements either constitute Permitted Liens or have
been or, in connection with the initial Credit Extension, will be
terminated or released;
(e) the
Perfection Certificate(s) executed by Borrower;
(f) a
legal opinion of counsel, Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP, dated as of the Effective Date as to
Borrower’s valid existence and good standing a Delaware
corporation and the due authorization and execution of this
Agreement, together with the duly executed original signatures
thereto;
(g) the
insurance policies and/or endorsements required pursuant to
Section 6.5 hereof, together with appropriate evidence showing
loss payable and/or additional insured clauses or endorsements in
favor of Bank;
(h) with
respect to the initial Advance under the Revolving Line only, the
completion of the Initial Audit with results satisfactory to Bank
in its sole and absolute discretion, which shall in any event be
completed on or before October 31, 2008;
(i) duly
executed Guaranties by AorTX Inc. and Hansen Medical International,
Inc.; and
-3-
(j) payment
of the fees and Bank Expenses then due as specified in
Section 2.4 hereof.
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) except
as otherwise provided in Section 3.4(a), timely receipt of an
executed Payment/Advance Form;
(b) the
representations and warranties in Section 5 shall be true in
all material respects on the date of the Payment/Advance Form and
on the Funding Date of each Credit Extension; provided, however,
that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a
specific date shall be true, accurate and complete in all material
respects as of such date, and no Default or Event of Default shall
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
in Section 5 remain true in all material respects; provided,
however, that such materiality qualifier shall not be applicable to
any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a
specific date shall be true, accurate and complete in all material
respects as of such date; and
(c) in
Bank’s good faith business judgment, there has not been a
Material Adverse Change.
3.3 Covenant
to Deliver .
Borrower agrees to
deliver to Bank each item required to be delivered to Bank under
this Agreement as a condition to any Credit Extension. Borrower
expressly agrees that the extension of a Credit Extension prior to
the receipt by Bank of any such item shall not constitute a waiver
by Bank of Borrower’s obligation to deliver such item, and
any such extension in the absence of a required item shall be in
Bank’s sole discretion.
3.4 Procedures
for Borrowing .
(a)
Advances . Subject to the prior satisfaction of all other
applicable conditions to the making of an Advance set forth in this
Agreement, to obtain an Advance, Borrower shall notify Bank (which
notice shall be irrevocable) by electronic mail, facsimile, or
telephone by 12:00 p.m. Pacific time on the Funding Date of
the Advance. Together with any such electronic or facsimile
notification, Borrower shall deliver to Bank by electronic mail or
facsimile a completed Payment/Advance Form executed by a
Responsible Officer or his or her designee. Bank may rely on any
telephone notice given by a person whom Bank believes is a
Responsible Officer or designee. Bank shall credit Advances to the
Designated 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.
(b)
Equipment Advances . Subject to the prior satisfaction of
all other applicable conditions to the making of an Equipment
Advance set forth in this Agreement, to obtain an Equipment
Advance, Borrower must notify Bank (which notice shall be
irrevocable) by electronic mail or facsimile no later than
12:00 p.m. Pacific time one (1) Business Day before the
proposed Funding Date. The notice shall be a Payment/Advance Form,
must be signed by a Responsible Officer or designee, and shall
include a copy of the invoice for the Equipment being financed. If
Borrower satisfies the conditions of each Equipment Advance, Bank
shall disburse such Equipment Advance by transfer to the Designated
Deposit Account.
4 CREATION
OF SECURITY INTEREST
4.1 Grant of
Security Interest . Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations, a
continuing security interest in, and pledges to Bank, the
Collateral, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products thereof.
Borrower represents, warrants, and covenants that the security
interest granted herein is and shall at all times continue to be a
first priority perfected security interest in the Collateral
(subject only to Permitted Liens that may have superior priority to
Bank’s Lien under this Agreement). If Borrower shall acquire
a commercial tort claim, Borrower shall promptly notify Bank in a
writing signed by Borrower of the general details thereof and grant
to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such
writing to be in form and substance reasonably satisfactory to
Bank.
-4-
If this Agreement
is terminated, Bank’s Lien in the Collateral shall continue
until the Obligations (other than inchoate indemnity obligations)
are repaid in full in cash. Upon payment in full in cash of the
Obligations (other than inchoate indemnity obligations) and at such
time as Bank’s obligation to make Credit Extensions has
terminated, Bank shall, at Borrower’s sole cost and expense,
release its Liens in the Collateral and all rights therein shall
revert to Borrower.
