Loan Agreement - Imperial Bank, Identix Inc. and Identicator Technology Inc.
SECOND AMENDED AND RESTATED LOAN AGREEMENT
This Second Amended and Restated Loan Agreement is entered into as of May
13, 1999 (this "Restated Loan Agreement") between Identix Incorporated, a
Delaware corporation (herein called "Identix"), and Identicator Technology,
Inc., a Delaware corporation (herein called "Identicator"), and Imperial Bank
(herein called "Bank"). This Restated Loan Agreement amends, restates and
supercedes in its entirety the First Amended and Restated Loan Agreement (as
hereinafter defined).
Recitals
A. Identix and Bank entered into a certain Security and Loan Agreement
dated as of August 29, 1997, as the same was amended by that certain First
Amendment to the Security and Loan Agreement and Addendum Thereto dated as of
December 22, 1997, that certain Second Amendment to the Security and Loan
Agreement and Addendum Thereto and Waiver dated as of July 6, 1998, that certain
extension letter dated August 28, 1998 and that certain extension and
modification letter dated November 4, 1998 (collectively, the "Prior Loan
Agreement"), pursuant to which Bank agreed to extend and make loans available to
Borrower upon the terms and conditions contained therein.
B. The Prior Loan Agreement was amended and restated in its entirety by
that certain Amended and Restated Security and Loan Agreement dated as of
December 25, 1998, as the same was amended by that certain First Amendment to
Amended and Restated Loan Agreement dated as of February 12, 1999 (collectively,
the "First Amended and Restated Loan Agreement"), to provide for, among other
things, the increase in the amount of Bank's commitment thereunder, the
amendment of certain provisions relating to advances under said commitment and
to modify certain covenants and reporting requirements of Identix, all as more
fully set forth therein.
C. Identix has acquired Identicator, including all of its capital stock,
as permitted under the First Amended and Restated Loan Agreement, and Identix
has requested and Bank has agreed to include the Accounts of Identicator in the
calculation of the Borrowing Base, but only if Identicator agrees to become a
co-borrower under this Restated Loan Agreement and subject to the terms and
conditions hereinafter set forth and in reliance on the representations and
warranties set forth herein.
Agreement
Now, Therefore, in consideration of the foregoing recitals and the mutual
covenants hereinafter set forth, and intending to be legally bound, the parties
hereby agree as follows:
1. Definitions. As used in this Restated Loan Agreement and unless
otherwise defined herein, all initially capitalized terms shall have the
meanings set forth on Exhibit A attached hereto and incorporated herein by this
reference.
2. Commitment.
A. Revolving Commitment. Subject to all the terms and conditions of
this Restated Loan Agreement and prior to the termination of its commitment as
hereinafter provided, Bank hereby agrees to make loans (each a "Revolving Loan")
to Borrower, from time to time and in such amounts as Borrower shall request
pursuant to this Section 2.A., up to an aggregate principal amount outstanding
under the Revolving Loan Account not to exceed the lesser of: (1) the sum of (a)
eighty percent (80.0%) of Eligible Accounts due from Domestic Account Debtors
and Foreign Account Debtors plus (b) eighty percent (80.0%) of Eligible Accounts
due from ANADAC plus (c) from the date of this Restated Loan Agreement through
June 30, 1999, the lesser of thirty-five
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percent (35.0%) of Eligible Inventory or $1,000,000.00 (as the same may be
adjusted from time to time as provided for under Section 9.B. hereof,
collectively, the "Borrowing Base") or (2) $10,000,000.00 (the "Revolving
Commitment"). If at any time or for any reason, the outstanding principal amount
of the Revolving Loan Account is greater than the lesser of: (x) the Borrowing
Base or (y) the Revolving Commitment, Borrower shall immediately pay to Bank, in
cash, the amount of such excess. Any commitment of Bank, pursuant to the terms
of this Restated Loan Agreement, to make Revolving Loans shall expire on the
Revolving Maturity Date, subject to Bank's right to renew said commitment in its
sole and absolute discretion at Borrower's request. Any such renewal of the
Revolving Commitment shall not be binding upon Bank unless it is in writing and
signed by an officer of Bank. The outstanding principal balance of the Revolving
Loan Account may be prepaid in whole or in part at any time without penalty.
Provided that no Event of Default has occurred and is continuing, all or any
portion of the Revolving Loans advanced by Bank which are repaid by Borrower
shall be available for reborrowing in accordance with the terms hereof. Borrower
promises to pay to Bank the entire outstanding unpaid principal balance (and all
accrued unpaid interest thereon) of the Revolving Loan Account on or before
December 24, 1999 ("Revolving Maturity Date").
(1) Revolving Loans. The amount of each Revolving Loan made by Bank to
Borrower hereunder shall be debited to the loan ledger account of Borrower
maintained by Bank for the Revolving Commitment (herein called the "Revolving
Loan Account") and Bank shall credit the Revolving Loan Account with all loan
repayments in respect thereof made by Borrower. When Borrower desires to obtain
a Revolving Loan, Borrower shall notify Bank (which notice shall be signed by an
officer of Borrower and shall be irrevocable) in accordance with Section 3
hereof, to be received no later than 3:00 p.m. Pacific time one (1) Banking Day
before the day on which the Revolving Loan is to be made. Revolving Loans may
only be used for short-term working capital requirements, the issuance of
letters of credit and the purchase of foreign exchange futures contracts.
(a) Letter of Credit Usage and Sublimit. Subject to the availability
of the Revolving Commitment and in reliance on the representations and
warranties of Borrower set forth herein, at any time and from time to time from
the date hereof through the Banking Day immediately prior to the Revolving
Maturity Date, Bank shall issue for the account of Borrower such standby and
commercial letters of credit ("Letters of Credit") as Borrower may request,
which request shall be made by delivering to Bank a duly executed letter of
credit application on Bank's standard form; provided, however, that the
outstanding and undrawn amounts under all such Letters of Credit (i) shall not
at any time exceed $3,000,000.00 and (ii) shall be deemed to constitute
Revolving Loans for the purpose of calculating availability under the Revolving
Commitment. Unless Borrower shall have deposited with Bank cash collateral in an
amount sufficient to cover all undrawn amounts under each such Letter of Credit
and Bank shall have agreed in writing, no Letter of Credit shall have an
expiration date that is later than the Revolving Maturity Date, subject to
Bank's right to extend the expiration date of each such Letter of Credit beyond
the Revolving Maturity Date in its sole and absolute discretion. All Letters of
Credit shall be in form and substance acceptable to Bank in its sole discretion
and shall be subject to the terms and conditions of Bank's form application and
letter of credit agreement. Borrower will pay any standard issuance and other
fees that Bank notifies Borrower will be charged for issuing and processing
Letters of Credit for Borrower.
(b) Foreign Exchange Usage and Sublimit. Subject to the availability
of the Revolving Commitment and in reliance on the representations and
warranties of Borrower set forth herein, at any time and from time to time from
the date hereof through the Banking Day immediately prior to the Revolving
Maturity Date, Bank shall arrange the purchase by Borrower of foreign exchange
futures contracts ("Exchange Contracts") as Borrower may request, which request
shall be made by delivering to Bank a duly executed exchange contract
application on Bank's standard form; provided, however, that the maximum
aggregate notional contract amount under all such Exchange Contracts shall not
at any time exceed $1,500,000.00; provided, further, that up to $150,000.00,
representing ten percent (10%) of the maximum aggregate notional contract amount
under all such Exchange Contracts, shall be deemed to constitute outstanding
Revolving Loans for the purpose of
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calculating availability under the Revolving Commitment. Unless Borrower shall
have deposited with Bank cash collateral in an amount sufficient to cover all
undrawn amounts under each such Exchange Contract and Bank shall have agreed in
writing, no Exchange Contract shall have a due date that is later than the
Revolving Maturity Date subject to Bank's right to extend the due date of each
such Exchange Contract beyond the Revolving Maturity Date in its sole and
absolute discretion. All Exchange Contracts shall be in form and substance
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank's form exchange contract application. Borrower will pay any
standard issuance and other fees that Bank notifies Borrower will be charged for
issuing and processing Exchange Contracts for Borrower. After and during the
continuance of an Event of Default, Bank may, in its sole and absolute
discretion, terminate any or all of the Exchange Contracts. Borrower agrees to
indemnify and hold harmless Bank from and against all loss, costs and expense
associated with any such termination of any Exchange Contract.
