Attached files
Exhibit 10.45
BUSINESS FINANCING AGREEMENT
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Borrower:
CHROMADEX CORPORATION,a Delaware
corporation
CHROMADEX,
INC., a California corporation
CHROMADEX
ANALYTICS, INC., a Nevada corporation
HEALTHSPAN
RESEARCH LLC, a Delaware limited liability company
10900 Wilshire Blvd., Suite 650Los Angeles, CA 90024
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Lender: WESTERN ALLIANCE BANK, an Arizona
corporation
55 Almaden Boulevard, Suite 100
San Jose, CA 95113
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This BUSINESS FINANCING AGREEMENT, dated as of
November 12, 2019 (“Closing
Date”), is made and
entered into among WESTERN ALLIANCE BANK, an Arizona corporation
(“Lender”),
and CHROMADEX CORPORATION, a Delaware corporation,
CHROMADEX, INC., a California corporation, CHROMADEX ANALYTICS,
INC., a Nevada corporation, and HEALTHSPAN RESEARCH LLC, a Delaware
limited liability company (individually and collectively,
“Borrower”),
on the following terms and conditions:
1.
CREDIT EXTENSIONS.
1.1
REVOLVING CREDIT LINE.
(a)
Advances. Subject to the terms and
conditions of this Agreement, from the date on which this Agreement
becomes effective until the Maturity Date, Lender will make
Advances to Borrower not exceeding the Credit Limit or the
Borrowing Base, whichever is less; provided that in no event shall
Lender be obligated to make any Advance that results in an
Overadvance or while any Overadvance is outstanding. Amounts
borrowed under this Section may be repaid and subject to the terms
and conditions hereof reborrowed during the term of this Agreement.
It shall be a condition to each Advance that an Advance
Request acceptable to Lender has been received by Lender, all
of the representations and warranties set forth in Section 3
are true and correct in all material respects on the date of such
Advance as though made at and as of each such date, and no
Default has occurred and is continuing, or would result from such
Advance.
(b)
Advance Requests. Borrower may request
that Lender make an Advance by delivering to Lender an Advance
Request therefor and Lender shall be entitled to rely on all the
information provided by Borrower to Lender on or with the Advance
Request. Lender may honor Advance Requests, instructions or
repayments given by Borrower (if an individual) or by any
Authorized Person. So long as all of the conditions for an Advance
set forth herein have been satisfied, Lender shall fund such
Advance into Borrower’s Account within one business day of
Lender’s receipt of the applicable Advance
Request.
(c)
Due Diligence. Lender shall (a) audit
Borrower’s Receivables and any and all records pertaining to
the Collateral, once every twelve (12) months or more frequently at
Lender’s sole discretion, and (b) conduct an appraisal on
Borrower’s Inventory once every twelve (12) months or, if an
Event of Default has occurred and is continuing, more frequently at
Lender’s sole discretion, in each case at Borrower’s
expense. Lender may at any time and from time to time contact
Account Debtors and other persons obligated or knowledgeable in
respect of Receivables to confirm the Receivable Amount of such
Receivables, to determine whether Receivables constitute Eligible
Receivables, and for any other purpose in connection with this
Agreement. If any of the Collateral or Borrower’s books or
records pertaining to the Collateral are in the possession of a
third party, Borrower authorizes that third party to permit Lender
or its agents to have access to perform inspections or audits
thereof and to respond to Lender’s requests for information
concerning such Collateral and records.
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(d)
Collections.
(i) Lender shall
have the exclusive right to receive all Collections on all
Receivables, and Borrower shall take the actions set out herein to
effectuate Lender’s right. Borrower shall promptly notify,
transfer and deliver to Lender all Collections Borrower receives
for deposit into the Collection Account. On or about the Closing
Date, Borrower shall promptly enter into a collection services
agreement acceptable to Lender (the “Lockbox
Agreement”) pursuant to which all Collections received
in the Lockbox shall be deposited into the Collection Account.
Borrower shall use the Lockbox address as the remit to and payment
address for all of Borrower’s Collections from Account
Debtors, and Borrower shall instruct all Account Debtors to make
payments either directly to the Lockbox for deposit by Lender
directly into the Collection Account, or instruct them to deliver
such payments to Lender by wire transfer, ACH, or other means as
Lender may direct for deposit to the Lockbox or Collection Account.
It will be considered an immediate Event of Default if Borrower
fails, in any material respect, to complete this transition with
all Account Debtors within 90 days of the date of this Agreement
(the “Transition
Period”). During the Transition Period, Borrower shall
forward all collections to Lender along with a weekly cash receipts
journal in form and substance reasonably satisfactory to
Lender.
(ii) Lender
shall when a Streamline Period is in effect, transfer all
Collections deposited into the Collection Account to
Borrower’s Account, or when a Streamline Period is not in
effect, apply the Collections deposited into the Collection Account
to the outstanding Account Balance, in either case, within three
business days of the date received; provided that upon the
occurrence and during the continuance of any Event of Default,
Lender may apply all Collections to the Obligations in such order
and manner as Lender may determine. Lender has no duty to do any
act other than to apply such amounts as required above. If an item
of Collections is not honored or Lender does not receive good funds
for any reason, any amount previously transferred to
Borrower’s Account or applied to the Account Balance shall be
reversed as of the date transferred or applied, as applicable, and,
if applied to the Account Balance, the Finance Charge will accrue
as if the Collections had not been so applied. Lender shall have,
with respect to any goods related to the Receivables, all the
rights and remedies of an unpaid seller under the UCC and other
applicable law, including the rights of replevin, claim and
delivery, reclamation and stoppage in transit.
(e)
Receivables Activity Report. Within 30
days after each Month End, Lender shall send to Borrower a report
covering the transactions for the prior billing period, including
the amount of all Advances, Collections, Adjustments, Finance
Charges, and other fees and charges. The accounting shall be deemed
correct and conclusive absent manifest error unless Borrower makes
written objection to Lender within 30 days after Lender sends the
accounting to Borrower.
(f)
Adjustments. In the event any Adjustment
or dispute is asserted by any Account Debtor, Borrower shall
promptly advise Lender and shall resolve such disputes and advise
Lender of any Adjustments; provided that in no case will
the aggregate Adjustments made with respect to any Receivable
exceed 5% of its original Receivable Amount unless Borrower has
obtained the prior written consent of Lender, which consent shall
not be unreasonably withheld or delayed. So long as any Obligations
are outstanding, Lender shall have the right, at any time after the
occurrence and during the continuance of an Event of Default, to
take possession of any rejected, returned, or recovered personal
property. If such possession is not taken by Lender, Borrower is to
resell it for Lender’s account at Borrower’s expense
with the proceeds made payable to Lender.
(g)
Recourse; Maturity. Advances and the
other Obligations shall be with full recourse against Borrower. On
the Maturity Date, Borrower will pay all then outstanding Advances
and other Obligations to Lender or such earlier date as shall be
herein provided.
(h)
Cash Management Services. Borrower may
use availability hereunder up to the Cash Management Sublimit for
Lender’s cash management services, which may include merchant
services, controlled disbursement accounts, direct deposit of
payroll, business credit card, and check cashing services
identified in various cash management services agreements related
to such services (the “Cash Management
Services”). Amounts outstanding under the Cash
Management Sublimit will be treated as an Advance for purposes of
determining availability under the Credit Limit and shall decrease,
on a dollar-for-dollar basis, the amount available for other
Advances. The Cash Management Services shall be subject to
additional terms set forth in applicable cash management services
agreements.
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(i)
International Sublimit.
(i) Letter of Credit Line. Subject to the
terms and conditions of this Agreement, Lender hereby agrees to
issue or cause an Affiliate to issue letters of credit for the
account of Borrower (each, a “Letter of
Credit” and collectively, “Letters of
Credit”) from time to time; provided that the Letter
of Credit Obligations shall not at any time exceed the
International Sublimit less any FX Amount (as defined below) and
the Letter of Credit Obligations will be treated as Advances
for purposes of determining availability under the Credit Limit and
shall decrease, on a dollar-for-dollar basis, the amount available
for other Advances. The form and substance of each Letter of Credit
shall be subject to approval by Lender, in its sole discretion.
Each Letter of Credit shall be subject to the additional terms of
the Letter of Credit agreements, applications and any related
documents required by Lender in connection with the issuance
thereof (each, a “Letter of Credit
Agreement”). Each draft paid under any Letter of
Credit shall be repaid by Borrower in accordance with the
provisions of the applicable Letter of Credit Agreement. No Letter
of Credit shall be issued that results in an Overadvance or while
any Overadvance is outstanding.
(ii) Foreign
Exchange Facility. Borrower may enter in foreign exchange
forward contracts with Lender under which Borrower commits to
purchase from or sell to Lender a set amount of foreign currency
more than one business day after the contract date (the
“FX Forward
Contract”). The total FX Forward Contracts at any one
time may not exceed 10 times an amount equal to the International
Sublimit minus the face amount of all outstanding Letters of
Credit. Ten percent (10%) of the amount of each outstanding FX
Forward Contract shall be treated as an Advance for purposes of
determining availability under the Credit Limit and shall decrease,
on a dollar-for-dollar basis, the amount available for other
Advances (the “FX
Amount”). Lender may terminate the FX Forward
Contracts if an Event of Default occurs. Each FX Forward Contract
shall be subject to additional terms set forth in the applicable FX
Forward Contract or other agreements executed in connection with
the foreign exchange facility.
(j)
Overadvances. Upon any occurrence of an
Overadvance, Borrower shall immediately pay down the Advances such
that, after giving effect to such payments, no Overadvance
exists.