4.2
Authorization to File Financing Statements . Borrower hereby
authorizes Bank to file financing statements, without notice to
Borrower, with all appropriate jurisdictions to perfect or protect
Bank’s interest or rights hereunder, including a notice that
any disposition of the Collateral in violation of Section 7.2
of this Agreement without Bank’s consent, by either Borrower
or any other Person, shall be deemed to violate the rights of Bank
under the Code.
5
REPRESENTATIONS AND WARRANTIES
Borrower
represents and warrants as follows:
5.1 Due
Organization, Authorization; Power and Authority . Borrower is
duly existing and in good standing as a Registered Organization in
its jurisdiction of formation and is qualified and licensed to do
business and is in good standing in any jurisdiction 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 have a material adverse effect on
Borrower’s business. In connection with this Agreement,
Borrower has delivered to Bank a completed certificate signed by
Borrower, entitled “Perfection Certificate”. Borrower
represents and warrants to Bank that (a) Borrower’s
exact legal name is that indicated on the Perfection Certificate
and on the signature page hereof; (b) Borrower is an
organization of the type and is organized in the jurisdiction set
forth in the Perfection Certificate; (c) the Perfection
Certificate accurately sets forth Borrower’s organizational
identification number or accurately states that Borrower has none;
(d) the Perfection Certificate accurately sets forth
Borrower’s place of business, or, if more than one, its chief
executive office as well as Borrower’s mailing address (if
different than its chief executive office); (e) Borrower (and
each of its predecessors) has not, in the past five (5) years,
changed its jurisdiction of formation, organizational structure or
type, or any organizational number assigned by its jurisdiction;
and (f) all other information set forth on the Perfection
Certificate pertaining to Borrower and each of its Subsidiaries is
accurate and complete in all material respects (it being understood
and agreed that Borrower may from time to time update certain
information in the Perfection Certificate after the Effective Date
to the extent permitted by one or more specific provisions in this
Agreement). If Borrower is not now a Registered Organization but
later becomes one, Borrower shall promptly notify Bank of such
occurrence and provide Bank with Borrower’s organizational
identification number.
The execution,
delivery and performance by Borrower of the Loan Documents to which
it is a party have been duly authorized, and do not
(i) conflict with any of Borrower’s organizational
documents, (ii) contravene, conflict with, constitute a
default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any material order,
writ, judgment, injunction, decree, determination or award of any
Governmental Authority by which Borrower or any its Subsidiaries or
any of their property or assets may be bound or affected,
(iv) require any material action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental
Authority (except such Governmental Approvals which have already
been obtained and are in full force and effect ) or are
being obtained pursuant to Section 6.1(b) ) or
(v) constitute an event of default under any material
agreement by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound
in which the default could reasonably be expected to have a
material adverse effect on Borrower’s business.
5.2
Collateral . Borrower has good title to, has rights in, and the
power to transfer each item of the Collateral upon which it
purports to grant a Lien hereunder, free and clear of any and all
Liens except Permitted Liens. Except to the extent permitted in
Section 6.6(a), Borrower has no deposit accounts other than
the deposit accounts with Bank, the deposit accounts, if any,
described in the Perfection Certificate delivered to Bank in
connection herewith, or of which Borrower has given Bank notice and
taken such actions as are necessary to give Bank a perfected
security interest therein except as set forth in
Section 6.6(b). The Eligible Accounts included in the
Borrowing Base Certificate are bona fide, existing obligations of
the Account Debtors.
