LOAN AND SECURITY AGREEMENT
Exhibit 10.1
THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of March 29, 2010 (the “Effective
Date”) between SILICON VALLEY BANK, a California corporation (“Bank”), and CARDIOVASCULAR SYSTEMS,
INC., a Delaware corporation (“Borrower”), provides the terms on which Bank shall lend to Borrower
and Borrower shall repay Bank. This Agreement amends and restates in its entirety the Loan and
Security Agreement, dated September 12, 2008, between Borrower and Bank, as the same has from time
to time been previously amended (the “Prior LSA”). Except for the provisions of the Prior LSA being
amended and restated in this Agreement, all other existing documents, instruments and agreements by
Borrower with or in favor of Bank shall continue in full force and effect, including all UCC-1
financing statements and other documents filed with governmental offices which perfect liens or
security interests in favor of Bank. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed following GAAP. Calculations and
determinations must be made following GAAP. Capitalized terms not otherwise defined in this
Agreement shall have the meanings set forth in Section 13. All other terms contained in this
Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent
such terms are defined therein.
2 LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the outstanding principal
amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in
accordance with this Agreement.
2.1.1 Revolving Advances.
(a) Availability. Subject to the terms and conditions of this Agreement and to deduction of
Reserves, Bank shall make Advances not exceeding the Availability Amount. Amounts borrowed
hereunder may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the
applicable terms and conditions precedent herein. The outstanding “Advances” under the Revolving
Line pursuant to the Prior LSA shall be the beginning balance of the Advances under this Agreement,
which Borrower agrees are owed without any defense, offset or counter-claim of any kind.
(b) Streamline Period. During certain periods of time (each, a “Streamline Period”),
provided that the Streamline Requirements are all met, Borrower’s reporting requirements shall be
reduced, and certain proceeds shall be deposited in Borrower’s operating accounts instead of being
applied to the Advances, as set forth in other provisions of this Agreement. Such a Streamline
Period shall be deemed to be in effect as of the Effective Date. If at any time during any
Streamline Period the Streamline Requirements are not met, upon written notice from Bank to
Borrower the Streamline Period shall immediately cease to be effective, and any terms or conditions
of this Agreement that are dependent upon the existence of a Streamline Period will immediately
revert to the respective terms and conditions that are to be in force when a Streamline Period is
not in effect, without the need for any further action on the part of Bank or Borrower. Further, if
following the cessation of a Streamline Period the Streamline Requirements are thereafter satisfied
for a period of at least 60 days (for which period Borrower must have confirmed via its monthly
Compliance Certificates that the Streamline Requirements were satisfied as of two consecutive month
ends during such period), Borrower may elect to again put a Streamline Period into effect pursuant
to the terms hereof by giving Bank at least 30 days prior written notice, specifying the date the
Streamline Period is to begin. Thus, it is the intention of the parties that Borrower have the
opportunity for successive Streamline Periods to apply when and to the extent the conditions
thereto are satisfied.
(c)
Termination; Repayment. The Revolving Line terminates on the Revolving Line Maturity
Date, when the principal amount of all Advances, the unpaid interest thereon, and all other
Obligations relating to the Revolving Line shall be immediately due and payable. Borrower may
terminate the Revolving Line
prior to the Revolving Line Maturity Date, effective five (5) Business Days after written notice of
termination is given to Bank, on which date Borrower shall repay the principal amount of all
Advances, the unpaid interest thereon, and all other Obligations relating to the Revolving Line. If
the Borrower terminates the Revolving Line prior to the Revolving Line Maturity Date, or if Bank
terminates the Revolving Line prior to the Revolving Line Maturity Date due to the occurrence and
continuance of an Event of Default, or if the Obligations under the Revolving Line otherwise become
due and payable as the result of an Event of Default (including, without limitation, becoming due
and payable as the result of an Insolvency Proceeding), Borrower shall immediately pay to Bank, in
addition to the payment of any other expenses or fees then-owing, a termination fee in an amount
equal to (i) 2% of the Maximum Dollar Amount if such termination or becoming due and payable occurs
on or before the first year anniversary of the Effective Date or (ii) 1% of the Maximum Dollar
Amount if such termination or becoming due and payable occurs after the first year anniversary of
the Effective Date but before the second year anniversary of Effective Date. Without limitation on
the fact that such fee shall be due as set forth in the preceding sentence, such fee shall bear
interest until paid at a rate equal to the highest rate applicable to the Revolving Line.