(2) Interest Payments on Revolving Loans. Borrower further
promises to pay to Bank from the date of the advance of the initial Revolving
Loan through the Revolving Maturity Date, on or before the tenth (10/th/) day of
each month, interest on the average daily unpaid balance of the Revolving Loan
Account during the immediately preceding month at a rate of interest equal to
one-half of one percent (0.50%) per annum in excess of the rate of interest
which Bank has announced as its prime lending rate (the "Prime Rate"), which
shall vary concurrently with any change in the Prime Rate. Interest shall be
computed at the above rate on the basis of the actual number of days during
which the principal balance of the Revolving Loan Account is outstanding divided
by 360, which shall for interest computation purposes be considered one (1)
year.
(a) Reduction in Interest Rate. Notwithstanding any of the
provisions contained in Section 2.A.(2) above, provided that no Event of Default
has occurred and is continuing, if on March 31, 1999 Identix is in compliance
with all of the financial covenants set forth in Section 10 hereof, then
beginning on April 1, 1999, Bank agrees to reduce the rate of interest accruing
on the unpaid balance of the Revolving Loan Account to a rate of interest per
annum equal to the Prime Rate.
3. Loan Requests. Requests for Revolving Loans hereunder shall be in
writing duly executed by Borrower in a form satisfactory to Bank and shall
contain a certification setting forth the matters referred to in Section 2,
which shall disclose that Borrower is entitled to the amount and type of Loan
being requested. Bank is hereby authorized to charge Borrower's deposit account
with Bank for all sums due Bank under this Restated Loan Agreement.
4. Delivery of Payments. Payment to Bank of all amounts due hereunder
shall be made at its Santa Clara Valley Regional office, or at such other place
as may be designated in writing by Bank from time to time. If any payment date
fall on a day that is not a day that Bank is open for the transaction of
business ("Banking Day"), the payment due date shall be extended to the next
Banking Day.
5. Late Charge. If any interest payment, principal payment or principal
balance payment required hereunder is not received by Bank on or before ten (10)
days from the date in which such payment becomes due, Borrower shall pay to
Bank, a late charge equal to the lesser of (a) five percent (5.0%) of the amount
of such unpaid payment, in addition to said unpaid payment or (b) the maximum
amount permitted to be charged by applicable law, until remitted to Bank;
provided; however, nothing contained in this Section 5, shall be construed as
any obligation on the part of Bank to accept payment of any past due payment or
less than the total unpaid principal balance of the Revolving Loan Account
following the Revolving Maturity Date. All payments shall be applied first to
any late charges due hereunder, next to accrued interest then payable and the
remainder, if any, to reduce any unpaid principal due under the Revolving Loan
Account.
6. Default Interest. From and after the Revolving Maturity Date or such
earlier date as all sums owing under the Revolving Loan Account becomes due and
payable by acceleration or otherwise, or upon the occurrence of an Event of
Default, at the option of Bank all sums owing under the Revolving Loan Account
shall
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bear interest until paid in full at a rate equal to the lesser of (a) five
percent (5.0%) per annum in excess of the then applicable interest rate provided
for in Section 2.A.(2) hereof or (b) the maximum amount permitted to be charged
by applicable law, until all obligations hereunder are repaid in full or the
Event of Default is waived or cured to the satisfaction of Bank, as applicable.
7. Representations and Warranties. Each Borrower represents and warrants
to Bank: (a) That it is a corporation, duly organized and existing in the State
of its incorporation and the execution, delivery and performance of each of the
Loan Documents are within such Borrower's corporate powers, have been duly
authorized and are not in conflict with law or the terms of any charter, by-law
or other incorporation papers, or of any indenture, agreement or undertaking to
which either Borrower is a party or by which either Borrower is bound or
affected; (b) Each Borrower is, and at the time the Collateral becomes subject
to Bank's security interest will be, the true and lawful owner of and has, and
at the time its respective Collateral becomes subject to Bank's security
interest will have, good and clear title to its Collateral, subject only to
Bank's rights therein and to Permitted Liens; (c) Each Account is, and at the
time the Account comes into existence will be, a true and correct statement of a
bona fide indebtedness incurred by the debtor named therein in the amount of the
Account for either merchandise sold or delivered (or being held subject to such
Borrower's delivery instructions) to, or services rendered, performed and
accepted by, the account debtor; (d) That there are and will be no defenses,
counterclaims, or setoffs which may be asserted against the Accounts from time
to time represented by each Borrower to be Eligible Accounts, except as
permitted in the definition thereof; (e) Any and all financial information,
including information relating to the Collateral, submitted by any Borrower to
Bank, whether previously or in the future, is and will be true and correct; (f)
There is no litigation or other proceeding pending or threatened against or
affecting any Borrower, and neither Borrower is in default with respect to any
order, writ, injunction, decree or demand of any court or other governmental or
regulatory authority; (g) (i) The consolidated and consolidating balance sheets
of Identix dated as of March 31, 1999, and the related consolidated and
consolidating profit and loss statements for Identix's fiscal year then ended,
copies of which have heretofore been delivered to Bank by Identix, and all other
statements and data submitted in writing by Identix to Bank in connection with
Borrower's request for credit are true and correct, and said balance sheet and
profit and loss statement accurately present the financial condition of Borrower
as of the date thereof and the results of the operations of Borrower for the
period covered thereby, and have been prepared in accordance with GAAP, (ii)
since such date, there have been no material adverse changes in the financial
condition of any Borrower, and (iii) neither Borrower has any knowledge of any
liabilities, contingent or otherwise, which are not reflected in said balance
sheet, and neither Borrower has entered into any special commitments or
substantial contracts which are not reflected in said balance sheet, other than
in the ordinary and normal course of its business, which may have a Material
Adverse Effect upon its financial condition, operations or business as now
conducted; (h) Neither Borrower has any liability for any delinquent local,
state or federal taxes, and, if any neither Borrower has contracted with any
government agency, neither has any liability for renegotiation of profits; (i)
Each Borrower, as of the date hereof, possesses all necessary Copyrights,
Trademarks, Patents and licenses to conduct its business as now operated,
without any known conflict with valid Copyrights, Trademarks, Patents and
license rights of others; and (j) Borrower and its Subsidiaries have reviewed
the areas within their operations and business which could be adversely affected
by, and have developed or are developing a program to address on a timely basis,
the Year 2000 Problem and have made related appropriate inquiry of material
suppliers and vendors, and based on such review and program, the Year 2000
Problem will not have a Material Adverse Effect upon its financial condition,
operations or business as now conducted.
8. Negative Covenants. Each Borrower agrees that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or the
commitment of Bank hereunder is in effect, neither Borrower, nor any of its
subsidiaries ("Subsidiaries") will, without the prior written consent of Bank:
A. Make any substantial change in the character of its business as
now conducted;
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B. Create, incur, assume or permit to exist any Indebtedness other
than loans from Bank except obligations now existing as shown in the financial
statements referenced in Section 7.(g)(i), excluding those being refinanced by
Bank, Subordinated Debt, Permitted Indebtedness and indebtedness of ANADAC to
Crestar Bank in an aggregate amount not to exceed $10,000,000.00 which has been
previously approved by Bank; or sell or transfer, either with or without
recourse, any accounts or notes receivable or any monies due or to become due;
C. Create, incur, assume or permit to exist any mortgage, pledge,
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
Permitted Liens and liens in favor of Bank, excluding any mortgage, pledge,
encumbrance, lien entered into by ANADAC;
D. Sell, lease, dispose of or grant a security interest in any of
the Collateral other than to Bank (other than the disposing of such Collateral
in the ordinary and normal course of its business as now conducted or other
assets which are obsolete or otherwise considered surplus), or execute any
financing statements covering the Collateral in favor of any secured party or
Person other than Bank. Notwithstanding the foregoing, upon delivery of prior
notice to Bank and the subsequent receipt of Bank's approval, Borrower may lease
certain Collateral to its vendors and Bank agrees to execute a financing
statement evidencing the release of its security interest in such leased
Collateral.