The Collateral is
not in the possession of any third party bailee (such as a
warehouse) except (a) as otherwise provided in the Perfection
Certificate, (b) at Permitted Locations (as defined below) or
(c) disclosed to Bank in writing and in accordance with this
Section 5.2. None of the components of the Collateral shall be
maintained at locations other than: (i) as provided in the
Perfection Certificate; (ii) locations where Collateral may be
temporarily located for sales, testing or demonstration purposes;
(iii) vendor locations where molds and tooling may
-5-
be kept in the
ordinary course of business; (iv) customer locations where
spare parts may be kept in the ordinary course of business;
(v) locations of contract manufacturers where parts,
components, Inventory and Equipment may be located in the ordinary
course of business; (vi) spare parts depots where Collateral
with a fair market value of less than $100,000 may be located at
any one location (provided however, the aggregate fair market value
of Collateral at all such locations shall not exceed $1,000,000);
(vii) other locations where Collateral with a fair market
value of less than $25,000 may be located at any one location
(provided however, the aggregate fair market value of Collateral at
all such locations shall not exceed $500,000); and
(viii) locations as to which Borrower has given Bank notice
pursuant to Section 7.2 (the “Permitted
Locations”). In the event that Borrower, after the date
hereof, intends to store or otherwise deliver any portion of the
Collateral to a bailee (other than at a locations where Collateral
with a fair market value of less than $500,000 is located), then
Borrower will first notify Bank and use its reasonable efforts to
cause such bailee to execute and deliver a bailee agreement in form
and substance satisfactory to Bank in its reasonable
discretion.
For any Eligible
Account in any Borrowing Base Certificate, all statements made and
all unpaid balances appearing in all invoices, instruments and
other documents evidencing such Eligible Accounts are and shall be
true and correct in all material respects and all such invoices,
instruments and other documents, and all of Borrower’s Books
are genuine and in all respects what they purport to be. Whether or
not an Event of Default has occurred and is continuing, Bank may
notify any Account Debtor owing Borrower money of Bank’s
security interest in such funds and verify the amount of such
Eligible Account. All sales and other transactions underlying or
giving rise to each Eligible Account shall comply in all material
respects with all applicable laws and governmental rules and
regulations. Borrower has no knowledge of any actual or imminent
Insolvency Proceeding of any Account Debtor whose accounts are an
Eligible Account in any Borrowing Base Certificate. To the best of
Borrower’s knowledge, all signatures and endorsements on all
documents, instruments, and agreements relating to all Eligible
Accounts are genuine, and all such documents, instruments and
agreements are legally enforceable in accordance with their
terms.
5.3
Litigation . Except as disclosed to Bank from time to time
pursuant to Section 6.2, there are no actions or proceedings
pending or, to the knowledge of the Responsible Officers,
threatened in writing by or against Borrower or any of its
Subsidiaries which could reasonably be expected to result in
liability of more than Five Hundred Thousand Dollars
($500,000).
5.4 No
Material Deviation in Financial Statements . All consolidated
financial statements for Borrower and any of its Subsidiaries
delivered to Bank fairly present in all material respects
Borrower’s consolidated financial condition and
Borrower’s consolidated results of operations. There has not
been any material deterioration in Borrower’s consolidated
financial condition since the date of the most recent financial
statements submitted to Bank.
5.5
Solvency . The fair salable value of Borrower’s assets
(including goodwill minus disposition costs) exceeds the fair value
of its liabilities; Borrower is not left with unreasonably small
capital after the transactions in this Agreement; and Borrower is
able to pay its debts (including trade debts) as they
mature.
5.6 Regulatory
Compliance . Borrower is not an “investment
company” or a company “controlled” by an
“investment company” under the Investment Company Act.
Borrower is not engaged as one of its important activities in
extending credit for margin stock (under Regulations T and U of the
Federal Reserve Board of Governors). Borrower has complied in all
material respects with the Federal Fair Labor Standards Act.
Neither Borrower nor any of its Subsidiaries is a “holding
company” or an “affiliate” of a “holding
company” or a “subsidiary company” of a
“holding company” as each term is defined and used in
the Public Utility Holding Company Act of 2005. Borrower has not
violated any laws, ordinances or rules, the violation of which
could reasonably be expected to have a material adverse effect on
its business. None of Borrower’s or any of its
Subsidiaries’ 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 of its Subsidiaries have 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 their respective businesses as currently
conducted.
5.7
Subsidiaries; Investments . Borrower does not own any stock,
partnership interest or other equity securities except for
Permitted Investments and Subsidiaries formed or acquired from time
to time in connection with acquisitions permitted under
Section 7.2..
-6-
5.8 Tax
Returns and Payments; Pension Contributions . Borrower has
timely filed all required federal, and all material foreign, state
and local, tax returns and reports, and Borrower has timely paid
all foreign, federal and all material foreign, state and local
taxes, assessments, deposits and contributions owed by Borrower.