1.2
RESERVED.
1.3
CONDITIONS PRECEDENT TO INITIAL CREDIT
EXTENSION. The obligation of Lender to make the initial
Credit Extension is subject to the condition precedent that Lender
shall have received, in form and substance satisfactory to Lender,
the following:
(a)
duly executed
signatures to this Agreement and the other Loan
Documents;
(b)
a certificate of
the Secretary of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this
Agreement;
(c)
evidence
satisfactory to Lender that the insurance required by Section 4.4
is in full force and effect;
(d)
an initial audit of
the Receivables as contemplated by Section 1.1(c)(a);
(e)
payment of the fees
and expenses then due specified in Section 2.2 and
Section 9 hereof, respectively; and
(f)
termination
statements on all liens other than those expressly permitted under
this Agreement.
2.
FEES AND FINANCE CHARGES.
2.1
Finance
Charges and Interest.
(a)
Advances. Lender may, but is not required to, deduct the
amount of accrued Finance Charge from Collections received by
Lender. The accrued and unpaid Finance Charge shall be due and
payable within 10 calendar days after each Month End during the
term hereof.
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2.2
Fees.
(a)
Revolving Termination Fee. In the event
this Agreement is terminated prior to the first anniversary of the
date of this Agreement, Borrower shall pay the Revolving
Termination Fee to Lender, provided, that, the Revolving
Termination Fee shall be waived by Lender if the Credit Extensions
are refinanced with Lender or Lender’s
affiliates.
(b)
Revolving Facility Fee. Borrower shall
pay the Revolving Facility Fee to Lender promptly on the Closing
Date and on the first (1st) year anniversary
of the Closing Date.
(c)
Letter of Credit Fees. Borrower shall
pay to Lender fees upon the issuance of each Letter of Credit, upon
the payment or negotiation of each draft under any Letter of Credit
and upon the occurrence of any other activity with respect to any
Letter of Credit (including without limitation, the transfer,
amendment or cancellation of any Letter of Credit) determined in
accordance with Lender’s standard fees and charges then in
effect for such activity.
(d)
Cash Management and FX Forward Contract
Fees. Borrower shall pay to Lender fees in connection with
the Cash Management Services and the FX Forward Contracts as
determined in accordance with Lender’s standard fees and
charges then in effect for such activity.
(e)
Due Diligence Fee. Borrower shall pay
the Due Diligence Fee to Lender on each anniversary of this
Agreement.
3.1
No
representation, warranty or other statement of Borrower in any
certificate or written statement given to Lender contains any
untrue statement of a material fact or omits to state a material
fact necessary to make the statement contained in the certificates
or statement not misleading when made or deemed made.
3.2
Borrower
is duly existing and in good standing in its state of formation and
qualified and licensed to do business in, and in good standing in,
any state in which the conduct of its business or its ownership of
property requires that it be qualified except to the extent that
any failure to remain so qualified could not reasonably be expected
to have a material adverse effect on the business, operations or
financial condition of the Borrower, taken as a whole, or a
material adverse effect on the Collateral or the priority of
Lender’s Lien on the Collateral.
3.3
The
execution, delivery and performance of this Agreement has been duly
authorized, and does not conflict with Borrower’s
organizational documents, nor constitute an Event of Default under
any material agreement by which Borrower is bound. Borrower is not
in default under any agreement to which or by which it is
bound.
3.4
Borrower
has good title to the Collateral and all Inventory is in all
material respects of good and marketable quality, free from
material defects.
3.5
As
of the date hereof, Borrower’s name, form of organization,
chief executive office, and the place where the records concerning
all Receivables and Collateral are kept is set forth at the
beginning of this Agreement, as of the date hereof, Borrower is
located at its address for notices set forth in this Agreement. In
addition, upon any change to any of the foregoing Borrower will
provide to Lender ten (10) Business Days prior written notice of
any such change.
3.6
If
Borrower owns, holds or has any interest in, any registered
copyrights, patents or trademarks, and material inbound licenses of
any of the foregoing, such interest has been specifically disclosed
and identified to Lender in writing.
3.7
The Eligible
Receivables are bona fide existing obligations. The property and
services giving rise to such Eligible Receivable has been delivered
or rendered to the account debtor or to the account debtor’s
agent for immediate and unconditional acceptance by the account
debtor. Borrower has not received notice of actual or imminent
Insolvency Proceeding of any Account Debtor that is included in any
Borrowing Base Certificate as an Eligible Receivable.
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4.
MISCELLANEOUS
PROVISIONS. Borrower
will:
4.1
At all times maintain its corporate existence and
good standing in its jurisdictions of incorporation and maintain
its qualification in each jurisdiction necessary to
Borrower’s business or operations and in which any failure to
remain so qualified could reasonably be expected to have a material
adverse effect on the business, operations or financial condition
of the Borrower, taken as a whole, or a material adverse effect on
the Collateral or the priority of Lender’s Lien on the
Collateral, and not merge or consolidate with or into any
other business organization, or acquire all or substantially all of
the capital stock or property of a third party, unless any
such acquired entity becomes a “borrower” under this
Agreement and Lender has previously consented to the
applicable transaction in writing.
4.2
Give
Lender at least thirty (30) days prior written notice of changes to
its name, type of organization, chief executive office or location
of records.
4.3
Pay all its taxes including gross payroll,
withholding and sales taxes when due, unless (i) such taxes are
being contested in good faith by appropriate proceedings and for
which Borrower has maintained adequate reserves in accordance with
GAAP, or (ii) with respect to withholding and sales taxes
only, such withholding and sales taxes do not, individually
or in the aggregate, exceed Ten Thousand Dollars ($10,000) and are
satisfied by Borrower within ten (10) days of Borrower’s
knowledge of non-payment, and will
deliver satisfactory evidence of payment to Lender if
requested.
(a)
insurance
satisfactory to Lender as to amount, nature and carrier covering
property damage (including loss of use and occupancy) to any of
Borrower’s properties, business interruption insurance,
public liability insurance including coverage for contractual
liability, product liability and workers’ compensation, and
any other insurance which is usual for Borrower’s business.
Each such policy shall provide for at least thirty (30) days prior
notice to Lender of any cancellation thereof.
(b)
all risk property
damage insurance policies (including without limitation windstorm
coverage, and hurricane coverage as applicable) covering the
tangible property comprising the Collateral. Each insurance policy
must be for the full replacement cost of the Collateral and include
a replacement cost endorsement, or be in an amount acceptable to
Lender. The insurance must be issued by an insurance company
acceptable to Lender and must include a lender’s loss payable
endorsement in favor of Lender in a form acceptable to
Lender.
Upon
the request of Lender, Borrower shall deliver to Lender a copy of
each insurance policy, or, if permitted by Lender, a certificate of
insurance listing all insurance in force.
4.5
Promptly
upon receipt, transfer and deliver to Lender all Collections
Borrower receives.
4.6
Not
create, incur, assume, or be liable for any indebtedness, other
than Permitted Indebtedness.
4.7
Not pay any
dividends or make any other distribution or payment on account of
or in redemption, retirement or purchase of any capital stock, or
permit any of its subsidiaries to do so, other than the
conversion of Borrower’s capital stock, dividends
payable in capital stock of Borrower, cash in lieu of
fractional shares upon exercise or conversion of the capital stock
of Borrower contemplated in clause (i) of this
Section 4.7, and as disclosed in Schedule 4.7 of
the Disclosure Letter.
4.8
Not directly or
indirectly acquire or own, or make any Investment in or to any
Person, or permit any of its subsidiaries so to do, other than
Permitted Investments.
4.9
Not 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.
4.10
Not 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 the subordination agreement among Lender and the
creditors for such Subordinated Debt, or amend any provision
contained in any documentation relating to the Subordinated Debt in
a manner adverse to the interest of Lender without Lender’s
prior written consent.
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4.11
Not become an
“investment company” 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. In any material respect, fail to meet the minimum funding
requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation,
which violation could reasonably be expected to have a material
adverse effect on Borrower’s business, or a material adverse
effect on the Collateral or the priority of Lender’s Lien on
the Collateral, or permit any of its subsidiaries to do any of the
foregoing.
4.12
Store any
Collateral with a bailee, warehouseman, or other third party unless
the third party has been notified of Lender’s security
interest and if Lender reasonably requests, Lender has
received an acknowledgment from the third party that it is holding
or will hold the Collateral for Lender’s benefit on terms
satisfactory to Lender. In addition, Borrower shall not store or
maintain any Collateral at a location (including any premises
leased by Borrower) other than (x) locations disclosed to
Lender in writing and (y) to the extent Lender so requests in
its reasonable discretion and to the extent commercially
practicable, Lender has received a landlord waiver from the
applicable landlord and/or sublandlord in form and substance
satisfactory to Lender.
4.13
Promptly
(and in any event within fifteen (15) Business Days) notify Lender
if Borrower hereafter obtains any interest in any copyrights,
patents, trademarks or licenses that are significant in value or
are material to the conduct of its business.
4.14
Provide the
following financial information and statements in form acceptable
to Lender, and such additional information as may be requested by
Lender from time to time. Lender has the right to require Borrower
to deliver financial information and statements to Lender more
frequently than otherwise provided below, and to use such
additional information and statements to measure any applicable
financial covenants in this Agreement.
(a)
Within one hundred
eighty (180) days of the fiscal year end, the annual financial
statements of Borrower, certified and dated by an authorized
financial officer. These financial statements must be audited (with
an opinion from such auditors not containing any “going
concern” qualifications) by a nationally recognized firm of
certified public accountants reasonably acceptable to Lender (and
for the avoidance of doubt, Marcum LLP is hereby deemed to be
acceptable to Lender). The statements shall be prepared on a
consolidated basis.
