EX-10.1
EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this
“Agreement”) is entered into as of May 24, 2012, by and between Comerica Bank (“Bank”) and Biolase, Inc., a Delaware corporation (“Borrower”).
RECITALS: In order to support general working capital requirements and to fund capital expenditures, Borrower wishes to obtain credit from time to
time from Bank, and Bank desires to extend credit to Borrower. This Agreement sets forth the terms on which Bank will advance credit to Borrower, and Borrower will repay the amounts owing to Bank.
AGREEMENT: The parties agree as follows:
| ARTICLE |
1. DEFINITIONS AND CONSTRUCTION. |
1.1
Definitions. As used in this Agreement, all capitalized terms shall have the definitions set forth on Exhibit A. Any term used in the Code and not defined herein shall have the meaning given to the term in the Code.
1.2 Accounting Terms. Any accounting term not specifically defined on Exhibit A shall be construed in accordance with GAAP and all
calculations shall be made in accordance with GAAP. The term “financial statements” shall include the accompanying notes and schedules.
| ARTICLE |
2. LOAN AND TERMS OF PAYMENT. |
(a)
Promise to Pay. Borrower promises to pay to Bank, in lawful money of the United States of America, the aggregate unpaid principal amount of all Credit Extensions made by Bank to Borrower, together with interest on the unpaid principal amount
of such Credit Extensions at rates in accordance with the terms hereof.
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(b) |
Advances under Revolving Line. |
(i) Amount. Subject to and upon the terms and conditions of this Agreement Borrower may request Advances in an aggregate outstanding amount not to exceed the lesser of (A) the Revolving Line
or (B) the Borrowing Base. Amounts borrowed pursuant to this Section 2.1(b) may be repaid and reborrowed at any time without penalty or premium prior to the Revolving Maturity Date, at which time all Advances under this Section 2.1(b)
shall be immediately due and payable.
(ii) Form of Request. Whenever Borrower desires an Advance, Borrower will notify
Bank by facsimile transmission or telephone no later than 3:00 p.m. Pacific time (12:00 p.m. Pacific time for wire transfers), on the Business Day that the Advance is to be made. Each such notification shall be promptly confirmed by a
Payment/Advance Form in substantially the form of Exhibit C. Bank is authorized to make Advances under this Agreement, based upon instructions received from a Responsible Officer or a designee of Responsible Officer, or without
instructions if in Bank’s discretion such Advances are necessary to meet Obligations which have become due and remain unpaid. Bank shall be entitled to rely on any facsimile or telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer or a designee thereof, and Borrower shall indemnify and hold Bank harmless for any damages or loss suffered by Bank as a result of such reliance. Bank will credit the amount of Advances made under this Section 2.1(b) to
Borrower’s deposit account.
2.2 Overadvances. If the aggregate amount of the outstanding Advances exceeds the lesser of the
Revolving Line or the Borrowing Base at any time, Borrower shall immediately pay to Bank, in cash, the amount of such excess.
| 2.3 |
Interest Rates, Payments, and Calculations. |
(a) Interest Rates – Advances. Except as set forth in Section 2.3(b), the Advances shall bear interest, on the outstanding daily balance thereof, as set forth in the Daily Adjusting LIBOR
Rate Addendum attached hereto as Exhibit F (“Rate Addendum”).
(b) Late Fee; Default Rate.
If any payment is not made within 10 days after the date such payment is due, Borrower shall pay Bank a late fee equal to the lesser of (i) five percent (5%) of the amount of such unpaid amount or (ii) the maximum amount permitted to
be charged under applicable law. All Obligations shall bear interest, from and after the occurrence and during the continuance of an Event of Default, at a rate equal to five (5) percentage points above the interest rate applicable immediately
prior to the occurrence of the Event of Default.
(c) Payments. Except as set forth in the Rate Addendum, interest
hereunder shall be due and payable on the first calendar day of each month during the term hereof. Bank shall, at its option, charge such interest, all Bank Expenses, and all Periodic Payments against any of Borrower’s deposit accounts or
against the Revolving Line, in which case those amounts shall thereafter accrue interest at the rate then applicable hereunder. Any interest not paid when due shall be compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed.
2.4
Crediting Payments. Prior to the occurrence of an Event of Default, Bank shall credit a wire transfer of funds, check or other item of payment to such deposit account or Obligation as Borrower specifies. After the occurrence of an Event of
Default, Bank shall have the right, in its sole discretion, to immediately apply any wire transfer of funds, check, or other item of payment Bank may receive to conditionally reduce Obligations, but such applications of funds shall not be considered
a payment on account unless such payment is of immediately available federal funds or unless and until such check or other item of payment is honored when presented for payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon Pacific Time shall be deemed to have been received by Bank as of the opening of business on the immediately following Business Day. Whenever any payment to Bank under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date that is not a Business Day, such payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for the period of
such extension.
| 2.5 |
Fees. Borrower shall pay to Bank the following: |
(a) Facility Fee. On the Closing Date, a fee equal to $120,000.00, which shall be nonrefundable; and
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(b) Bank Expenses. On the Closing Date, Bank Expenses of
$ incurred through the Closing Date, and, after the Closing Date, all Bank Expenses, as and when they become due.
2.6 Term. This Agreement shall become effective on the Closing Date and, subject to Section 13.8, shall continue in full force and effect for so long as any Obligations remain outstanding or
Bank has any obligation to make Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank shall have the right to terminate its obligation to make Credit Extensions under this Agreement immediately and without notice upon the
occurrence and during the continuance of an Event of Default.
| ARTICLE |
3. CONDITIONS OF LOANS. |
3.1
Conditions Precedent to Initial Credit Extension. The obligation of Bank to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) an officer’s certificate of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Agreement, accompanied by certified copies of Borrower’s
organizational documents;
(c) financing statement (Form UCC-1);
(d) an agreement to furnish insurance;
(e) the Security Agreement;
(f) the Security Agreement- Stock Pledge for the
Shares executed and delivered by Borrower and the certificates for the Shares, together with assignment(s) separate from certificate, duly executed in blank;
(g) payment of the fees and Bank Expenses then due specified in Section 2.5;
(h) current SOS Reports indicating that except for Permitted Liens, there are no other security interests or Liens of record in the
Collateral;
(i) an audit of the Collateral, the results of which shall be satisfactory to Bank;
(j) current financial statements, including (i) audited statements for Biolase Technology Inc.’s most recently ended fiscal
year, together with an unqualified opinion of its accountants regarding those statements, (ii) company prepared consolidated and consolidating balance sheets and income statements for the most recently ended month in accordance with
Section 6.2, and (iii) such other updated financial information as Bank may reasonably request;
(k) a current
Borrowing Base Certificate as contemplated by Section 6.2(h);
(l) a current Compliance Certificate in accordance with
Section 6.2(i);
(m) a Collateral Information Certificate in form satisfactory to Bank;
(n) an Automatic Debit Authorization;
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(o) a Warrant for 80,000 shares of Biolase Technology’s common stock with an exercise
price of 120% of the public trading closing price on the Closing Date and a five year term; and
(p) such other documents or
certificates, and completion of such other matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all
Credit Extensions. The obligation of Bank to make each Credit Extension, including the initial Credit Extension, is further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided in Section 2.1; and
(b) the representations and warranties contained in Article 5 shall be true and correct in all material respects on and as of the date of such Payment/Advance Form and on the effective date of each Credit
Extension as though made at and as of each such date, and no Event of Default shall have occurred and be continuing, or would exist after giving effect to such Credit Extension (provided, however, that those representations and
warranties expressly referring to another date shall be true, correct and complete in all material respects as of such date). The making of each Credit Extension shall be deemed to be a representation and warranty by Borrower on the date of such
Credit Extension as to the accuracy of the facts referred to in this Section 3.2.
| ARTICLE |
4. CREATION OF SECURITY INTEREST. |
4.1
Grant of Security Interest. Borrower grants and pledges to Bank a continuing security interest in the Collateral to secure prompt repayment of any and all Obligations and to secure prompt performance by Borrower of each of its covenants and
duties under the Loan Documents. Except as set forth in the Schedule, such security interest constitutes a valid, first priority security interest in the presently existing Collateral, and will constitute a valid, first priority security interest in
later-acquired Collateral. Borrower also hereby agrees not to sell, transfer, assign, mortgage, pledge, lease, grant a security interest in, or encumber any of its Intellectual Property, except in connection with Permitted Liens and Permitted
Transfers. Borrower further agrees that it shall not enter into any agreement with or for the benefit of any other person that restricts or limits Borrower’s ability to assign or grant a security interest to Bank in any of Borrower’s
Intellectual Property. Notwithstanding any termination of this Agreement, Bank’s Lien on the Collateral shall remain in effect for so long as any Obligations are outstanding.
