UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 8, 2016
Vericel Corporation
(Exact name of registrant as specified in its charter)
Michigan |
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001-35280 |
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94-3096597 |
(State or other jurisdiction |
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(Commission |
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(I.R.S. Employer |
of incorporation) |
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File Number) |
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Identification No.) |
64 Sidney St. |
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(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: (734) 418-4400
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement.
On March 8, 2016, Vericel Corporation (the Company), as borrower, and Silicon Valley Bank (the Bank), as lender, entered into a Loan and Security Agreement (the Loan Agreement) providing for a term loan (the Term Loan Facility) and revolving line of credit (together with the Term Loan Facility, the Debt Facility) in an aggregate principal amount of $15,000,000. The Term Loan Facility is structured in two tranches, as follows: (i) the first tranche of $3,000,000 may be accessed at any time through February 28, 2017, and (ii) the second tranche of $2,000,000 will become available at any time after the U.S. Food and Drug Administrations approval of MACI (matrix applied characterized autologous cultured chondrocytes), an investigational treatment for cartilage defects of the knee, through February 28, 2017. Both tranches will only be advanced upon the Companys request. The available revolving line of credit will be equal to the lesser of 80% of the Companys eligible accounts receivable and $10,000,000.
The maturity date for any term loan advances made under the Term Loan Facility is February 1, 2020 (the Term Loan Maturity Date). The maturity date for advances made under the revolving line of credit is March 8, 2018. The effective interest rate for both facilities is dependent on a number of factors, including the current Wall Street Journal Prime Rate. The effective interest rate, assuming that both facilities were fully utilized at current market interest rates, would be in the low-to-mid single digits for each of the Term Loan Facility and revolving line of credit. The Loan Agreement requires the Company to make monthly interest-only payments through February 28, 2017. Thereafter, each term loan advance shall be repaid in thirty-six (36) equal monthly installments of principal, plus accrued interest.
The Companys final payment on the Term Loan Facility, due on the Term Loan Maturity Date, shall include all outstanding principal and accrued and unpaid interest under the Term Loan Facility, plus a final payment (the Final Payment) equal to the original aggregate principal amount of the Term Loan Facility multiplied by four and one quarter of one percent (4.25%). Once repaid, amounts borrowed under the Term Loan Facility may not be reborrowed. The Company may prepay the Term Loan Facility, subject to paying the Prepayment Fee (described below) and the Final Payment. The Prepayment Fee is equal to 2.50% of the original principal amount of the term loan advance if the prepayment occurs on or prior to the one (1) year anniversary of the funding date for such term loan advance, 1.50% of the original principal amount of the term loan advance if the prepayment occurs after such one (1) year anniversary, and 0.50% of the original principal amount of the term loan advance if the prepayment occurs after the two (2) year anniversary of the funding date for such term loan advance.
The Loan Agreement requires the Company to pay an aggregate non-refundable facility fee of $62,500 on the closing date. Thereafter, a non-refundable anniversary fee of $50,000 shall be due and payable on the earlier of March 8, 2017, the occurrence of an event of default under the Loan Agreement or the termination of the Loan Agreement.
The Loan Agreement requires the Company to make and maintain certain financial covenants, representations and warranties and other agreements that are customary in loan agreements of this type. The Loan Agreement also contains customary events of default, including non-payment of principal or interest, violations of covenants, bankruptcy and material judgments. The Companys obligations to the Bank are secured by substantially all of the Companys assets, excluding intellectual property.
The Company intends to use any proceeds from the Debt Facility for general corporate purposes.
The foregoing description of the Debt Facility is only a summary and is qualified in its entirety by reference to the Loan Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information provided in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.
Item 7.01. Regulation FD Disclosure.
On March 9, 2016, the Company issued a press release announcing the Debt Facility. A copy of this press release is filed herewith as Exhibit 99.1.
The information in the press released attached as Exhibit 99.1 is intended to be furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. |
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Description |
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10.1 |
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Loan and Security Agreement dated March 8, 2016 between Vericel Corporation, as borrower, and Silicon Valley Bank, as lender. |
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99.1 |
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Press release dated March 9, 2016. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Vericel Corporation | |
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Date: March 9, 2016 |
By: |
/s/ Gerard Michel |
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Name: Gerard Michel |
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Title: Chief Financial Officer and Vice President, Corporate Development |
Exhibit Index
Exhibit No. |
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Description |
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10.1 |
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Loan and Security Agreement dated March 8, 2016 between Vericel Corporation, as borrower, and Silicon Valley Bank, as lender. |
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99.1 |
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Press release dated March 9, 2016. |
Exhibit 10.1
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (this Agreement) dated as of March 8, 2016 (the Effective Date) is between SILICON VALLEY BANK, a California corporation (Bank), and VERICEL CORPORATION, a Michigan corporation (Borrower), and provides the terms on which Bank shall lend to Borrower, and Borrower shall repay Bank. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following GAAP; provided that if at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either Borrower or Bank shall so request, Borrower and Bank shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided, further, that, until so amended, (a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) Borrower shall provide Bank financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. Notwithstanding the foregoing, all financial calculations (whether for pricing covenants, or otherwise) shall be made with regard to Borrower only and not on a consolidated basis. The term financial statements includes the notes and schedules. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13 of this Agreement. All other terms contained in this Agreement, unless otherwise indicated, shall have the meanings provided by the Code to the extent such terms are defined therein.
2 LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon together with any fees and Finance Charges as and when due in accordance with this Agreement.
2.1.1 Financing of Accounts
(a) Availability.
(i) Subject to the terms of this Agreement and provided that Borrower is not Streamline Facility Eligible, Borrower may request that Bank finance specific Eligible Accounts. Bank shall finance such Eligible Accounts by extending credit to Borrower in an amount equal to the result of the Advance Rate multiplied by the face amount of the specific Eligible Account. Bank may, in its sole discretion, change the percentage of the Advance Rate for a particular Eligible Account on a case by case basis upon notice thereof to Borrower.
(ii) Subject to the terms of this Agreement and provided that Borrower is Streamline Facility Eligible, Borrower may request that Bank finance Eligible Accounts on an aggregate basis (the Aggregate Eligible Accounts). Bank shall finance Aggregate Eligible Accounts by extending credit to Borrower in an aggregate amount outstanding at any time of up to the Availability Amount. Bank may, in its sole discretion, change the percentage of the Borrowing Base on a case by case basis upon notice thereof to Borrower.
(iii) Subject to the terms of this Agreement and provided that Borrower is Streamline Facility Eligible, Borrower may request that Bank finance specific Eligible Accounts for Approved Concentration Accounts. Bank shall finance such Eligible Accounts by extending credit to Borrower in an amount equal to the result of the Advance Rate multiplied by the face amount of the Approved Concentration Account. Bank may, in its sole discretion, change the percentage of the Advance Rate for an Approved Concentration Account on a case by case basis upon notice thereof to Borrower. For clarity Approved Concentration Account Advances shall be treated in all respects as an Advance made upon specific Eligible Accounts, except for the Applicable Rate.
(iv) Any extension of credit made pursuant to the terms of subsections (i), (ii) or (iii) above shall hereinafter be referred to as an Advance, and, collectively, the Advances. When Bank makes an Advance, the specific Eligible Account, the Aggregate Eligible Accounts, or the Approved Concentration Account each become a separate Financed Receivable.
(b) Maximum Advances.
(i) The aggregate face amount of all Financed Receivables outstanding at any time may not exceed the Facility Amount. In addition to and notwithstanding the foregoing, (A) the aggregate amount of Advances outstanding at any time may not exceed the Maximum Availability Amount and (B) while Borrower is Streamline Facility Eligible, the aggregate amount of Advances outstanding at any time may not exceed the Availability Amount.
(ii) If, at any time, amounts outstanding exceed the amounts set forth in this Section 2.1.1(b), Borrower shall immediately pay to Bank in cash such excess amount, and Borrower hereby irrevocably authorizes Bank to debit any of its accounts maintained with Bank or any of Banks Affiliates in connection therewith.
(c) Borrowing Procedure. Borrower will deliver an Advance Request and Invoice Transmittal in the form attached hereto as Exhibit C signed by a Responsible Officer for each Advance it requests, accompanied by (i) an accounts receivable aging and a Borrowing Base Certificate, with respect to requests for Advances based upon Aggregate Eligible Accounts, or (ii) invoices, with respect to requests for Advances based upon specific Eligible Accounts. Bank may rely on information set forth in or provided with the Advance Request and Invoice Transmittal. In addition, upon Banks request, Borrower shall deliver to Bank any contracts, purchase orders, shipping documents or other underlying supporting documentation with respect to any Eligible Account (including those Eligible Accounts comprising all or any portion of the Aggregate Eligible Accounts).
(d) Credit Quality; Confirmations. Bank may, at its option, conduct a credit check of the Account Debtor for each Account requested by Borrower for financing hereunder to approve any such Account Debtors credit before agreeing to finance such Account. Bank may also verify directly with the respective Account Debtors the validity, amount and other matters relating to the Accounts (including confirmations of Borrowers representations in Section 5.3 of this Agreement) by means of mail, email, telephone or otherwise, either in the name of Borrower or Bank from time to time in its sole discretion; provided, however, prior to the occurrence and continuance of an Event of Default, Bank will notify Borrower prior to making any direct contact with Borrowers Account Debtors.
(e) Accounts Notification/Collection. Bank may notify any Account Debtor of Banks security interest in Borrowers Accounts and verify and/or collect them; provided, however, prior to the occurrence and continuance of an Event of Default, Bank will notify Borrower prior to making any direct contact with Borrowers Account Debtors.
(f) Early Termination. This Agreement may be terminated prior to the Maturity Date as follows: (i) by Borrower, effective three (3) Business Days after written notice of termination is given to Bank; or (ii) by Bank at any time after the occurrence and during the continuance of an Event of Default, without notice, effective immediately. If this Agreement is terminated (A) by Bank in accordance with clause (ii) in the foregoing sentence, or (B) by Borrower for any reason, Borrower shall pay to Bank a non refundable termination fee in an amount equal to one half of one percent (0.50%) of the Maximum Availability Amount (the Early Termination Fee). The Early Termination Fee shall be due and payable on the effective date of such termination and thereafter shall bear interest at a rate equal to the highest rate applicable to any of the Obligations. Notwithstanding the foregoing, Bank agrees to waive the Early Termination Fee if Bank agrees to refinance and re-document this Agreement under another division of Bank (in its sole and exclusive discretion) prior to the Maturity Date.
(g) Maturity. All Obligations outstanding hereunder with respect to (i) Advances shall be immediately due and payable in full on the Maturity Date or the earlier termination of this Agreement and (ii) Term Loan Advances shall be immediately due and payable in full on the Term Loan Advance Maturity Date or the earlier termination of this Agreement.
(h) End of Streamline Facility Eligible Status. On any day that Borrower ceases to be Streamline Facility Eligible, all outstanding Advances made based on Aggregate Eligible Accounts and all outstanding Approved Concentration Account Advances shall be immediately due and payable, together with all Finance Charges accrued thereon. Provided no Event of Default then exists hereunder and subject to the terms of this Agreement, Bank shall refinance the outstanding principal amount of such Advances with new Advances made based on specific Eligible Accounts (in accordance with this Agreement, including, without limitation, Section 2.1.1 hereof). In connection with same, Borrower shall deliver to Bank an Advance Request and Invoice Transmittal in the form attached hereto as Exhibit C containing detailed invoice reporting, signed by a Responsible Officer, together with a current accounts receivable aging and a copy of each invoice, all in accordance with Section 6.2(g) hereof and Bank shall finance same (in accordance with this Agreement, including, without limitation, Section 2.1.1 hereof) and each specific Eligible Account financed shall thereafter be deemed to be a Financed Receivable for purposes of this Agreement. If, following such determination, the outstanding principal amount of the Obligations in connection with Advances made pursuant to Section 2.1.1 exceeds the amount of Advances Bank has agreed to make based on specific Eligible Accounts, Borrower shall immediately pay to Bank the excess and, in connection with same, hereby irrevocably authorizes Bank to debit any account of Borrower maintained by Borrower with Bank or any of Banks Affiliates for the amount of such excess.