(b)
No later than
thirty (30) days after the end of each month (including the last
period in each fiscal year), monthly financial statements of
Borrower including a balance sheet, income statement, statement of
cash flows, and sell through reports, certified and dated by an
authorized financial officer. The statements shall be prepared on a
consolidated basis.
(c)
Promptly, upon
sending or receipt, copies of any management letters and
correspondence relating to management letters, sent or received by
Borrower to or from Borrower’s auditor.
(d)
If applicable,
within five (5) days of filing, copies of the Form 10-K Annual
Report, Form 10-Q Quarterly Report and Form 8-K Current
Report for Borrower filed with the Securities and Exchange
Commission, provided that delivery of any such reports shall be
deemed satisfied upon posting on the Electronic Data Gathering,
Analysis and Retrieval database maintained by the Securities and
Exchange Commission so long as Borrower provides a link to such
filing on Borrower’s website.
(e)
Financial
projections covering the current fiscal year, specifying the
assumptions used in creating the projections and setting forth
calculations showing compliance with the financial covenants set
forth in this Agreement, and an annual budget approved by the Board
of Directors of Borrower. Annual projections and annual
Board-approved budgets shall in any case be provided to Lender no
later than sixty (60) days after the beginning of each fiscal
year.
(f)
Within thirty (30)
days after each Month End, a compliance certificate of
Borrower, signed by an authorized financial officer and setting
forth the information and computations (in sufficient detail)
to establish compliance with all financial covenants at the end of
the period covered by the financial statements then being furnished
and whether there existed as of the date of such financial
statements and whether there exists as of the date of the
certificate, any Default or Event of Default under this Agreement
and, if any such Default or Event of Default exists, specifying the
nature thereof and the action Borrower is taking and proposes to
take with respect thereto.
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(g)
Within fifteen (15)
days after each Month End, a roll forward borrowing base
certificate substantially in the form attached hereto as
Exhibit B, in form and substance satisfactory to Lender,
setting forth Eligible Receivables and Receivable Amounts thereof
and Eligible Inventory as of the last day of the preceding calendar
month (a “Borrowing Base
Certificate”); provided, however, when a Streamline
Period is not in effect, Borrower shall also deliver to Lender at
the funding of each Advance a Borrowing Base Certificate (except
that such Borrowing Base Certificate need not include updates to
Eligible Inventory) as of a date no more than three (3) business
days from the date of such Advance.
(h)
Within
fifteen (15) days after each Month End and when a Streamline
Period is not in effect, at the funding of each Advance (as of a
date no more than three (3) business days from the date of such
Advance), a detailed aging of Borrower’s Receivables by
invoice or a summary aging by Account Debtor, together with payable
aging, deferred revenue report, sales and billings journals, cash
receipts journals, and such other matters as Lender may reasonably
request.
(i)
Prompt reports of
any material updates (as information becomes available to Borrower)
in connection with Borrower’s litigation
matters.
(j)
Promptly upon
Lender’s request, such other financial information, books,
records, statements, lists of property and accounts, budgets,
forecasts or reports as to Borrower and as to each guarantor of
Borrower’s obligations to Lender as Lender may request,
including without limitation, invoices, purchase orders, proof of
delivery, and acceptance documentation.
4.15
Within 90 days from the Closing Date, maintain all
of its and its U.S. subsidiaries’ primary depository
relationship, including operating and deposit accounts with Lender;
provided, that, any accounts maintained outside of Lender shall be
subject to a deposit account control agreement in favor of Lender
and in form and substance satisfactory to Lender except for
Borrower’s accounts maintained with Adyen, PayPal, Humboldt,
Stripe or other merchant processors so long as Borrower transfers
the entire balance with such merchant processors to an operating
account with Lender on a weekly basis. Borrower and its
subsidiaries will endeavor to utilize Lender’s International
Banking Division for services offered by such division including,
without limitation, services related to foreign currency wires,
hedging, swaps, and letters of credit.
4.16
Promptly
provide to Lender such additional information and documents
regarding the finances, properties, business or books and records
of Borrower or any guarantor or any other obligor as Lender may
request.
4.17
Maintain
Borrower’s financial condition as follows in accordance with
GAAP and used consistently with prior practices (except to the
extent modified by the definitions herein):
(a)
RML. Borrower shall maintain at all
times, tested as of each Month End, RML of at least four (4)
months, provided, that, for any month in which Borrower’s
Average EBDAS is at least Zero Dollars ($0), RML shall not be
tested.
(b)
Cash. Borrower shall maintain at all
times, tested as of each Month End, unrestricted and unencumbered
cash at Lender of at least Three Million Dollars
($3,000,000).
4.18
Not make or
contract to make, without Lender’s prior written consent, (i)
capital expenditures, including leasehold improvements, in any
fiscal year in excess of One Million Dollars ($1,000,000), or (ii)
incur liability for rentals of property (including both real and
personal property) in any fiscal year in excess of Five Million
Dollars ($5,000,000).
5.
SECURITY INTEREST.
To secure the prompt payment and
performance to Lender of all of the Obligations, Borrower hereby
grants to Lender a continuing security interest in the Collateral.
Borrower is not authorized to sell, assign, transfer or otherwise
convey any Collateral without Lender’s prior written consent,
except for the sale of Inventory in Borrower’s usual course
of business. Borrower agrees to sign any instruments and documents
requested by Lender to evidence, perfect, or protect the interests
of Lender in the Collateral. Borrower agrees to deliver to Lender
the originals of all instruments, chattel paper and documents
evidencing or related to Receivables and Collateral. Borrower shall
not grant or permit any lien or security in the Collateral or any
interest therein other than Permitted Liens. If this Agreement is
terminated, Lender’s lien in the Collateral shall continue
until the Obligations (other than inchoate indemnity obligations)
are repaid in full in cash. Upon payment in full in cash of the
Obligations (other than inchoate indemnity obligations) and at such
time as Lender’s obligation to make Advances has terminated,
Lender shall, at the sole cost and expense of Borrower, release its
liens in the Collateral and all rights therein shall revert to
Borrower. In the event (x) all Obligations (other than inchoate
indemnity obligations), except for Obligations under Cash
Management Services, Letter of Credit Obligation and FX Amount, are
satisfied in full, and (y) this Agreement is terminated, Lender
shall terminate the security interest granted herein upon Borrower
providing cash collateral in an amount equal to at least one
hundred ten percent (110%), of the U.S. dollar equivalent of the
Obligations outstanding, Cash Management Services, Letter of Credit
Obligation and FX Amount, plus all interest, fees, and costs due or
to become due in connection therewith (as estimated by Lender is
its sole discretion), to secure all of the Obligations relating to
such Cash Management Services, Letter of Credit Obligation and FX
Amount.
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6.
POWER OF ATTORNEY.
Borrower irrevocably appoints Lender
and its successors as Borrower’s true and lawful attorney in
fact, and authorizes Lender to, whether or not there has been
an Event of Default, demand, collect, receive, sue, and give
releases to any Account Debtor for the monies due or which may
become due upon or with respect to the Receivables and to
compromise, prosecute, or defend any action, claim, case or
proceeding relating to the Receivables, including the filing of a
claim or the voting of such claims in any bankruptcy case, all in
Lender’s name or Borrower’s name, as Lender may choose;
prepare, file and sign Borrower’s name on any notice,
claim, assignment, demand, draft, or notice of or satisfaction of
lien or mechanics’ lien or similar document; verify and
confirm directly with the respective Account Debtors the validity,
amount and other matters relating to the Receivables, either in the
name of Borrower or Lender or such other name as Lender may choose;
(iv) with notice to Borrower (provided failure to provide notice
shall not give rise to any liability to Lender), notify all Account
Debtors with respect to the Receivables to pay Lender directly;
(v) receive and open all mail addressed to Borrower for the
purpose of collecting the Receivables; (vi) endorse
Borrower’s name on any checks or other forms of payment on
the Receivables; (vii) execute on behalf of Borrower any and
all instruments, documents, financing statements and the like to
perfect Lender’s interests in the Receivables and Collateral;
(viii) debit any Borrower’s deposit accounts maintained with
Lender for any and all Obligations due under this Agreement; and
(ix) do all acts and things necessary or expedient, in furtherance
of any such purposes, and to, upon the occurrence and during
the continuance of an Event of Default, sell, assign, transfer,
pledge, compromise, or discharge the whole or any part of the
Receivables. Upon the occurrence and continuation of an Event of
Default, all of the power of attorney rights granted by Borrower to
Lender hereunder shall be applicable with respect to all
Receivables and all Collateral.
7.
DEFAULT AND REMEDIES.
(a)
Failure
to Pay. Borrower fails to make a payment when due under this
Agreement.
(b)
Lien
Priority. Lender fails to have an enforceable first lien
(except for Permitted Liens) on or a security interest in the
Collateral.
(c)
False
Information. Borrower (or any guarantor) has given Lender
any materially false or misleading information or representations
or has failed to disclose any material fact relating to the subject
matter of this Agreement necessary to make such information or
representations true, correct and complete in all material respects
when made or deemed made.
(d)
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 Borrower (provided
that no Credit Extensions will be required to be made during such
cure period).
(e)
Bankruptcy.
An involuntary bankruptcy petition is filed against Borrower (or
any guarantor) which is not dismissed or vacated within thirty (30)
days of filing (provided no Credit Extensions shall be made during
such period), or Borrower (or any guarantor) files a bankruptcy
petition, or Borrower (or any guarantor) makes a general assignment
for the benefit of creditors.