4.2 Perfection of Security Interest. Borrower authorizes Bank to file at any time financing statements, continuation statements, and amendments thereto that (i) either specifically describe
the Collateral or describe the Collateral as all assets of Borrower of the kind pledged hereunder, and (ii) contain any other information required by the Code for the sufficiency of filing office acceptance of any financing statement,
continuation statement, or amendment, including whether Borrower is an organization, the type of organization and any organizational identification number issued to Borrower, if applicable. Any such financing statements may be filed by Bank at any
time in any jurisdiction whether or not Revised Article 9 of the Code is then in effect in that jurisdiction. Borrower shall from time to time endorse and deliver to Bank, at the request of Bank, all Negotiable Collateral and other documents that
Bank may reasonably request, in form satisfactory to Bank, to perfect and continue perfection of Bank’s security interests in the Collateral and in order to fully consummate all of the transactions contemplated under the Loan Documents.
Borrower shall have possession of the Collateral, except where expressly otherwise provided in this Agreement or where Bank chooses to perfect its security interest by possession in addition to the filing of a financing statement. Where Collateral
is in possession of a third party bailee, Borrower shall take such steps as Bank reasonably requests for Bank to (i) obtain an acknowledgment, in form and substance satisfactory to Bank, of the bailee that the bailee holds such Collateral for
the benefit of Bank, (ii) obtain “control” of any Collateral consisting of investment
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property, deposit accounts, letter-of-credit rights or electronic chattel paper (as such items and the term “control” are defined in Revised Article 9 of the Code) by causing the
securities intermediary or depositary institution or issuing bank to execute a control agreement in form and substance satisfactory to Bank. Borrower will not create any chattel paper without placing a legend on the chattel paper acceptable to Bank
indicating that Bank has a security interest in the chattel paper. Borrower from time to time may deposit with Bank specific cash collateral to secure specific Obligations; Borrower authorizes Bank to hold such specific balances in pledge and to
decline to honor any drafts thereon or any request by Borrower or any other Person to pay or otherwise transfer any part of such balances for so long as the specific Obligations are outstanding.
4.3 Right to Inspect. Bank (through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to
time during Borrower’s usual business hours but no more than twice a year (unless an Event of Default has occurred and is continuing), to inspect Borrower’s Books and to make copies thereof and to check, test, and appraise the Collateral
in order to verify Borrower’s financial condition or the amount, condition of, or any other matter relating to, the Collateral.
(a)
Borrower agrees that the Obligations shall be on a “remittance basis”. Borrower shall at its sole expense establish and maintain (and Bank, at Bank’s option, may establish and maintain at Borrower’s expense) a non-interest
bearing deposit account with Bank which shall be titled as designated by Bank (the “Dominion of Funds Account”) to which Bank shall have exclusive access and control. Borrower agrees to notify all account debtors and other parties
obligated to Borrower that all payments made to Borrower by electronic funds transfer shall be remitted to the Dominion of Funds Account, and Borrower, at Bank’s request, shall include a like statement on all invoices. Borrower shall execute
all documents and authorizations as required by Bank to establish and maintain the Dominion of Funds Account.
(b) Borrower
shall hold in trust for Bank all amounts that Borrower receives by check or other form of payment or despite the directions to make electronic funds transfer payments to the Dominion of Funds Account, and immediately deliver such payments to Bank in
their original form as received from the account debtor, with proper endorsements for deposit into the Dominion of Funds Account.
(c) All items or amounts which are remitted to the Dominion of Funds Account, or otherwise delivered by or for the benefit of Borrower to Bank on account of partial or full payment of, or with respect to,
any Collateral shall, on a daily basis, be applied to the payment of outstanding Advances, whether then due or not, with the balance, if any, deposited to Borrower’s operating account maintained at Bank. After the occurrence and during the
continuance of an Event of Default, all items or amounts remitted to the Dominion of Funds Account or that Bank has otherwise received shall, in Bank’s sole discretion, be applied to the payment of any Obligations, whether then due or not, in
such order or at such time of application as Bank may determine in its sole discretion. Borrower agrees that Bank shall not be liable for any loss or damage which Borrower may suffer as a result of Bank’s processing of items or its exercise of
any other rights or remedies under this Agreement, including without limitation indirect, special or consequential damages, loss of revenues or profits, or any claim, demand or action by any third party arising out of or in connection with the
processing of items or the exercise of any other rights or remedies under this Agreement. Borrower agrees to indemnify and hold Bank harmless from and against all such third party claims, demands or actions, and all related expenses or liabilities,
including, without limitation, attorney’s fees and INCLUDING CLAIMS, DAMAGES, FINES, EXPENSES, LIABILITIES OR CAUSES OF ACTION OF WHATEVER KIND RESULTING FROM BANK’S OWN NEGLIGENCE except to the extent (but only to the extent) caused by
Bank’s gross negligence, willful misconduct, or fraud.
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ARTICLE 5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary is an entity duly existing under the laws of the jurisdiction in which it is
organized and qualified and licensed to do business in any state in which the conduct of its business or its ownership of property requires that it be so qualified, except where the failure to do so could not reasonably be expected to cause a
Material Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and performance of the Loan Documents are within
Borrower’s powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in Borrower’s organizational documents, nor will they constitute an event of default under any material agreement
by which Borrower is bound. Borrower is not in default under any agreement by which it is bound, except to the extent such default would not reasonably be expected to cause a Material Adverse Effect.
5.3 Collateral. Borrower has rights in or the power to transfer the Collateral, and its title to the Collateral is free and clear of Liens,
adverse claims, and restrictions on transfer or pledge except for Permitted Liens. All Collateral is located solely in the Collateral States. The Eligible Accounts are bona fide existing obligations. The property or services giving rise to such
Eligible Accounts has been delivered or rendered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor. Borrower has not received notice of actual or imminent Insolvency Proceeding of any
account debtor whose accounts are included in any Borrowing Base Certificate as an Eligible Account. No licenses or agreements giving rise to such Eligible Accounts are with any Prohibited Territory or with any Person organized under or doing
business in a Prohibited Territory. All Inventory is in all material respects of good and merchantable quality, free from all material defects, except for Inventory for which adequate reserves have been made. Except as set forth in the Schedule,
none of the Collateral is maintained or invested with a Person other than Bank or Bank’s Affiliates.
5.4 Intellectual Property
Collateral. Borrower is the sole owner of the Intellectual Property, except for licenses granted by Borrower to its customers in the ordinary course of business. To the best of Borrower’s knowledge, each of the Copyrights, Trademarks and
Patents is valid and enforceable, and no part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and no claim has been made to Borrower that any part of the Intellectual Property violates the rights of any
third party except to the extent such claim could not reasonably be expected to cause a Material Adverse Effect.
5.5 Name; Location of
Chief Executive Office. Except as disclosed in the Schedule, Borrower has not done business under any name other than that specified on the signature page hereof, and its exact legal name is as set forth in the first paragraph of this Agreement.
The chief executive office of Borrower is located in the Chief Executive Office State at the address indicated in Article 10.
5.6 Actions,
Suits, Litigation, or Proceedings. Except as set forth in the Schedule, there are no actions, suits, litigation or proceedings, at law or in equity, pending by or against Borrower or any Subsidiary before any court, administrative agency, or
arbitrator in which a likely adverse decision could reasonably be expected to have a Material Adverse Effect.
5.7 No Material Adverse
Change in Financial Statements. All consolidated and consolidating financial statements related to Borrower and any Subsidiary that are delivered by Borrower to Bank fairly
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present in all material respects Borrower’s consolidated and consolidating financial condition as of the date thereof and Borrower’s consolidated and consolidating results of operations
for the period then ended. There has not been a material adverse change in the consolidated or in the consolidating financial condition of Borrower since the date of the most recent of such financial statements submitted to Bank.
5.8 Solvency, Payment of Debts. Borrower is able to pay its debts (including trade debts) as they become due; the fair saleable value of
Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; and Borrower is not left with unreasonably small capital after the transactions contemplated by this Agreement.
5.9 Compliance with Laws and Regulations. Borrower and each Subsidiary have met the minimum funding requirements of ERISA with respect to any
employee benefit plans subject to ERISA. No event has occurred resulting from Borrower’s failure to comply with ERISA that is reasonably likely to result in Borrower’s incurring any liability that could reasonably be expected to have a
Material Adverse Effect. Borrower is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940. Borrower is not engaged principally, or as
one of the important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T and U of the Board of Governors of the Federal Reserve System). Borrower has complied in
all material respects with all the provisions of the Federal Fair Labor Standards Act. Borrower is in compliance with all Environmental Laws except where the failure to comply is not reasonably likely to have a Material Adverse Effect. Borrower has
not violated any statutes, laws, ordinances or rules applicable to it, the violation of which could reasonably be expected to have a Material Adverse Effect. Borrower and each Subsidiary have filed or caused to be filed all tax returns required to
be filed, and have paid, or have made adequate provision for the payment of, all taxes reflected therein except those being contested in good faith with adequate reserves under GAAP or where the failure to file such returns or pay such taxes could
not reasonably be expected to have a Material Adverse Effect.
5.10 Subsidiaries. Borrower does not own any stock, partnership interest
or other equity securities of any Person, except for Permitted Investments. All Subsidiaries of Biolase Technology and their respective shareholders are listed on the Schedule.