E. Make (1) any loans or advances to any Person or other entity
other than in the ordinary and normal course of its business as now conducted
(provided that such loans or advances are not made to any Person or entity which
is controlled by or under common control with any Borrower) or (2) any
investment in the securities of any Person or other entity other than the United
States Government. Notwithstanding the foregoing, Identix may make (a) loans or
advances (on normal trade terms) in the form of any product of such Borrower
sold to its Subsidiaries in the ordinary and normal course of its business as
now conducted, (b) loans or advances to its wholly-owned Subsidiaries up to an
aggregate amount of $1,500,000.00 at any one time outstanding; provided,
however, if any loans or advances are made in excess of $500,000.00 to any one
Subsidiary, said Subsidiary shall execute and deliver to Bank a guaranty of the
Revolving Commitment, in form and substance satisfactory to Bank and (c)
investments of up to $500,000.00 in a joint venture between Identix and Sylvan
Learning Systems, Inc.
F. (1) Purchase or otherwise acquire all or substantially all of the
assets or business of any Person or other entity; or (2) liquidate, dissolve,
merge or consolidate, or commence any proceedings therefore; or (3) except in
the ordinary and normal course of its business as now conducted, sell
(including, without limitation, the selling of any property or other asset
accompanied by the leasing back of the same) any assets including any fixed
assets, any property, or other assets necessary for the continuance of its
business as now conducted. Notwithstanding the foregoing, Borrower may proceed
with any acquisition (as described above) (a) so long as no Event of Default has
occurred and is continuing or would exist after giving effect to such
transaction and (b) upon consummating such transaction, Identix remains in
compliance with all of the financial covenants set forth in Section 10 hereof;
G. (1) Declare or pay any dividend or make any other distribution on
any of its capital stock now outstanding or hereafter issued; or (2) purchase,
redeem or retire any of such stock other than in dividends or distributions
payable in any Borrower's or any such Subsidiary's capital stock, except for the
repurchase of such Borrower's capital stock from officers, directors, employees
or consultants of such Borrower upon termination of their employment with or
rendering of service to such Borrower; and
H. Sell, transfer, assign, mortgage, pledge, license, lease, grant a
security interest in, or otherwise encumber any of its Intellectual Property,
other than licenses or leases of its intellectually property granted in the
ordinary and normal course of its business as now conducted.
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9. Affirmative Covenants. Each Borrower affirmatively covenants that so
long as any loans, obligations or liabilities remain outstanding or unpaid to
Bank or the commitment of Bank hereunder is in effect, it will:
A. Furnish Bank from time to time such financial statements and
information as Bank may reasonably request and inform Bank immediately upon the
occurrence of a material adverse change therein;
B. Permit representatives of Bank to conduct an audit of each
Borrower's books and records relating to the Collateral and make extracts
therefrom, with results satisfactory to Bank, provided that Bank shall use its
best efforts to not interfere with the conduct of such Borrower's business, and
to the extent possible to arrange for verification of the Accounts directly with
the account debtors obligated thereon or otherwise, all under reasonable
procedures acceptable to Bank and at such Borrower's sole expense; provided
further that, prior to an Event of Default, such Borrower shall not be
responsible for the expense of more than two (2) such audits in any fiscal year.
Each Borrower hereby acknowledges and agrees that upon completion of any such
audit, Bank shall have the right to adjust the Borrowing Base percentages, in
its sole and reasonable discretion, based on its review of the results of such
Collateral audit;
C. Promptly notify Bank of any attachment or other legal process
levied against any of the Collateral and any information received by any
Borrower relative to the Collateral, including the Accounts, the account debtors
or other Persons obligated in connection therewith, which may in any way affect
the value of the Collateral or the rights and remedies of Bank in respect
thereto;
D. Reimburse Bank upon demand for any and all legal costs, including
reasonable attorneys' fees, and other expenses incurred in collecting any sums
payable by any Borrower under the Revolving Loan Account or any other obligation
secured hereby, enforcing any term or provision of this Restated Loan Agreement
or otherwise or in the checking, handling and collection of the Collateral and
the preparation and enforcement of any agreement relating thereto;
E. Notify Bank of each location and of each office of each Borrower
at which records of such Borrower relating to the Accounts are kept;
F. Provide, maintain and deliver to Bank policies insuring the
Collateral against loss or damage by such risks and in such amounts, forms and
companies as Bank may require (to the extent customarily maintained by
businesses similar to Borrower) and with loss payable to Bank, and, in the event
Bank takes possession of the Collateral, the insurance policy or policies and
any unearned or returned premium thereon shall at the option of Bank become the
sole property of Bank, such policies and the proceeds of any other insurance
covering or in any way relating to the Collateral, whether now in existence or
hereafter obtained, being hereby assigned to Bank;
G. In the event the unpaid balance of the Revolving Loan Account
shall exceed the maximum amount of outstanding loans to which any Borrower is
entitled under Section 2 hereof, either Borrower shall immediately pay to Bank
for credit to such Loan Account the amount of such excess;
H. Maintain and preserve all rights, franchises and other authority
adequate and necessary for the conduct of its business and maintain and preserve
its existence in the state of its incorporation and any other states in which
any Borrower conducts its business, except with respect to such other states,
where the failure to do so would not have a Material Adverse Effect;
I. Maintain public liability, property damage and workers
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the
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extent usually maintained by similar businesses. Each Borrower shall provide
evidence of property insurance in amounts and types acceptable to Bank, and
certificates naming Bank as a loss payee;
J. Pay and discharge, before the same becomes delinquent and
penalties accrue thereon, all taxes, assessments and governmental charges upon
or against it or any of its properties, and any of its other liabilities at any
time existing, except to the extent and so long as: (1) the same are being
contested in good faith and by appropriate proceedings in such manner as not to
cause any Material Adverse Effect or the loss of any right of redemption from
any sale thereunder; and (2) it shall have set aside on its books reserves
(segregated to the extent required by GAAP);
K. Maintain a standard and modern system of accounting in accordance
with GAAP on a basis consistently maintained; permit Bank's representatives to
have access to, and to examine its properties, books and records at all
reasonable times; provided that Bank shall use its best efforts to not interfere
with the conduct of such Borrower's business;
L. Maintain its properties, equipment and facilities in good order
and repair;
M. Maintain its primary banking and operating and depository
accounts with Bank;
N. Prior to allowing any of either Borrower's raw materials, work in
process, finished goods inventory and property, plant and equipment to be
transported to or be held at any contract manufacturer, warehouse or other
location (other than with bona fide distributors and retail accounts), such
Borrower shall provide notice to Bank and shall have complied with such filing
and notice requirements as shall, in Bank's opinion, assure such Borrower's and
Bank's priority in such property over creditors of such contract manufacturer,
warehouseman or operator of such other location, including, without limitation,
making filings under California Commercial Code (S)2326, providing notice under
California Commercial Code (S)9114 and making filings and publications as
required under California Civil Code (S)3440.1 and (S)3440.5 All such filings,
notices and publications shall be in form and substance satisfactory to Bank;
and
O. Identix shall perform all acts reasonably necessary to ensure
that (1) each Borrower, its Subsidiaries and any business in which any Borrower
holds a substantial interest and (2) all customers, suppliers and vendors that
are material to any Borrower's business, become Year 2000 Compliant in a timely
manner. Such acts shall include, without limitation, performing a comprehensive
review and assessment of all of each Borrower's systems and adopting a detailed
plan, with an itemized budget, for the remediation, monitoring and testing of
such systems. If requested by Bank, Identix shall within ten (10) business days
deliver a statement to Bank summarizing the Year 2000 exposure, program or
progress of each Borrower and its Subsidiaries or other evidence of such
Borrower's compliance with the terms of this Section 9.O. certified by an
officer of Identix.