(i) Commencement of Streamline Facility Eligible Status. On any day that Borrower becomes Streamline Facility Eligible, all outstanding Advances made based on specific Eligible Accounts shall be immediately due and payable, together with all Finance Charges accrued thereon. Provided no Event of Default then exists hereunder and subject to the terms of this Agreement, Bank shall refinance such Advances with new Advances made based on Aggregate Eligible Accounts and/or new Approved Concentration Account Advances (in accordance with this Agreement, including, without limitation, Section 2.1.1 hereof). In connection with such request, Borrower shall deliver to Bank (i) an Advance Request and Invoice Transmittal in the form attached hereto as Exhibit C containing a current accounts receivable aging, (ii) a Borrowing Base Certificate, and (iii) with respect to any Approved Concentration Account Advances, a copy of each invoice in connection therewith, and Bank shall refinance the outstanding principal amount of such Advances with new Advances made based on Aggregate Eligible Accounts and/or new Approved Concentration Account Advances (in accordance with this Agreement, including, without limitation, Section 2.1.1 hereof) and the Aggregate Eligible Accounts and/or Approved Concentration Account financed shall thereafter be deemed to be a Financed Receivable for purposes of this Agreement. If, following such determination, the outstanding principal amount of the Obligations in connection with Advances made pursuant to Section 2.1.1 exceeds the amount of Advances Bank has agreed to make based on Aggregate Eligible Accounts and the amount of Approved Concentration Account Advances, Borrower shall immediately pay to Bank the excess and, in connection with same, hereby irrevocably authorizes Bank to debit any account of Borrower maintained by Borrower with Bank or any of Banks Affiliates for the amount of such excess.
2.1.2 Term Loan Advances
(a) Availability. Subject to the terms and conditions of this Agreement, during the Term Advance A Draw Period, upon Borrowers request, Bank shall make one (1) term loan advance (the Term Loan A Advance) available to Borrower in an original principal amount of Three Million Dollars ($3,000.000.00). Subject to the terms and conditions of this Agreement, during the Term Advance B Draw Period, upon Borrowers request, Bank shall make one (1) term loan advance (the Term Loan B Advance) available to Borrower in an original principal amount of Two Million Dollars ($2,000,000.00). The Term Loan A Advance and the Term Loan B Advance are hereinafter referred to singly as a Term Loan Advance and collectively as the Term Loan Advances. After repayment, no Term Loan Advance (or any portion thereof) may be reborrowed.
(b) Interest Period. With respect to each Term Loan Advance, commencing on the first Payment Date of the month following the month in which the Funding Date of such Term Loan Advance occurs, and continuing on the Payment Date of each month thereafter, Borrower shall make monthly payments of interest, in arrears, on the principal amount of such Term Loan Advance, at the rate set forth in Section 2.1.2(f)(i).
(c) Repayment. Commencing on March 1, 2017, and continuing on each Payment Date thereafter, Borrower shall repay each Term Loan Advance, in (i) thirty-six (36) equal monthly installments of principal, plus (ii) monthly payments of accrued interest at the rate set forth in Section 2.1.2(f)(i). All outstanding principal and accrued and unpaid interest under the Term Loan Advances, and all other outstanding Obligations
hereunder with respect to the Term Loan Advances, are due and payable in full on the Term Loan Advance Maturity Date.
(d) Permitted Prepayment. Borrower shall have the option to prepay all, but not less than all, of the Term Loan Advances, provided Borrower (i) delivers written notice to Bank of its election to prepay the Term Loan Advances at least five (5) days prior to such prepayment, and (ii) pays, on the date of such prepayment (A) all outstanding principal plus accrued and unpaid interest with respect to the Term Loan Advances, (B) the Term Loan Prepayment Premium, (C) the Term Loan Final Payment and (D) all other sums, if any, that shall have become due and payable hereunder with respect to the Term Loan Advances, including interest at the Default Rate with respect to any past due amounts.
(e) Mandatory Prepayment Upon an Acceleration. If the Term Loan Advances are accelerated by Bank following the occurrence and during the continuance of an Event of Default, Borrower shall immediately pay to Bank an amount equal to the sum of (i) all outstanding principal plus accrued and unpaid interest with respect to the Term Loan Advances, (ii) the Term Loan Prepayment Premium, (iii) the Term Loan Final Payment and (iv) all other sums, if any, that shall have become due and payable hereunder with respect to the Term Loan Advances, including interest at the Default Rate with respect to any past due amounts.
(f) Interest.
(i) Interest Rate. Subject to Section 2.1.2(f)(ii), the principal amount of each Term Loan Advance outstanding shall accrue interest at a floating per annum rate equal to the Prime Rate plus three-quarters of one percent (0.75%), which interest shall be payable monthly in accordance with Section 2.1.2(f)(v) below.
(ii) Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations in connection with the Term Loan Advances shall bear interest at the Default Rate. Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Bank Expenses incurred after the Effective Date) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations. Payment or acceptance of the increased interest rate provided in this Section 2.1.2(f)(ii) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.
(iii) Adjustment to Interest Rate. Changes to the interest rate of any Term Loan Advance based on changes to the Prime Rate shall be effective on the effective date of any change to the Prime Rate and to the extent of any such change.
(iv) Computation; 360-Day Year. In computing interest with respect to the Term Loan Advances, the date of the making of any Term Loan Advance shall be included and the date of payment shall be excluded; provided, however, that if any Term Loan Advance is repaid on the same day on which it is made, such day shall be included in computing interest on such Term Loan Advance. Interest with respect to the Term Loan Advances shall be computed on the basis of a 360-day year for the actual number of days elapsed.
(v) Interest Payment Date. Unless otherwise provided, interest with respect to the Term Loan Advances is payable monthly in arrears on the Payment Date.
(g) Borrowing Procedure. Subject to the prior satisfaction of all other applicable conditions to the making of a Term Loan Advance set forth in this Agreement, to obtain a Term Loan Advance, Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 1:00 p.m. Eastern time one (1) Business Day prior to the requested Funding Date of the Term Loan Advance. Together with any such electronic or facsimile notification, Borrower shall deliver to Bank by electronic mail or facsimile a completed Payment/Advance Form executed by a Responsible Officer or his or her designee. Bank may rely on any telephone notice given by a person whom Bank reasonably believes is a Responsible Officer or designee. Bank shall credit Term Loan Advances to a deposit account of Borrower maintained with Bank. Bank may make Term Loan
Advances under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if the Term Loan Advances are necessary to meet Obligations which have become due.
(h) Application of Payments. All payments to be made by Borrower under any Loan Document in respect of any Term Loan Advance shall be made in immediately available funds in Dollars, without setoff or counterclaim, before 1:00 p.m. Eastern time on the date when due. Payments of principal and/or interest received after 1:00 p.m. Eastern time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid.
2.2 Collections, Finance Charges, Remittances and Fees. The Obligations shall be subject to the following fees and Finance Charges. Unpaid fees and Finance Charges may, in Banks discretion, accrue interest at the then highest rate applicable to the Obligations.
2.3 Collections. Collections will be credited to the Financed Receivable Balance for such Financed Receivable, but if there is an Event of Default, Bank may apply Collections to the Obligations then due in any order it chooses. If Bank receives a payment for both a Financed Receivable and a non-Financed Receivable, the funds will first be applied to the Financed Receivable and, if there is no Event of Default then existing, the excess will be remitted to Borrower, subject to Section 2.9 of this Agreement.
2.4 Fees.
(a) A non-refundable facility fee of Fifty Thousand Dollars ($50,000.00) shall be earned, due and payable upon the Effective Date (the Facility Fee);
(b) A fully earned, non-refundable anniversary fee of Fifty Thousand Dollars ($50,000.00) (the Anniversary Fee) shall be earned as of the Effective Date and shall be due and payable on the earliest to occur of (i) the one (1) year anniversary of the Effective Date, (ii) the occurrence of an Event of Default, or (iii) the termination of this Agreement;
(c) A non-refundable term loan facility fee of Twelve Thousand Five Hundred Dollars ($12,500.00) shall be earned, due and payable upon the Effective Date (the Term Loan Facility Fee);
(d) The Term Loan Final Payment which is due and payable on the earliest to occur of (i) the Term Loan Maturity Date, or (ii) the acceleration of the Term Loan Advances by Bank following the occurrence and during the continuance of an Event of Default, or (iii) the repayment of the Term Loan Advances in full; and
(e) The Term Loan Prepayment Premium when due hereunder.
The Facility Fee, the Anniversary Fee, the Term Loan Facility Fee and the Term Loan Final Payment are hereinafter collectively referred to as the Loan Fees.
Borrower has paid to Bank a deposit of Twenty-Five Thousand Dollars ($25,000.00) (the Good Faith Deposit) to initiate Banks due diligence review process. Any portion of the Good Faith Deposit not utilized to pay Bank Expenses will be applied to the Facility Fee.
2.5 Finance Charges. In computing Finance Charges on the Obligations under this Agreement, all Collections received by Bank shall be deemed applied by Bank on account of the Obligations on the day of receipt of the Collections. Borrower will pay a finance charge (the Finance Charge) on the Financed Receivable Balance or Account Balance (as applicable) which is equal to the Applicable Rate divided by 360 multiplied by the number of days each such Financed Receivable is outstanding multiplied by (a) with respect to Financed Receivables based on specific Eligible Accounts, the outstanding Financed Receivable Balance with respect to such Financed Receivables, (b) with respect to Financed Receivables based on Aggregate Eligible Accounts, the outstanding Account Balance and (c) with respect to Financed Receivables based upon Approved Concentration Accounts, the portion of the outstanding Financed Receivable Balance attributable to Approved Concentration Accounts. Except as otherwise provided in Section 2.1.1(h), Section 2.1.1(i) and/or Section 2.11.1(b)(i), the Finance Charge is payable when the Advance made based on such Financed Receivable is due and payable in accordance
with Section 2.11 of this Agreement.Immediately upon the occurrence and during the continuance of an Event of Default, the Applicable Rate will increase to the Default Rate.
2.6 Unused Line Fee. A fee (the Unused Line Fee), payable on the first (1st) day of each calendar quarter, in arrears, on a calendar year basis, in an amount equal to three-eighths of one percent (0.375%) per annum of the average unused portion of the Maximum Availability Amount, as determined by Bank. The unused portion of the Maximum Availability Amount, for purposes of this calculation, shall equal the difference between (a) the Maximum Availability Amount and (b) the average for the period of the Advances outstanding on each day. Borrower shall not be entitled to any credit, rebate or repayment of any Unused Line Fee previously earned by Bank pursuant to this Section 2.6 notwithstanding any termination of the Agreement or the suspension or termination of Banks obligation to make loans and advances hereunder.
2.7 Accounting. After each Reconciliation Period, Bank will provide Borrower with an accounting of the transactions for that Reconciliation Period, including the amount of all Financed Receivables, all Collections, Adjustments, Unused Line Fees and Finance Charges. If Borrower does not object to the accounting in writing within thirty (30) days it shall be considered accurate. All Finance Charges and other interest and fees are calculated on the basis of a 360 day year and actual days elapsed.
2.8 Deductions. Bank may deduct fees, Bank Expenses, Finance Charges, Unused Line Fees, the Loan Fees, Credit Extensions which become due pursuant to Section 2.11 of this Agreement, and other amounts due pursuant to this Agreement from any Credit Extensions made or Collections received by Bank.