5.11 Government Consents. Borrower and each Subsidiary have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all governmental
authorities that are necessary for the continued operation of Borrower’s business as currently conducted, except where the failure to do so would not reasonably be expected to cause a Material Adverse Effect.
5.12 Inbound Licenses. Except as disclosed on the Schedule, Borrower is not a party to, nor is bound by, any inbound license or other agreement,
the failure, breach, or termination of which could reasonably be expected to cause a Material Adverse Effect, or that prohibits or otherwise restricts Borrower from granting a security interest in such Borrower’s interest in license or
agreement or any other property.
5.13 Full Disclosure. No representation, warranty or other statement made by Borrower in any
certificate or written statement furnished to Bank taken together with all such certificates and written statements furnished to Bank contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the
statements contained in such certificates or statements not misleading, it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not to be viewed as facts and that
actual results during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results.
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ARTICLE 6. AFFIRMATIVE COVENANTS. Borrower covenants and shall cause its Material Subsidiaries to
covenant that, until payment in full of all outstanding Obligations, and for so long as Bank may have any commitment to make a Credit Extension hereunder, Borrower shall and shall cause each of its Material Subsidiaries to do all of the following:
6.1 Good Standing and Government Compliance. Borrower shall maintain its and each of its Subsidiaries’ organizational existence
and good standing in the Borrower State, shall maintain qualification and good standing in each other jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Effect, and shall furnish to Bank the
organizational identification numbers issued to Borrower by the authorities of the jurisdiction in which Borrower is organized, if applicable. Borrower shall meet, and shall cause each Subsidiary to meet, the minimum funding requirements of ERISA
with respect to any employee benefit plans subject to ERISA. Borrower shall comply in all material respects with all applicable Environmental Laws, and maintain all material permits, licenses and approvals required thereunder where the failure to do
so could reasonably be expected to have a Material Adverse Effect. Borrower shall comply, and shall cause each Subsidiary to comply, with all statutes, laws, ordinances and government rules and regulations to which it is subject, and shall maintain,
and shall cause each of its Subsidiaries to maintain, in force all licenses, approvals and agreements, the loss of which or failure to comply with which would reasonably be expected to have a Material Adverse Effect.
| 6.2 |
Financial Statements, Reports, Certificates. Borrower shall deliver to Bank: |
(a) as soon as available, but in any event within 30 days after the end of each calendar month, a company prepared consolidated and
consolidating balance sheet and income statement covering Borrower’s operations during such period, in a form reasonably acceptable to Bank and certified by a Responsible Officer;
(b) as soon as available, but in any event within 120 days after the end of Borrower’s fiscal year, audited consolidated and
consolidating financial statements of Borrower prepared in accordance with GAAP, consistently applied, together with an opinion which is unqualified (including no going concern comment or qualification) or otherwise consented to in writing by Bank
on such financial statements of an independent certified public accounting firm reasonably acceptable to Bank;
(c) if
applicable, copies of all statements, reports and notices sent or made available generally by Borrower to its security holders or to any holders of Subordinated Debt, if any, and all reports on Forms 10-K and 10-Q filed with the Securities and
Exchange Commission (the “SEC”) (the filing of such documents on the SEC’s EDGAR system shall be deemed delivery by Borrower of such information to Bank);
(d) promptly upon receipt of notice thereof, a report of any legal actions pending or, to Borrower’s knowledge, threatened in writing against Borrower or any Subsidiary that could result in damages
or costs to Borrower or any Subsidiary of $150,000.00 or more;
(e) promptly upon receipt, each management letter prepared by
Borrower’s independent certified public accounting firm regarding Borrower’s management control systems;
(f) as soon
as available, but in any event not later than 60 days after the commencement of each fiscal year, Borrower’s board of directors-approved financial and business projections and budget, sales projections, and operating plans for that year;
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(g) within 30 days of the last day of each fiscal quarter, a report signed by
Borrower, in form reasonably acceptable to Bank, listing any applications or registrations that Borrower has made or filed in respect of any Patents, Copyrights or Trademarks and the status of any outstanding applications or registrations, as well
as any material change in Borrower’s Intellectual Property;
(h) within 30 days after the last day of each month, a
Borrowing Base Certificate signed by a Responsible Officer in substantially the form of Exhibit D, together with aged listings by invoice date of accounts receivable and accounts payable; provided, however, during any Weekly
Reporting Period, Borrower shall submit Borrowing Base Certificates as of the last Business Day of each week within 2 Business Days thereafter;
(i) within 30 days after the last day of each month, with the monthly financial statements a Compliance Certificate certified as of the last day of the applicable month and signed by a Responsible
Officer in substantially the form of Exhibit E.
(j) immediately upon becoming aware of the occurrence or existence of
an Event of Default hereunder, a written statement of a Responsible Officer setting forth details of the Event of Default, and the action which Borrower has taken or proposes to take with respect thereto.
Bank shall have a right from time to time hereafter to audit Borrower’s Accounts and Inventory and appraise Collateral at Borrower’s expense,
provided that, unless an Event of Default has occurred and is continuing, (i) audits of Accounts will be conducted no more often than every six (6) months and (ii) audits of Inventory will be conducted no more often than every
twelve (12) months.
Borrower may deliver to Bank on an electronic basis any certificates, reports or information required pursuant to
this Section 6.2, and Bank shall be entitled to rely on the information contained in the electronic files, provided that Bank in good faith believes that the files were delivered by a Responsible Officer. If Borrower delivers this information
electronically, it shall also deliver to Bank by U.S. Mail, reputable overnight courier service, hand delivery, facsimile or .pdf file within five (5) days of submission of the unsigned electronic copy the certification of monthly financial
statements, the intellectual property report, the Borrowing Base Certificate and the Compliance Certificate, each bearing the physical signature of the Responsible Officer.
6.3 Inventory; Returns. Borrower shall keep all Inventory in good and merchantable condition, free from all material defects except for Inventory for which adequate reserves have been made. Returns
and allowances, if any, as between Borrower and its account debtors shall be on the same basis and in accordance with the usual customary practices of Borrower, as they exist on the Closing Date. Borrower shall promptly notify Bank of all returns
and recoveries and of all disputes and claims involving more than $100,000.00.
6.4 Taxes. Borrower shall make, and cause each
Subsidiary to make, due and timely payment or deposit of all material federal, state, and local taxes, assessments, or contributions required of it by law, including, but not limited to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and
state disability, and will execute and deliver to Bank, on demand, proof satisfactory to Bank indicating that Borrower or a Subsidiary has made such payments or deposits and any appropriate certificates attesting to the payment or deposit thereof;
provided that Borrower or a Subsidiary need not make any payment if the amount or validity of such payment is contested in good faith by appropriate proceedings and is reserved against (to the extent required by GAAP) by Borrower.
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(a) Borrower,
at its expense, shall keep the Collateral insured against loss or damage by fire, theft, explosion, sprinklers, and all other hazards and risks, and in such amounts, as ordinarily insured against by other owners in similar businesses conducted in
the locations where Borrower’s business is conducted on the date hereof. Borrower shall also maintain liability and other insurance in amounts and of a type that are customary to businesses similar to Borrower’s.
(b) All such policies of insurance shall be in such form, with such companies, and in such amounts as are reasonably satisfactory to Bank.
All policies of property insurance shall contain a lender’s loss payable endorsement, in a form satisfactory to Bank, showing Bank as an additional loss payee, and all liability insurance policies shall show Bank as an additional insured and
specify that the insurer must give at least twenty (20) days notice to Bank before canceling its policy for any reason. Upon Bank’s request, Borrower shall deliver to Bank certified copies of the policies of insurance and evidence of all
premium payments. If no Event of Default has occurred and is continuing, proceeds payable under any casualty policy will, at Borrower’s option, be payable to Borrower to replace the property subject to the claim, provided that any such
replacement property shall be deemed Collateral in which Bank has been granted a first priority security interest. If an Event of Default has occurred and is continuing, all proceeds payable under any such policy shall, at Bank’s option, be
payable to Bank to be applied on account of the Obligations.
6.6 Accounts. Borrower shall maintain all its depository and operating
accounts with Bank and its primary investment accounts with Bank or Bank’s Affiliates (covered by satisfactory control agreements).
| 6.7 |
Financial Covenants. Borrower shall maintain the following financial ratios and covenants: |
(a) Liquidity Ratio. As of the end of each month, commencing with May 31, 2012, a ratio of (i) cash plus Eligible
Accounts plus Eligible Ex-Im Accounts plus Eligible Inventory to (ii) the outstanding principal amount of the Obligations, at not less than 1.25:1.00.