(f)
Receivers.
A receiver or similar official is appointed for a substantial
portion of Borrower’s (or any guarantor’s) business, or
the business is terminated.
(g)
Judgments.
Any judgments or arbitration awards are entered against Borrower
(or any guarantor), or Borrower (or any guarantor) enters into any
settlement agreements with respect to any litigation or arbitration
and the aggregate amount of all such judgments, awards, and
agreements exceeds Five Hundred Thousand Dollars ($500,000) to the
extent not covered by insurance.
-8-
(h)
Material
Adverse Change. A material adverse change occurs in
Borrower’s (or any guarantor’s) business condition
(financial or otherwise), operations, or properties, or ability to
repay the credit extended by Lender under this
Agreement.
(i)
Cross-default.
Any default occurs under any agreement in connection with any
indebtedness Borrower (or any guarantor) or any of Borrower’s
Affiliates has obtained from anyone else or which Borrower (or any
guarantor) or any of Borrower’s Affiliates has guaranteed in
excess of Two Hundred Fifty Thousand Dollars ($250,000), the result
of which gives the holder of such indebtedness the right (whether
or not exercised) to accelerate the date for payment of such
indebtedness.
(j)
Default
under Related Documents. Any default occurs under any
guaranty, subordination agreement, security agreement, deed of
trust, mortgage, or other document required by or delivered in
connection with this Agreement or any such document is no longer in
effect.
(k)
Other
Agreements. Borrower (or any guarantor) or any of
Borrower’s Affiliates fails to meet the conditions of, or
fails to perform any obligation under any other agreement Borrower
(or any guarantor) or any of Borrower’s Affiliates has with
Lender or any Affiliate of Lender and, as to any such default that can be
cured, has failed to cure such default within ten (10) days after
Borrower or Affiliate receives notice thereof or any officer of
Borrower or Affiliate becomes aware thereof (provided that no
Credit Extensions will be required to be made during such cure
period).
(l)
Change
of Control. A transaction or series of transactions (other
than an offering of the Borrower’s stock to the general
public through a registration statement filed with the Securities
and Exchange Commission) whereby any “person” or
related “group” of “persons”, as such terms
are used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934 (other than the Borrower, any of its
subsidiaries, an employee benefit plan maintained by the Borrower
or any of its subsidiaries or a “person” that, prior to
such transaction, directly or indirectly controls, is controlled
by, or is under common control with, the Borrower) directly or
indirectly acquires beneficial ownership (within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934) of
securities of the Corporation possessing more than 50% of the total
combined voting power of the Corporation’s securities
outstanding immediately after such acquisition.
(m)
Other
Breach Under Agreement. (i)
Borrower fails to perform any obligation under Section 1 or Section
4 of this Agreement; or (ii) Borrower fails to meet the conditions
of, or fails to perform any obligation under, any term of this
Agreement not specifically referred to above, and, as to any
such default 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 that no Credit
Extensions will be required to be made during such cure
period).
7.2
Remedies. Upon the occurrence of an Event of Default,
without implying any obligation to do so, Lender may cease
making Credit Extensions or extending any other financial
accommodations to Borrower; all or a portion of the
Obligations shall be, at the option of and upon demand by Lender,
or with respect to an Event of Default described in
Section 7.1(e),
automatically and without notice or demand, due and payable in
full; and Lender shall have and may exercise all the rights
and remedies under this Agreement and under applicable law,
including the rights and remedies of a secured party under the UCC,
all the power of attorney rights described in
Section 6
with respect to all Collateral, and
the right to collect, dispose of, sell, lease, use, and realize
upon all Receivables and all Collateral in any commercially
reasonable manner.
8.
ACCRUAL OF INTEREST.
All interest and finance charges
hereunder calculated at an annual rate shall be based on a year of
360 days, which results in a higher effective rate of interest than
if a year of 365 or 366 days were used. Lender may charge interest,
finance charges and fees based upon the projected amounts thereof
as of the due dates therefor, and adjust subsequent charges to
account for the actual accrued amounts. If any amount due under
Section 2.2, amounts due
under Section 9, and any
other Obligations not otherwise bearing interest hereunder is not
paid when due, such amount shall bear interest at a per annum rate
equal to the Finance Charge Percentage until the earlier of
payment in good funds or entry of a trial judgment
thereof, at which time the principal amount of any money judgment
remaining unsatisfied shall accrue interest at the highest rate
allowed by applicable law.
-9-
9.
FEES, COSTS AND EXPENSES;
INDEMNIFICATION. Borrower will
pay to Lender upon demand all fees, costs and expenses (including
fees of attorneys and professionals and their costs and expenses)
that Lender incurs or may from time to time impose in connection
with any of the following: preparing, negotiating,
administering, and enforcing this Agreement or any other agreement
executed in connection herewith, including any amendments, waivers
or consents in connection with any of the foregoing, any
litigation or dispute (whether instituted by Lender, Borrower or
any other person) in any way relating to the Receivables, the
Collateral, this Agreement or any other agreement executed in
connection herewith or therewith, enforcing any rights
against Borrower or any guarantor, or any Account Debtor,
protecting or enforcing its interest in the Receivables or
the Collateral, collecting the Receivables and the
Obligations, or the representation of Lender in connection
with any bankruptcy case or insolvency proceeding involving
Borrower, any Receivable, the Collateral, any Account Debtor, or
any guarantor. Borrower shall indemnify and hold Lender harmless
from and against any and all claims, actions, damages, costs,
expenses, and liabilities of any nature whatsoever arising in
connection with any of the foregoing.
10.
INTEGRATION, SEVERABILITY WAIVER, CHOICE OF LAW, FORUM AND
VENUE.
10.1
This
Agreement and any related security or other agreements required by
this Agreement, collectively: represent the sum of the
understandings and agreements between Lender and Borrower
concerning this credit; replace any prior oral or written
agreements between Lender and Borrower concerning this credit; and
are intended by Lender and Borrower as the final, complete
and exclusive statement of the terms agreed to by them. In the
event of any conflict between this Agreement and any other
agreements required by this Agreement, this Agreement will prevail.
If any provision of this Agreement is deemed invalid by reason of
law, this Agreement will be construed as not containing such
provision and the remainder of the Agreement shall remain in full
force and effect. Lender retains all of its rights, even if it
makes a Credit Extension after a default. If Lender waives a
default, it may enforce a later default. Any consent or waiver
under, or amendment of, this Agreement must be in writing, and no
such consent, waiver, or amendment shall imply any obligation by
Lender to make any subsequent consent, waiver, or
amendment.
10.2
THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA. THE PARTIES HERETO AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
RELATED DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF SANTA CLARA,
CALIFORNIA, OR, AT THE SOLE OPTION OF LENDER, IN ANY OTHER COURT IN
WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND
WHICH HAS JURISDICTION OVER THE SUBJECT MATTER AND PARTIES IN
CONTROVERSY. EACH PARTY HERETO WAIVES ANY RIGHT TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
AND STIPULATES THAT THE STATE AND FEDERAL COURTS LOCATED IN THE
COUNTY OF SANTA CLARA, CALIFORNIA SHALL HAVE IN PERSONAM
JURISDICTION AND VENUE OVER EACH SUCH PARTY FOR THE PURPOSE OF
LITIGATING ANY SUCH DISPUTE, CONTROVERSY, OR PROCEEDING ARISING OUT
OF OR RELATED TO THIS AGREEMENT, OR ANY OTHER RELATED DOCUMENTS.
SERVICE OF PROCESS SUFFICIENT FOR PERSONAL JURISDICTION IN ANY
ACTION AGAINST THE BORROWER MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO ITS ADDRESS SPECIFIED FOR
NOTICES PURSUANT TO SECTION 11.
11.
NOTICES; TELEPHONIC AND TELEFAX
AUTHORIZATIONS. All notices
shall be given to Lender and Borrower at the addresses or faxes set
forth on the signature page of this agreement and shall be deemed
to have been delivered and received: if mailed, three (3)
calendar days after deposited in the United States mail, first
class, postage pre-paid, one (1) calendar day after deposit
with an overnight mail or messenger service; or on the same
date of confirmed transmission if sent by hand delivery, telecopy,
telefax or telex. Lender may honor telephone or telefax
instructions for Credit Extensions or repayments given, or
purported to be given, by any one of the Authorized Persons.
Borrower will indemnify and hold Lender harmless from all
liability, loss, and costs in connection with any act resulting
from telephone or telefax instructions Lender reasonably believes
are made by any Authorized Person. This paragraph will survive this
Agreement’s termination, and will benefit Lender and its
officers, employees, and agents.
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-11-
12.
CO-BORROWERS.
12.1
Co-Borrowers. Borrowers are jointly and
severally liable for the Obligations and Lender may proceed against
one Borrower to enforce the Obligations without waiving its right
to proceed against the other Borrower. This Agreement and the Loan
Documents are a primary and original obligation of each Borrower
and shall remain in effect notwithstanding future changes in
conditions, including any change of law or any invalidity or
irregularity in the creation or acquisition of any Obligations or
in the execution or delivery of any agreement between Lender and
any Borrower. Each Borrower shall be liable for existing and future
Obligations as fully as if all of the Credit Extensions were
advanced to such Borrower. Lender may rely on any certificate or
representation made by any Borrower as made on behalf of, and
binding on, each Borrower, including without limitation Advance
Request Forms and Compliance Certificates. Each Borrower appoints
each other Borrower as its agent with all necessary power and
authority to give and receive notices, certificates or demands for
and on behalf of each Borrower, to act as disbursing agent for
receipt of any Advances on behalf of each Borrower and to apply to
Lender on behalf of each Borrower for Advances, any waivers and any
consents. This authorization cannot be revoked, and Lender need not
inquire as to one Borrower’s authority to act for or on
behalf of another Borrower.