2.9 Lockbox; Account Collection Services
(a) Borrower shall direct each Account Debtor (and each depository institution where proceeds of Accounts are on deposit) to remit payments with respect to the Accounts to a lockbox account established with Bank or to wire transfer payments to a cash collateral account that Bank controls (collectively, the Lockbox). It will be considered an immediate Event of Default if the Lockbox is not established and operational on the Effective Date and at all times thereafter.
(b) Upon receipt by Borrower of any proceeds of Accounts, Borrower shall promptly (but in any event within one (1) Business Day) transfer and deliver same to Bank, along with a detailed cash receipts journal.
(c) Provided no Event of Default exists or an event that with notice or lapse of time will be an Event of Default, within three (3) days of receipt of any proceeds of the Accounts by Bank (whether received by Bank in the Lockbox, directly from Borrower, or otherwise), Bank will turn over to Borrower such proceeds other than (i) Collections applied by Bank pursuant to Section 2.3 of this Agreement in respect of Financed Receivables based upon specific Eligible Accounts, and (ii) such proceeds which shall be used by Bank to repay any other amounts due to Bank in respect of Financed Receivables based upon specific Eligible Accounts, such as the Finance Charges, the Facility Fee, and Bank Expenses; provided, however, Bank may hold any proceeds of the Accounts (whether received by Bank in the Lockbox, directly from Borrower, or otherwise and whether or not in respect of Financed Receivables) as a reserve until the end of the applicable Reconciliation Period if Bank, in its reasonable discretion, determines that other Financed Receivable(s) may no longer qualify as an Eligible Account or Aggregate Eligible Accounts at any time prior to the end of the subject Reconciliation Period.
(d) This Section 2.9 does not impose any affirmative duty on Bank to perform any act other than as specifically set forth herein. All Accounts and the proceeds thereof are Collateral, and if an Event of Default occurs, Bank may, without notice, apply the proceeds of such Accounts to the Obligations.
2.10 Bank Expenses. Borrower shall pay all Bank Expenses (including reasonable attorneys fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due.
2.11 Repayment of Obligations; Adjustments
2.11.1 Repayment.
(a) Borrower will repay each Advance made based upon a specific Eligible Account (including any Approved Concentration Account Advances) on the earliest of: (i) the date on which payment is received of the Financed Receivable with respect to which the Advance was made, (ii) the date on which the Financed Receivable is no longer an Eligible Account, (iii) the date on which any Adjustment is asserted to the Financed Receivable (but only to the extent of the Adjustment if the Financed Receivable otherwise remains an Eligible Account), (iv) the date on which there is a breach of any representation or warranty in Section 5.3 of this Agreement or of any covenant in the Loan Documents, (v) as required pursuant to Section 2.1.1(j), (vi) as required pursuant to Section 2.1.1(h) for Approved Concentration Account Advances, or (vii) the Maturity Date (including any early termination). Each payment shall also include all accrued Finance Charges with respect to such Advance and all other amounts then due and payable hereunder.
(b) With respect to each Advance made based upon Aggregate Eligible Accounts:
(i) Borrower shall pay to Bank, on the first day of each Reconciliation Period, all Finance Charges accrued thereon; and
(ii) Borrower will pay the principal amount of such Advances on the earliest of: (A) the date on which the aggregate amount of outstanding Advances made based upon Aggregate Eligible Accounts exceeds the Availability Amount (but only up to the amount exceeding the Availability Amount), (B) the Maturity Date (including any early termination), or (C) as required pursuant to Section 2.1.1(h). Any payment made pursuant to (B) or (C) shall also include all accrued Finance Charges with respect to the Advances based upon Aggregate Eligible Accounts and all other amounts then due and payable hereunder.
2.11.2 Repayment on Event of Default. When there is an Event of Default, Borrower will, if Bank demands (or, upon the occurrence of an Event of Default under Section 8.5 of this Agreement, immediately without notice or demand from Bank) repay all of the Obligations then due. The demand may, at Banks option, include all Credit Extensions then outstanding and all accrued Finance Charges, Unused Line Fees, the Early Termination Fee, the Loan Fees then due and owing, Bank Expenses and any other Obligations then due hereunder.
2.11.3 Debit of Accounts. Bank may debit any of Borrowers deposit accounts for payments or any amounts Borrower owes Bank hereunder. These debits shall not constitute a set-off.
2.12 Power of Attorney. Borrower irrevocably appoints Bank and its successors and assigns as attorney-in-fact and authorizes Bank and its successors and assigns, to: (a) following the occurrence and during the continuance of an Event of Default, (i) sell, assign, transfer, pledge, compromise, or discharge all or any part of the Financed Receivables; (ii) demand, collect, sue, and give releases to any Account Debtor for monies due and compromise, prosecute, or defend any action, claim, case or proceeding about the Financed Receivables, including filing a claim or voting a claim in any bankruptcy case in Banks or Borrowers name, as Bank chooses; and (iii) prepare, file and sign Borrowers name on any notice, claim, assignment, demand, draft, or notice of or satisfaction of lien or mechanics lien or similar document; and (b) regardless of whether an Event of Default has occurred and is continuing, (i) notify all Account Debtors to pay Bank directly; provided , however, prior to the occurrence and continuance of an Event of Default, Bank will notify Borrower prior to making any direct contact with an Account Debtor of Borrower; (ii) receive, open, and dispose of mail addressed to Borrower; (iii) endorse Borrowers name on checks or other instruments (to the extent necessary to pay amounts owed pursuant to any of the Loan Documents); and (iv) execute on Borrowers behalf any instruments, documents, financing statements to perfect Banks interests in the Financed Receivables and Collateral and do all acts and things necessary or prudent, as determined solely and exclusively by Bank, to protect or preserve Banks rights and remedies under the Loan Documents, as directed by Bank.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Banks obligation to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank shall have reasonably requested, including, without limitation:
(a) the Loan Documents;
(b) the SVB Control Agreement and any other Control Agreement[s] required by Bank;
(c) a Secretarys Corporate Borrowing Certificate for Borrower with respect to Borrowers Articles of Formation, By-Laws, incumbency and resolutions authorizing the execution and delivery of this Agreement and the other loan documents;
(d) shareholder consent (if required);
(e) Borrowers Operating Documents and a long form good standing certificate of Borrower certified by the Secretary of State of the State of Michigan as of a date no earlier than thirty (30) days prior to the Effective Date;
(f) the completed and executed Borrowing Resolutions for Borrower;
(g) certified copies, dated as of a recent date, of financing statement searches, as Bank shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;
(h) the Perfection Certificate of Borrower, together with the duly executed original signature thereto;
(i) evidence satisfactory to Bank that the insurance policies required by Section 6.4 of this Agreement are in full force and effect (including certificates on Acord 25 and Acord 28 forms);
(j) legal opinions of Borrowers counsel (authority/enforceability), in form and substance acceptable to Bank;
(k) the completion of an initial audit of the Accounts, Borrowers Books and other Collateral with results satisfactory to Bank in its sole and absolute discretion;
(l) payment of the fees and Bank Expenses then due as specified in Section 2.10 of this Agreement; and
(m) Certificate of Good Standing/Foreign Qualification from Michigan and Massachusetts.
3.2 Conditions Precedent to all Credit Extensions. Banks agreement to make each Credit Extension, including the initial Credit Extension, is subject to the following:
(a) receipt of (i) with respect to requests for Advances, the Advance Request and Invoice Transmittal and the documents required by Section 2.1.1(c) of this Agreement, and (ii) with respect to requests for Term Loan Advances, an executed Payment/Advance Form;
(b) Bank shall have (at its option) conducted the confirmations and verifications as described in Section 2.1.1(d) of this Agreement; and
(c) each of the representations and warranties in Section 5.3 of this Agreement shall be true and accurate on the date of the Advance Request and Invoice Transmittal and/or the Payment/Advance Form, as applicable, and on the effective date of each Credit Extension and no Event of Default shall have occurred and be continuing, or result from the Credit Extension. Each Credit Extension is Borrowers representation and warranty on that date that the representations and warranties in Section 5.3 of this Agreement are true and accurate as of such date; and
(d) each of the representations and warranties in this Agreement (other than those in Section 5.3) shall be true and accurate in all material respects on the date of the Advance Request and Invoice Transmittal
and/or the Payment/Advance Form, as applicable, and on the effective date of each Credit Extension and no Event of Default shall have occurred and be continuing, or result from the Credit Extension. Each Credit Extension is Borrowers representation and warranty on that date that the representations and warranties in this Agreement (other than those in Section 5.3) are true and accurate in all material respects as of such date.
3.3 Suspension of Credit Extensions. Borrowers ability to request that Bank make Credit Extensions hereunder will be suspended if, in Banks reasonable discretion, there has been a material adverse change in the general affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations when due, or there has been any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank prior to the Effective Date.
3.4 Covenant to Deliver. Borrower agrees to deliver to Bank each item required to be delivered to Bank under this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of Borrowers obligation to deliver such item, and the making of any Credit Extension in the absence of a required item shall be in Banks sole discretion.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower represents, warrants, and covenants that the security interest granted herein shall be and shall at all times continue to be a first priority perfected security interest in the Collateral subject only to Permitted Liens that are permitted to have priority over Banks Liens hereunder. If Borrower shall at any time acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to Bank.
Borrower acknowledges that it may have previously entered, and/or may in the future enter, into Bank Services with Bank. Regardless of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority security interest granted herein subject only to Permitted Liens that are permitted to have priority over Banks Liens hereunder.
If this Agreement is terminated, Banks Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are satisfied in full, and at such time, Bank shall, at Borrowers sole cost and expense, terminate its security interest in the Collateral and all rights therein shall revert to Borrower. In the event (a) all Obligations (other than inchoate indemnity obligations), except for Bank Services, are satisfied in full, and (b) this Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good faith business judgment for Bank Services, if any. In the event such Bank Services consist of outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in an amount equal to one hundred five percent (105.0%) for Letters of Credit denominated in Dollars and one hundred ten percent (110.0%) for Letters of Credit denominated in a currency other than Dollars, in each case of the Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to such Letters of Credit.
4.2 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Banks interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Bank under the Code. Any such financing statements may indicate the Collateral as all assets of the Debtor or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Banks discretion.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Authorization. Borrower and each of its Subsidiaries are duly existing and in good standing as Registered Organizations in their respective jurisdictions of formation and are qualified and licensed to do business and are in good standing in any other jurisdiction in which the conduct of their respective business or ownership of property requires that they be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrowers business. In connection with this Agreement, Borrower has delivered to Bank a completed certificate signed by Borrower, entitled Perfection Certificate (the Perfection Certificate). Borrower represents and warrants to Bank that (a) Borrowers exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrowers organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrowers place of business, or, if more than one, its chief executive office as well as Borrowers mailing address (if different than its chief executive office); (e) Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, corporate structure, organizational type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement). If Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly notify Bank of such occurrence and provide Bank with Borrowers organizational identification number.
The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrowers organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any of its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect) or (v) constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrowers business.
5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer, each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts with Bank, the deposit accounts, if any, described in the Perfection Certificate delivered to Bank in connection herewith, or of which Borrower has given Bank notice and taken such actions as are necessary to give Bank a perfected security interest therein. The Accounts are bona fide, existing obligations of the Account Debtors. All Inventory is in all material respects of good and marketable quality, free from material defects.
The Collateral is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate. None of the components of the Collateral (other than mobile equipment such as laptop computers in the possession of Borrowers employees or agents) are currently being maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2 of this Agreement.
Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers in the ordinary course of business, (b) over-the-counter software that is commercially available to the public, and (c) material Intellectual Property licensed to Borrower and noted on the Perfection Certificate. Each Patent which it owns or purports to own and which is material to Borrowers business is valid and enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrowers business has been judged invalid or unenforceable, in whole or in part. To the best of Borrowers knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party except to the extent such claim would not reasonably be expected to have a material adverse effect on
Borrowers business. Except as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound by, any Restricted License.
5.3 Financed Receivables. Borrower represents and warrants for each Financed Receivable:
(a) Such Financed Receivable is an Eligible Account;
(b) Borrower is the owner of and has the legal right to sell, transfer, assign and encumber such Financed Receivable;
(c) The correct amount is on the Advance Request and Invoice Transmittal and is not disputed;
(d) Payment is not contingent on any obligation or contract and Borrower has fulfilled all its obligations as of the Advance Request and Invoice Transmittal date;
(e) Such Financed Receivable is based on an actual sale and delivery of goods and/or services rendered, is due to Borrower, is not past due or in default, has not been previously sold, assigned, transferred, or pledged and is free of any liens, security interests and encumbrances other than Permitted Liens;
(f) There are no defenses, offsets, counterclaims or agreements for which the Account Debtor may claim any deduction or discount;
(g) Borrower reasonably believes no Account Debtor is insolvent or subject to any Insolvency Proceedings;
(h) Borrower has not filed or had filed against it Insolvency Proceedings and does not anticipate any filing;
(i) Bank has the right to endorse and/ or require Borrower to endorse all payments received on Financed Receivables and all proceeds of Collateral; and
(j) No representation, warranty or other statement of Borrower in any certificate or written statement given to Bank in respect of a Financed Receivable 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 in light of the circumstances in which they were made.
5.4 Litigation. There are no actions or proceedings pending or, to the knowledge of Borrowers Responsible Officers, threatened in writing by or against Borrower or any Subsidiary in which an adverse decision could reasonably be expected to cause a Material Adverse Change.
5.5 No Material Deviation in Financial Statements and Deterioration in Financial Condition. All consolidated financial statements for Borrower and any Subsidiary delivered to Bank fairly present in all material respects Borrowers consolidated financial condition and Borrowers consolidated results of operations as of the date thereof. There has not been any material deterioration in Borrowers consolidated financial condition since the date of the most recent financial statements submitted to Bank.
5.6 Solvency. The fair salable value of Borrowers assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.
5.7 Regulatory Compliance. Borrower is not an investment company or a company controlled by an investment company under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change. None of Borrowers or any Subsidiarys properties or assets have been used
by Borrower or any Subsidiary or, to the best of Borrowers knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.
5.8 Subsidiaries. Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments.
5.9 Tax Returns and Payments; Pension Contributions. Borrower and each Subsidiary have timely filed all required tax returns and reports, and Borrower and each Subsidiary have timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower and each Subsidiary. Borrower may defer payment of any contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Bank in writing of the commencement of, and any material development in, the proceedings and (c) posts bonds or takes any other steps required to prevent the Governmental Authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a Permitted Lien. Borrower is unaware of any claims or adjustments proposed for any of Borrowers prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
5.10 Full Disclosure. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank in connection with the Loan Documents, or the transactions contemplated thereby, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Bank, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading in light of the circumstances in which they were made (it being recognized by Bank that any projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 Government Compliance
(a) Maintain its and (except as otherwise permitted by Section 7.3) all its Subsidiaries legal existence and good standing in their respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrowers business or operations. Borrower shall comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could reasonably be expected to have a material adverse effect on Borrowers business.
(b) Obtain all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Bank in all of its property. Borrower shall promptly provide copies of any such obtained Governmental Approvals to Bank.
(c) Deliver to Bank, within five (5) days after the same are sent or received, copies of all correspondence, reports, documents and other filings with any Governmental Authority regarding compliance with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be expected to have a material adverse effect on any of the Governmental Approvals or otherwise on the operations of Borrower or any of its Subsidiaries.
6.2 Financial Statements, Reports, Certificates
(a) Deliver to Bank: (i) as soon as available, but no later than thirty (30) days (or, with respect to the months ending March 31st, June 30th, September 30th and December 31st only, forty-five (45) days) after the last day of each Reconciliation Period, a company prepared consolidated balance sheet and income statement covering Borrowers consolidated operations during the period certified by a Responsible Officer and in a form acceptable to Bank; (ii) within five (5) days of filing, copies of all statements, reports and notices made available to Borrowers security holders or to any holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed with the SEC, but in no event shall the Form 10-K shall be delivered later than ninety (90) days after the last day of Borrowers fiscal year; (iii) a prompt report of any legal actions pending or threatened against Borrower or any Subsidiary that could reasonably be expected to result in damages or costs to Borrower or any Subsidiary of Two Hundred Fifty Thousand Dollars ($250,000.00) or more; (iv) as soon as available, but no later than thirty (30) days after the last day of Borrowers fiscal year, and contemporaneously with any updates or amendments thereto, annual financial projections approved by Borrowers board of directors, together with any related business forecasts used in the preparation of such annual financial plans and projections; and (v) budgets, sales projections, operating plans or other financial information of Borrower reasonably requested by Bank.
(b) Within thirty (30) days (or, with respect to the months ending March 31st, June 30th, September 30th and December 31st only, forty-five (45) days) after the last day of each Reconciliation Period, deliver to Bank with the monthly financial statements a Compliance Certificate signed by a Responsible Officer in the form of Exhibit B.
(c) Allow Bank to inspect the Collateral and audit and copy Borrowers Books, including, but not limited to, Borrowers Accounts, upon reasonable notice to Borrower. Such inspections or audits shall be conducted as frequently as Bank determines in its reasonable discretion that conditions warrant. In the event Borrower and Bank schedule an audit more than ten (10) days in advance, and Borrower cancels or seeks to reschedule the audit with less than ten (10) days written notice to Bank, then (without limiting any of Banks rights or remedies), Borrower shall pay Bank a fee of One Thousand Dollars ($1,000.00) plus any out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling. After the occurrence and during the continuance of an Event of Default, Bank may audit Borrowers Collateral at Borrowers expense, including, but not limited to, Borrowers Accounts as frequently as Bank deems necessary at Borrowers expense and at Banks sole and exclusive discretion, without notification to and authorization from Borrower.
(d) Upon Banks reasonable request, provide a written report on any Financed Receivable, where payment of such Financed Receivable does not occur by its due date and include the reasons for the delay.
(e) Provide Bank with, as soon as available, but no later than thirty (30) days following each Reconciliation Period, an aged listing of accounts receivable and accounts payable by invoice date, in form and detail reasonably acceptable to Bank.
(f) Immediately upon Borrower becoming Streamline Facility Eligible, and thereafter until Borrower is no longer Streamline Facility Eligible, provide Bank with (i) as soon as available, but no later than thirty (30) days following each Reconciliation Period, (ii) together with each request for an Advance based upon Aggregate Eligible Accounts, and (iii) as required by Section 2.1.1(i), a duly completed Borrowing Base Certificate signed by a Responsible Officer.
(g) Immediately upon Borrower ceasing to be Streamline Facility Eligible, provide Bank with a current aging of Accounts in form and detail reasonably acceptable to Bank and, to the extent not previously delivered to Bank, a copy of the invoice for each Eligible Account and an Advance Request and Invoice Transmittal with respect to each such Account.
6.3 Taxes. Make, and cause each Subsidiary to make, timely payment of all foreign, federal, state, and local taxes or assessments (other than taxes and assessments which Borrower is contesting in good faith, with adequate reserves maintained in accordance with GAAP) and will deliver to Bank, on demand, appropriate certificates attesting to such payments.
6.4 Insurance. Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrowers industry and location, and as Bank may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are satisfactory to Bank. All property policies shall have a lenders loss payable endorsement showing Bank as the sole lender loss payee and waive subrogation against Bank, and all liability policies shall show, or have endorsements showing, Bank as an additional insured. All policies (or the lender loss payable and additional insured endorsements) shall provide that the insurer must give Bank at least twenty (20) days notice before canceling, amending, or declining to renew its policy. At Banks request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy shall, at Banks option, be payable to Bank on account of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to Two Hundred Fifty Thousand Dollars ($250,000.00), in the aggregate, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Bank has been granted a first priority security interest subject only to Permitted Liens that are permitted to have priority over Banks Liens hereunder and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Bank, be payable to Bank on account of the Obligations then due. If Borrower fails to obtain insurance as required under this Section 6.4 or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this Section 6.4, and take any action under the policies Bank deems prudent.
6.5 Accounts
(a) At all times on and after the date that is ninety (90) days from the Effective Date, to permit Bank to monitor Borrowers financial performance and condition, Borrower and all of its Subsidiaries shall maintain all of Borrowers and its Subsidiaries depository, operating and securities/investment accounts with Bank and Banks Affiliates. In addition to the foregoing, Borrower shall conduct all of its investment management, letters of credit and foreign exchange banking with Bank. Notwithstanding the foregoing, Borrowers Subsidiary Vericel Denmark Aps shall be permitted to maintain the account ending 437 DKK with Danske Bank so long as the aggregate amount of funds in such account does not exceed One Hundred Fifty Thousand Dollars ($150,000.00) at any time. Any Guarantor shall maintain all depository and operating accounts with Bank, and, with respect to securities/investment accounts, with an Affiliate of Bank.
(b) For any Collateral Account that Bank in its sole discretion permits Borrower at any time to open or maintain, Borrower shall cause the applicable bank or financial institution (other than Bank) at or with which any Collateral Account is opened or maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Banks Lien in such Collateral Account in accordance with the terms hereunder which Control Agreement may not be terminated without the prior written consent of Bank. The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrowers employees and identified to Bank by Borrower as such.
6.6 Inventory; Returns; Notices of Adjustments. Keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its Account Debtors shall follow Borrowers customary practices as they exist at the Effective Date. If, at any time during the term of this Agreement, any Account Debtor asserts an Adjustment in excess of Two Hundred Fifty Thousand Dollars ($250,000.00), Borrower issues a credit memorandum, or any representation, warranty or covenant set forth in this Agreement or the other Loan Documents is no longer true in all material respects, Borrower will promptly advise Bank.
6.7 Financial Covenant Adjusted Quick Ratio. Maintain at all times an Adjusted Quick Ratio of at least 1.10 to 1.0.
6.8 Protection of Intellectual Property Rights
(a) (i) Protect, defend and maintain the validity and enforceability of any Intellectual Property material to Borrowers business; (ii) promptly advise Bank in writing of material infringements of its
Intellectual Property; and (iii) not allow any Intellectual Property material to Borrowers business to be abandoned, forfeited or dedicated to the public without Banks written consent.
(b) Provide written notice to Bank within ten (10) days of entering or becoming bound by any Restricted License (other than over-the-counter software that is commercially available to the public). Borrower shall take such steps as Bank requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License to be deemed Collateral and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (ii) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Banks rights and remedies under this Agreement and the other Loan Documents.
6.9 Litigation Cooperation. From the Effective Date and continuing through the termination of this Agreement, make available to Bank, without expense to Bank, Borrower and its officers, employees and agents and Borrowers Books, to the extent that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with respect to any Collateral or relating to Borrower.
6.10 Further Assurances. Execute any further instruments and take further action as Bank reasonably requests to perfect or continue Banks Lien in the Collateral or to effect the purposes of this Agreement.
6.11 Post-Closing Conditions. Deliver to Bank within thirty (30) days of the Effective Date a landlords consent in favor of Bank for 64 Sidney Street, Cambridge, Massachusetts 02139.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without Banks prior written consent:
7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively a Transfer), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out, obsolete or surplus Equipment; (c) in connection with Permitted Liens, Permitted Investments and Permitted Dissolutions; (d) consisting of the sale or issuance of any stock of Borrower permitted under Section 7.2 of this Agreement; (e) consisting of Borrowers use or transfer of money or Cash Equivalents in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents; and (f) of non-exclusive licenses for the use of the property of Borrower or its Subsidiaries in the ordinary course of business.