(b) EBITDA. As of the end of each fiscal quarter, commencing with the fiscal quarter ending March 31, 2012, an EBITDA of not less than the amount set forth below for the applicable measurement
date, measured in each case for the three (3) months then-ending:
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| Measurement Date |
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Minimum EBITDA |
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| March 31, 2012 |
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–$1,000,000.00 |
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| June 30, 2012 |
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-$650,000.00 |
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| September 30, 2012 |
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$- 0 - |
|
| December 31, 2012 and thereafter |
|
|
+ $300,000.00 |
|
| 6.8 |
Registration of Intellectual Property Rights. |
(a) Borrower shall register or cause to be registered on an expedited basis (to the extent not already registered) with the United States Patent and Trademark Office or the United States Copyright Office,
as the case may be, those registrable intellectual property rights now owned or hereafter developed or acquired by Borrower, to the extent that Borrower, in its reasonable business judgment, deems it appropriate to so protect such intellectual
property rights.
(b) Borrower shall promptly give Bank written notice of any applications or registrations of intellectual
property rights filed with the United States Patent and Trademark Office and United States Copyright Office, including the date of such filing and the registration or application numbers, if any.
- 10 -
(c) Borrower shall give Bank prompt written notice of the filing of any applications or
registrations with the United States Copyright Office, including the title of such intellectual property rights to be registered, as such title will appear on such applications or registrations, and the date such applications or registrations will
be filed.
(d) Borrower shall (i) protect, defend and maintain the validity and enforceability of the Trademarks, Patents,
Copyrights, and trade secrets, (ii) use commercially reasonable efforts to detect infringements of the Trademarks, Patents and Copyrights and promptly advise Bank in writing of material infringements detected and (iii) not allow any
material Trademarks, Patents or Copyrights to be abandoned, forfeited or dedicated to the public without the written consent of Bank, which shall not be unreasonably withheld.
6.9 Notice of Inbound Licenses. Prior to entering into or becoming bound by any material license or agreement, Borrower shall provide written notice to Bank of the material terms of such material
license or agreement with a description of its likely impact on Borrower’s business or financial condition.
6.10 Further
Assurances. At any time and from time to time, Borrower shall execute and deliver such further instruments and take such further action as may reasonably be requested by Bank to effect the purposes of this Agreement.
6.11 Future Subsidiaries; Additional Collateral. Borrower shall cause, with respect to each Person which is or becomes a Material Subsidiary of
Borrower (directly or indirectly) after the Closing Date, within 30 days of the later of the date when the date such Person becomes a Material Subsidiary, such Material Subsidiary to execute and deliver to Bank (x) a joinder agreement in the
form of Exhibit A to the Guaranty made by the Guarantors whereby such Material Subsidiary becomes obligated as a Guarantor under such Guaranty, (y) a joinder agreement in the form of Exhibit A to the Security Agreement – Stock Pledge, if
applicable, and (z) a joinder agreement in the form of Exhibit C to the Security Agreement; and Borrower shall pledge, or cause to be pledged, to Bank 100% of the shares of capital stock or other ownership or equity interests in such Material
Subsidiary; and in each case such documents to be in form reasonably satisfactory to Bank together with such supporting documentation, including without limitation corporate or other legal authority items, certificates and opinions of counsel, as
reasonably required by Bank.
ARTICLE 7. NEGATIVE COVENANTS. Borrower covenants and agrees and shall cause each of its Subsidiaries to
covenant and agree that, so long as any credit hereunder shall be available and until the outstanding Obligations are paid in full or for so long as Bank may have any commitment to make any Credit Extensions, Borrower will not and will not permit
any of its Subsidiaries to do any of the following without Bank’s prior written consent:
7.1 Dispositions. Convey, sell, lease,
license, transfer or otherwise dispose of (collectively, to “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, or move cash balances on deposit with Bank to accounts opened at
another financial institution, other than Permitted Transfers.
7.2 Change in Name, Location, Executive Office, or Executive Management;
Change in Business; Change in Fiscal Year; Change in Control. Change its name or the Borrower State or relocate its chief executive office without 30 days prior written notification to Bank; replace its chief executive officer or chief
financial officer without 30 days prior written notification to Bank, provided that, Borrower’s board
- 11 -
of directors acting in good faith may determine that there exist exigent circumstances requiring prompt replacement of such officers without prior notification to Bank, in which case notice will
be given as soon as reasonably practicable; engage in any business, or permit any of its Subsidiaries to engage in any business, other than or reasonably related or incidental to the businesses currently engaged in by Borrower; change its fiscal
year end; have a Change in Control.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with or into any other business organization (other than mergers or consolidations of a Subsidiary into another Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person, or enter into any agreement to do any of the same, except where (i) such transactions do not in the aggregate exceed $100,000.00 during any fiscal year, (ii) no Event of Default has
occurred, is continuing or would exist after giving effect to such transactions, (iii) such transactions do not result in a Change in Control, and (iv) Borrower is the surviving entity.
7.4 Indebtedness. Create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness, or prepay any Indebtedness or take any actions which impose on Borrower an obligation to prepay any Indebtedness, except Indebtedness to Bank.
7.5 Encumbrances. Create, incur, assume or allow any Lien with respect to any of its property, or assign or otherwise convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries so to do, except for Permitted Liens, or covenant to any other Person that Borrower in the future will refrain from creating, incurring, assuming or allowing any Lien with respect to any of Borrower’s property.
7.6 Distributions. Pay any cash dividends or make any other distribution or payment on account of or in redemption, retirement or
purchase of any capital stock, except that Borrower may (i) repurchase the stock of former employees pursuant to stock repurchase agreements as long as an Event of Default does not exist prior to such repurchase or would not exist after
giving effect to such repurchase[, and (ii) repurchase the stock of former employees pursuant to stock repurchase agreements by the cancellation of indebtedness owed by such former employees to Borrower regardless of whether an Event of Default
exists. For the avoidance of doubt, Bank acknowledges that Borrower currently pays a stock dividend and such dividend shall not be deemed a violation of this Section 7.6.
7.7 Investments. Directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries to do so, other than Permitted Investments, or maintain or
invest any of its property with a Person other than Bank or Bank’s Affiliates or permit any Subsidiary to do so unless such Person has entered into a control agreement with Bank, in form and substance satisfactory to Bank, or suffer or permit
any Subsidiary to be a party to, or be bound by, an agreement that restricts such Subsidiary from paying dividends or otherwise distributing property to Borrower. Further, Borrower shall not enter into any license or agreement with any Prohibited
Territory or with any Person organized under or doing business in a Prohibited Territory.
7.8 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 non-affiliated Person.
7.9 Subordinated Debt. Make any
payment in respect of any Subordinated Debt, or permit any of its Subsidiaries to make any such payment, except in compliance with the terms of such Subordinated Debt
- 12 -
and the terms of the subordination agreement relating to such Subordinated Debt, or amend any provision of any document evidencing such Subordinated Debt, except in compliance with the terms of
the subordination agreement relating to such Subordinated Debt, or amend any provision affecting Bank’s rights contained in any documentation relating to the Subordinated Debt without Bank’s prior written consent.
7.10 Inventory and Equipment. Store the Inventory or the Equipment with a bailee, warehouseman, or similar third party unless the third party has
been notified of Bank’s security interest and Bank (a) has received an acknowledgment from the third party that it is holding or will hold the Inventory or Equipment for Bank’s benefit or (b) is in possession of the warehouse
receipt, where negotiable, covering such Inventory or Equipment. Except for Inventory sold in the ordinary course of business and except for such other locations as Bank may approve in writing, Borrower shall keep the Inventory and Equipment only at
the location set forth in Article 10 and such other locations of which Borrower gives Bank prior written notice and as to which Bank files a financing statement where needed to perfect its security interest.
7.11 No Investment Company; Margin Regulation. Become or be controlled by an “investment company,” within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the business of extending credit for the purpose of purchasing or carrying margin stock, or use the proceeds of any Credit Extension for such
purpose.
ARTICLE 8. EVENTS OF DEFAULT. Any one or more of the following events shall constitute an Event of Default by Borrower under
this Agreement:
| 8.1 |
Payment Default. If Borrower fails to pay any of the Obligations when due. |
(a) If
any Borrower fails to perform any obligation under Article 6 or violates any of the covenants contained in Article 7 of this Agreement; or
(b) If Borrower fails or neglects to perform or observe any other material term, provision, condition, covenant 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 or covenant that can be cured, has failed to cure such default within ten (10) days after Borrower receives notice thereof or any officer of
Borrower becomes aware 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, so long as Borrower continues to
diligently 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 but no Credit Extensions will be made;
8.3 Material Adverse Change. If there occurs any circumstance or circumstances that could reasonably be expected to have a Material Adverse
Effect.