10. Financial Covenants and Information. All financial covenants and
financial information referenced herein shall be interpreted and prepared in
accordance with GAAP as used in the United States of America applied on a basis
consistent with previous years for the operations of Identix, excluding its
Subsidiaries. Compliance with the financial covenants shall be calculated and
monitored on a monthly basis, except as shall be expressly stated to the
contrary. Identix affirmatively covenants that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or any
commitment is outstanding hereunder, it will, on a consolidating basis using
only the operations of Identix, Identix Australia Pty Limited (Fingerscan) and
Biometric Applications and Technology, Inc. (BA&T), and excluding all other
Subsidiaries:
A. At all times, maintain a Minimum Tangible Net Worth in an amount
which is greater than the then outstanding principal amount of the Revolving
Loan Account multiplied by 1.25. As used herein, "Tangible Net Worth" shall
mean the sum of all assets, excluding any value for goodwill, Copyrights,
Trademarks, Patents, organization expense, investments in its Subsidiaries, in-
process technology, Accounts due
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from the Subsidiaries of Identix (excluding Accounts of Identix due from sale of
any product of Identix to ANADAC in the ordinary and normal course of its
business as now conducted which are less than 90 days from the applicable
invoice date) and other similar intangible items, less all liabilities, plus
Subordinated Debt;
B. At all times maintain a Maximum Ratio of Total Liabilities to
Tangible Net Worth not to exceed 1.25 to 1.00. As used herein "Total
Liabilities" means all liabilities, excluding Subordinated Debt and deferred
revenues;
C. At all times maintain a Minimum Quick Ratio of not less than 1.00
to 1.00. As used herein "Quick Ratio" means the sum of all cash plus Accounts
(excluding Accounts due from the Subsidiaries of Identix, but including Accounts
of Identix due from sale of any product of Identix to ANADAC in the ordinary and
normal course of its business as now conducted which are less than 90 days from
the applicable invoice date) divided by current liabilities less deferred
revenue;
D. Measured on a quarterly basis on the last day of each fiscal
quarter, have an operating after-tax profitability of at least $1.00;
E. As soon as it is available, but not later than twenty-five (25)
days after and as of the end of each month, deliver to Bank an internally-
prepared consolidated and consolidating financial statement consisting of a
balance sheet and profit and loss statement, in form satisfactory to Bank, and a
Compliance Certificate in the form of Exhibit B attached hereto and incorporated
herein by this reference, certified by an officer of Identix;
F. As soon as it is available, but not later than forty-five (45)
days after and as of the end of each of the first three fiscal quarters of each
fiscal year of Identix, a copy of its quarterly 10-Q report for each such
quarter, as filed with the Securities Exchange Commission.
G. As soon as it is available, but not later than ninety (90) days
after the end of Identix's fiscal year, deliver to Bank (1) unqualified copies
of Identix's consolidated financial statements together with changes in
financial position audited by an independent certified public accountant
selected by Identix but acceptable to Bank and (2) a copy of its annual 10-K
report, as filed with the Securities Exchange Commission;
H. So long as any amounts remain outstanding and unpaid under the
Revolving Loan Account, on a monthly basis as of the month end and as soon as it
is available, but not later than ten (10) days after the end of each month,
deliver to Bank, in such form and detail as Bank may require, statements showing
aging of the Accounts of each Borrower, its accounts payable and an inventory
report together with a Borrowing Base Certificate in the form of Exhibit C
attached hereto and incorporated herein by this reference (the "Borrowing Base
Certificate"), certified by an officer of such Borrower; provided, however, that
(1) if the amounts outstanding and unpaid under the Revolving Loan Account
exceed $5,000,000.00 in the aggregate, each Borrower shall also be required to
provide such aging statements as of the end of each mid-month (15/th/), but not
later than the twenty-fifth (25/th/) day of each month; and (2) if the amounts
that have been advanced under the Borrowing Base for Eligible Inventory exceed
$500,000.00 in the aggregate, each Borrower shall also be required to provide
the inventory report as of the end of each mid-month (15/th/), but not later
than the twenty-fifth (25/th/) day of each month. Notwithstanding the
foregoing, if either Borrower has not provided to Bank aging statements and an
inventory report for the most recent month then ended, then as a condition to
any request for a Revolving Loan, such Borrower shall have delivered to Bank
said aging statements and inventory report as well as a Borrowing Base
Certificate covering the most recent month then ended at least twenty (20) days
prior to the date of such Borrower's request for an advance for said Revolving
Loan;
I. As soon as it is available, but not later than July 25, 1999,
Identix shall deliver to Bank revised consolidating and consolidated financial
projections;
8.
<PAGE>
J. On or before June 30, 1999, Identix shall close the sale of a
minimum of Nine Million Dollars ($9,000,000.00) of new equity investments in
Identix's Inc. capital common stock, and shall deliver satisfactory evidence of
same to Bank.
K. Upon the reasonable request of Bank, deliver to Bank current
budgets, sales projections, operating plans and other financial exhibits and
information in form and substance satisfactory to Bank; and
L. Upon any officer becoming aware, deliver immediately to Bank
written notice of any pending or threatened litigation claiming, or reasonably
likely to result in, damages against any Borrower in an amount in excess of
$50,000.00.
11. Loan Fee and Warrant. In addition to any other amounts due or to
become due, concurrent with the execution hereof, Borrower shall deliver to Bank
a loan modification fee in the amount of One Thousand Five Hundred Dollars
($1,500.00). In addition, Identix Incorporated will issue to Bank a warrant to
purchase One Hundred Thousand Dollars ($100,000) of the common stock of Identix
Inc. at an exercise price to be determined by the closing common stock price of
Identix Inc. on June 30, 1999. Notwithstanding the foregoing, provided that on
or before June 30, 1999, (1) Identix Inc. closes the sale of a minimum of Nine
Million Dollars ($9,000,000.00) of new equity investments in Identix's common
stock to investors acceptable to Bank and (2) delivers satisfactory evidence of
such sale to Bank (the "Next Equity Round"), this warrant shall be null and
void.
12. Default and Remedies. The occurrence of any one or more of the
following shall constitute an "Event of Default": (a) Default be made in the
payment of any obligation by any Borrower under any Loan Document; (b) Except
for any failure to pay as described in clause (a) above, breach be made in any
warranty, statement, promise, term or condition, contained herein or in any
other Loan Document and the same shall not have been cured to the satisfaction
of Bank within fifteen (15) days after any Borrower shall have become aware
thereof, whether by written notice from Bank, or otherwise, (except that no cure
period shall exist for breaches in respect of any Borrower's obligations under
Subsections 8.E., 8.F., 8.G., 8.H., Subsections 10.A., 10.B., 10.C., 10.D.,
10.E., 10.F., 10.G., 10.H., 10.I. and 10.J. of this Restated Loan Agreement, and
Sections 1 and 2 of the General Security Agreement; and except for a five (5)
day cure period shall exist for breaches in respect of any Borrower's
obligations under Subsections 9.A., 9.B., 9.C., 9.F., 9.G., 9.H., 9.I. and 9.O.,
and Subsections 10.K. and 10.L.); (c) Any statement, warranty or representation
made by any Borrower at any time proves false; (d) Any Borrower defaults in the
repayment of any principal of or the payment of any interest on any indebtedness
exceeding in the aggregate principal amount $50,000.00 or breaches or violates
any term or provision of any promissory note, loan agreement, mortgage,
indenture or other evidence of such indebtedness pursuant to which amounts
outstanding in the aggregate exceed $50,000.00 if the effect of such breach is
to permit the acceleration of such indebtedness, whether or not waived by the
note holder or obligee, and such failure shall not have been cured to Bank's
satisfaction within fifteen (15) calendar days after such Borrower shall become
aware thereof, whether by written notice from Bank or otherwise, or there has in
fact been an acceleration of such indebtedness; (e) Any Borrower becomes
insolvent or makes an assignment for the benefit of creditors; (f) Any
proceeding be commenced by any Borrower under any bankruptcy, reorganization,
arrangement, readjustment of debt or moratorium law or statute or, any such a
proceeding is commenced against such Borrower and is not dismissed or stayed
within thirty (30) days (provided that no Revolving Loans will be made prior to
the dismissal of such proceeding); (g) Any money judgment, writ of attachment,
garnishment, execution or other legal process be entered against any Borrower or
issued against any material property of any Borrower which is not fully covered
by insurance (subject to reasonable deductibles) and remains unvacated,
unbonded, unstayed or unpaid or undischarged for more than fifteen (15) days
(whether or not consecutive) or in any event later than five (5) days prior to
the date of any proposed sale thereunder, or if any assessment for taxes against
any Borrower other than against any of its real property, is made by the Federal
or State government or any department thereof; or (h) Any change in any
Borrower's financial condition, prospects or operations which has a Material
Adverse Effect. Upon the occurrence and during the continuance of an Event of
Default, Bank may, at its option and without demand first made and without
notice to either Borrower, do any one or more of the following: (i) Terminate
its
9.