7.2 Changes in Business, Management, Control, or Business Locations. (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or dissolve; (c) have a change in management such that any Key Person ceases to hold such office with Borrower and a replacement is not made by Borrowers board of directors within sixty (60) days after such Key Persons departure from Borrower; or (d) permit or suffer any Change in Control.
Borrower shall not, without at least thirty (30) days prior written notice to Bank: (1) add any new offices or business locations, including warehouses (unless each such new office or business location contains less than Two Hundred Fifty Thousand Dollars ($250,000.00) in Borrowers assets or property), (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, (5) change any organizational number (if any) assigned by its jurisdiction of organization, or (6) deliver any portion of the Collateral to a bailee, unless (i) such bailee location contains less than Two Hundred Fifty Thousand Dollars ($250,000.00) in Borrowers assets or property and (ii) Bank and such bailee are parties to a bailee agreement governing both the Collateral and the location to which Borrower intends to deliver the Collateral.
Borrower hereby agrees upon Borrower adding any new office or business location, including any warehouse, Borrower will cause its landlord to enter into a landlord consent in favor of Bank prior to such new office or business location containing Two Hundred Fifty Thousand Dollars ($250,000.00) of Collateral.
Borrower hereby agrees that prior to Borrower delivering any Collateral to a bailee, Borrower shall cause such bailee to execute and deliver a bailee agreement in form and substance satisfactory to Bank.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrowers or any Subsidiarys Intellectual Property, except as is otherwise permitted in Section 7.1 of this Agreement and the definition of Permitted Liens herein.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.5 of this Agreement.
7.7 Distributions; Investments. (a) Directly or indirectly acquire or own any Person, or make any Investment in any Person, other than Permitted Investments, or permit any of its Subsidiaries to do so; or (b) pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock; provided that Borrower may (i) pay dividends solely in common stock or (ii) make open-market repurchase of its publicly-traded equity securities so long as (A) a Default or Event of Default does not exist at the time of any such repurchase and would not exist immediately after giving effect to any such repurchase and (B) the aggregate amount of such repurchases does not exceed One Million Dollars ($1,000,000.00).
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower, except for (a) transactions that are in the ordinary course of Borrowers business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arms length transaction with a non-affiliated Person or (b) equity financings to the extent not prohibited by Section 7.2.
7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount owed by Borrower thereof, shorten the maturity thereof, increase the rate of interest applicable thereto or adversely affect the subordination thereof to Obligations owed to Bank.
7.10 Compliance. Become an investment company or a company controlled by an investment company, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, each as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrowers business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
8 EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an Event of Default) under this Agreement:
8.1 Payment Default. Borrower fails to pay any of the Obligations when due;
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under Sections 2.9, 6.2, 6.3, 6.4, 6.5, 6.7, 6.8 or 6.11 of this Agreement or violates any of the covenants contained in Section 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep, or observe any other term, provision, condition, covenant, or agreement contained in this Agreement, in any of the Loan Documents, or in any other present or future agreement between Borrower and Bank and as to any default under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure such default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional reasonable period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default (provided that no Credit Extensions will be made during such cure period). Grace periods provided under this Section 8.2(b) shall not apply to the financial covenant(s) or any other covenants that are required to be satisfied, completed or tested by a date certain or as set forth in clause (a) above;
8.3 Material Adverse Change. A Material Adverse Change occurs;
8.4 Attachment; Levy; Restraint on Business.
(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the control of Borrower (including a Subsidiary) on deposit or otherwise maintained with Bank or any Bank Affiliate, or (ii) a notice of lien or levy is filed against any of Borrowers assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; or
(b) (i) any material portion of Borrowers assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting any material part of its business;
8.5 Insolvency. (a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within forty-five (45) days (but no Credit Extensions shall be made while any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);
8.6 Other Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties, (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Two Hundred Fifty Thousand Dollars ($250,000.00); or (b) any default by Borrower or Guarantor, the result of which could result in a Material Adverse Change to Borrowers or any Guarantors business;
8.7 Judgments. One or more final judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least One Hundred Fifty Thousand Dollars ($150,000.00) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower and the same are not, within ten (10) days after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of
any such stay (provided that no Credit Extensions will be made prior to the discharge, stay, or bonding of such judgment, order, or decree);
8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;
8.9 Subordinated Debt. Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement or the applicable subordination agreement;
8.10 Guaranty. (a) Any guaranty of any Obligations terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform any obligation or covenant under any guaranty of the Obligations; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.6, 8.7, or 8.8 of this Agreement occurs with respect to any Guarantor; (d) the death, liquidation, winding up, or termination of existence of any Guarantor; or (e) (i) a material impairment in the perfection or priority of Banks Lien in the collateral provided by Guarantor or in the value of such collateral or (ii) a material adverse change in the general affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations occurs with respect to any Guarantor; or
8.11 Governmental Approvals. Any Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any such Governmental Approval or that could reasonably be expected to result in the Governmental Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission, suspension, modification or non-renewal (i) has, or could reasonably be expected to have, a Material Adverse Change, or (ii) materially adversely affects the legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to materially adversely affect the status of or legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction.
9 BANKS RIGHTS AND REMEDIES
9.1 Rights and Remedies. When an Event of Default occurs and continues beyond any applicable grace period Bank may, without notice or demand, do any or all of the following to the extent not prohibited by applicable law:
(a) declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 of this Agreement occurs, all Obligations are immediately due and payable without any action by Bank);
(b) stop advancing money or extending credit for Borrowers benefit under this Agreement or under any other agreement between Borrower and Bank;
(c) demand that Borrower (i) deposit cash with Bank in an amount equal to one hundred five percent (105.0%) for Letters of Credit denominated in Dollars and one hundred ten percent (110.0%) for Letters of Credit denominated in a currency other than Dollars, in each case of the Dollar Equivalent of the aggregate face amount of all Letters of Credit remaining undrawn (plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment)), to secure all of the Obligations relating to such Letters of Credit, as collateral security for the repayment of any future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid or payable over the remaining term of any Letters of Credit;
(d) settle or adjust disputes and claims directly with Account Debtors for amounts, on terms and in any order that Bank considers advisable and notify any Person owing Borrower money of Banks security interest in such funds and verify the amount of such account. Borrower shall collect all payments in trust for Bank and, if requested by Bank, immediately deliver the payments to Bank in the form received from the Account Debtor, with proper endorsements for deposit;
(e) make any payments and do any acts it considers necessary or reasonable to protect its security interest in the Collateral. Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates at a location that is reasonably convenient to Bank and Borrower. Bank may peaceably enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge by Borrower, to exercise any of Banks rights or remedies;
(f) apply to the Obligations then due any (i) balances and deposits of Borrower it holds, or (ii) amount held by Bank owing to or for the credit or the account of Borrower;
(g) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrowers labels, Patents, Copyrights, mask works, rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Banks exercise of its rights under this Section 9.1, Borrowers rights under all licenses and all franchise agreements inure to Banks benefit;
(h) place a hold on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;
(i) demand and receive possession of Borrowers Books; and
(j) exercise all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).
9.2 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.4 of this Agreement or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then highest rate applicable to the Obligations, and secured by the Collateral. Bank will make reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Bank are deemed an agreement to make similar payments in the future or Banks waiver of any Event of Default.
9.3 Banks Liability for Collateral. So long as Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral.
9.4 No Waiver; Remedies Cumulative. Banks failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by the party granting the waiver and then is only effective for the specific instance and purpose for which it is given. Banks rights and remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Banks exercise of one right or remedy is not an election and shall not preclude Bank from exercising any other remedy under this Agreement or other remedy available at law or in equity, and Banks waiver of any Event of
Default is not a continuing waiver. Banks delay in exercising any remedy is not a waiver, election, or acquiescence.
9.5 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable.
10 NOTICES
All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below. Bank or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.
If to Borrower: |
Vericel Corporation | ||
|
64 Sidney Street | ||
|
Cambridge, Massachusetts 02139 | ||
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Attn: Gerard Michel and Jacquelyn Fahey Snadell | ||
|
Email: |
gmichel@vcel.com and jfaheysandell@vcel.com | |
|
| ||
with a copy to: |
Goodwin Procter LLP | ||
|
53 State Street | ||
|
Boston, Massachusetts 02109 | ||
|
Attn: |
Mark D. Smith | |
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Fax: |
(617) 523-1231 | |
|
Email: |
marksmith@goodwinprocter.com | |
|
| ||
If to Bank: |
Silicon Valley Bank | ||
|
275 Grove Street, Suite 2-200 | ||
|
Newton, Massachusetts 02466 | ||
|
Attn: |
Mr. Sam Subilia | |
|
Fax: |
(617) 527-0177 | |
|
Email: |
SSubilia@svb.com | |
|
| ||
with a copy to: |
Riemer & Braunstein LLP | ||
|
Three Center Plaza | ||
|
Boston, Massachusetts 02108 | ||
|
Attn: |
David A. Ephraim, Esquire | |
|
Fax: |
(617) 880-3456 | |
|
Email: |
DEphraim@riemerlaw.com | |
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Except as otherwise expressly provided in any of the Loan Documents, Massachusetts law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Massachusetts; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or
equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided to Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrowers actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or obligations under it without Banks prior written consent (which may be granted or withheld in Banks discretion). Bank has the right, without the consent of or notice to Borrower, to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, Banks obligations, rights, and benefits under this Agreement and the other Loan Documents.
12.2 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank (each, an Indemnified Person) harmless against: (a) all obligations, demands, claims, and liabilities (collectively, Claims) claimed or asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or expenses (including Bank Expenses) in any way suffered, incurred, or paid by such Indemnified Person as a result of, following from, consequential to, or arising from transactions between Bank and Borrower (including reasonable attorneys fees and expenses), except for Claims and/or losses directly caused by such Indemnified Persons gross negligence or willful misconduct.
12.3 Right of Set-Off. Borrower hereby grants to Bank, a lien, security interest and right of setoff as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Bank (including a Bank subsidiary) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and apply the same to any Obligations of Borrower then due regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.4 Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.
12.5 Correction of Loan Documents. Bank may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the parties.
12.6 Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.
12.7 Amendments in Writing; Waiver; Integration. No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting the generality of the foregoing, no oral promise or
statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document. Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver. The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents merge into the Loan Documents.
12.8 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.
12.9 Survival. All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been paid in full and satisfied. Without limiting the foregoing, except as otherwise provided in Section 4.1, the grant of a security interest by Borrower in Section 4.1 shall survive until the termination of this Agreement and all Bank Services Agreements. The obligation of Borrower in Section 12.2 of this Agreement to indemnify Bank shall survive until the statute of limitations with respect to such claim or cause of action shall have run.
12.10 Confidentiality. In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Banks Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with Bank, each a Bank Entity and collectively, the Bank Entities); (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, Bank shall use its best efforts to obtain any prospective transferees or purchasers agreement to the terms of this Section 12.10); (c) as required by law, regulation, subpoena, or other order; (d) to Banks regulators or as otherwise required in connection with Banks examination or audit; (e) as Bank considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein. Confidential information does not include information that is: (i) either in the public domain other than as a result of Banks breach of this Section 12.10 or is in Banks possession when disclosed to Bank; or (ii) disclosed to Bank by a third party on a nonconfidential basis if Bank does not know that the third party is prohibited from disclosing the information.