Notwithstanding any termination of the Revolving Line, Bank’s liens and security interests in the
Collateral and all of Bank’s rights and remedies under this Agreement shall continue until Borrower
fully satisfies all Obligations.
2.1.2 Letters of Credit Sublimit.
(a) Availability. As part of the Revolving Line, Bank shall issue or have issued Letters of
Credit denominated in Dollars or a Foreign Currency for Borrower’s account. The aggregate Dollar
Equivalent amount utilized for the issuance of Letters of Credit shall at all times reduce the
amount otherwise available for Advances under the Revolving Line. The aggregate Dollar Equivalent
of the face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) may not exceed the lesser of (A) One Million Dollars
($1,000,000), minus (i) the sum of all amounts used for Cash Management Services, and minus (ii)
the FX Reduction Amount, or (B) the lesser of the Maximum Dollar Amount or the Borrowing Base,
minus (i) the sum of all outstanding principal amounts of any Advances (including any amounts used
for Cash Management Services), and minus (ii) the FX Reduction Amount.
(b) Cash Collateral: Documentation; Liability. If, on the Revolving Line Maturity Date (or
the effective date of any termination of this Agreement), there are any outstanding Letters of
Credit, then on such date Borrower shall provide to Bank cash collateral in an amount equal to 105%
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. All
Letters of Credit shall be in form and substance acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank’s standard Application and Letter of Credit
Agreement (the “Letter of Credit Application”). Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably request. Borrower
further agrees to be bound by the regulations and interpretations of the issuer of any Letters of
Credit guarantied by Bank and opened for Borrower’s account or by Bank’s interpretations of any
Letter of Credit issued by Bank for Borrower’s account, and Borrower understands and agrees that
Bank shall not be liable for any error, negligence, or mistake, whether of omission or commission,
in following Borrower’s instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto.
(c) Reimbursement for Draws. The obligation of Borrower to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute, unconditional, and irrevocable, and shall
be performed strictly in accordance with the terms of this Agreement, such Letters of Credit, and
the Letter of Credit Application.
(d) Foreign Currency Letters of Credit. Borrower may request that Bank issue a Letter of
Credit payable in a Foreign Currency. If a demand for payment is made under any such Letter of
Credit, Bank shall treat such demand as an Advance to Borrower of the Dollar Equivalent of the
amount thereof (plus fees and charges in connection therewith such as wire, cable, SWIFT or similar
charges).
(e) Letter of Credit Reserve. To guard against fluctuations in currency exchange rates,
upon the issuance of any Letter of Credit payable in a Foreign Currency, Bank shall create a
reserve (the “Letter of Credit Reserve”) under the Revolving Line in an amount equal to ten percent
(10%) of the face amount of such Letter of Credit. The amount of the Letter of Credit Reserve may
be adjusted by Bank from time to time to account for
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fluctuations in the exchange rate. The availability of funds under the Revolving Line shall be
reduced by the amount of such Letter of Credit Reserve for as long as such Letter of Credit remains
outstanding.
2.1.3 Foreign Exchange Sublimit. As part of the Revolving Line, Borrower may enter into foreign
exchange contracts with Bank under which Borrower commits to purchase from or sell to Bank a
specific amount of Foreign Currency (each, a “FX Forward Contract”) on a specified date (the
“Settlement Date”). FX Forward Contracts shall have a Settlement Date of at least one (1) FX
Business Day after the contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract (the “FX Reserve”). The aggregate amount of FX Forward Contracts at
any one time may not exceed ten (10) times the lesser of (A) One Million Dollars ($1,000,000),
minus (i) the sum of all amounts used for Cash Management Services, and minus (ii) the aggregate
Dollar Equivalent of the face amount of any outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve), or (B) the lesser of Maximum
Dollar Amount or the Borrowing Base, minus (i) the sum of all outstanding principal amounts of any
Advances (including any amounts used for Cash Management Services), and minus (ii) the Dollar
Equivalent of the face amount of any outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve). The amount otherwise available
for Credit Extensions under the Revolving Line shall be reduced by an amount equal to ten percent
(10%) of each outstanding FX Forward Contract (the “FX Reduction Amount”). Any amounts needed to
fully reimburse Bank for any amounts not paid by Borrower in connection with FX Forward Contracts
will be treated as Advances under the Revolving Line and will accrue interest at the interest rate
applicable to Advances.