12.2
Subrogation and Similar Rights.
Notwithstanding any other provision of this Agreement or any other
Loan Document, each Borrower irrevocably waives, until all
Obligations (other than inchoate indemnity obligations) are paid in
full and Lender has no further obligation to make Credit Extensions
to each Borrower, all rights that it may have at law or in equity
(including, without limitation, any law subrogating a Borrower to
the rights of Lender under the Loan Documents) to seek
contribution, indemnification, or any other form of reimbursement
from any other Borrower, or any other Person now or hereafter
primarily or secondarily liable for any of the Obligations, for any
payment made by a Borrower with respect to the Obligations in
connection with the Loan Documents or otherwise and all rights that
it might have to benefit from, or to participate in, any security
for the Obligations as a result of any payment made by a Borrower
with respect to the Obligations in connection with the Loan
Documents or otherwise. Any agreement providing for
indemnification, reimbursement or any other arrangement prohibited
under this Section shall be null and void. If any payment is made
to a Borrower in contravention of this Section, such Borrower shall
hold such payment in trust for Lender and such payment shall be
promptly delivered to Lender for application to the Obligations,
whether matured or unmatured.
12.3
Waivers of Notice. Each Borrower waives,
to the extent permitted by law, notice of acceptance hereof; notice
of the existence, creation or acquisition of any of the
Obligations; notice of an Event of Default except as set forth
herein; notice of the amount of the Obligations outstanding at any
time; notice of any adverse change in the financial condition of
any other Borrower or of any other fact that might increase a
Borrower’s risk; presentment for payment; demand; protest and
notice thereof as to any instrument; and all other notices and
demands to which Borrower would otherwise be entitled by virtue of
being a co-borrower or a surety. Each Borrower waives any defense
arising from any defense of any other Borrower, or by reason of the
cessation from any cause whatsoever of the liability of any other
Borrower. Lender’s failure at any time to require strict
performance by any Borrower of any provision of the Loan Documents
shall not waive, alter or diminish any right of Lender thereafter
to demand strict compliance and performance therewith. Each
Borrower also waives any defense arising from any act or omission
of Lender that changes the scope of Borrower’s risks
hereunder. Each Borrower hereby waives any right to assert against
Lender any defense (legal or equitable), setoff, counterclaim, or
claims that such Borrower individually may now or hereafter have
against another Borrower or any other Person liable to Lender with
respect to the Obligations in any manner or
whatsoever.
12.4
Subrogation of Defenses. For so long as
any Obligations are outstanding or Lender has any obligations to
make Credit Extensions to Borrower hereunder, each Borrower hereby
agrees not to assert any defense based on impairment or destruction
of its subrogation or other rights against any other Borrower and
waives all benefits which might otherwise be available to it under
California Civil Code Sections 2809, 2810, 2819, 2839, 2845, 2848,
2849, 2850, 2899, and 3433 and California Code of Civil Procedure
Sections 580a, 580b, 580d and 726, as those statutory provisions
are now in effect and hereafter amended, and under any other
similar statutes now and hereafter in effect. This Section 14.4
shall have no further force or effect and shall terminate
automatically upon the indefeasible repayment in full in cash of
all Obligations owing to Lender and the termination of this
Agreement and Lender’s obligation to make Credit Extensions
to Borrower hereunder.
12.5
Right to Settle, Release.
12.5.1
The liability of
Borrower hereunder shall not be diminished by (i) any agreement,
understanding or representation that any of the Obligations is or
was to be guaranteed by another Person or secured by other
property, or (ii) any release or unenforceability, whether partial
or total, of rights, if any, which Lender may now or hereafter have
against any other Person, including another Borrower, or property
with respect to any of the Obligations.
-12-
12.5.2
Without notice to
any given Borrower and without affecting the liability of any given
Borrower hereunder, Lender may (i) compromise, settle, renew,
extend the time for payment, change the manner or terms of payment,
discharge the performance of, decline to enforce, or release all or
any of the Obligations with respect to any other Borrower by
written agreement with such other Borrower, (ii) grant other
indulgences to another Borrower in respect of the Obligations,
(iii) modify in any manner any documents relating to the
Obligations with respect to any other Borrower by written agreement
with such other Borrower, (iv) release, surrender or exchange any
deposits or other property securing the Obligations, whether
pledged by a Borrower or any other Person, or (v) compromise,
settle, renew, or extend the time for payment, discharge the
performance of, decline to enforce, or release all or any
obligations of any guarantor, endorser or other Person who is now
or may hereafter be liable with respect to any of the
Obligations.
12.6
Subordination. All indebtedness of a
Borrower now or hereafter arising held by another Borrower, except
as disclosed in the Disclosure Letter, is subordinated to the
Obligations and Borrower holding the indebtedness shall take all
actions requested by Lender to effect, to enforce and to give
notice of such subordination.
13.
DEFINITIONS AND CONSTRUCTION.
13.1
Definitions. In this Agreement:
“Account
Balance” means at any
time the aggregate of the Advances outstanding as reflected on the
records maintained by Lender, together with any past due Finance
Charges thereon.
“Account
Debtor” has the meaning
in the UCC and includes any person liable on any Receivable,
including without limitation, any guarantor of any Receivable and
any issuer of a letter of credit or banker’s acceptance
assuring payment thereof.
“Adjustments”
means all discounts, allowances, disputes, offsets, defenses,
rights of recoupment, rights of return, warranty claims, or short
payments, asserted by or on behalf of any Account Debtor with
respect to any Receivable.
“Advance”
means an advance made by Lender to Borrower under this
Agreement.
“Advance
Request” means a writing in form and substance
satisfactory to Lender and signed by an Authorized Person
requesting an Advance.
“Affiliate”
means, as to any person or entity, any other person or entity
directly or indirectly controlling or controlled by, or under
direct or indirect common control with, such person or
entity.
“Agreement”
means this Business Financing Agreement.
“Authorized
Person” means Borrower
(if an individual) or any one of the individuals authorized to sign
on behalf of Borrower, and any other individual designated by any
one of such authorized signers.
“Availability
Amount” means the lesser of (a) the Credit Limit
or (b) the Borrowing Base, minus the outstanding principal
balance of Advances.
“Average EBDAS” means, as of the
date of determination, (a) EBDAS measured for the trailing three
(3) months then ended, divided by (b) three (3).
“Borrower”
is defined in the preamble of this Agreement.
“Borrower’s
Account” means Borrower’s general operating
account maintained with Lender, into which all Credit Extensions
will be deposited unless otherwise instructed by Borrower in
writing.
“Borrowing
Base” means at any time
the sum of (i) the Eligible Receivable Amount multiplied by
the Eligible Receivable Advance Rate plus (ii) the lesser of
(x) the Eligible Inventory Value or (y) the Inventory Sublimit
(provided, however, that the Borrowing Base shall not be comprised
of more than forty percent (40%) of Eligible Inventory and no
Eligible Inventory shall be part of the Borrowing Base until
Lender has received an inventory appraisal satisfactory to
Lender), minus (iii) such reserves as
Lender may deem proper and necessary from time to
time.
-13-
“Borrowing
Base Certificate” is
defined in Section 4.14(g).
“Cash Management
Services” is defined in Section 1.1(h).
“Cash
Management Sublimit” means One Hundred Fifty Thousand Dollars
($150,000).
“Collateral”
means all of Borrower’s rights and interest in any and all
personal property, whether now existing or hereafter acquired or
created and wherever located, and all products and proceeds thereof
and accessions thereto, including but not limited to the following
(collectively, the “Collateral”):
(a) all accounts (including health care insurance
receivables), chattel paper (including tangible and electronic
chattel paper), Inventory (including all goods held for sale or
lease or to be furnished under a contract for service, and
including returns and repossessions), equipment (including all
accessions and additions thereto), instruments (including
promissory notes), investment property (including securities and
securities entitlements), documents (including negotiable
documents), deposit accounts, letter of credit rights, money, any
commercial tort claim of Borrower which is now or hereafter
identified by Borrower or Lender, general intangibles (including
payment intangibles and software), goods (including fixtures) and
all of Borrower’s books and records with respect to any of
the foregoing, and the computers and equipment containing said
books and records; and (b) any and all cash proceeds and/or
noncash proceeds thereof, including without limitation, insurance
proceeds, and all supporting obligations and the security therefore
or for any right to payment. Notwithstanding the foregoing,
Collateral shall not include (a) rights of Borrower held under
a license that are not assignable by their terms without the
consent of the licensor thereof (but only to the extent such
restriction on assignment is enforceable under applicable law),
(b) any interest of Borrower as a lessee or sublessee under a
real property lease or an equipment lease if Borrower is prohibited
by the terms of such lease from granting a security interest in
such lease or under which such an assignment or Lien would cause a
default to occur under such lease (but only to the extent that such
prohibition is enforceable under all applicable laws including,
without limitation, the UCC); provided, however, that upon
termination of such prohibition, such interest shall immediately
become Collateral without any action by Borrower or Lender or (c)
any intent-to-use trademark application prior to the filing of a
“Statement of Use” or “Amendment to Allege
Use” with respect thereto, to the extent, if any, that, and
solely during the period, if any, in which the grant of a security
interest therein would impair the validity or enforceability of
such intent-to-use trademark application under applicable federal
law.