Borrower may defer payment of any contested taxes, provided that
Borrower (a) in good faith contests its obligation to pay the
taxes by appropriate proceedings promptly and diligently instituted
and conducted, (b) notifies Bank in writing of the
commencement of, and any material development in, the proceedings,
(c) posts bonds or takes any other steps required to prevent
the governmental authority levying such contested taxes from
obtaining a Lien upon any of the Collateral that is other than a
“Permitted Lien”. Borrower is unaware of any claims or
adjustments proposed for any of Borrower’s prior tax years
which could result in any material additional taxes becoming due
and payable by Borrower. Borrower has paid all amounts necessary to
fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not
withdrawn from participation in, and has not permitted partial or
complete termination of, or permitted the occurrence of any other
event with respect to, any such plan which could reasonably be
expected to result in any liability of Borrower, including any
liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.
5.9 Use of
Proceeds . Borrower shall use the proceeds of the Credit
Extensions solely as working capital, to purchase Eligible
Equipment, and to fund its general business requirements and not
for personal, family, household or agricultural
purposes.
5.10 Full
Disclosure . No written representation, warranty or other
statement of Borrower in any certificate or written statement given
to Bank, as of the date such representation, warranty, or other
statement was made, taken together with all such written
certificates and written statements given 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, in the light of the circumstances under which they
were made, 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 or
forecasted results).
Borrower shall do
all of the following:
6.1 Government
Compliance .
(a) Maintain
its and all its Subsidiaries’ legal existence and good
standing in their respective jurisdictions of formation and
maintain qualification in each jurisdiction in which the failure to
so qualify would reasonably be expected to have a material adverse
effect on Borrower’s business or operations. Borrower shall
comply, and have each Subsidiary comply, with all laws, ordinances
and regulations to which it is subject, noncompliance with which
could reasonably be expected to have a material adverse effect on
Borrower’s business.
(b) Obtain
all of the Governmental Approvals necessary for the performance by
Borrower of its obligations under the Loan Documents to which it is
a party and the grant of a security interest to Bank in all of the
Collateral.
6.2 Financial
Statements, Reports, Certificates .
(a) Deliver
to Bank: (i) as soon as available, but no later than thirty
(30) days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering
Borrower’s consolidated operations for such month certified
by a Responsible Officer and in a form acceptable to Bank;
(ii) as soon as available, but no later than one hundred
eighty (180) days after the last day of Borrower’s
fiscal year, audited consolidated financial statements prepared
under GAAP, consistently applied, together with an unqualified
opinion on the financial statements from an independent certified
public accounting firm acceptable to Bank in its reasonable
discretion; (iii) within five (5) days of delivery,
copies of all statements, reports and notices made available to
Borrower’s security holders or to any holders of Subordinated
Debt (iv) within forty five (45) days after quarter end,
all reports on Form 10-Q (including quarterly balance sheet, report
of operating income and cash flow statements) and, within five
(5) days of filing, all reports on Form 10-K and 8-K, in each
case filed with the Securities and Exchange Commission or a link
thereto on Borrower’s or another website on the Internet
(Bank shall obtain quarterly and annual audits from public sources,
however Borrower shall provide such reports or other information to
Bank at any time they are not available to Bank); (iv) a
prompt report of any legal actions pending or threatened against
Borrower or any of its
-7-
Subsidiaries
that could result in damages or costs to Borrower or any of its
Subsidiaries of Five Hundred Thousand Dollars ($500,000) or more;
(v) prompt notice of an event that materially and adversely
affects the value of the intellectual property; (vi)
annual financial projections approved by the Borrower’s board
of directors promptly after approval of the same by
Borrower’s board of directors but no later than 45 days
after Borrower’s fiscal year end, and (vii) budgets,
sales projections, operating plans and other financial information
reasonably requested by Bank.
(b) Within
thirty (30) days after the last day of each month, deliver to
Bank a duly completed Borrowing Base Certificate signed by a
Responsible Officer, with (i) aged listings of accounts
receivable and accounts payable (by invoice date) and
(ii) perpetual inventory reports for the Inventory valued on a
first-in, first-out basis at the lower of cost or market (in
accordance with GAAP) or such other inventory reports as are
requested by Bank in its good faith business judgment.
(c) Within
thirty (30) days after the last day of each month, deliver to
Bank with the monthly financial statements, a duly completed
Compliance Certificate signed by a Responsible Officer setting
forth calculations showing compliance with the financial covenants
set forth in this Agreement.