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obligation to make loans to Borrower as provided in Section 2 hereof; (ii)
Declare all sums secured hereby immediately due and payable; (iii) Immediately
take possession of the Collateral wherever it may be found, using all legally
permissible means to do so, or require either Borrower to assemble the
Collateral and make it available to Bank at a place designated by Bank which is
reasonably convenient to such Borrower and Bank, and each Borrower waives all
claims for damages due to or arising from or connected with any such taking;
(iv) Proceed in the foreclosure of Bank's security interest and sale of the
Collateral in any manner permitted by law, or provided for herein; (v) Sell,
lease or otherwise dispose of the Collateral at public or private sale, with or
without having the Collateral at the place of sale, and upon terms and in such
manner as Bank may determine, and Bank may purchase same at any such sale; (vi)
Retain the Collateral in full satisfaction of the obligations secured thereby to
the extent permitted under the Uniform Commercial Code; or (vii) Exercise any
remedies of a secured party under the Uniform Commercial Code. Prior to any
such disposition, Bank may, at its option, cause any of the Collateral to be
repaired or reconditioned in such manner and to such extent as Bank may deem
advisable, and any sums expended therefor by Bank shall be repaid by either
Borrower and secured hereby. Bank shall have the right to enforce one or more
remedies hereunder successively or concurrently, and any such action shall not
estop or prevent Bank from pursuing any further remedy that it may have
hereunder or by law. If a sufficient sum is not realized from any such
disposition of the Collateral to pay all obligations secured by this Restated
Loan Agreement, each Borrower hereby promises and agrees to pay Bank any
deficiency.
13. Records Retention. Each Borrower authorizes Bank to destroy all
invoices, delivery receipts, reports and other types of documents and records
submitted to Bank in connection with the transactions contemplated herein at any
time subsequent to four (4) months from the time such items are delivered to
Bank.
14. Attorneys' Fees. Each Borrower agrees to reimburse Bank for its
reasonable attorneys' fees and expenses incurred in connection with the
negotiation, preparation, execution and delivery of the Loan Documents.
15. Governing Law; Judicial Reference.
A. Governing Law. This Agreement shall be deemed to have been made
in the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
B. Judicial Reference.
(1) Other than (a) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (b) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Restated Loan Agreement or the other Loan Documents, which
controversy, dispute or claim is not settled in writing within thirty (30) days
after the "Claim Date" (defined as the date on which a party subject to this
Restated Loan Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in California in accordance with the provisions of Section 638 et seq. of the
California Code of Civil Procedure, or their successor section ("CCP"), which
shall constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Restated Loan Agreement, including whether such
controversy, dispute or claim is subject to the reference proceeding and except
as set forth above, the parties waive their rights to initiate any legal
proceedings against each other in any court or jurisdiction other than the
Superior Court in the County where the real property, if any, is located or
Santa Clara County, if none (the "Court"). The referee shall be a retired Judge
of the Court selected by mutual agreement of the parties, and if they cannot so
agree within forty-five (45) days after the Claim Date, the referee shall be
promptly selected by the Presiding Judge of the Court (or his/her
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
10.
<PAGE>
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP (S) 170.6. The
referee shall (x) be requested to set the matter for hearing within sixty (60)
days after the date of selection of the referee and (y) try any and all issues
of law or fact and report a statement of decision upon them, if possible, within
ninety (90) days of the Claim Date. Any decision rendered by the referee will be
final, binding and conclusive and judgement shall be entered pursuant to CCP (S)
644 in any court in the State of California having jurisdiction. Any party may
apply for a reference proceeding at any time after thirty (30) days following
notice to any other party of the nature of the controversy, dispute or claim, by
filing a petition for a hearing and/or trial. All discovery permitted by this
Restated Loan Agreement shall be completed no later than fifteen (15) days
before the first hearing date established by the referee. The referee may extend
such period in the event of a party's refusal to provide requested discovery for
any reason whatsoever, including, without limitation, legal objections raised to
such discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducting discovery. Depositions may
be taken by either party upon seven (7) days written notice, and request for
production or inspection of documents shall be responded to within ten (10) 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 upon the parties. Pending appointment of the referee as provided herein,
the Superior Court is empowered to issue temporary and/or provisional remedies,
as appropriate.
(2) Except as expressly set forth in this Restated Loan
Agreement, the referee shall determine the manner in which the reference
proceeding is conducted including the time and place of all 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. The party making such a request
shall have the obligation to arrange for and pay for the court reporter. The
costs of the court reporter at the trial shall be borne equally by the parties.
(3) 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, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding that shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly 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.
(4) In the event that 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 the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, (S) 1280 through (S) 1294.2 of the CCP as
amended from time to time. The limitations with respect to discovery as set
forth hereinabove shall apply to any such arbitration proceeding.
16. Suretyship Waivers and Consents. Each Borrower agrees that it is
jointly and severally, directly, and primarily liable to Bank for payment in
full of all obligations under the Loan Documents ("Obligations") and that such
liability is independent of the duties, obligations and liabilities of the other
Borrower. The Loan Documents are a primary and original obligation of each
Borrower, are not the creation of a surety relationship, and are an absolute,
unconditional, and continuing promise of payment and performance which shall
remain in full force and effect without respect to future changes in conditions,
including any change of law or any invalidity or irregularity with respect to
the Loan Documents. Each Borrower acknowledges that
11.
<PAGE>
the obligations of such Borrower undertaken herein might be construed to
consist, at least in part, of the guaranty of obligations of persons or entities
other than such Borrower (including any other Borrower party hereto) and, in
full recognition of that fact, each Borrower consents and agrees that Bank may,
at any time and from time to time, without notice or demand, whether before or
after any actual or purported termination, repudiation, or revocation of this
Loan Agreement by any one or more Borrowers, and without affecting the
enforceability or continuing effectiveness hereof as to each Borrower: (a)
supplement, restate, modify, amend, increase, decrease, extend, renew,
accelerate, or otherwise change the time for payment or the terms of the
Obligations or any part thereof, including any increase or decrease of the
rate(s) of interest thereon; (b) supplement restate, modify, amend, increase,
decrease or waive, or enter into or give any agreement, approval, or consent
with respect to, the Obligations or any part thereof, or any of the Loan
Documents or any additional security or guaranties, or any condition covenant,
default, remedy, right, representation or term thereof or thereunder; (c) accept
new or additional instruments, documents or agreements in exchange for or
relative to any of the Loan Documents or the Obligations or any part thereof;
(d) accept partial payments on the Obligations; (e) receive and hold additional
security or guaranties for the Obligations or any part thereof; (f) release,
reconvey, terminate, waive, abandon, fail to perfect, subordinate, exchange,
substitute, transfer, or enforce any security or guaranties, and apply any
security and direct the order or manner of sale thereof as Bank in its sole and
absolute discretion may determine; (g) release any Person from any personal
liability with respect to the Obligations or any part thereof; (h) settle,
release on terms satisfactory to Bank or by operation of applicable laws, or
otherwise liquidate or enforce any Obligations and any security therefor or
guaranty thereof in any manner, consent to the transfer of any security and bid
and purchase at any sale; or (i) consent to the merger, change, or any other
restructuring or termination of the corporate or partnership existence of any
Borrower or any other Person, and correspondingly restructure the Obligations,
and any such merger, change, restructuring, or termination shall not affect the
liability of any Borrower or the continuing effectiveness hereof, or the
enforceability hereof with respect to all or any part of the Obligations.