8.4 Defective Perfection. If Bank shall receive at any time following the Closing Date an SOS Report indicating that except
for Permitted Liens, Bank’s security interest in the Collateral is not prior to all other security interests or Liens of record reflected in the report;
- 13 -
8.5 Attachment. If any material portion of Borrower’s assets is attached, seized, subjected to a
writ or distress warrant, or is levied upon, or comes into the possession of any trustee, receiver or person acting in a similar capacity and such attachment, seizure, writ or distress warrant or levy has not been removed, discharged or rescinded
within ten (10) days, or if Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, or if a judgment or other claim becomes a lien or encumbrance upon
any material portion of Borrower’s assets, or if a notice of lien, levy, or assessment is filed of record with respect to any of Borrower’s assets by the United States Government, or any department, agency, or instrumentality thereof, or
by any state, county, municipal, or governmental agency, and the same is not paid within ten (10) days after Borrower receives notice thereof, provided that none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith contest by such Borrower (provided that no Credit Extensions will be made during such cure period);
8.6 Insolvency. If Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced against Borrower and is not dismissed or stayed
within forty five (45) days (provided that no Credit Extensions will be made prior to the dismissal of such Insolvency Proceeding);
8.7
Other Agreements. If there is a default or other failure to perform in any agreement to which Borrower is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of $100,000.00 or that could reasonably be expected to have a Material Adverse Effect;
8.8 Subordinated Debt. If Borrower makes any payment on account of Subordinated Debt, except to the extent the payment is allowed under any
subordination agreement entered into with Bank;
8.9 Judgments; Settlements. If one or more (a) judgments, orders, decrees or
arbitration awards requiring Borrower and/or any of its Subsidiaries to pay an aggregate amount of $150,000.00 or greater shall be rendered against Borrower and/or any of its Subsidiaries and the same shall not have been vacated or stayed within
twenty (20) days thereafter (provided that no Credit Extensions will be made prior to such matter being vacated or stayed); or (b) settlements are agreed upon by Borrower and/or its Subsidiaries for the payment by Borrower and/or its
Subsidiaries of an aggregate amount of $150,000.00 or greater.
8.10 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth herein or in any certificate delivered to Bank by any Responsible Officer pursuant to this Agreement or to induce Bank to enter into this Agreement or any other Loan
Document.
| ARTICLE |
9. BANK’S RIGHTS AND REMEDIES. |
9.1
Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, Bank may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by
Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise,
immediately due and payable (provided that upon the occurrence of an Event of Default described in Section 8.6 (insolvency), all Obligations shall become immediately due and payable without any action by Bank);
- 14 -
(b) Cease advancing money or extending credit to or for the benefit of Borrower 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, upon terms and in whatever order that Bank reasonably considers advisable;
(d) Make such payments
and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral. Borrower agrees to assemble the Collateral if Bank so requires, and to make the Collateral available to Bank as Bank may designate.
Borrower authorizes Bank to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Bank’s
determination appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect to any of Borrower’s owned premises, Borrower hereby grants Bank a license to enter into possession of
such premises and to occupy the same, without charge, in order to exercise any of Bank’s rights or remedies provided herein, at law, in equity, or otherwise;
(e) Set off and apply to the Obligations any and all (i) balances and deposits of Borrower held by Bank, and (ii) indebtedness at any time owing to or for the credit or the account of Borrower
held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in
the manner provided for herein) the Collateral. Bank is hereby granted a license or other right, solely pursuant to the provisions of this Section 9.1, to use, without charge, Borrower’s labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in
connection with Bank’s exercise of its rights under this Section 9.1, Borrower’s rights under all licenses and all franchise agreements shall inure to Bank’s benefit;
(g) Sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower’s premises) as Bank determines is commercially reasonable, and apply any proceeds to the Obligations in whatever manner or order Bank deems appropriate. Bank may sell the Collateral
without giving any warranties as to the Collateral. Bank may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If Bank
sells any of the Collateral upon credit, Borrower will be credited only with payments actually made by the purchaser, received by Bank, and applied to the indebtedness of the purchaser. If the purchaser fails to pay for the Collateral, Bank may
resell the Collateral and Borrower shall be credited with the proceeds of the sale;
(h) Bank may credit bid and purchase at
any public sale;
(i) Apply for the appointment of a receiver, trustee, liquidator or conservator of the Collateral, without
notice and without regard to the adequacy of the security for the Obligations and without regard to the solvency of Borrower, any guarantor or any other Person liable for any of the Obligations; and
(j) Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrower.
- 15 -
Bank may comply with any applicable state or federal law requirements in connection with a disposition of
the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.
9.2
Power of Attorney. Effective only upon the occurrence and during the continuance of an Event of Default, Borrower hereby irrevocably appoints Bank (and any of Bank’s designated officers, or employees) as Borrower’s true and lawful
attorney to: (a) send requests for verification of Accounts or notify account debtors of Bank’s security interest in the Accounts; (b) endorse Borrower’s name on any checks or other forms of payment or security that may come into
Bank’s possession; (c) sign Borrower’s name on any invoice or bill of lading relating to any Account, drafts against account debtors, schedules and assignments of Accounts, verifications of Accounts, and notices to account debtors;
(d) dispose of any Collateral; (e) make, settle, and adjust all claims under and decisions with respect to Borrower’s policies of insurance; (f) settle and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; and (g) file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature
of Borrower where permitted by law; provided Bank may exercise such power of attorney to sign the name of Borrower on any of the documents described in clause (g) above, regardless of whether an Event of Default has occurred. The
appointment of Bank as Borrower’s attorney in fact, and each and every one of Bank’s rights and powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully repaid and performed and Bank’s
obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. At any time after the occurrence and during the
continuation of an Event of Default, Bank may notify any Person owing funds to Borrower of Bank’s security interest in such funds and verify the amount of such Account. Borrower shall collect all amounts owing to Borrower for Bank, receive in
trust all payments as Bank’s trustee, and immediately deliver such payments to Bank in their original form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as required under the terms of this Agreement, then Bank may do
any or all of the following after reasonable notice to Borrower: (a) make payment of the same or any part thereof; (b) set up such reserves under the Revolving Line as Bank deems necessary to protect Bank from the exposure created by such
failure; or (c) obtain and maintain insurance policies of the type discussed in Section 6.5 of this Agreement, and take any action with respect to such policies as Bank deems prudent. Any amounts so paid or deposited by Bank shall
constitute Bank Expenses, shall be immediately due and payable, and shall bear interest at the then applicable rate hereinabove provided, and shall be secured by the Collateral. Any payments made by Bank shall not constitute an agreement by Bank to
make similar payments in the future or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank’s Liability for
Collateral. Bank has no obligation to clean up or otherwise prepare the Collateral for sale. All risk of loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 No Obligation to Pursue Others. Bank has no obligation to attempt to satisfy the Obligations by collecting them from any other person liable for them and Bank may release, modify or waive any
collateral provided by any other Person to secure any of the Obligations, all without affecting Bank’s rights against Borrower. Borrower waives any right it may have to require Bank to pursue any other Person for any of the Obligations.
9.7 Remedies Cumulative. Bank’s rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Bank shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Bank of one right
- 16 -
or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on Borrower’s part shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver,
election, or acquiescence by it. No waiver by Bank shall be effective unless made in a written document signed on behalf of Bank and then shall be effective only in the specific instance and for the specific purpose for which it was given. Borrower
expressly agrees that this Section 9.7 may not be waived or modified by Bank by course of performance, conduct, estoppel or otherwise.
9.8 Demand; Protest. Except as otherwise provided in this Agreement, Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment and any other notices relating to the Obligations.
Unless
otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by a recognized overnight delivery service, certified mail, postage prepaid, return receipt requested, or by telefacsimile to Borrower or to
Bank, as the case may be, at its addresses set forth below:
|
|
|
| If to Borrower: |
|
Biolase Technology Inc. 4
Cromwell Irvine, CA 92618 Attn:
Federico Pignatelli, Chairman and CEO FAX: (949) 273-6685 |
|
|
| If to Bank: |
|
Comerica Bank M/C
7578 39200 Six Mile Rd. Livonia, MI
48152 Attn: National Documentation Services |
|
|
| with a copy to: |
|
Comerica Bank Technology
& Life Sciences Division 11943 El Camino Real Suite 110B San Diego, CA 92130 Attn: Lake T. McGuire FAX: (858) 509-2365 |
The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the
foregoing manner given to the other.
ARTICLE 11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of California, without regard to principles of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive jurisdiction of the State and Federal courts located in the State
of California. THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF ITS, HIS OR HER CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, WAIVES ANY
- 17 -
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE UNDERSIGNED PARTIES.
| ARTICLE |
12. REFERENCE PROVISION. |
12.1 In the
event the Jury Trial Waiver set forth above is not enforceable, the parties elect to proceed under this Judicial Reference Provision.
(a) With the exception of the items specified in Section 12.1(b), below, any controversy, dispute or claim (each, a “Claim”) between the parties arising out of or relating to this
Agreement or any other document, instrument or agreement between the undersigned parties (collectively in this Section, the “Loan Documents”), will be resolved by a reference proceeding in California in accordance with the
provisions of Sections 638 et seq. of the California Code of Civil Procedure (“CCP”), or their successor sections, which shall constitute the exclusive remedy for the resolution of any Claim, including whether the Claim is subject
to the reference proceeding. Except as otherwise provided in the Loan Documents, venue for the reference proceeding will be in the Superior Court in the County where the real property involved in the action, if any, is located or in a County where
venue is otherwise appropriate under applicable law (the “Court”).