Bank Entities may use the confidential information for reporting purposes and the development and distribution of databases and market analyses so long as such confidential information is aggregated and anonymized prior to distribution unless otherwise expressly prohibited by Borrower. The provisions of the immediately preceding sentence shall survive the termination of this Agreement.
12.11 Electronic Execution of Documents. The words execution, signed, signature and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
12.12 Captions. The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.
12.13 Construction of Agreement. The parties mutually acknowledge that they and their attorneys have participated in the preparation and negotiation of this Agreement. In cases of uncertainty this Agreement shall be construed without regard to which of the parties caused the uncertainty to exist.
12.14 Relationship. The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement. The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different from those of parties to an arms-length contract.
12.15 Third Parties. Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement; or (c) give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.
13 DEFINITIONS
13.1 Definitions. As used in the Loan Documents, the word shall is mandatory, the word may is permissive, the word or is not exclusive, the words includes and including are not limiting, the singular includes the plural, and numbers denoting amounts that are set off in brackets are negative. As used in this Agreement, the following capitalized terms have the following meanings:
Account is any account as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower.
Account Balance is, on any date, the aggregate outstanding principal amount of all Advances made based upon Aggregate Eligible Accounts.
Account Debtor is as defined in the Code and shall include, without limitation, any person liable on any Financed Receivable, such as, a guarantor of the Financed Receivable and any issuer of a letter of credit or bankers acceptance.
Adjusted Quick Ratio is the ratio of (a) Quick Assets to (b) Current Liabilities minus the current portion of Deferred Revenue.
Adjustments are all discounts allowances, returns, recoveries, disputes, claims of any kind (including, without limitation, counterclaims or warranty claims), offsets, defenses, rights of recoupment, rights of return, or short payments, asserted by or on behalf of any Account Debtor for any Financed Receivable.
Advance and Advances are defined in Section 2.1.1(a) of this Agreement.
Advance Rate is eighty percent (80.0%), net of any offsets related to each specific Account Debtor, including, without limitation, Deferred Revenue, or such other percentage as Bank establishes under Section 2.1.1 of this Agreement.
Advance Request and Invoice Transmittal shows specific Eligible Accounts and/or Aggregate Eligible Accounts, which Bank may finance, and (a) with respect to requests for Advances based upon specific Eligible Accounts, includes the Account Debtors name, address, invoice amount, invoice date and invoice number, and (b) with respect to requests for Advances based upon Aggregate Eligible Accounts, includes (i) the Account Debtors name, address, invoice amount, invoice date and invoice number, (ii) the current outstanding amount of Advances made based upon Aggregate Eligible Accounts and (iii) the Availability Amount.
Affiliate of any Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Persons senior executive officers, directors, partners, and, for any Person that is a limited liability company, that Persons managers and members.
Aggregate Eligible Accounts is defined in Section 2.1.1.
Agreement is defined in the preamble of this Agreement.
Anniversary Fee is defined in Section 2.4.
Applicable Rate is (a) with respect to Financed Receivables based upon specific Eligible Accounts, a per annum rate equal to the Prime Rate plus three-quarters of one percent (0.75%), (b) with respect to Financed Receivables based upon Aggregate Eligible Accounts, a per annum rate equal to the Prime Rate plus one-quarter of
one percent (0.25%), (c) with respect to Financed Receivables based upon Approved Concentration Accounts, a per annum rate equal to the Prime Rate minus one-half of one percent (0.50%).
Approved Concentration Accounts shall mean Eligible Accounts for which the Account Debtor is US Bioservices and whose total obligations to Borrower exceeds twenty-five percent (25.0%) of all Accounts.
Approved Concentration Account Advances are Advances made pursuant to Section 2.1.1(a)(iii).
Availability Amount is the lesser of (a) (i) the Maximum Availability Amount, minus (ii) the outstanding principal balance of Approved Concentration Account Advances and (b) the Borrowing Base.
Bank is defined in the preamble of this Agreement.
Bank Entities is defined in Section 12.10.
Bank Expenses are all audit fees and expenses, costs, and expenses (including reasonable attorneys fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower or any Guarantor.
Bank Services are any products, credit services, and/or financial accommodations previously, now, or hereafter provided to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified in Banks various agreements related thereto (each, a Bank Services Agreement).
Bank Services Agreement is defined in the definition of Bank Services.
Borrower is defined in the preamble of this Agreement.
Borrowers Books are all Borrowers books and records including ledgers, federal and state tax returns, records regarding Borrowers assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.
Borrowing Base is eighty percent (80.0%) (or such other percentage as Bank establishes under Section 2.1.1) multiplied by Borrowers Aggregate Eligible Accounts (net of any offsets related to each specific Account Debtor, including, without limitation, Deferred Revenue).
Borrowing Base Certificate is that certain certificate in the form attached hereto as Exhibit D.
Borrowing Resolutions are, with respect to any Person, those resolutions adopted by such Persons board of directors (and, if required under the terms of such Persons Operating Documents, stockholders), and delivered by such Person to Bank approving the Loan Documents to which such Person is a party and the transactions contemplated thereby, together with a certificate executed by its secretary on behalf of such Person certifying that (a) such Person has the authority to execute, deliver, and perform its obligations under each of the Loan Documents to which it is a party, (b) that attached as an exhibit to such certificate is a true, correct, and complete copy of the resolutions then in full force and effect authorizing and ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it is a party, (c) the name(s) of the Person(s) authorized to execute the Loan Documents on behalf of such Person, together with a sample of the true signature(s) of such Person(s), and (d) that Bank may conclusively rely on such certificate unless and until such Person shall have delivered to Bank a further certificate canceling or amending such prior certificate.
Business Day is any day that is not a Saturday, Sunday or a day on which Bank is closed.
Cash Equivalents means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poors Ratings Group or Moodys Investors Service, Inc.; (c) Banks certificates of deposit issued maturing no more than one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition.
Change in Control means (a) at any time, any person or group (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the beneficial owner (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of forty percent (40.0%) or more of the ordinary voting power for the election of directors of Borrower (determined on a fully diluted basis) other than by the sale of Borrowers equity securities in a public offering or to venture capital or private equity investors so long as Borrower identifies to Bank the venture capital or private equity investors at least seven (7) Business Days prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction; (b) during any period of twelve (12) consecutive months, a majority of the members of the board of directors or other equivalent governing body of Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or (c) at any time, Borrower shall cease to own and control, of record and beneficially, directly or indirectly, one hundred percent (100.0%) of each class of outstanding capital stock of each subsidiary of Borrower free and clear of all Liens (except Liens created by this Agreement).
Claims is defined in Section 12.2 of this Agreement.
Code is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the Commonwealth of Massachusetts; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Banks Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the Commonwealth of Massachusetts, the term Code shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
Collateral is any and all properties, rights and assets of Borrower described on Exhibit A.
Collateral Account is any Deposit Account, Securities Account, or Commodity Account.
Collections are all funds received by Bank from or on behalf of an Account Debtor for Financed Receivables.
Commodity Account is any commodity account as defined in the Code with such additions to such term as may hereafter be made.
Compliance Certificate is attached as Exhibit B.
Contingent Obligation is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but Contingent Obligation does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably
anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.
Control Agreement is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Collateral Account.
Copyrights are any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.
Credit Extension is any Advance, Term Loan Advance, or any other extension of credit by Bank for Borrowers benefit.
Current Liabilities are (a) all obligations and liabilities of Borrower to Bank, plus (b) without duplication, the aggregate amount of Borrowers Total Liabilities that mature within one (1) year; provided, however, Current Liabilities shall not include non-cash liabilities solely in connection with warrants to purchase Borrowers equity securities that have been issued by Borrower.
Default means any event which with notice or passage of time or both, would constitute an Event of Default.
Default Rate is a per annum rate of interest which is five percent (5.0%) above the rate that is then in effect.
Deferred Revenue is all amounts received or invoiced, as appropriate, in advance of performance under contracts and not yet recognized as revenue.
Deposit Account is any deposit account as defined in the Code with such additions to such term as may hereafter be made.
Dollar Equivalent is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.
Dollars, dollars or use of the sign $ means only lawful money of the United States and not any other currency, regardless of whether that currency uses the $ sign to denote its currency or may be readily converted into lawful money of the United States.
Early Termination Fee is defined in Section 2.1.1(f) of this Agreement.
Effective Date is defined in the preamble hereof.
Eligible Accounts are billed Accounts in the ordinary course of Borrowers business that meet all Borrowers representations and warranties in Section 5.3 of this Agreement, have been, at the option of Bank, confirmed in accordance with Section 2.1.1(d) of this Agreement, and are due and owing from Account Debtors deemed creditworthy by Bank in its good faith business judgment after consultation with Borrower. Without limiting the fact that the determination of which Accounts are eligible hereunder is a matter of Bank discretion in each instance, Eligible Accounts shall not include the following Accounts (which listing may be amended or changed in Banks discretion with notice to Borrower):
(a) Accounts for which the Account Debtor is Borrowers Affiliate, Subsidiary, officer, employee, or agent, or intercompany Accounts or invoices;
(b) Accounts that the Account Debtor has not paid within ninety (90) days of invoice date regardless of invoice payment period terms;
(c) Accounts with credit balances over ninety (90) days from invoice date;
(d) Accounts owing from an Account Debtor which does not have its principal place of business in the United States or Canada, unless otherwise approved by Bank in writing on a case-by-case basis in its sole discretion;
(e) Accounts billed and/or payable outside of the United States;
(f) Accounts owing from an Account Debtor to the extent that Borrower is indebted or obligated in any manner to the Account Debtor (as creditor, lessor, supplier or otherwise - sometimes called contra accounts, accounts payable, customer deposits or credit accounts), with the exception of customary credits, adjustments and/or discounts given to an Account Debtor by Borrower in the ordinary course of its business;
(g) Accounts owing from an Account Debtor which is a United States government entity or any department, agency, or instrumentality thereof unless Borrower has assigned its payment rights to Bank and the assignment has been acknowledged under the Federal Assignment of Claims Act of 1940, as amended (it being acknowledged by Bank that Accounts owing from an Account Debtor which is a United States military hospital, shall not, as of the Effective Date, require such an assignment, which is subject to change after the Effective Date upon notice by Bank to Borrower);
(h) Accounts for demonstration or promotional equipment, or in which goods are consigned, or sold on a sale guaranteed, sale or return, sale on approval, or other terms if Account Debtors payment may be conditional;
(i) Accounts owing from an Account Debtor where goods or services have not yet been rendered to the Account Debtor (sometimes called memo billings or pre-billings);
(j) Accounts 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);
(k) Accounts owing from an Account Debtor the amount of which may be subject to withholding based on the Account Debtors satisfaction of Borrowers complete performance (but only to the extent of the amount withheld; sometimes called retainage billings or retention billings);
(l) Accounts subject to trust provisions, subrogation rights of a bonding company, or a statutory trust;
(m) Accounts 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 in its sole discretion wherein the Account Debtor acknowledges that (i) it has title to and has ownership of the goods wherever located, (ii) a bona fide sale of the goods has occurred, and (iii) it owes payment for such goods in accordance with invoices from Borrower (sometimes called bill and hold accounts);
(n) Accounts for which the Account Debtor has not been invoiced;
(o) Accounts that represent non-trade receivables or that are derived by means other than in the ordinary course of Borrowers business;
(p) Accounts with a due date that is more than ninety (90) days from invoice date;
(q) Accounts subject to chargebacks, debit memos, or other payment deductions taken by an Account Debtor;
(r) Accounts arising from product returns and/or exchanges (sometimes called warranty or RMA accounts);
(s) Accounts in which the Account Debtor disputes liability or makes any claim (but only up to the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business;
(t) Accounts owing from an Account Debtor with respect to which Borrower has received Deferred Revenue (but only to the extent of such Deferred Revenue);
(u) Accounts for which Bank has notified Borrower that Bank in its good faith business judgment determines collection to be doubtful, including, without limitation, accounts represented by refreshed or recycled invoices;
(v) Accounts owing from an Account Debtor, fifty percent (50.0%) or more of whose Accounts have not been paid within ninety (90) days of invoice date; and
(w) with respect to requested Advances based upon Aggregate Eligible Accounts, Accounts owing from an Account Debtor, including Affiliates, whose total obligations to Borrower exceed twenty-five percent (25.0%) of all Accounts, for the amounts that exceed that percentage, unless Bank otherwise approves in writing.