Upon the occurrence and during the continuance of any Event of Default,
Bank may enforce this Loan Agreement independently as to each Borrower and
independently of any other remedy or security Bank at any time may have or hold
in connection with the Obligations, and it shall not be necessary for Bank to
marshal assets in favor of any Borrower or any other Person or to proceed upon
or against or exhaust any security or remedy before proceeding to enforce this
Loan Agreement. Each Borrower expressly waives any right to require Bank to
marshal assets in favor of any Borrower or any other Person or to proceed
against any other Borrower or any Collateral provided by any Person, and agrees
that Bank may proceed against Borrowers or any Collateral in such order as it
shall determine in its sole and absolute discretion.
Bank may file a separate action or actions against any Borrower, whether
action is brought or prosecuted with respect to any security or against any
other person, or whether any other person is joined in any such action or
actions. Each Borrower agrees that Bank and any Borrower and any affiliate of
any Borrower may deal with each other in connection with the Obligations or
otherwise, or alter any contracts or agreements now or hereafter existing
between any of them, in any manner whatsoever, all without in any way altering
or affecting the continuing efficacy of this Loan Agreement.
Bank's hereunder shall be reinstated and revived, and the enforceability of
this Loan Agreement shall continue, with respect to any amount at any time paid
on account of the Obligations which thereafter shall be required to be restored
or returned by Bank, all as though such amount had not been paid. The rights of
Bank created or granted herein and the enforceability of this Loan Agreement
at all times shall remain effective to cover the full amount of all the
Obligations even though the Obligations, including any part thereof or any other
security or guaranty therefor, may be or hereafter may become invalid or
otherwise unenforceable as against any Borrower and whether or not any other
Borrower shall have any personal liability with respect thereto.
12.
<PAGE>
To the maximum extent permitted by applicable law and to the extent that a
Borrower is deemed a guarantor, each Borrower expressly waives any and all
defenses now or hereafter arising or asserted by reason of (a) any disability or
other defense of any other Borrower with respect to the Obligations, (b) the
unenforceability or invalidity of any security or guaranty for the Obligations
or lack of perfection or continuing perfection or failure of priority of any
security for the Obligations, (c) the cessation for any cause whatsoever of the
liability of any other Borrower (other than by reason of the full payment and
performance of all Obligations), (d) any failure of Bank to marshal assets in
favor of any Borrower or any other person, (e) any failure of Bank to give
notice of sale or other disposition of collateral to any Borrower or any other
Person or any defect in any notice that may be given in connection with any sale
or disposition of collateral, (f) any failure of Bank to comply with applicable
law in connection with the sale or other disposition of any collateral or other
security for any Obligation, including any failure of Bank to conduct a
commercially reasonable sale or other disposition of any collateral or other
security for any Obligation, (g) any act or omission of Bank or others that
directly or indirectly results in or aids the discharge or release of any
Borrower or the Obligations or any security or guaranty therefor by operation of
law or otherwise, (h) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation, (i) any failure of Bank to file or
enforce a claim in any bankruptcy or other proceeding with respect to any
Person, (j) the election by Bank of the application or non-application of
Section 1111(b)(2) of the United States Bankruptcy code, (k) any extension of
credit or the grant of any lien under Section 364 of the United States
Bankruptcy code, (1) any use of cash collateral under Section 363 of the United
States Bankruptcy Code, (m) any agreement or stipulation with respect to the
provision of adequate protection in any bankruptcy proceeding of any Person, (n)
the avoidance of any lien in favor of Bank for any reason, or (o) any action
taken by Bank that is authorized by this section or any other provision of any
Loan Document. Until such time as all of the Obligations have been fully,
finally, and indefeasibly paid in full in cash: (i) each Borrower hereby waives
and postpones any right of subrogation it has or may have as against any other
Borrower respect to the Obligations; and (ii) in addition, each borrower also
hereby waives and postpones any right to proceed or to seek recourse against or
with respect to any property or asset of any other Borrower. Each borrower
expressly waives all setoffs and counterclaims and all presentments, demands for
payment or performance, notices of nonpayment or nonperformance, protests,
notices of protest, notices of dishonor and all other notices or demands of any
kind or nature whatsoever with respect to the Obligations, and all notices of
acceptance of this Loan Agreement or of the existence, creation or incurring of
new or additional Obligations.
In the event that all or any part of the Obligations at any time are
secured by any one or more deeds of trust or mortgages or other instruments
creating or granting liens on any interests in real property, each Borrower
authorizes Bank, upon the occurrence of and during the continuance of any Event
of Default, at its sole option, without notice or demand and without affecting
the obligations of any Borrower, the enforceability of this Loan Agreement, or
the validity or enforceability of any Liens of Bank , to foreclose any or all of
such deeds of trust or mortgages or other instruments by judicial or nonjudicial
sale.
To the fullest extent permitted by applicable law, to the extent that a
Borrower is deemed a guarantor, each Borrower expressly waives any defenses to
the enforcement of this Loan Agreement or any rights of Bank created or granted
hereby or to the recovery by Bank against any Borrower or any other Person
liable therefor of any deficiency after a judicial or nonjudicial foreclosure or
sale, even though such a foreclosure or sale may impair the subrogation rights
of Borrowers and may preclude Borrowers from obtaining reimbursement or
contribution from other Borrowers. To the fullest extent permitted by applicable
law, each Borrower expressly waives any suretyship defenses or benefits that it
otherwise might or would have under applicable law. WITHOUT LIMITING THE
GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS SECTION, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER WAIVES ALL RIGHTS
AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY THE BANK, EVEN THOUGH
THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO
SECURITY FOR THE OBLIGATIONS, HAS DESTROYED SUCH BORROWER'S RIGHTS OF
SUBROGATION AND REIMBURSEMENT AGAINST THE OTHER BORROWERS BY THE OPERATION LAW,
13.
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INCLUDING BUT NOT LIMITED TO SECTION 580d OF THE CODE OF CIVIL PROCEDURE, OR
OTHERWISE.
Borrower and each of them warrant and agree that each of the waivers and
consents set forth herein are made after consultation with legal counsel and
with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect any rights which Borrower may
otherwise have against any other Borrower, Bank or others, or against any
Collateral. If any of the waivers or consents herein are determined to be
contrary to any applicable law or public policy, such waivers and consents shall
be effective to the maximum extent permitted by law.
17. Miscellaneous Provisions.
A. Nothing herein shall in any way limit the effect of the
conditions set forth in any other security or other agreement executed by any
Borrower, but each and every condition hereof shall be in addition thereto.
B. No failure or delay on the part of Bank, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
C. All rights and remedies existing under this Restated Loan
Agreement or any other Loan Document are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
D. All headings and captions in this Restated Loan Agreement and any
related documents are for convenience only and shall not have any substantive
effect.
E. The liability of each Borrower hereunder shall be joint and
several.
F. This Restated Loan Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. Each
such agreement shall become effective upon the execution of a counterpart hereof
or thereof by each of the parties hereto and telephonic notification that such
executed counterparts has been received by Borrower and Bank.
G. This Restated Loan Agreement is not intended to be, and shall not
be construed to create, a novation or accord and satisfaction, and, except as
otherwise provided herein, the Amended and Restated Loan Agreement is amended
and restated in full by the terms of this Restated Loan Agreement and all
obligations outstanding under the Amended and Restated Loan Agreement are
governed by the terms of this Restated Loan Agreement.
Bank: Borrower:
Imperial Bank Identix Incorporated,
a Delaware corporation
By:_____________________________ By:_____________________________
Printed Name:___________________ Printed Name:___________________
Title:__________________________ Title:__________________________
14.