(b) The matters that shall not be subject
to a reference are the following: (i) foreclosure of any security interests in real or personal property, (ii) exercise of self-help remedies (including, without limitation, set-off), (iii) appointment of a receiver and
(iv) temporary, provisional or ancillary remedies (including, without limitation, writs of attachment, writs of possession, temporary restraining orders or preliminary injunctions). This Agreement does not limit the right of any party to
exercise or oppose any of the rights and remedies described in clauses (i) and (ii) or to seek or oppose from a court of competent jurisdiction any of the items described in clauses (iii) and (iv). The exercise of, or opposition to,
any of those items does not waive the right of any party to a reference pursuant to this Agreement.
(c) The referee shall be a
retired Judge or Justice selected by mutual written agreement of the parties. If the parties do not agree within ten (10) days of a written request to do so by any party, then, upon request of any party, the referee shall be selected by the
Presiding Judge of the Court (or his or her representative). A request for appointment of a referee may be heard on an ex parte or expedited basis, and the parties agree that irreparable harm would result if ex parte relief is not granted.
(d) The parties agree that time is of the essence in conducting the reference proceedings. Accordingly, the referee shall be
requested, subject to change in the time periods specified herein for good cause shown, to (i) set the matter for a status and trial-setting conference within fifteen (15) days after the date of selection of the referee, (ii) if
practicable, try all issues of law or fact within one hundred twenty (120) days after the date of the conference and (iii) report a statement of decision within twenty (20) days after the matter has been submitted for decision.
(e) The referee will have power to expand or limit the amount and duration of discovery. The referee may set or extend
discovery deadlines or cutoffs for good cause, including a party’s failure to provide requested discovery for any reason whatsoever. Unless otherwise ordered based upon good cause shown, no party shall be entitled to “priority” in
conducting discovery, depositions may be taken by either party upon seven (7) days written notice, and all other discovery shall be responded to within fifteen (15) days after service. All disputes relating to discovery which cannot be
resolved by the parties shall be submitted to the referee whose decision shall be final and binding.
- 18 -
(f) Except as expressly set forth in this Agreement, the referee shall determine the manner
in which the reference proceeding is conducted including the time and place of hearings, the order of presentation of evidence, and all other questions that arise with respect to the course of the reference proceeding. All proceedings and hearings
conducted before the referee, except for trial, shall be conducted without a court reporter, except that when any party so requests, a court reporter will be used at any hearing conducted before the referee, and the referee will be provided a
courtesy copy of the transcript. The party making such a request shall have the obligation to arrange for and pay the court reporter. Subject to the referee’s power to award costs to the prevailing party, the parties will equally share the cost
of the referee and the court reporter at trial.
(g) The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the State of California. The rules of evidence applicable to proceedings at law in the State of California will be applicable to the reference proceeding. The referee shall be empowered to enter equitable
as well as legal relief, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a court proceeding, including without limitation motions for summary judgment or summary adjudication. The
referee shall issue a decision at the close of the reference proceeding which disposes of all claims of the parties that are the subject of the reference. Pursuant to CCP § 644, such decision shall be entered by the Court as a judgment or an
order in the same manner as if the action had been tried by the Court and any such decision will be final, binding and conclusive. The parties reserve the right to appeal from the final judgment or order or from any appealable decision or order
entered by the referee. The parties reserve the right to findings of fact, conclusions of laws, a written statement of decision, and the right to move for a new trial or a different judgment, which new trial, if granted, is also to be a reference
proceeding under this provision.
(h) If the enabling legislation which provides for appointment of a referee is repealed (and
no successor statute is enacted), any dispute between the parties that would otherwise be determined by reference procedure will be resolved and determined by arbitration. The arbitration will be conducted by a retired judge or Justice, in
accordance with the California Arbitration Act §1280 through §1294.2 of the CCP as amended from time to time. The limitations with respect to discovery set forth above shall apply to any such arbitration proceeding.
(i) THE PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES AND CLAIMS RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY
A REFEREE AND NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, AGREES THAT THIS REFERENCE
PROVISION WILL APPLY TO ANY CONTROVERSY, DISPUTE OR CLAIM BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
| ARTICLE |
13. GENERAL PROVISIONS. |
13.1
Successors and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties and shall bind all persons who become bound as a debtor to this Agreement; provided,
however, that neither this Agreement nor any rights hereunder may be assigned by Borrower without Bank’s prior written consent, which consent may be granted or withheld
- 19 -
in Bank’s sole discretion. Bank shall have 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 hereunder.
13.2 Indemnification. Borrower shall defend, indemnify and hold harmless
Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this Agreement and/or the Loan Documents; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank, its officers, employees and agents as a result of or in any way arising out of, following, or consequential to transactions between Bank and Borrower whether under
this Agreement, or otherwise (including without limitation reasonable attorney’s fees and expenses), except for losses caused by Bank’s gross negligence or willful misconduct.
13.3 Time of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement.
13.4 Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any
specific provision.
13.5 Correction of Loan Documents. Bank may correct patent errors and fill in any blanks in this Agreement and the
other Loan Documents consistent with the agreement of the parties.
13.6 Amendments in Writing, Integration. All amendments to or
terminations of this Agreement or the other Loan Documents must be in writing signed by the parties. All prior agreements, understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of
this Agreement and the other Loan Documents, if any, are merged into this Agreement and the Loan Documents.
13.7 Counterparts. This
Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one
and the same Agreement.
13.8 Survival. All covenants, representations and warranties made in this Agreement shall continue in full
force and effect so long as any Obligations remain outstanding or Bank has any obligation to make any Credit Extension to Borrower. The obligations of Borrower to indemnify Bank with respect to the expenses, damages, losses, costs and liabilities
described in Section 13.2 shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Bank have run.
13.9 Confidentiality. In handling any confidential information, Bank and all employees and agents of Bank shall exercise the same degree of care that Bank exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any non-public information thereby received or received pursuant to this Agreement except that disclosure of such information may be made (i) to the subsidiaries or
Affiliates of Bank in connection with their present or prospective business relations with Borrower, (ii) to prospective transferees or purchasers of any interest in the Loans, (iii) as required by law, regulations, rule or order,
subpoena, judicial order or similar order, (iv) as may be required in connection with the examination, audit or similar investigation of Bank, (v) to Bank’s accountants, auditors and regulators, and (vi) as Bank may determine in
connection with the enforcement of any remedies hereunder. Confidential information hereunder shall not include information that either: (a) is in the public domain or in the knowledge or possession of Bank when disclosed to Bank, or becomes
part of the public domain after disclosure to Bank through no fault of Bank; or (b) is disclosed to Bank by a third party, provided Bank does not have actual knowledge that such third party is prohibited from disclosing such information.
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IN WITNESS WHEREOF, the parties hereto have caused this Loan and Security Agreement to be executed as of the
date first above written.
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| Biolase, Inc. |
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Comerica Bank |
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/s/ Frederick D. Furry |
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By: |
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/s/ Lake T. McGuire |
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Frederick D. Furry |
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Name: |
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Lake T. McGuire |
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Chief Financial Officer |
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Title: |
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Vice President |
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Exhibit A: Definitions
“Accounts” means all presently existing and hereafter arising accounts, contract rights, payment intangibles and all other forms of obligations owing to Borrower arising out of the sale or lease
of goods (including, without limitation, the licensing of software and other technology) or the rendering of services by Borrower and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or
reclaimed by Borrower and Borrower’s Books relating to any of the foregoing.
“Advance” or “Advances” means a cash
advance or cash advances under the Revolving Line.
“Affiliate” means, with respect to any Person, any Person that owns or controls
directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person, and each of such Person’s senior executive officers, directors, and partners.
“Bank Expenses” means all reasonable costs or expenses (including reasonable attorneys’ fees and expenses, whether generated in-house or
by outside counsel) incurred in connection with the preparation, negotiation, administration, and enforcement of the Loan Documents; reasonable Collateral audit fees but no more than $10,000 per audit; and Bank’s reasonable attorneys’ fees
and expenses (whether generated in-house or by outside counsel) incurred in amending, enforcing or defending the Loan Documents (including fees and expenses of appeal), incurred before, during and after an Insolvency Proceeding, whether or not suit
is brought.
“Borrower State” means Delaware, the state under whose laws each Borrower is organized.
“Borrower’s Books” means all of Borrower’s books and records including: ledgers; records concerning such Borrower’s assets or
liabilities, the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment, containing such information.
“Borrowing Base” means an amount equal to:
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(a) |
Eighty percent (80.0%) of Eligible Accounts plus |
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(b) |
the least of the following: |
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(i) |
Fifty percent (50.0%) of Eligible Inventory, or |
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(iii) |
the amount determined under clause (a); |
as each of the foregoing is determined by Bank with reference to the most recent Borrowing Base Certificate delivered by Borrower.
“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks in the State of California are authorized or required to close.
“Cash” means unrestricted cash and cash equivalents.
“Change in Control” shall mean a transaction in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of a
- 1 -
sufficient number of shares of all classes of stock then outstanding of Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group”
to elect a majority of the Board of Directors of Borrower, who did not have such power before such transaction.