(d) Allow
Bank to audit Borrower’s Collateral at Borrower’s
expense (which amount shall not exceed $3,000 per audit unless an
Event of Default has occurred and is continuing, and which audits
will not occur more frequently than once every 12 months
unless an Event of Default has occurred and is
continuing).
6.3 Inventory;
Returns . Keep all Inventory in good and marketable condition,
free from material defects other than Inventory for which adequate
reserves have been made in accordance with GAAP. Returns and
allowances between Borrower and its Account Debtors shall follow
Borrower’s customary practices as they exist at the Effective
Date. Borrower must promptly notify Bank of all returns,
recoveries, disputes and claims that involve more than Five Hundred
Thousand Dollars ($500,000).
6.4 Taxes;
Pensions . Make, and cause each of its Subsidiaries to make,
timely payment of all federal, and all material foreign, state, and
local taxes or assessments (other than taxes and assessments which
Borrower is contesting pursuant to the terms of Section 5.9
hereof) and shall deliver to Bank, on demand, appropriate
certificates attesting to such payments, and pay all amounts
necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with their terms.
6.5
Insurance . Keep its business and the Collateral insured for
risks and in amounts standard for companies in Borrower’s
industry and location and as Bank may reasonably request. Insurance
policies shall be in a form, with companies, and in amounts that
are satisfactory to Bank. All property policies shall have a
lender’s loss payable endorsement showing Bank as an
additional loss payee and waive subrogation against Bank, and all
liability policies shall show, or have endorsements showing, Bank
as an additional insured. All policies (or the loss payable and
additional insured endorsements) shall provide that the insurer
must give Bank at least twenty (20) days notice before canceling,
amending, or declining to renew its policy. At Bank’s
request, Borrower shall deliver certified copies of policies and
evidence of all premium payments. Proceeds payable under any
casualty policy shall be payable to Borrower for repair or
replacement of the damaged or destroyed property so long as no
Event of Default is outstanding; provided, however, that if an
Event of Default is outstanding, at Bank’s option, such
proceeds may be payable to Bank on account of the Obligations. If
Borrower fails to obtain insurance as required under this
Section 6.5 or to pay any amount or furnish any required proof
of payment to third persons and Bank, Bank may make all or part of
such payment or obtain such insurance policies required in this
Section 6.5, and take any action under the policies Bank deems
prudent.
(a) Maintain
its primary operating accounts with Bank or Bank’s
Affiliates.
(b) Provide
Bank five (5) days prior written notice before establishing
any Collateral Account at or with any bank or financial institution
other than Bank or Bank’s Affiliates. For each Collateral
Account that Borrower at any time maintains, Borrower shall cause
the applicable bank or financial institution (other than Bank) at
or with which any Collateral Account is maintained to execute and
deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Bank’s Lien in
such Collateral Account in accordance with the terms hereunder. The
provisions of the previous sentence shall not apply to deposit
accounts exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the benefit of
Borrower’s employees and identified to Bank by Borrower as
such.
-8-
6.7 Financial
Covenants . Borrower shall maintain at all times, to be tested
as of the last day of each month or quarter as indicated below, the
following financial covenants:
(a)
Liquidity . Borrower shall maintain at all times, tested as
of the last day of each month, the greater of: (i) Liquidity
in an amount greater than one and one half times (1.5X) the
Obligations outstanding under this Agreement as of such date; or
(ii) Remaining Months Liquidity in an amount greater than six
months.
“Liquidity”
means Borrower’s unrestricted cash and Cash Equivalents and
marketable securities and short term investments plus the Committed
Availability.
“Net
Cash Loss” means for any period, for the Borrower and its
Subsidiaries on a consolidated basis, an amount equal to Net Income
plus (a) amortization expense plus (b) depreciation
expense plus (c) expenses associated with stock-based
compensation and the granting of stock options, plus (d) all
non-cash items decreasing Net Income for such period, plus
(e) all expenses related to acquisitions permitted under
Section 7.3 hereof, all as determined in accordance with GAAP,
and calculated on a rolling three-month average basis.
“Remaining
Months Liquidity” means Liquidity divided by monthly Net Cash
Loss.