<PAGE>
Identicator Technology, Inc.,
a Delaware corporation
By:_____________________________
Printed Name:___________________
Title:__________________________
LIST OF EXHIBITS AND SCHEDULES
------------------------------
Exhibit A: Definitions
Schedule 1 to Exhibit A: List of Specific Permitted Indebtedness
Schedule 2 to Exhibit A: List of Specific Permitted Liens
Exhibit B: Compliance Certificate
Exhibit C: Borrowing Base Certificate
15.
<PAGE>
Exhibit A
DEFINITIONS
"Accounts" means any right to payment for goods sold or leased, or to be
sold or to be leased, or for services rendered or to be rendered no matter how
evidenced, including accounts receivable, contract rights, chattel paper,
instruments, purchase orders, notes, drafts, acceptances, general intangibles
and other forms of obligations and receivables.
"ANADAC" means ANADAC, Inc., a wholly owned subsidiary of Identix.
"Borrower" means individually and collectively, Identix and Identicator.
"Capital Lease" means, as to any Person, any lease of any Property by such
Person as lessee that is, or should be in accordance with Financing Accounting
Standards Board Statement No. 13, classified and accounted for as a "capital
lease" on the balance sheet of such Person prepared in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.
"Collateral" means any and all personal property of each Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest hereunder (including, without
limitation, the Accounts), or pursuant to the terms of the General Security
Agreement, the IP Security Agreement or otherwise.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), co-made or discounted or sold with recourse by that Person,
or in respect of which that Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation for which that Person is in
effect liable through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, capital stock purchases, capital contributions or
otherwise), or to maintain the solvency of the obligor of such obligation, or to
make payment for any products, materials or supplies or for any transportation,
services or lease regardless of the non-delivery or non-furnishing thereof, in
any such case if the purpose or intent of such agreement is to provide assurance
that such obligation will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof. The amount of
any Contingent Obligation of any Person shall be deemed to be an amount equal to
the maximum amount of such Person's liability with respect to the stated or
determinable amount of the primary obligation for which such Contingent
Obligation is incurred or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder).
"Domestic Account Debtors" means all account debtors of Borrower whose
principal place of business is located within the United States of America.
Exhibit A
Page 1 of 6
<PAGE>
"Eligible Accounts" means such of Borrower's Accounts, as Bank in its sole
and reasonable discretion shall determine are eligible from time to time;
provided, however, that in no event shall Eligible Accounts include the
following:
(1) all Accounts under which payment is not received within ninety
(90) days from the applicable invoice date; provided that all Accounts for
Sagem Morpho Inc. ("Morpho") and NEC Technologies ("NEC") under which
payment is not received within one hundred twenty (120) days from the
applicable invoice date shall be deemed ineligible Accounts;
(2) from the date hereof through June 30, 1999, all Accounts for
Morpho, NEC and the California Department of Justice ("DOJ") under which
payment is not received within one hundred fifty (150) days from the
applicable invoice date. Notwithstanding the foregoing, from and after June
30, 1999, if an assignment of claim on future sales to DOJ has been
obtained by Bank, all Accounts for DOJ under which payment is received
within one hundred fifty (150) days from the applicable invoice date shall
be deemed eligible Accounts;
(3) all Accounts against which the account debtor or any other Person
obligated to make payment thereon asserts any defense, offset, counterclaim
or other right to avoid or reduce the liability represented by the
Accounts;
(4) any Accounts if the account debtor or any other Person liable in
connection therewith is insolvent, subject to bankruptcy or receivership
proceedings or has made an assignment for the benefit of creditors or whose
credit standing is unacceptable to Bank and Bank has so notified such
Borrower;
(5) Accounts with respect to which the account debtor is an officer,
director, shareholder, employee or Subsidiary, excluding Accounts due from
the sale of any product of Identix to ANADAC in the ordinary and normal
course of its business now conducted, which are less than ninety (90) days
from the applicable invoice date;
(6) Accounts due from an account debtor if more than fifty percent
(50.0%) of the aggregate amount of Accounts of such account debtor have at
that time remained unpaid for more than ninety (90) days from the
applicable invoice date (except as permitted in clauses (1) and (2) above);
(7) Accounts due from an account debtor whose principal place of
business is located outside of the United States of America (with the
exception of Armaguard, who has been previously approved by Bank) unless
either (a) such Accounts are insured or covered by a letter of credit in a
manner and form acceptable to Bank or (b) Bank shall have otherwise
permitted in writing in its sole and absolute direction;
(8) salesperson's accounts for promotional purposes;
(9) the amount by which the aggregate of all Accounts of an account
debtor exceeds twenty-five percent (25.0%) of the total accounts receivable
balance ("Concentration Limit"); provided, however, the Concentration Limit
for Morpho and NEC shall be thirty-five percent (35.0%);
(10) Accounts where the account debtor is a seller to borrower, to the
extent that a potential offset exists (but excluding deferred maintenance
revenue); and
(11) Accounts where the account debtor is a governmental entity,
agency or instrumentality thereof under which payment is not received
within one hundred twenty (120) days from the applicable invoice date.
Exhibit A
Page 2 of 6
<PAGE>
"Eligible Inventory" means Identix's raw materials and Finished Goods
Inventory received and/or completed within ninety (90) days and stored at
Identix's principal place of business located at 510 North Pastoria Avenue,
Sunnyvale, California, or at Bank's sole discretion, at any other such principal
place of business as Borrower shall notify Bank in writing.
"Event of Default" has the meaning set forth in Section 12.
"Finished Goods Inventory" means all of Borrower's goods, merchandise and
other personal property which are held for sale or lease.
"Foreign Account Debtors" means all account debtors of Borrower whose (1)
principal place of business is located outside of the United States of America
and (2) accounts (a) are insured or covered by a letter of credit in manner and
form acceptable to Bank or (b) shall have otherwise been approved by Bank in
writing in its sole and absolute discretion.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by the significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"General Security Agreement" means collectively the General Security
Agreement dated as of December 25, 1998, made by Identix in favor of Bank and
the General Security Agreement dated of even date herewith made by Identicator
in favor of Bank.
"IP Security Agreement" means that certain Collateral Assignment, Patent
Mortgage and Security Agreement dated of even date herewith made by Identicator
in favor of Bank.
"Indebtedness" means, as to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money, including, without limitation,
all of such indebtedness outstanding under this Restated Loan Agreement and any
of the other Loan Documents, (b) all Capital Lease Obligations of such Person,
(c) to the extent of the outstanding indebtedness thereunder, any obligation of
such Person representing an extension of credit to such Person, whether or not
for borrowed money, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than (i) trade or other accounts payable in
the ordinary course of business in accordance with customary industry terms and
(ii) deferred franchise fees), (e) all Contingent Obligations, (f) any
obligation of such Person of the nature described in clauses (a), (b), (c), (d)
or (e) above, that is secured by a Lien on assets of such Person and which is
non-recourse to the credit of such Person, but only to the extent of the fair
market value of the assets so subject to the Lien, (g) obligations of such
Person arising under acceptance facilities or under facilities for the discount
of accounts receivable of such Person, (h) any obligation of such Person to
reimburse the issuer of any letter of credit issued for the account of such
Person upon which a draw has been made, and (i) any lease having the effect of
indebtedness, whether or not the same shall be treated as such on the balance
sheet of Borrower under GAAP.
"Intellectual Property" means
(1) Any and all copyright rights, copyright applications, copyright
registrations and like protection in each work or authorship and derivative
work thereof, whether published or unpublished and whether or not the same
also constitutes a trade secret, now or hereafter existing, created,
acquired or held (collectively, the "Copyrights");
Exhibit A
Page 3 of 6
<PAGE>
(2) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;
(3) Any and all design rights which may be available to any Borrower
now or hereafter existing, created, acquired or held;
(4) Any patents, patent applications and like protections, including,
without limitation, improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same, including,
without limitation, the patents and patent applications (collectively, the
"Patents");
(5) Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like
protections, and the entire goodwill of the business of any Borrower
connected with and symbolized by such trademarks (collectively, the
"Trademarks");
(6) Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the right, but not
the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(7) Any licenses or other rights to use any of the Copyrights,
Patents or Trademarks and all license fees and royalties arising from such
use to the extent permitted by such license or rights;
(8) Any amendments, extensions, renewals and extensions of any of the
Copyrights, Patents or Trademarks; and
(9) Any proceeds and products of the foregoing, including, without
limitation, all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Lien" means any mortgage, pledge, security interest, lien or other charge
or encumbrance, including the lien or retained security title of a conditional
vendor, upon or with respect to any property or assets.