2.1.4 Cash Management Services Sublimit. Borrower may use the Revolving Line for Bank’s cash
management services, which may include merchant services, direct deposit of payroll for which Bank
has credit exposure, business credit card, and check cashing services identified in Bank’s various
cash management services agreements (collectively, the “Cash Management Services”), in an aggregate
amount not to exceed the lesser of (A) One Million Dollars ($1,000,000), minus (i) the aggregate
Dollar Equivalent of the face amount of any outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve), and minus (ii) the FX Reduction
Amount, or (B) the lesser of Maximum Dollar Amount or the Borrowing Base, minus (i) the sum of all
outstanding principal amounts of any Advances, minus the Dollar Equivalent of the face amount of
any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any
Letter of Credit Reserve), and minus (ii) the FX Reduction Amount. Any amounts Bank pays on behalf
of Borrower for any Cash Management Services will be treated as Advances under the Revolving Line
and will accrue interest at the interest rate applicable to Advances.
2.1.5 Term Loan.
(a) Availability Combination of Term Loans. Term Loan A and Term Loan C are outstanding
pursuant to the Prior LSA in the outstanding principal balances of $1,795,670.12 and $3,792,949.96,
respectively, as of March 29, 2010. Within five (5) days from the Effective Date, Bank shall make a
term loan to Borrower in an amount (the “New Term Loan Advance”) equal to the Term Loan Commitment
Amount minus the sum of the outstanding principal balances of Term Loan A and Term Loan C as of the
date of the New Term Loan Advance, subject to the satisfaction of the terms and conditions of this
Agreement. Effective upon Bank making the New Term Loan Advance, its balance shall be combined with
the outstanding balances of Term Loan A and Term Loan C to constitute the “Term Loan” referred to
in this Agreement and thereafter such combined loans shall be subject to the terms of this
Agreement and not the terms of the Prior LSA. No portion of the Term Loan may be reborrowed after
repayment.
(b) Repayment. Borrower shall continue to pay interest on Term Loan A and Term Loan C in
accordance with the Prior LSA until the New Term Loan Advance is made. The Borrower shall pay Bank
accrued interest on the Term Loan beginning on the first day of the calendar month following the
month during which the New Term Loan Advance is made and continuing on the same day of each
succeeding month. Borrower shall repay the Term Loan in 30 equal monthly payments of principal and
accrued interest, each in the amount necessary to fully amortize the Term Loan over such period
(such amount to be calculated by Bank), commencing on November 1, 2010 and continuing on the first
day of each calendar month thereafter until the Term Loan Maturity Date on which date the entire
unpaid principal balance of the Term Loan, plus the Final Payment, plus any
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and all accrued and unpaid interest, and plus all other sums, if any, that shall have become due
and payable hereunder with respect to the Term Loan, shall be paid.
(c) Mandatory Prepayment. Reference is made to the definition of “Borrowing Base”
(contained in Section 13.1) which subtracts the amount of the Full Term Loan Reserve, to the extent
it is in effect, in calculating the Borrowing Base. If at any time, and from time to time, such a
subtraction of the amount of the Full Term Loan Reserve shall cause the Borrowing Base to be less
than zero, then Borrower shall immediately make a prepayment of the principal of Term Loan in the
amount by which zero exceeds the Borrowing Base.
(d) Permitted Prepayment. At Borrower’s option, so long as an Event of Default has not
occurred and is not continuing, Borrower shall have the option to prepay all, but not less than
all, of the Term Loan, provided Borrower (i) provides written notice to Bank of its election to
prepay the Term Loan at least thirty (30) days prior to such prepayment, and (ii) pays, on the date
of the prepayment (A) all accrued and unpaid interest with respect to the Term Loan through the
date the prepayment is made; (B) all unpaid principal with respect to the Term Loan; (C) a fee
equal to the Make-Whole Premium; (D) the Final Payment; and (E) all other sums, if any, that shall
have become due and payable hereunder with respect to the Term Loan. Without limitation on the fact
that such amounts shall be due on the date of the prepayment, they shall bear interest from the
date due until paid at a rate equal to the highest rate applicable to the Term Loan.