“Collection
Account” means the deposit account maintained with
Lender which, pursuant to the Lockbox Agreement, all Collections
received in the Lockbox are to be deposited, and as to which
Borrower has no right to withdraw funds.
“Collections”
means all payments from or on behalf of an Account Debtor with
respect to Receivables.
“Compliance
Certificate” means a
certificate in the form attached as Exhibit A
to this Agreement by an Authorized
Person that, among other things, the representations and warranties
set forth in this Agreement are true and correct in all material
respects as of the date such certificate is
delivered.
“Credit
Extension” means each
Advance or any other extension of credit by Lender for the benefit
of Borrower hereunder.
“Credit
Limit” means Seven
Million Dollars ($7,000,000), which is intended to be the maximum
amount of Advances at any time outstanding.
“Default”
means any Event of Default or any event that with notice would
constitute an Event of Default.
“Deferred
Revenue” is all amounts
received or invoiced, as appropriate, in advance of performance
under contracts and not yet recognized as
revenue.
“Disclosure
Letter” means that
certain Disclosure Letter delivered to Lender by Borrower on the
date hereof.
“Due
Diligence Fee” means a
payment of an annual fee equal to Nine Hundred Dollars ($900) due
upon the date of this Agreement and Nine Hundred Dollars ($900) due
upon each anniversary thereof so long as any Advance is outstanding
or available hereunder.
-14-
“EBDAS”
means net income before depreciation and amortization expenses and
non-cash stock compensation expenses.
“Eligible
Inventory” means
Inventory which shall be valued in accordance with the definition
of “Eligible Inventory Value”, and which satisfies the
following requirements:
(a)
the Inventory is
owned by Borrower free of any title defects or any liens or
interests of others except the security interest in favor of
Lender;
(b)
the Inventory is
held for sale or use in the ordinary course of Borrower’s
business and is of good and merchantable quality. Display items,
raw materials, work-in-process, parts, samples, and packing and
shipping materials are not eligible. Inventory which is obsolete,
unsalable, damaged, defective, used, discontinued, perishable or
slow-moving, or which has been returned by the buyer, is not
eligible;
(c)
the Inventory is
covered by insurance as required in Section 4.4 of this
Agreement;
(d)
the Inventory has
not been manufactured to the specifications of a particular Account
Debtor;
(e)
the Inventory is
not subject to any licensing agreements which would prohibit or
restrict in any way the ability of Lender to sell the Inventory
(including its packaging) to third parties;
(f)
the portion of the
Inventory actually manufactured or assembled by Borrower has been
produced in compliance with the requirements of the U.S. Fair Labor
Standards Act (29 U.S.C. §§201 et seq.);
(g)
the Inventory is
not on consignment;
(h)
the Inventory is
located in the United States and is located at the locations
identified by Borrower in the Perfection Certificate where it
maintains Inventory for which Lender has received a landlord waiver
or a bailee agreement in form and substance satisfactory to Lender
signed by the landlord or bailee, as applicable;
(i)
Lender has received
an audit on the Inventory satisfactory to Lender in its sole
discretion; and
(j)
the Inventory is
otherwise acceptable to Lender in the exercise of its sole
discretion.
“Eligible
Inventory Value” means
for Inventory, forty-five percent (45%) of the book value of such
Eligible Inventory, or such greater or lesser percentage as Lender
may from time to time establish in its sole discretion
upon notice to
Borrower.
“Eligible
Jurisdiction” means the
United States and any Province in Canada except for the Province of
Quebec.
“Eligible
Receivable” means a
Receivable that satisfies all of the following:
(a)
The Receivable has
been created by Borrower in the ordinary course of Borrower’s
business and without any obligation on the part of Borrower to
render any further performance.
(b)
There are no
conditions which must be satisfied before Borrower is entitled to
receive payment of the Receivable, and the Receivable does not
arise from COD sales, consignments or guaranteed
sales.
(c)
The Account Debtor
upon the Receivable does not claim any defense to payment of the
Receivable, whether well founded or otherwise.
(d)
The Receivable is
not the obligation of an Account Debtor who has asserted or may be
reasonably be expected to assert any counterclaims or offsets
against Borrower (including offsets for any “contra
accounts” owed by Borrower to the Account Debtor for goods
purchased by Borrower or for services performed for
Borrower).
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(e)
The Receivable
represents a genuine obligation of the Account Debtor and to the
extent any credit balances exist in favor of the Account Debtor,
such credit balances shall be deducted in calculating the
Receivable Amount.
(f)
Borrower has sent
an invoice to the Account Debtor in the amount of the
Receivable.
(g)
Borrower is not
prohibited by the laws of the state where the Account Debtor is
located from bringing an action in the courts of that state to
enforce the Account Debtor’s obligation to pay the
Receivable. Borrower has taken all appropriate actions to ensure
access to the courts of the state where Account Debtor is located,
including, where necessary; the filing of a Notice of Business
Activities Report or other similar filing with the applicable state
agency or the qualification by Borrower as a foreign corporation
authorized to transact business in such state.
(h)
The Receivable is
owned by Borrower free of any title defects or any liens or
interests of others except the security interest in favor of
Lender, and Lender has a perfected, first priority security
interest in such Receivable.
(i)
The Account Debtor
on the Receivable is not any of the following: an employee,
Affiliate, parent or subsidiary of Borrower, or an entity which has
common officers or directors with Borrower; the U.S.
government or any agency or department of the U.S. government
unless Borrower complies with the procedures in the Federal
Assignment of Claims Act of 1940 (41 U.S.C. §15) with respect
to the Receivable, and the underlying contract expressly provides
that neither the U.S. government nor any agency or department
thereof shall have the right of set-off against Borrower, provided
that such Receivables may be permitted to be included as Eligible
Receivables hereunder by Lender in its sole discretion on a
case-by-case basis; any person or entity located outside an
Eligible Jurisdiction, unless the Receivable is supported by
an irrevocable letter of credit issued by a bank acceptable to
Lender, and if requested by Lender, the original of such letter of
credit and/or any usance drafts drawn under such letter of credit
and accepted by the issuing or confirming bank have been delivered
to Lender or the Receivable is supported by other insurance,
bond, or assurance acceptable to Lender, provided that such
Receivables may be permitted to be included as Eligible Receivables
hereunder by Lender in its sole discretion on a case-by-case basis;
or an Account Debtor as to which thirty-five percent (35%) or
more of the aggregate dollar amount of all outstanding Receivables
owing from such Account Debtor have not been paid within ninety
(90) days from invoice date.
(j)
The Receivable is
not in default (a Receivable will be considered in default if any
of the following occur: the Receivable is not paid within
ninety (90) days from its invoice date, provided that such
Receivables may be permitted to be included as Eligible Receivables
hereunder by Lender in its sole discretion on a case-by-case basis;
the Account Debtor obligated upon the Receivable suspends
business, makes a general assignment for the benefit of creditors,
or fails to pay its debts generally as they come due; or any
petition is filed by or against the Account Debtor obligated upon
the Receivable under any bankruptcy law or any other law or laws
for the relief of debtors).
(k)
The Receivable does
not arise from the sale of goods which remain in Borrower’s
possession or under Borrower’s control.
(l)
The Receivable is
not subject to contractual arrangements between Borrower and
an Account Debtor where payments shall be scheduled or due
according to completion or fulfillment requirements (sometimes
called contracts accounts receivable, progress billings, milestone
billings, or fulfillment contracts), or owing from an Account
Debtor the amount of which may be subject to withholding based on
the Account Debtor’s satisfaction of Borrower’s
complete performance (but only to the extent of the amount
withheld; sometimes called retainage billings).
(m)
The Receivable is
not owing from an Account Debtor with respect to which Borrower has
received Deferred Revenue (but only to the extent of such Deferred
Revenue); provided that such Receivables may be permitted to be
included as Eligible Receivables hereunder by Lender in its sole
discretion on a case-by-case basis.
(n)
The Receivable is
not evidenced by a promissory note or chattel paper, nor is the
Account Debtor obligated to Borrower under any other obligation
which is evidenced by a promissory note.
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(o)
The Receivable is
not that portion of Receivables due from an Account Debtor which is
in excess of thirty percent (30%) of Borrower’s aggregate
dollar amount of all outstanding Receivables.
(p)
The Receivable is
not owing from an Account Debtor that has been invoiced for goods
that have not been shipped to the Account Debtor unless Bank,
Borrower, and the Account Debtor have entered into an agreement
acceptable to Bank wherein the Account Debtor acknowledges that (1)
it has title to and has ownership of the goods wherever located,
(2) a bona fide sale of the goods has occurred, and (3) it owes
payment for such goods in accordance with invoices from Borrower
(sometimes called “bill and hold”
accounts)
(q)
The Receivable is
not owing from Elysian Health, Covance, or any of their
affiliates.
(r)
The Receivable is
not owing from A.S Watson Group or any of its affiliates unless
covered by foreign credit insurance acceptable to
Lender.
(s)
The Receivable is
otherwise acceptable to Lender in the exercise of its sole
discretion.
“Eligible Receivable
Advance Rate” means eighty percent (80%) or such
lesser rate as Lender may establish in its discretion to the extent
the twelve (12) month dilution of Receivables (excluding Elysian
Health and Covance) deteriorates by more than five percent
(5.0%).
“Eligible
Receivable Amount” means at any time the sum of the Receivable
Amounts of the Eligible Receivables.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
“Event
of Default” has the
meaning set forth in Section 7.1.
“Finance
Charge” means an interest
amount equal to the Finance Charge Percentage of the ending daily
Account Balance for the relevant period.