(b)
EBITDA . Beginning March 31, 2009, Borrower shall
maintain at all times, measured as of the end of each fiscal
quarter thereafter, an EBITDA not less than the amounts agreed upon
by Borrower and Bank based on projections approved by
Borrower’s board of directors, which projections Borrower
shall deliver to Bank within 45 days after the last day of
Borrower’s fiscal year end.
6.8 Protection
of Intellectual Property Rights . Borrower shall:
(a) protect, defend and maintain the validity and
enforceability of its intellectual property except where Borrower
in the exercise of its business judgment deems it in its best
interest not to do so; (b) promptly advise Bank in writing of
material infringements of its intellectual property; and
(c) not allow any intellectual property material to
Borrower’s business to be abandoned, forfeited or dedicated
to the public without Bank’s written consent except where
Borrower in the exercise of its business judgment deems it in its
best interest to do so.
6.9 Litigation
Cooperation . From the date hereof and continuing through the
termination of this Agreement, make available to Bank, without
expense to Bank, Borrower and its officers, employees and agents
and Borrower’s books and records, to the extent that Bank may
deem them reasonably necessary to prosecute or defend any
third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.
6.10 Post
Closing Matters .
(a) Borrower
shall use its reasonable efforts to cause the lessor at
Borrower’s Mountain View, California headquarters facility to
execute a landlord consent in favor of Bank within sixty (60) days
after the Effective Date
6.11 Further
Assurances . Execute any further instruments and take further
action as Bank reasonably requests to perfect or continue
Bank’s Lien in the Collateral or to effect the purposes of
this Agreement.
Borrower shall not
do any of the following without Bank’s prior written
consent:
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.
(a) of
Inventory in the ordinary course of business;
(b) of
worn out, uneeded or obsolete Equipment and Inventory that does not
constitute Financed Equipment;
(c) in
connection with Permitted Liens and Permitted
Investments;
-9-
(d) of
non-exclusive licenses and similar arrangements for the use of the
property of Borrower or its Subsidiaries in the ordinary course of
business and other non-perpetual licenses that may be exclusive in
some respects, such as, by way of example, with respect to field of
use or geographic territory, but that do not result, under
applicable law, in a sale of all of Borrower’s interest in
the property that is the subject of the license;
(e) Transfers
by Subsidiaries to Borrower and Transfers among
Subsidiaries;
(f) Transfers
by Borrower to Subsidiaries in the ordinary course of business not
in excess of $500,000 in any fiscal year; and
(g) Other
Transfers not otherwise permitted in this Section 7.1,
provided that the aggregate book value of all such Transfers does
not exceed $500,000 in any fiscal year.
7.2 Changes in
Business, Management, Ownership Control, or Business Locations
. (a) Engage in or permit any of its Subsidiaries to engage in
any material line of business other than the businesses currently
engaged in by Borrower and such Subsidiary, as applicable, or
reasonably related thereto; (b) liquidate or dissolve; or
(c) permit or suffer any Change in Control. Borrower shall
not, without prompt notice to Bank: (1) add any new offices or
business locations, including warehouses (unless such new offices
or business locations are Permitted Locations), (2) change its
jurisdiction of organization, (3) change its organizational
structure or type, (4) change its legal name, or (5) change
any organizational number (if any) assigned by its jurisdiction of
organization.
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 without Bank’s consent which will not be unreasonably
withheld, conditioned or delayed. 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.
7.5
Encumbrance . Except for Permitted Liens, (a) create,
incur, allow, or suffer any Lien on any of its property including
without limitation its intellectual property, (b) assign or
convey any right to receive income, including the sale of any
Accounts, or (c) permit any of its Subsidiaries to do so,
permit any Collateral not to be subject to the first priority
security interest granted herein or enter into any agreement,
document, instrument or other arrangement (except with or in favor
of Bank) with any Person which directly or indirectly prohibits or
has the effect of prohibiting Borrower from assigning, mortgaging,
pledging, granting a security interest in or upon, or encumbering
any of Borrower’s intellectual property, except (a) as
is otherwise permitted in Section 7.1 hereof or the definition
of “Permitted Lien” herein, and (b) customary
restrictions on assignment and encumbrance contained in license
agreements permitted hereunder.
7.6
Maintenance of Collateral Accounts . Maintain any Collateral
Account except pursuant to the terms of Section 6.6.(b)
hereof.