Equipment is all equipment as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
ERISA is the Employee Retirement Income Security Act of 1974, and its regulations.
Events of Default are set forth in Section 8 of this Agreement.
Exchange Act is the Securities Exchange Act of 1934, as amended.
Facility Amount is Twelve Million Five Hundred Thousand Dollars ($12,500,000.00).
Facility Fee is defined in Section 2.4 of this Agreement.
Finance Charges is defined in Section 2.5 of this Agreement.
Financed Receivables are all those specific Eligible Accounts and Aggregate Eligible Accounts, including their proceeds which Bank finances and makes an Advance, as set forth in Section 2.1.1 of this Agreement. A Financed Receivable stops being a Financed Receivable (but remains Collateral) when the Advance made for the Financed Receivable has been fully paid.
Financed Receivable Balance is the total outstanding gross face amount, at any time, of any Financed Receivable.
Foreign Currency means lawful money of a country other than the United States.
Funding Date is the date on which a Term Loan Advance is made to or for the account of Borrower, which shall be a Business Day.
GAAP is 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 a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.
Good Faith Deposit is defined in Section 2.4 of this Agreement.
Governmental Approval is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
Governmental Authority is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
Guarantor is any present or future guarantor of the Obligations.
Indebtedness is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and (d) Contingent Obligations.
Indemnified Person is defined in Section 12.2 of this Agreement.
Insolvency Proceeding is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
Intellectual Property means all of Borrowers right, title, and interest in and to the following:
(a) its Copyrights, Trademarks and Patents;
(b) any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating manuals;
(c) any and all source code;
(d) any and all design rights which may be available to Borrower;
(e) any and all claims for damages by way of past, present and future infringement of any of the foregoing, 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; and
(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.
Inventory is all inventory as defined in the Code in effect on the Effective Date with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrowers custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
Investment is any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person.
Key Person is each of Borrowers Chief Executive Officer, who is Nick Colangelo as of the Effective Date, and Chief Financial Officer, who is Gerard Michel as of the Effective Date.
Letter of Credit means a standby letter of credit issued by Bank or another institution based upon an application, guarantee, indemnity or similar agreement on the part of Bank.
Lien is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.
Loan Documents are, collectively, this Agreement, the Perfection Certificate, any subordination agreements, the SVB Control Agreement and any other Control Agreements, any Bank Services Agreement, the Borrowing Resolutions, any note, or notes or guaranties executed by Borrower and/or any Guarantor, and any other present or future agreement between Borrower and/or any Guarantor and/or for the benefit of Bank, all as amended, restated, or otherwise modified.
Loan Fees is defined in Section 2.4 of this Agreement.
Lockbox is defined in Section 2.9 of this Agreement.
Material Adverse Change is: (a) a material impairment in the perfection or priority of Banks Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; (c) a material impairment of the prospect of repayment of any portion of the Obligations; or (d) Bank determines, based upon information available to it and in its reasonable judgment, that there is a substantial likelihood that Borrower shall fail to comply with one or more of the financial covenant(s) in Section 6 of this Agreement during the next succeeding financial reporting period.
Maturity Date is the date which is two (2) years from the Effective Date.
Maximum Availability Amount is Ten Million Dollars ($10,000,000.00).
Obligations are Borrowers obligations to pay when due any debts, principal, interest, Bank Expenses, the Early Termination Fee, the Loan Fees, and other amounts Borrower owes Bank now or later, whether under this Agreement, the Loan Documents, or otherwise, including, without limitation, any interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and to perform Borrowers duties under the Loan Documents.
Operating Documents are, for any Person, such Persons formation documents, as certified with the Secretary of State of such Persons state of formation on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.
Patents means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
Payment/Advance Form is that certain form attached hereto as Exhibit E.
Payment Date is the first (1st) calendar day of each month.
Perfection Certificate is defined in Section 5.1 of this Agreement.
Permitted Dissolutions are the dissolution, liquidation or winding up of any of all of (a) Borrowers existing Danish Subsidiary (Vericel Denmark Aps), (b) Borrowers existing German Subsidiary (Aastrom Biosciences GmbH) and/or (c) Borrowers existing bone marrow donation Subsidiary (Marrow Donation, LLC).
Permitted Indebtedness is:
(a) Borrowers Indebtedness to Bank under this Agreement and the other Loan Documents;
(b) Indebtedness existing on the Effective Date which is shown on the Perfection Certificate;
(c) Subordinated Debt;
(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(e) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;
(f) Indebtedness secured by Liens permitted under clauses (a) and (c) of the definition of Permitted Liens hereunder; and
(g) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (f) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.
Permitted Investments are:
(a) Investments (including, without limitation, Subsidiaries) existing on the Effective Date which are shown on the Perfection Certificate (but specifically excluding any future Investments in any Subsidiaries unless otherwise permitted hereunder);
(b) Investments consisting of Cash Equivalents;
(c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;
(d) Investments consisting of deposit accounts in which Bank has a first priority perfected security interest (but only to the extent that such accounts are permitted to be maintained under Section 6.5);
(e) Investments accepted in connection with Transfers permitted by Section 7.1;
(h) Investments consisting of travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business;
(i) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; and
(j) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (j) shall not apply to Investments of Borrower in any Subsidiary.
Permitted Liens are:
(a) Liens existing on the Effective Date which are shown on the Perfection Certificate or arising under this Agreement and the other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which Borrower maintains adequate reserves on Borrowers Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;
(c) purchase money Liens (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;
(d) Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed One Hundred Thousand Dollars ($100,000.00) and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;
(e) Liens to secure payment of workers compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);
(f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (e), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;
(g) leases or subleases of real property granted in the ordinary course of Borrowers business (or, if referring to another Person, in the ordinary course of such Persons business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrowers business (or, if referring to another Person, in the ordinary course of such Persons business), if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest therein;
(h) non-exclusive licenses of Intellectual Property granted to third parties in the ordinary course of business;
(i) Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and 8.7; and
(j) Liens in favor of other financial institutions arising in connection with Borrowers deposit and/or securities accounts held at such institutions, provided that Bank has a first priority perfected security interest in the amounts held in such deposit and/or securities accounts (but only to the extent that such accounts are permitted to be maintained under Section 6.5).
Person is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.
Prime Rate is, with respect to any day, the Prime Rate as quoted in the Wall Street Journal print edition on such day (or, if such day is not a day on which the Wall Street Journal is published, the immediately preceding day on which the Wall Street Journal was published).
Quick Assets is, on any date, Borrowers unrestricted and unencumbered cash and Cash Equivalents maintained with Bank and Banks Affiliates and net billed accounts receivable, determined according to GAAP.
Reconciliation Period is each calendar month.
Registered Organization is any registered organization as defined in the Code with such additions to such term as may hereafter be made.
Requirement of Law is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
Responsible Officer is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of Borrower.
Restricted License is any material license or other agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrowers interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with Banks right to sell any Collateral.
SEC shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.
Second Tranche Availability Event means Banks confirmation in writing that Borrower has provided evidence to Bank, satisfactory to Bank in its sole discretion, on or before February 28, 2017, that Borrowers Biologics License Application has received final approval for its MACI product from the United States Food and Drug Administration.
Securities Account is any securities account as defined in the Code with such additions to such term as may hereafter be made.
Streamline Facility Eligible means, as of any day during any Subject Month, Borrower has provided evidence to Bank that Borrower (a) had an Adjusted Quick Ratio of at least 1.25 to 1.0 at all times during the applicable Testing Month, and (b) has an Adjusted Quick Ratio of at least 1.25 to 1.0 on such day.
Subject Month is the month which is two (2) calendar months after any Testing Month.
Subordinated Debt is indebtedness incurred by Borrower subordinated to all of Borrowers now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.
Subsidiary is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower or Guarantor.
SVB Control Agreement is that certain Securities Account Control Agreement by and among SVB Securities, Apex Clearing Corporation, Borrower and Bank.
Term Advance A Draw Period is the period of time commencing upon the Effective Date through the earlier to occur of (a) February 28, 2017, or (b) an Event of Default.
Term Advance B Draw Period is the period of time commencing upon the occurrence of the Second Tranche Availability Event through the earlier to occur of (a) February 28, 2017, or (b) an Event of Default.
Term Loan A Advance is defined in Section 2.1.2(a).
Term Loan Advance and Term Loan Advances are each defined in Section 2.1.2(a).
Term Loan Advance Maturity Date is February 1, 2020.
Term Loan B Advance is defined in Section 2.1.2(a).
Term Loan Facility Fee is defined in Section 2.4.
Term Loan Final Payment is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) in an amount, equal to the original aggregate principal amount of the Term Loan Advances multiplied by four and one quarter of one percent (4.25%).
Term Loan Prepayment Premium is an additional fee payable to Bank in an amount equal to:
(a) for a prepayment of a Term Loan Advance made on or prior to the one (1) year anniversary of the Funding Date for such Term Loan Advance, two and one-half of one percent (2.50%) of the original principal amount of such Term Loan Advance;
(b) for a prepayment of a Term Loan Advance made after the one (1) year anniversary but on or prior to the two (2) year anniversary of the Funding Date for such Term Loan Advance, one and one-half of one percent (1.50%) of the original principal amount of such Term Loan Advance; and
(c) for a prepayment of a Term Loan Advance made after the two (2) year anniversary of the Funding Date for such Term Loan Advance, one-half of one percent (0.50%) of the original principal amount of such Term Loan Advance.
Testing Month is any month with respect to which Bank has tested Borrowers Adjusted Quick Ratio to determine whether Borrower is Streamline Facility Eligible.
Total Liabilities is on any day, obligations that should, under GAAP, be classified as liabilities on Borrowers consolidated balance sheet, including all Indebtedness.
Trademarks means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.
Transfer is defined in Section 7.1 of this Agreement.
Unused Line Fee is defined in Section 2.6 of this Agreement.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as a sealed instrument under the laws of the Commonwealth of Massachusetts as of the Effective Date.
BORROWER |
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VERICEL CORPORATION |
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By: |
/s/ Dominick Colangelo |
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Name: Dominick Colangelo |
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Title: Chief Executive Officer |
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BANK |
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SILICON VALLEY BANK |
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By: |
/s/ Sam Subilia |
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Name: Sam Subilia |
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Title: Vice President |
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EXHIBIT A
The Collateral consists of all of Borrowers right, title and interest in and to the following:
All goods, equipment, inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, general intangibles (including payment intangibles), accounts (including health-care receivables), documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), commercial tort claims, securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and any copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, now owned or later acquired; any patents, trademarks, service marks and applications therefor; trade styles, trade names, any trade secret rights, including any rights to unpatented inventions, know-how, operating manuals, license rights and agreements and confidential information, now owned or hereafter acquired; or any claims for damages by way of any past, present and future infringement of any of the foregoing; and
All Borrowers books relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral shall not be deemed to include any copyrights (including computer programs, blueprints and drawings), copyright applications, copyright registration and like protection in each work of authorship and derivative work thereof, whether published or unpublished, now owned or hereafter acquired; any design rights; any patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same, trademarks, servicemarks and applications therefor, whether registered or not, except that the Collateral shall include all accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the foregoing.