“Finance
Charge Percentage” means
a floating rate per year equal to the Prime Rate plus one and one
half of one percent (1.50%), plus an additional five percent
(5.00%) during any period that an Event of Default has occurred and
is continuing.
“GAAP”
means generally accepted accounting principles consistently applied
and used consistently with prior practices.
“International
Sublimit” means Five
Hundred Thousand Dollars ($500,000).
“Inventory”
means and includes all of Borrower’s now owned or hereafter
acquired goods, merchandise and other personal property, wherever
located, to be furnished under any consignment, arrangement,
contract of service or held for sale or lease, all raw materials,
work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or consumed
in Borrower’s business or used in selling or furnishing such
goods, merchandise and other personal property, and all documents
of title or other documents representing them.
“Inventory
Sublimit” means Three
Million Dollars ($3,000,000).
“Investment”
means any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
“Lender”
means WESTERN ALLIANCE BANK, an Arizona corporation, and its
successors and assigns.
“Letter
of Credit” has the
meaning set forth in Section 1.1(i).
“Letter of Credit
Obligation” means, at any time, the sum of, without
duplication, (a) the maximum amount available to be drawn on
all outstanding Letters of Credit issued by Lender or by
Lender’s Affiliate and (b) the aggregate amount of all
amounts drawn and unreimbursed with respect to Letters of Credit
issued by Lender or by Lender’s Affiliate.
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“Liquidity”
means an amount equal to Borrower’s unrestricted and
unencumbered cash at Lender, plus the Availability
Amount.
“Loan
Documents” is defined in Section 14.2.
“Lockbox”
is defined in the Lockbox Agreement.
“Lockbox
Agreement” is defined in
Section 1.1(d)(i).
“Maturity
Date” means twenty-four
(24) months from the date hereof or such earlier date as Lender
shall have declared the Obligations immediately due and payable
pursuant to Section 7.2.
“Month
End” means the last
calendar day of each month.
“Obligations”
means all liabilities and obligations of Borrower to Lender of any
kind or nature, present or future, arising under or in connection
with this Agreement or under any other document, instrument or
agreement, whether or not evidenced by any note, guarantee or other
instrument, whether arising on account or by overdraft, whether
direct or indirect (including those acquired by assignment)
absolute or contingent, primary or secondary, due or to become due,
now owing or hereafter arising, and however acquired; including,
without limitation, all Credit Extensions, Finance Charges,
Revolving Facility Fee, Revolving Termination Fee, fees, interest,
expenses, professional fees and attorneys’
fees.
“Overadvance”
means at any time an amount equal to the greater of (a) the
amounts (if any) by which the total amount of the outstanding
Advances (including deemed Advances with respect to the
International Sublimit and the total amount of the Cash Management
Sublimit) exceeds the lesser of the Credit Limit or the Borrowing
Base or (b) the amounts (if any) by which the total amount of
the outstanding deemed Advances with respect to the International
Sublimit or the Cash Management Sublimit exceeds its respective
Subfacility Maximum.
“Perfection
Certificate” means that
certain completed certificate signed by Borrower, entitled
“Perfection Certificate” and delivered to Lender on or
about the Closing Date in connection with this
Agreement.
“Permitted
Indebtedness”
means:
(a)
Indebtedness under
this Agreement or that is otherwise owed to Lender.
(b)
Indebtedness
existing on the date hereof and specifically disclosed on a
schedule to the Disclosure Letter.
(c)
Purchase money
indebtedness (including capital leases) incurred to acquire capital
assets in ordinary course of business and not exceeding One Million
Dollars ($1,000,000) in total principal amount at any time
outstanding.
(d)
Indebtedness to
trade creditors incurred in the ordinary course of
business.
(e)
Other indebtedness
in an aggregate amount not to exceed Two Hundred Fifty Thousand
Dollars ($250,000) at any time outstanding; provided that such
indebtedness is junior in priority (if secured) to the Obligations
and provided that the incurrence of such Indebtedness does not
otherwise cause an Event of Default hereunder.
(f)
Indebtedness
incurred in the refinancing of any indebtedness set forth in (a)
through (e) above, provided that the principal amount thereof is
not increased and the terms thereof are not modified to impose more
burdensome terms upon Borrower.
(g)
Subordinated
Debt.
“Permitted
Investment”
means:
(a)
Investments
existing on the Closing Date and specifically disclosed on a
schedule to the Disclosure Letter;
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(b)
Investments
(i) by Borrower in subsidiaries not to exceed Two Hundred
Fifty Thousand Dollars ($250,000) in the aggregate in any fiscal
year and (ii) by Subsidiaries in other Subsidiaries or in
Borrower;
(c)
Investments
consisting of travel advances and employee relocation loans and
other employee loans and advances in the ordinary course of
business;
(d)
other Investments
not to exceed One Hundred Thousand Dollars ($100,000) in the
aggregate in any fiscal year of the Borrower; and
(e)
(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) certificates of deposit maturing no more than one (1)
year from the date of investment therein issued by Lender and
(iv) Lender’s money market accounts.
“Permitted
Liens” means the
following but only with respect to property not consisting of
Receivables or Inventory:
(a)
Liens securing any
of the indebtedness described in clauses (a) through (d) of the
definition of Permitted Indebtedness.
(b)
Liens for taxes,
fees, assessments or other governmental charges or levies, either
not delinquent or being contested in good faith by appropriate
proceedings, provided the same have no priority over any of
Lender’s security interest in the Collateral.
(c)
Liens incurred in
connection with the extension, renewal or refinancing of the
indebtedness described in clause (f) of the definition of Permitted
Indebtedness, 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.
(d)
Liens securing
Subordinated Debt.
(e)
carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other
similar Liens arising in the ordinary course of business by
operation of law (and that do not secure borrowed money) which are
not delinquent or remain payable without penalty.
(f)
Liens upon any
equipment or other personal property acquired by Borrower after the
date hereof not to exceed One Million Dollars ($1,000,000) in the
aggregate to secure (i) the purchase price of such equipment or
other personal property, or (ii) lease obligations or indebtedness
incurred solely for the purpose of financing the acquisition,
construction, installation, development or improvement of such
equipment or other personal property provided that such Liens are
confined solely to the equipment or other personal property so
acquired, constructed, installed, developed or improved and the
amount secured does not exceed the cost of such acquisition,
installation, development or improvement.
(g)
non-exclusive
licenses of Intellectual Property entered into in the ordinary
course of business.
(h)
Judgment liens that
do not constitute an Event of Default hereunder.
(i)
Liens on cash for
the purpose of securing obligations of Borrower for services
provided with respect to cash management accounts, provided such
Liens apply only to cash held in such management
accounts.
(j)
deposits or pledges
made in connection with, or to secure payment of, workmen's
compensation, unemployment insurance, old age pensions or other
social security obligations and good faith deposits in connection
with tenders, contracts or leases which Borrower or any Subsidiary
deposits or pledges to secure, or in lieu of, surety, penalty or
appeal bonds, performance bonds or other similar obligations not to
exceed One Hundred Thousand Dollars ($100,000) in the
aggregate.
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“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 greater
of four and three quarters of one percent (4.75%) per year or the
Prime Rate published in the Money Rates section of the Western
Edition of The Wall Street Journal, or such other rate of interest
publicly announced from time to time by Lender as its Prime Rate.
Lender may price loans to its customers at, above, or below the
Prime Rate. Any change in the Prime Rate shall take effect at the
opening of business on the day specified in the public announcement
of a change in the Prime Rate.
“Receivable
Amount” means as to any
Receivable, the Receivable Amount due from the Account Debtor after
deducting all discounts, credits, offsets, payments or other
deductions of any nature whatsoever, whether or not claimed by the
Account Debtor.
“Receivables”
means Borrower’s rights to payment arising in the ordinary
course of Borrower’s business, including accounts, chattel
paper, instruments, contract rights, documents, general
intangibles, letters of credit, drafts, and bankers
acceptances.
“Revolving
Facility Fee” means a
payment of a fully earned and non-refundable annual fee equal to
one half of one percent (0.50%) of the Credit Limit, due upon the
date of this Agreement and each anniversary thereof so long as any
Advance is outstanding or available hereunder.
“Revolving Termination
Fee” means a payment
equal to one percent (1.0%) of the Credit
Limit.
“RML” means Liquidity, divided by the absolute
value of Average EBDAS.
“Streamline
Period” is, on and
after the Closing Date, provided no Event of Default has occurred
and is continuing, the period (a) commencing on the first day
of the month following the day that Borrower provides to Lender a
written report that Borrower has, as of the immediately preceding
Month End maintained a RML as determined by Lender in its judgment,
of at least 6 months (the “Streamline
Threshold”); and (b) terminating on the earlier
to occur of (i) the occurrence of an Event of Default, or
(ii) the first day thereafter in which Borrower fails to
maintain the Streamline Threshold, as determined by Lender in its
judgment. Upon the termination of a Streamline Period, Borrower
must maintain the Streamline Threshold for two (2) consecutive
months as determined by Lender in its judgment, prior to entering
into a subsequent Streamline Period. Each such Streamline Period
shall commence on the first day of the month following the date
Lender determines, in its judgment, that the Streamline Threshold
has been achieved.
“Subfacility
Maximum” means (a) One
Hundred Fifty Thousand Dollars ($150,000) for the Cash Management
Sublimit and (b) Five Hundred Thousand Dollars ($500,000) for the
International Sublimit.
“Subordinated
Debt” means indebtedness
of Borrower that is expressly subordinated to the indebtedness of
Borrower owed to Lender pursuant to a subordination agreement
satisfactory in form and substance to Lender.
“Transition
Date” has the meaning set forth in
Section 4.15.