"Loan Documents" means this Restated Loan Agreement, the General Security
Agreement, the IP Security Agreement, the Warrant to Purchase Stock and those
certain Agreements to Provide Insurance (Real or Personal Property) dated of
even date herewith, each as executed by each Borrower in favor of Bank, together
with all other documents entered into or delivered pursuant to any of the
foregoing, in each case as originally executed or as the same may from time to
time be modified, amended, supplemented or restated.
"Material Adverse Effect" means any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse effect upon
the validity or enforceability of any material provision of any Loan Document,
(b) is or could reasonably be expected to be material and adverse to the
condition (financial or otherwise) or business operations of any Borrower, (c)
materially impairs or could reasonably be expected to materially impair the
ability of any Borrower, to perform its material Obligations, (d) materially
impairs or could reasonably be expected to materially impair the value or
priority of Bank's security interest in any Collateral or (e) materially impairs
or could reasonably be expected to materially impair the ability of Bank to
enforce any of its legal remedies pursuant to the Loan Documents.
"Permitted Indebtedness" means the following:
(1) indebtedness of each Borrower or Indebtedness and Contingent
Obligations of its Subsidiaries in favor of Bank arising under this
Restated Loan Agreement and the other Loan Documents;
Exhibit A
Page 4 of 6
<PAGE>
(2) the existing Indebtedness and Contingent Obligations disclosed on
Schedule 1 attached hereto and incorporated herein by this reference;
provided that the principal amount thereof is not increased and the terms
thereof are not modified to impose more burdensome terms upon any Borrower
or any of its Subsidiaries;
(3) the Subordinated Debt;
(4) extensions, renewals or refinancings of Indebtedness permitted
under this Restated Loan Agreement, other than clause (3) immediately
above;
(5) accrued dividends on the preferred stock of any Borrower;
(6) interest rate and currency hedging agreements;
(7) guaranties of any Subsidiary's suppliers in connection with the
purchase of supplies in the ordinary course of business;
(8) guaranties of lease obligations incurred in the ordinary course
of business and to the extent otherwise permitted hereunder;
(9) Contingent Obligations constituting Permitted Liens; and
(10) the indebtedness referred to in clause (3)(a) of the definition
of Permitted Liens.
"Permitted Liens" means the following:
(1) liens and security interests existing as of this date and
disclosed in Schedule 2 attached hereto and incorporated herein by this
reference;
(2) liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by
appropriate proceedings;
(3) liens and security interests (a) upon or in any equipment
acquired or held by any Borrower to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment and in an amount not greater than the
purchase price thereof or (b) existing on such equipment at the time of its
acquisition, provided that the lien and security interest is confined
solely to the property so acquired and improvements thereon, and the
proceeds of such equipment;
(4) liens consisting of leases or subleases and licenses and
sublicenses granted to others in the ordinary course of any Borrower's
business not interfering in any material respect with the business of such
Borrower and any interest or title of a lessor or licensor under any lease
or license, as applicable;
(5) liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons or entities
imposed without action of such parties, provided that the payment thereof
is not yet required;
(6) liens incurred or deposits made in the ordinary course of any
Borrower's business in connection with worker's compensation, unemployment
insurance, social security and other like laws;
Exhibit A
Page 5 of 6
<PAGE>
(7) liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(8) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances affecting real property not interfering in any material
respect with the ordinary conduct of any Borrower's business;
(9) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(10) liens that are not prior to Bank's security interest which
constitute rights of set-off of a customary nature;
(11) any interest or title of a lessor in equipment subject to any
Capitalized Lease otherwise permitted hereunder; and
(12) any liens arising from the filing of any financing statements
relating to true leases otherwise permitted hereunder.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"Revolving Maturity Date" has the meaning set forth in Section 2.A.
"Subordinated Debt" means indebtedness of any Borrower, the repayment of
principal of which is fully subordinated in time and right of payment to the
Revolving Loans, and has been approved in Bank's sole and absolute discretion
and in writing.
"Warrant to Purchase Stock" means that certain Warrant to Purchase Stock
effective as of July 1, 1999, issued by Identix to Bank in connection herewith,
providing for the purchase of $100,000.00 in shares of the [common] [Series
_____ preferred] stock of Identix trading under the ticker symbol "IDX," at an
initial exercise price equal to the share price of such stock at the close of
the financial markets on June 30, 1999, at 4:30PM (eastern standard time) and in
no event shall exceed twelve thousand (12,000) shares of such stock. Such
Warrant shall be in form satisfactory to Bank and shall be exercisable only upon
Identix's failure to close the Next Equity Round through the expiration date
noted thereon.
"Year 2000 Compliant" means, in regard to any Borrower or any Person, that
all software, hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of such Borrower or
such Person, will properly perform date sensitive functions before, during and
after the year 2000.
"Year 2000 Problem" means the risk that any computer applications used by
any Borrower and its Subsidiaries may be unable to recognize and properly
perform date-sensitive functions involving certain dates prior to and any date
on or after December 31, 1999.
Exhibit A
Page 6 of 6
<PAGE>
Schedule 1 to Exhibit A
SPECIFIC PERMITTED INDEBTEDNESS
(List, attach schedule or indicate "None")
Schedule 1 to Exhibit A
<PAGE>
Schedule 2 to Exhibit A
SPECIFIC PERMITTED LIENS
(List, attach schedule or indicate "None")
Schedule 2 to Exhibit A
<PAGE>
Exhibit B
COMPLIANCE CERTIFICATE
The consolidated financial statements dated as of __________________________ of
Identix Incorporated, Delaware corporation ("Identix") attached hereto and
submitted to Imperial Bank ("Bank") pursuant to that certain Second Amended and
Restated Loan Agreement dated as of May 13, 1999, entered into between Identix,
Identicator Technology, Inc., a Delaware corporation, and Bank (the "Loan
Agreement"), are in compliance with all financial covenants (unless otherwise
noted below) as specified in Section 10 therein, as follows:
--------------------------------------------------------------------------------
Covenant: Actual:
--------------------------------------------------------------------------------
A. Minimum Tangible Net Worth of:
-----------------------------
outstanding principal amount of the Revolving Loan
Account multiplied by 1.25
--------------------------------------------------------------------------------
B. Maximum Liabilities to Tangible Net Worth Ratio:
-----------------------------------------------
1.25 to 1.00
--------------------------------------------------------------------------------
C. Minimum Quick Ratio:
-------------------
1.00 to 1.00
--------------------------------------------------------------------------------
D. After-tax profitability:
-----------------------
$1.00
--------------------------------------------------------------------------------
Exceptions: (if none, so state):
________________________________________________________________________________
________________________________________________________________________________
The undersigned authorized officer of Identix hereby certifies that Identix is
in complete compliance with the terms and conditions of the Loan Agreement for
the period ending _____________________, ____, and as of the date of this
Compliance Certificate the representations and warranties stated therein are
true, accurate and complete as of the date hereof (except as to those
representations and warranties which specifically reference a particular date
and except as noted above).
The undersigned further certifies that s/he knows of no pending conditions which
may cause an Event of Default (as defined in the Loan Agreement) to exist in the
next thirty (30) days. The required support documents for this certification are
attached and prepared in accordance with GAAP consistently applied.
Date:_____________________________ Identix Incorporated,
a Delaware corporation
By:____________________________________
Name:__________________________________
Title:_________________________________
Exhibit B
<PAGE>
Exhibit C
BORROWING BASE CERTIFICATE
(To be provided and attached by Bank)
Exhibit C