“Chief
Executive Office State” means California, where Borrower’s chief executive office is located.
“Closing
Date” means the date of this Agreement.
“Code” means the California Uniform Commercial Code as amended or
supplemented from time to time.
“Collateral” means the property described on attached Exhibit B and all
Negotiable Collateral to the extent not described on Exhibit B, except to the extent any such property (i) is non-assignable by its terms without the consent of the licensor thereof or another party (but only to the extent such
prohibition on transfer is enforceable under applicable law, including, without limitation, Sections 9406 and 9408 of the Code), (ii) the granting of a security interest therein is contrary to applicable law, provided that upon the cessation of
any such restriction or prohibition, such property shall automatically become part of the Collateral, or (iii) constitutes the capital stock of a controlled foreign corporation (as defined in the IRC), in excess of 65% of the voting power of
all classes of capital stock of such controlled foreign corporations entitled to vote.
“Collateral State” means the
state or states where the Collateral is located, which is California.
“Consolidated Net Income (or Deficit)” means
the consolidated net income (or deficit) of any Person and its Subsidiaries, after deduction of all expenses, taxes, and other proper charges, determined in accordance with GAAP, after eliminating therefrom all extraordinary nonrecurring items of
income.
“Consolidated Total Interest Expense” means with respect to any Person for any period, the aggregate amount
of interest required to be paid or accrued by a Person and its Subsidiaries during such period on all Indebtedness of such Person and its Subsidiaries outstanding during all or any part of such period, whether such interest was or is required to be
reflected as an item of expense or capitalized, including payments consisting of interest in respect of any capitalized lease or any synthetic lease, and including commitment fees, agency fees, facility fees, balance deficiency fees and similar fees
or expenses in connection with the borrowing of money.
“Contingent Obligation” means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit,
corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include
endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support arrangement.
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“Copyrights” means any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held.
“Credit Extension” means each Advance or any other extension of credit by Bank to or for the benefit of Borrower
hereunder.
“EBITDA” means with respect to any fiscal period an amount equal to the sum of (a) Consolidated Net
Income of the Borrower and its Subsidiaries for such fiscal period, plus (b) in each case to the extent deducted in the calculation of Borrower’s Consolidated Net Income and without duplication, (i) depreciation and
amortization for such period, plus (ii) income tax expense for such period, plus (iii) Consolidated Total Interest Expense paid or accrued during such period, plus (iv) non-cash expense associated with granting
stock options, and minus, to the extent added in computing Consolidated Net Income, and without duplication, all extraordinary and non-recurring revenue and gains (including income tax benefits) for such period, all as determined in
accordance with GAAP.
“Eligible Accounts” means those Accounts that arise in the ordinary course of Borrower’s
business that comply with all of Borrower’s representations and warranties to Bank set forth in Section 5.3; provided, that Bank may change the standards of eligibility by giving Borrower thirty (30) days prior written notice. Unless
otherwise agreed to by Bank, Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has
failed to pay in full within ninety (90) days of invoice date;
(b) Credit balances over ninety (90) days;
(c) Accounts with respect to an account debtor, twenty-five percent (25%) of whose Accounts the account debtor has failed
to pay within ninety (90) days of invoice date;
(d) Accounts with respect to an account debtor, including Subsidiaries
and Affiliates, whose total obligations to Borrower exceed:
(i) fifty percent (50%) of all Accounts in the case of
accounts owned by National Technology Leasing and
(ii) twenty-five percent (25%) of all Accounts in the case of all other
Account Debtors, in either case, to the extent such obligations exceed the aforementioned percentage, except as approved in writing by Bank;
(e) Accounts with respect to which the account debtor does not have its principal place of business in the United States, except for Eligible Foreign Accounts;
(f) Accounts with respect to which the account debtor is the United States or any department, agency, or instrumentality of the United
States, except for Accounts of the United States if the payee has assigned its payment rights to Bank and the assignment has been acknowledged under the Assignment of Claims Act of 1940 (31 U.S.C. 3727);
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(g) Accounts with respect to which Borrower is liable to the account debtor for goods sold
or services rendered by the account debtor to Borrower, but only to the extent of any amounts owing to the account debtor against amounts owed to Borrower;
(h) Accounts with respect to which goods are placed on consignment, guaranteed sale, sale or return, sale on approval, bill and hold, demo or promotional, or other terms by reason of which the payment by
the account debtor may be conditional;
(i) Accounts with respect to which the account debtor is an officer, employee, agent or
Affiliate of Borrower;
(j) Accounts that have not yet been billed to the account debtor or that relate to deposits (such as
good faith deposits) or other property of the account debtor held by Borrower for the performance of services or delivery of goods which Borrower has not yet performed or delivered;
(k) Accounts with respect to which the account debtor disputes liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute (but only to the extent of the amount subject to such dispute or claim), or is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of business;
(l) Accounts the collection of which Bank reasonably determines after inquiry and consultation with Borrower to be doubtful; and
(m) Retentions and hold-backs.
“Eligible Ex-Im Accounts” means those Accounts that are deemed “Eligible” under the Ex-Im Facility Documents.
“Eligible Foreign Accounts” means Accounts with respect to which the account debtor does not have its principal place of business in the United States and is not located in an OFAC sanctioned
country and that are (i) supported by one or more letters of credit in an amount and of a tenor, and issued by a financial institution, acceptable to Bank, (ii) insured by the Export Import Bank of the United States, (iii) generated
by an account debtor with its principal place of business in Canada, provided that the Bank has perfected its security interest in the appropriate Canadian province, or (iv) approved by Bank on a case-by-case basis. All Eligible Foreign
Accounts must be calculated in U.S. Dollars.
“Eligible Inventory” is Borrower’s Inventory consisting of raw materials and of
finished goods held by Borrower for sale in the ordinary course of business pursuant to a valid third-party purchase order received by Borrower, for delivery in the United States, valued at the lowest of (i) Borrower’s net purchase cost or
net manufacturing cost and (ii) the average sales price, excluding, however, any Inventory which consists of:
(a)
Inventory located outside of the United States;
(b) Work-in-process, supplies, displays, packaging or promotional materials or
Inventory sold on consignment;
(c) Inventory consisting of proprietary software;
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(d) Any Inventory not in the actual possession of Borrower, except to the extent provided in
Subsection (l) below;
(e) Any Inventory the sale or other disposition of which has given rise to an Account;
(f) Any Inventory which fails to meet all standards and requirements imposed by any governmental authority over such Inventory or its
production, storage, use or sale;
(g) Any Inventory located on premises leased or rented to the Borrower or otherwise not
owned by a Borrower, unless Bank has received a waiver and consent from the lessor, landlord or owner, in form and substance reasonably satisfactory to Bank and from any mortgagee of such lessor, landlord or owner to the extent required by Bank;
(h) Inventory with offsetting claims;
(i) Inventory that is damaged, defective, obsolete, returned, recalled or unfit for further processing;
(j) Inventory that is not subject to a valid, perfected first priority Lien in favor of Bank;
(k) Inventory that is located at an address that has not been disclosed to Bank in writing;
(l) Inventory that is in the possession of a processor or bailee, or located on premises leased or subleased to Borrower, or on premises subject to a mortgage in favor of a Person other than Bank, unless
such processor or bailee or mortgagee or the lessor or sublessor of such premises, as the case may be, has executed and delivered all documentation which Bank shall reasonably require to evidence the subordination or other limitation or
extinguishment of such Person’s rights with respect to such Inventory and Bank’s right to gain access thereto;
(m)
any Inventory as to which Bank determines in the exercise of its sole and absolute discretion at any time and in good faith is not in good condition or is defective, unmerchantable, post-seasonal, slow moving or obsolete; and
(n) any Inventory which Bank in the good faith exercise of its sole and absolute discretion has deemed to be ineligible because Bank
otherwise considers the collateral value to Bank to be impaired or its ability to realize such value to be insecure.
In the event of any
dispute under the foregoing criteria, as to whether Inventory is, or has ceased to be, Eligible Inventory, the decision of Bank in the good faith exercise of its sole and absolute discretion shall control.
“Environmental Laws” means all laws, rules, regulations, orders and the like issued by any federal state, local foreign or other governmental
or quasi-governmental authority or any agency pertaining to the environment or to any hazardous materials or wastes, toxic substances, flammable, explosive or radioactive materials, asbestos or other similar materials.
“Equipment” means all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the
regulations thereunder.
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“Event of Default” has the meaning assigned in Article 8.
“Ex-Im” means the Export-Import Bank of the United States.
“Ex-Im Facility Documents” means the Ex-Im Facility Letter Agreement, the $4,000,000 Master Revolving Note, the Loan Authorization Notice, the Borrower Agreement, and Economic Impact
Certification, each dated as of May , 2012.
“Ex-Im Facility Loans” means the loans advanced to
Borrower under and pursuant to the Ex-Im Facility Documents.
“GAAP” means generally accepted accounting principles, consistently
applied, as in effect from time to time.