“UCC”
means the California Uniform Commercial Code, as amended or
supplemented from time to time.
13.2
Construction:
(a)
In this Agreement:
references to the plural include the singular and to the
singular include the plural; references to any gender include
any other gender; the terms “include” and
“including” are not limiting; the term
“or” has the inclusive meaning represented by the
phrase “and/or,” unless otherwise specified,
section and subsection references are to this Agreement, and
any reference to any statute, law, or regulation shall
include all amendments thereto and revisions thereof.
(b)
Neither this
Agreement nor any uncertainty or ambiguity herein shall be
construed or resolved using any presumption against either Borrower
or Lender, whether under any rule of construction or otherwise. On
the contrary, this Agreement has been reviewed by each party hereto
and their respective counsel. In case of any ambiguity or
uncertainty, this Agreement shall be construed and interpreted
according to the ordinary meaning of the words used to accomplish
fairly the purposes and intentions of all parties
hereto.
(c)
Titles and section
headings used in this Agreement are for convenience only and shall
not be used in interpreting this Agreement.
-20-
14.
JURY TRIAL WAIVER.
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
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.
15.
JUDICIAL REFERENCE PROVISION.
15.1
In
the event the Jury Trial Waiver set forth above is not enforceable,
the parties elect to proceed under this Judicial Reference
Provision.
15.2
With the exception of the items specified in
Section 15.3, 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 state or federal court in the county or district
where the real property involved in the action, if any, is located
or in the state or federal court in the county or district where
venue is otherwise appropriate under applicable law (the
“Court”).
15.3
The matters that shall not be subject to a
reference are the following: nonjudicial foreclosure of any security
interests in real or personal property, exercise of self-help remedies (including,
without limitation, set-off), appointment of a receiver, and
temporary,
provisional or ancillary remedies (including, without limitation,
writs of attachment, writs of possession, temporary restraining
orders or preliminary injunctions). This reference provision does
not limit the right of any party to exercise or oppose any of the
rights and remedies described in clauses (a) and
(b) or to seek or oppose from a court of competent
jurisdiction any of the items described in
clauses (c)
and (d). The
exercise of, or opposition to, any of those items does not waive
the right of any party to a reference pursuant to this reference
provision as provided herein.
15.4
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. Pursuant to CCP
§ 170.6, each party shall have one peremptory challenge
to the referee selected by the Presiding Judge of the Court (or his
or her representative).
15.5
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 set the matter for a status and trial-setting
conference within fifteen (15) days after the date of selection of
the referee, if practicable, try all issues of law or fact
within one hundred twenty (120) days after the date of the
conference, and report a statement of decision within twenty
(20) days after the matter has been submitted for
decision.
15.6
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.
15.7
Except
as expressly set forth herein, 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.
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15.8
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.
15.9
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.
15.10
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.
16.
EXECUTION, EFFECTIVENESS,
SURVIVAL. This
Agreement may be executed in counterparts (and by different parties
hereto in different counterparts), each of which shall constitute
an original, but all of which when taken together shall constitute
a single contract. This Agreement and the other documents executed
in connection herewith constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and
all previous agreements and understandings, oral or written,
relating to the subject matter hereof. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall
be effective as delivery of a manually executed counterpart of this
Agreement. This Agreement shall become
effective upon the execution and delivery hereof by Borrower and
Lender and shall continue in full force and effect until the
Maturity Date and thereafter so long as any Obligations remain
outstanding hereunder. Lender reserves the right to issue press
releases, advertisements, and other promotional materials
describing any successful outcome of services provided on
Borrower’s behalf. Borrower agrees that Lender shall have the
right to identify Borrower by name in those
materials.
17.
OTHER AGREEMENTS.
Any security agreements, liens and/or
security interests securing payment of any obligations of Borrower
owing to Lender or its Affiliates also secure the Obligations, and
are valid and subsisting and are not adversely affected by
execution of this Agreement. An Event of Default under this
Agreement constitutes a default under other outstanding agreements
between Borrower and Lender or its Affiliates.
18.
REVIVAL AND REINSTATEMENT OF
OBLIGATIONS. If the incurrence or payment of the Obligations
by Borrower or any guarantor, or the transfer to Lender of any
property should for any reason subsequently be asserted, or
declared, to be void or voidable under any state or federal law
relating to creditors’ rights, including provisions of the
United States Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or
transfers of property (each, a “Voidable Transfer”), and
if Lender is required to repay or restore, in whole or in part, any
such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or
the amount thereof that Lender is required or elects to repay or
restore, and as to all reasonable costs, expenses, and reasonable
attorneys’ fees of Lender related thereto, the liability of
Borrower and such guarantor automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
19.
PATRIOT ACT NOTIFICATION. Lender hereby
notifies Borrower that pursuant to the requirements of the USA
Patriot Act, Title III of Pub. L. 107-56, signed into law
October 26, 2001 (“Patriot Act”), Lender is
required to obtain, verify and record information that identifies
Borrower, which information includes the names and addresses of
Borrower and other information that will allow Lender to identify
Borrower in accordance with the Patriot Act.
20.
NOTICE OF FINAL AGREEMENT. BY SIGNING THIS DOCUMENT EACH PARTY
REPRESENTS AND AGREES THAT:
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES, THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES, AND THIS WRITTEN AGREEMENT MAY NOT BE CONTRADICTED
BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.
[Signature Page
Follows.]
-22-
IN
WITNESS WHEREOF, Borrower and Lender have executed this Agreement
on the day and year above written.
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BORROWER:
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CHROMADEX
CORPORATION, A DELAWARE
CORPORATION
By /s/ Kevin M.
Farr
Name: Kevin M.
Farr
Title: CFO
CHROMADEX,
INC., A CALIFORNIA
CORPORATION
By /s/ Kevin M.
Farr
Name: Kevin M.
Farr
Title: CFO
CHROMADEX
ANALYTICS, INC., A NEVADA
CORPORATION
By /s/ Kevin M.
Farr
Name: Kevin M.
Farr
Title: CFO
HEALTHSPAN RESEARCH LLC, A DELAWARE LIMITED LIABILITY
COMPANY
By /s/ Kevin M.
Farr
Name: Kevin M.
Farr
Title: CFO
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Address for Notices:
c/o
Chromadex Corporation
10900
Wilshire Blvd., Suite 650
Los
Angeles, California 90024
Fax:
Email: kevinf@chromadex.com
Attn: Kevin Farr,
CFO
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[Signature
Page to Business Financing Agreement]
-23-
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LENDER:
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WESTERN ALLIANCE BANK, AN ARIZONA CORPORATION
By /s/ Darin
Cunningham
Name: Darin
Cunningham
Title: Vice
President
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Address for Notices:
WESTERN ALLIANCE BANK
600 Anton Blvd., Suite 150
Costa Mesa, CA 92626
Fax:
Email: darin.cunningham@bridgebank.com
Attn: Darin Cunningham
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[Signature
Page to Business Financing Agreement]
-24-
EXHIBIT A
COMPLIANCE CERTIFICATE
TO:
WESTERN ALLIANCE
BANK, an Arizona corporation (the “Lender”)
FROM:
CHROMADEX
CORPORATION, CHROMADEX, INC., CHROMADEX ANALYTICS, INC., and
HEALTHSPAN RESEARCH LLC
(collectively, “Borrower”)
The
undersigned authorized officer of Borrower hereby certifies that in
accordance with the terms and conditions of the Business Financing
Agreement among Borrower and Lender (the “Agreement”),
(i) Borrower is in complete compliance for the period ending
_______________ with all required covenants except as noted below
and (ii) all representations and warranties of Borrower stated
in the Agreement are true and correct in all material respects as
of the date hereof. Attached herewith are the required documents
supporting the above certification. The Officer further certifies
that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one
period to the next except as explained in an accompanying letter or
footnotes.
Please indicate compliance status by circling Yes/No under
“Complies” column.
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Reporting Covenant
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Required
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Complies
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Monthly
financial statements (consolidated)
with
Compliance Certificate
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Monthly
within 30 days
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Yes |
No
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Annual
financial statements (CPA Audited)
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FYE
within 180 days
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Yes |
No
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Borrowing Base
Certificates, A/R & A/P Agings, sales or billings
journal,
cash
receipts report, deferred revenue report, and
inventory
report
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Monthly
within 15 days
and,
when a Streamline Period is not in
Effect,
at the date of each Advance (other
than
inventory report)
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Yes |
No
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Board
approved budget
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FYE
within 60 days and as
amended/updated
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Yes |
No
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Complies
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Financial Covenant
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Required
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Actual
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RML
(monthly)
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4
months
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Yes
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No
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Unrestricted cash
at Lender (monthly)
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$3,000,000
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Yes
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No
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Streamline Threshold
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Required
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Actual
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Complies
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RML
(monthly)
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6
months
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Yes
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No
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Comments Regarding Exceptions: See Attached.
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BANK USE ONLY
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Received
by:
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Sincerely,
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AUTHORIZED
SIGNER
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||||
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CHROMADEX
CORPORATION
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Date:
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Verified:
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SIGNATURE
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AUTHORIZED
SIGNER
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Date:
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||||
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TITLE
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||||
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Compliance
Status
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Yes
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No
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||||
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DATE
CHROMADEX,
INC.
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SIGNATURE
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TITLE
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DATE
CHROMADEX
ANALYTICS, INC.
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SIGNATURE
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TITLE
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DATE
HEALTHSPAN RESEARCH LLC
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SIGNATURE
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TITLE
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A-1
Exhibit B
Form of
Compliance Certificate
[to be
provided by Lender]
B-1