EXHIBIT B
SPECIALTY FINANCE DIVISION
Compliance Certificate
I, an authorized officer of VERICEL CORPORATION (Borrower) certify under the Loan and Security Agreement (as amended, the Agreement) between Borrower and Silicon Valley Bank (Bank) as follows for the period ending (all capitalized terms used herein shall have the meaning set forth in the Agreement):
Borrower represents and warrants for each Financed Receivable:
Each Financed Receivable is an Eligible Account;
Borrower is the owner with legal right to sell, transfer, assign and encumber such Financed Receivable;
The correct amount is on the Advance Request and Invoice Transmittal and is not disputed;
Payment is not contingent on any obligation or contract and Borrower has fulfilled all its obligations as of the Advance Request and Invoice Transmittal date;
Each Financed Receivable is based on an actual sale and delivery of goods and/or services rendered, is due to Borrower, is not past due or in default, has not been previously sold, assigned, transferred, or pledged and is free of any liens, security interests and encumbrances other than Permitted Liens;
There are no defenses, offsets, counterclaims or agreements for which the Account Debtor may claim any deduction or discount;
Borrower reasonably believes no Account Debtor is insolvent or subject to any Insolvency Proceedings;
Borrower has not filed or had filed against it Insolvency Proceedings and does not anticipate any filing;
Bank has the right to endorse and/or require Borrower to endorse all payments received on Financed Receivables and all proceeds of Collateral; and
No representation, warranty or other statement of Borrower in any certificate or written statement given to Bank in respect of a Financed Receivable 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 in light of the circumstances in which they were made.
Additionally, Borrower represents and warrants as follows:
Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrowers 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 in which the default could reasonably be expected to cause a Material Adverse Change.
Borrower has good title to the Collateral, free of Liens except Permitted Liens. All inventory is in all material respects of good and marketable quality, free from material defects.
Borrower is not an investment company or a company controlled by an investment company under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change. None of Borrowers or any Subsidiarys properties or assets have been used by Borrower or any Subsidiary or, to the best of Borrowers knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted except where the failure to obtain or make such consents, declarations, notices or filings would not reasonably be expected to cause a Material Adverse Change.
Borrower is in compliance with the financial covenant(s) set forth in Section 6.7 of this Agreement. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes.
The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered.
Financial Covenant
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Required |
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Actual |
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Compliance |
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Adjusted Quick Ratio |
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>1.10:1.0 |
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:1.0 |
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Yes No |
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Streamline Facility Eligible
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Required |
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Actual |
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Eligible for Streamline |
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Adjusted Quick Ratio |
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>1.25:1.0 |
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:1.0 |
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Yes No |
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All other representations and warranties in the Agreement are true and correct in all material respects on this date, and Borrower represents that there is no existing Event of Default.
Sincerely,
VERICEL CORPORATION
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Signature |
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Title |
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Date |
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EXHIBIT C
[To be provided by Bank]
EXHIBIT D
BORROWING BASE CERTIFICATE
Borrower: VERICEL CORPORATION |
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Lender: Silicon Valley Bank |
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Commitment Amount: $10,000,000.00 |
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ACCOUNTS RECEIVABLE | |||
1. |
Accounts Receivable (invoiced) Book Value as of |
$ | |
2. |
Additions (please explain on next page) |
$ | |
3. |
Less: Intercompany / Employee / Non-Trade Accounts |
$ | |
4. |
NET TRADE ACCOUNTS RECEIVABLE |
$ | |
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ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication) | |||
5. |
Affiliate/Subsidiary/Intercompany/Employee Accounts/invoices |
$ | |
6. |
90 Days Past Invoice Date |
$ | |
7. |
Credit Balances over 90 Days |
$ | |
8. |
Foreign Account Debtors (non-United States/Canada) |
$ | |
9. |
Accounts billed and/or payable outside the United States |
$ | |
10. |
Contra/Customer Deposit Accounts |
$ | |
11 |
U.S. Government Accounts w/out assignment of claims (except U.S. military hospitals as of the Effective Date and until notice otherwise is given by Bank) |
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$ |
12. |
Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts |
$ | |
13. |
Accounts with Memo or Pre-Billings |
$ | |
14. |
Contract Accounts; Accounts with Progress/Milestone Billings |
$ | |
15. |
Accounts for Retainage or Retention Billings |
$ | |
16. |
Trust / Bonded Accounts |
$ | |
17. |
Bill and Hold Accounts |
$ | |
18. |
Unbilled Accounts |
$ | |
19. |
Non-Trade Accounts (if not already deducted above) |
$ | |
20. |
Payment Terms over 90 Days |
$ | |
21. |
Chargebacks Accounts / Debit Memos |
$ | |
22. |
Product Returns/Exchanges |
$ | |
23. |
Disputed Accounts; Insolvent Account Debtor Accounts |
$ | |
24. |
Doubtful / Refreshed / Recycled Accounts |
$ | |
25. |
Deferred Revenue |
$ | |
26. |
Balance of 50% over 90 Day Accounts (cross-age or current affected) |
$ | |
27. |
Concentration Limits (25%) |
$ | |
28. |
Other (please explain on next page) |
$ | |
29. |
TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS |
$ | |
30. |
Eligible Accounts (#4 minus #29) |
$ | |
31. |
ELIGIBLE AMOUNT OF ACCOUNTS (80.0% of #30) |
$ | |
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BALANCES |
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32. |
Maximum Loan Amount |
$ 10,000,000.00 | |
33. |
Total Funds Available (lesser of #31 or #32) |
$ | |
34. |
Present balance of Advances (including Approved Concentration Account Advances) |
$ | |
35. |
RESERVE POSITION (#33 minus #34) |
$ | |
[Continued on following page.]
Explanatory comments from previous page:
The undersigned represents and warrants that this is true, complete and correct, and that the information in this Borrowing Base Certificate complies with the representations and warranties in the Loan and Security Agreement between the undersigned and Silicon Valley Bank.
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BANK USE ONLY | |||||
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COMMENTS: |
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Received by: |
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AUTHORIZED SIGNER | ||||
VERICEL CORPORATION |
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Date: |
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Verified: |
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By: |
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AUTHORIZED SIGNER | |||
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Authorized Signer |
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Date: |
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Date: |
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Compliance Status: |
Yes No | |||
EXHIBIT E
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS NOON EASTERN TIME
Fax To: |
Date: |
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LOAN PAYMENT: |
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VERICEL CORPORATION | |||||
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From Account # |
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To Account # |
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(Deposit Account #) |
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(Loan Account #) | |
Principal $ |
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and/or Interest $ |
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Authorized Signature: |
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Phone Number: |
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Print Name/Title: |
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LOAN ADVANCE: |
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Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire. | |||||||
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From Account # |
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To Account # |
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(Loan Account #) |
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(Deposit Account #) | |||
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Amount of Term Loan Advance $ |
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All Borrowers representations and warranties in the Loan and Security Agreement are true, correct and complete on the date of the request for an advance: | |||||||
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Authorized Signature: |
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Phone Number: |
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Print Name/Title: |
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OUTGOING WIRE REQUEST: |
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Complete only if all or a portion of funds from the loan advance above is to be wired. | |||||||
Deadline for same day processing is noon, Eastern Time | |||||||
Beneficiary Name: |
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Amount of Wire: $ |
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Beneficiary Bank: |
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Account Number: |
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City and State: |
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Beneficiary Bank Transit (ABA) #: |
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Beneficiary Bank Code (Swift, Sort, Chip, etc.): |
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(For International Wire Only) |
Intermediary Bank: |
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Transit (ABA) #: |
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For Further Credit to: |
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Special Instruction: |
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By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which agreements(s) were previously received and executed by me (us). | |||||
Authorized Signature: |
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2nd Signature (if required): |
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Print Name/Title: |
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Print Name/Title: |
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Telephone #: |
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Telephone #: |
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Exhibit 99.1
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Vericel Corporation 64 Sidney Street Cambridge, MA 02139 T 617 252-7999 F 617 252-7550 |
Vericel Enters into $10 Million Credit Facility and $5 Million Term Loan
Agreement with Silicon Valley Bank
CAMBRIDGE, Mass., March 9, 2016 (GLOBE NEWSWIRE) Vericel Corporation (NASDAQ: VCEL), a leading developer of patient-specific expanded cellular therapies for the treatment of severe diseases and conditions, announced today that it has entered into a term loan and revolving line of credit agreement with Silicon Valley Bank, providing access to up to $15 million of new capital to the company to be used for general corporate purposes. Additional details concerning the credit facility and term loan will be contained in the companys Current Report on Form 8-K to be filed shortly with the Securities and Exchange Commission.
We are pleased to forge this new partnership with Silicon Valley Bank, said Vericels chief financial officer and vice president of corporate development Gerard Michel. These loan facilities provide the flexibility, at a low cost of capital, to invest in our key future growth drivers, Epicel and MACI, without diluting our current shareholders.
Katherine Andersen, Managing Director of Silicon Valley Bank commented, We are pleased to partner with Vericel as the company works to expand its portfolio of cell therapy products. Our aim is to provide Vericel with the right financing tools to advance its product portfolio and position the company to meet its corporate objectives.
About Vericel Corporation
Vericel Corporation is a leader in developing patient-specific expanded cellular therapies for use in the treatment of patients with severe diseases and conditions. The company markets two autologous cell therapy products in the U.S.: Carticel® (autologous cultured chondrocytes), an autologous chondrocyte implant for the treatment of cartilage defects in the knee, and Epicel® (cultured epidermal autografts), a permanent skin replacement for the treatment of patients with deep-dermal or full-thickness burns comprising greater than or equal to 30% of total body surface area. Vericel is also developing MACITM, a third-generation autologous chondrocyte implant for the treatment of cartilage defects in the knee, and ixmyelocel-T, a patient-specific multicellular therapy for the treatment of advanced heart failure due to ischemic dilated cardiomyopathy. For more information, please visit the companys website at www.vcel.com.
Epicel® and Carticel® are registered trademarks and MACITM is a trademark of Vericel Corporation. © 2016 Vericel Corporation. All rights reserved.
About Silicon Valley Bank
For more than 30 years, Silicon Valley Bank (SVB) has helped innovative companies and their investors move bold ideas forward, fast. SVB provides targeted financial services and expertise through its offices in innovation centers around the world. With commercial, international and private banking services, SVB helps address the unique needs of innovators.
©2016 SVB Financial Group. All rights reserved. Silicon Valley Bank is the California bank subsidiary of SVB Financial Group. Silicon Valley Bank is a member of FDIC and Federal Reserve System.
This document contains forward-looking statements, including, without limitation, statements concerning anticipated profitability and objectives and expectations regarding our company described herein, all of which involve certain risks and uncertainties. These statements are often, but are not always, made through the use of words or phrases such as anticipates, intends, estimates, plans, expects, we believe, we intend, and similar words or phrases, or future or conditional verbs such as will, would, should, potential, can continue, could, may, or similar expressions. Actual results may differ significantly from the expectations contained in the forward-looking statements. Among the factors that may result in differences are the inherent uncertainties associated with competitive developments, clinical trial and product development activities, regulatory approval requirements, the availability and allocation of resources among different potential uses, estimating the commercial potential of our products and product candidates and growth in revenues and improvement in costs, market demand for our products, our ability to supply or meet customer demand for our products and our ability to draw down on the second tranche of the SVB term loan or the full amount of the SVB revolving line of credit. These and other significant factors are discussed in greater detail in Vericels Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission (SEC) on March 25, 2015, Quarterly Reports on Form 10-Q and other filings with the SEC. These forward-looking statements reflect managements current views and Vericel does not undertake to update any of these forward-looking statements to reflect a change in its views or events or circumstances that occur after the date of this release except as required by law.