“Guarantors” means BL Acquisition Corp., a Delaware corporation, and BL Acquisition II
Inc., a Delaware corporation, together with any Subsidiary that becomes a Guarantor after the date of this Agreement pursuant to Section 6.11.
“Guaranty” means the Guaranty dated as of the Closing Date, covering all outstanding Obligations of Borrower made by the Guarantors (whether by execution thereof, or by execution of the joinder
or assumption agreement with respect thereto), to Bank, as amended, renewed, replaced, extended, or supplemented from time to time.
“Indebtedness” means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations, and (d) all
Contingent Obligations.
“Insolvency Proceeding” means any proceeding commenced by or against any Person or entity under any
provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.
“Intellectual Property” means all of Borrower’s right,
title, and interest in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower now or
hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such
use to the extent permitted by such license or rights;
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(f) All amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents;
and
(g) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity
or warranty payable in respect of any of the foregoing.
“Inventory” means all present and future inventory in which Borrower has
any interest.
“Investment” means any beneficial ownership of (including stock, partnership or limited liability company interest or
other securities) any Person, or any loan, advance or capital contribution to any Person.
“IRC” means the Internal Revenue Code of
1986, as amended, and the regulations thereunder.
“Lien” means any mortgage, lien, deed of trust, charge, pledge, security interest
or other encumbrance.
“Loan Documents” means, collectively, this Agreement, any note or notes executed by Borrower, and any other
document, instrument or agreement entered into in connection with this Agreement, all as amended or extended from time to time.
“Material Adverse Effect” means (i) a material adverse change in Borrower’s prospects, business or financial condition (including
without limitation, evidence of a lack of investor support and/or Borrower’s inability to attract sufficient additional equity financing from its investors), (ii) a material impairment in the prospect of repayment of all or any portion of
the Obligations or in otherwise performing Borrower’s obligations under the Loan Documents, or (iii) a material impairment in the perfection, value or priority of Bank’s security interests in the Collateral.
“Material Subsidiary” means:
(a) the Guarantors;
(b) each Subsidiary that, together with its Subsidiaries
(i) generates more than five percent (5.0%) of Borrower’s consolidated gross revenue for the four (4) fiscal quarter periods most recently ended and (ii) represents more than five percent (5.0%) of Borrower’s
consolidated assets as of the end of any fiscal quarter; and
(c) each Subsidiary that when combined with all Subsidiaries that
are not covered by clause (b) of this definition (“Immaterial Subsidiaries”) would cause all of the Immaterial Subsidiaries, taken as a whole, to (i) be the source of more than fifteen percent (15.0%) of Borrower’s
consolidated gross revenue for the four (4) fiscal quarter periods most recently ended and (ii) represent more than fifteen percent (15.0%) of Borrower’s consolidated assets as of the end of any fiscal quarter.
“Negotiable Collateral” means all of Borrower’s present and future letters of credit of which it is a beneficiary, drafts, instruments
(including promissory notes), securities, documents of title, and chattel paper, and Borrower’s Books relating to any of the foregoing.
“Obligations” means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
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“Patents” means all patents, patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“Permitted
Indebtedness” means:
(a) Indebtedness of Borrower in favor of Bank arising under this Agreement or any other Loan
Document or any Ex-Im Facility Document;
(b) Indebtedness existing on the Closing Date and disclosed in the Schedule;
(c) Indebtedness not to exceed $100,000.00 in the aggregate secured by a lien described in clause (c) of the defined term
“Permitted Liens,” provided such Indebtedness does not exceed the lesser of the cost or fair market value of the equipment financed with such Indebtedness;
(d) Subordinated Debt;
(e) Indebtedness to trade creditors incurred in the
ordinary course of business;
(f) Guarantees of Borrower in respect of Indebtedness otherwise permitted hereunder of Borrower
or any subsidiary; and
(g) Extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the
principal amount is not increased or the terms modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.
“Permitted Investment” means:
(a) Investments existing on the Closing Date disclosed in the Schedule;
(b) (i)
Marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one (1) year from the date of acquisition thereof, (ii) commercial paper maturing no more
than one (1) year from the date of creation thereof and currently having rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service, (iii) Bank’s certificates of deposit
maturing no more than one (1) year from the date of investment therein, and (iv) Bank’s money market accounts;
(c) Repurchases of stock from former employees or directors of Borrower under the terms of applicable repurchase agreements (i) in an
aggregate amount not to exceed $100,000.00 in any fiscal year, provided that no Event of Default has occurred, is continuing or would exist after giving effect to the repurchases, or (ii) in any amount where the consideration for the repurchase
is the cancellation of indebtedness owed by such former employees to Borrower regardless of whether an Event of Default exists;
(d) Investments accepted in connection with Permitted Transfers;
(e) Investments of Subsidiaries in or to other Subsidiaries or Borrower and Investments by Borrower in Subsidiaries not to exceed the following amounts in any fiscal year: (i) $250,000 for any
Subsidiaries located in India, (ii) $250,000 for any Subsidiaries located in Brazil, (iii) $100,000 for any Subsidiary located in all other countries; and (iv) $750,000.00 in the aggregate;
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(f) Investments not to exceed $100,000.00 in the aggregate in any fiscal year consisting of
(i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its
Subsidiaries pursuant to employee stock purchase plan agreements approved by Borrower’s Board of Directors;
(g)
Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary
course of Borrower’s business;
(h) Investments consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business, provided that this subparagraph (h) shall not apply to Investments of Borrower in any Subsidiary; and
(i) Joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the non-exclusive licensing of
technology, the development of technology or the providing of technical support, provided that any cash Investments by Borrower do not exceed $150,000.00 in the aggregate in any fiscal year.
“Permitted Liens” means the following:
(a) Any Liens existing on the
Closing Date and disclosed in the Schedule (excluding Liens to be satisfied with the proceeds of the Advances) or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings and for which Borrower maintains adequate
reserves, provided the same have no priority over any of Bank’s security interests;
(c) Liens not to exceed $100,000.00
in the aggregate (i) upon or in any Equipment (other than Equipment financed by an Equipment Advance) acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such Equipment or indebtedness incurred solely for the
purpose of financing the acquisition or lease of such Equipment, or (ii) existing on such Equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the
proceeds of such Equipment;
(d) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clauses (a) through (e) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase; and
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Sections 8.5 (attachment) or 8.9 (judgments).
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“Permitted Transfer” means the conveyance, sale, lease, transfer or disposition by Borrower or any
Subsidiary of:
(a) Inventory in the ordinary course of business;
(b) Non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of
business;
(c) Worn-out or obsolete Equipment; or
(d) Other assets of Borrower or its Subsidiaries that do not in the aggregate exceed $100,000.00 during any fiscal year.
“Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public
benefit corporation, firm, joint stock company, estate, entity or governmental agency.
“Prime Rate” means the variable rate of
interest, per annum, most recently announced by Bank, as its “prime rate,” whether or not such announced rate is the lowest rate available from Bank.
“Prohibited Territory” means any person or country listed by the Office of Foreign Assets Control of the United States Department of Treasury as to which transactions between a United States
Person and that territory are prohibited.
“Responsible Officer” means each of the Chief Executive Officer, the Chief Financial
Officer and the Controller of Borrower.
“Revolving Line” means a Credit Extension of up to Four Million and 00/100 Dollars
($4,000,000.00).
“Revolving Maturity Date” means May 1, 2014.
“Schedule” means the schedule of exceptions attached hereto and approved by Bank, if any.
“Security Agreement” means the Security Agreement dated as of the Closing Date, executed and delivered by the Guarantors, as debtor, in favor
of Bank with respect to any or all of the Collateral (as defined therein) to secure any or all of the Obligations, as such Security Agreement may be amended, renewed, replaced, extended, or supplemented from time to time.
“Security Agreement-Stock Pledge” means the Security Agreement dated as of the Closing Date, executed and delivered by Borrower, as pledgor, in
favor of Bank with respect to any or all of the Collateral (as defined therein) to secure any or all of the Obligations, as such Security Agreement may be amended, renewed, replaced, extended, or supplemented from time to time.
“Shares” means 100% of the outstanding shares of capital stock or other equity interests of each Guarantor.
“SOS Reports” means the official reports from the Secretaries of State of each Collateral State, Chief Executive Office State and the Borrower
State and other applicable federal, state or local government offices identifying all current security interests filed in the Collateral and Liens of record as of the date of such report.
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“Subordinated Debt” means any debt incurred by a Borrower that is subordinated in writing to the
debt owing by Borrower to Bank on terms reasonably acceptable to Bank (and identified as being such by Borrower and Bank).
“Subsidiary” means any corporation, partnership or limited liability company or joint venture in which (i) any general partnership
interest or (ii) more than 50% of the stock, limited liability company interest or joint venture of which by the terms thereof ordinary voting power to elect the Board of Directors, managers or trustees of the entity, at the time as of which
any determination is being made, is owned by Borrower, either directly or through an Affiliate.
“Trademarks” means any trademark
and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.
“Weekly Reporting Period” means any time that EBITDA, as measured on a trailing three month basis, is less than $0.
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