7.7
Distributions; Investments . (a) Pay any dividends or make
any distribution or payment or redeem, retire or purchase any
capital stock provided that (i) Borrower may convert any of
its convertible securities into other securities pursuant to the
terms of such convertible securities or otherwise in exchange
thereof, (ii) Borrower may pay dividends and make
distributions payable solely in capital stock; (iii) Borrower
may purchase fractional shares of capital stock arising our of
stock dividends, splits or combinations, and (iv) Borrower may
repurchase the stock of former employees or consultants pursuant to
stock repurchase agreements so long as an Event of Default does not
exist at the time of such repurchase and would not exist after
giving effect to such repurchase, provided such repurchase does not
exceed in the aggregate of One Hundred Thousand Dollars ($100,000)
per fiscal year; or (b) directly or indirectly make any
Investment other than Permitted Investments, or permit any of its
Subsidiaries to do so.
7.8
Transactions with Affiliates . Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate
of Borrower, except for: (a) Permitted Investments in
Subsidiaries, and (b) transactions that are in the ordinary
course of Borrower’s business, upon fair and reasonable terms
that are no less favorable to Borrower than would be obtained in an
arm’s length transaction with a non-affiliated
Person.
-10-
7.9
Subordinated Debt . (a) Make or permit any payment on any
Subordinated Debt, except under the terms of the subordination,
intercreditor, or other similar agreement to which such
Subordinated Debt is subject, or (b) amend any provision in
any document relating to the Subordinated Debt which would increase
the amount thereof or adversely affect the subordination thereof to
Obligations owed to Bank.
7.10
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 (as defined in Regulation U of the Board of Governors of
the Federal Reserve System), 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 permit any
of its Subsidiaries to do so; withdraw or permit any Subsidiary to
withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with
respect to, any present pension, profit sharing and deferred
compensation plan which could reasonably be expected to result in
any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other
governmental agency.
Any one of the
following shall constitute an event of default (an “ Event
of Default ”) under this Agreement:
8.1 Payment
Default . Borrower fails to (a) make any payment of
principal or interest on any Credit Extension on its due date, or
(b) pay any other Obligations within three (3) Business
Days after such Obligations are due and payable (which three
(3) day grace period shall not apply to payments due on the
Revolving Line Maturity Date and Equipment Maturity Date). During
the cure period, the failure to cure the payment default is not an
Event of Default (but no Credit Extension will be made during the
cure period);
(a) Borrower
fails or neglects to perform any obligation in Sections 6.2,
6.5, 6.6, 6.7 or violates any covenant in Section 7;
or
(b) Borrower
fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant or agreement contained in this
Agreement or any Loan Documents, and as to any default (other than
those specified in this Section 8) under such other term,
provision, condition, covenant or agreement that can be cured, has
failed to cure the 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 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 cure the default shall not be deemed an Event
of Default (but no Credit Extensions shall be made during such cure
period). Grace periods provided under this section shall not apply,
among other things, to financial covenants or any other covenants
set forth in subsection (a) above;
8.3 Material
Adverse Change . An event occurs or condition exists that Bank
believes in its good faith business judgment is a Material Adverse
Change, and after meeting with and discussing the circumstances
with Borrower, Bank continues to believe in its good faith business
judgment that a Material Adverse Change has occurred and so advises
Borrower in writing (provided that no such meeting shall be
required if Borrower is not available to meet with Bank or there
are exigent circumstances such that it is unreasonable to wait for
any such meeting);
8.4
Attachment . (a) Any material portion of Borrower’s
assets is attached, seized, levied on, or comes into possession of
a trustee or receiver; (b) the service of process seeking to
attach, by trustee or similar process, any funds of Borrower or of
any entity under control of Borrower (including a Subsidiary) on
deposit with Bank or any Bank Affiliate; (c) Borrower is
enjoined, restrained, or prevented by court order from conducting
any material part of its business; or (d) a notice of lien,
levy, or assessment is filed against any of Borrower’s assets
by any government agency, and the same under clauses
(a) through (d) hereof are not, within ten (10) days
after the occurrence thereof, discharged or stayed (whether through
the posting of a bond or otherwise); provided, however, no Credit
Extensions shall be made during any ten (10) day cure
period;
-11-
8.5
Insolvency (a) Borrower is unable to pay its debts
(including trade debts) as they become due or otherwise becomes
insolvent; (b) Borrower begins an Insolvency Proceeding; or
(c) an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within forty five (45) days (but no Credit
E
|