(e)
Fee and Final Payment Due Upon Acceleration. If all or any portion of the Term Loan has
become due and payable according to the terms hereof because of the occurrence and continuance of
an Event of Default, Borrower shall pay to Bank on the date that it has become due and payable
according to the terms hereof, in addition to any other sums owing, a fee equal to the Make-Whole
Premium, plus the Final Payment. Without limitation on the fact that such amounts shall be due as
set forth in the preceding sentence, they shall bear interest from the date due until paid at a
rate equal to the highest rate applicable to the Term Loan.
2.2 Overadvances. If, at any time, the sum of (a) the outstanding principal amount of any Advances
(including any amounts used for Cash Management Services), plus (b) the face amount of any
outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve), plus (c) the FX Reduction Amount, exceeds the lesser of either the Maximum Dollar
Amount or the Borrowing Base (such excess being an “Overadvance”), Borrower shall immediately pay
to Bank in cash such Overadvance. Without limiting Borrower’s obligation to repay Bank any amount
of the Overadvance, Borrower agrees to pay Bank interest on the outstanding amount of any
Overadvance, on demand, at the Default Rate.
2.3 Payment of Interest on the Credit Extensions.
(a) Interest Rate.
(i) Advances. Subject to Section 2.3(b), the principal amount outstanding under the
Revolving Line shall accrue interest at a floating per annum rate equal to 2.0 percentage points
above the Prime Rate, provided that the interest rate in effect on any day shall not be less than
6.0% per annum, which interest shall be payable monthly.
(ii) Term Loan. Subject to Section 2.3(b), the principal amount outstanding under the Term
Loan shall accrue interest at a per annum rate equal to 9.0%, which interest shall be payable
monthly.
(b) Default Rate. Immediately upon the occurrence and during the continuance of an Event of
Default, Obligations shall bear interest at a rate per annum which is five percentage points
(5.00%) above the rate that is otherwise applicable thereto (the
“Default Rate”) unless Bank
otherwise elects from time to time in its sole discretion to impose a smaller increase. Fees and
expenses which are required to be paid by Borrower pursuant to the Loan Documents (including,
without limitation, Bank Expenses) 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 2.3(b) is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit
any rights or remedies of Bank.
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(c) Adjustment to Interest Rate. Changes to the interest rate of any Credit Extension based
on changes to the Prime Rate shall be effective on the effective date of any change to the Prime
Rate and to the extent of any such change.
(d) 360-Day Year. Interest shall be computed on the basis of a 360-day year for the actual
number of days elapsed.
(e) Debit of Accounts. Bank may debit any of Borrower’s deposit accounts, including the
Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes
Bank when due. These debits shall not constitute a set-off.
(f)
Payment; Interest Computation; Float Charge. Unless otherwise provided, interest is
payable monthly on the last calendar day of each month (including with respect to interest on
amount outstanding under the Revolving Line). In computing interest, (i) all Payments received
after 12:00 p.m. Pacific time on any day shall be deemed received at the opening of business on the
next Business Day, and (ii) the date of the making of any Credit Extension shall be included and
the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on
the same day on which it is made, such day shall be included in computing interest on such Credit
Extension. In addition, Bank shall be entitled to charge Borrower a “float” charge in an amount
equal to two (2) Business Days interest, at the interest rate applicable to the Advances whether or
not any Advances are outstanding, on all Payments received by Bank, unless at the time of receipt a
Streamline Period is in effect and no Event of Default has occurred and is continuing. The float
charge for each month shall be payable on the last day of the month. Bank shall not, however, be
required to credit Borrower’s account for the amount of any item of payment which is unsatisfactory
to Bank in its good faith business judgment, and Bank may charge Borrower’s Designated Deposit
Account for the amount of any item of payment which is returned to Bank unpaid.
2.4 Fees. Borrower shall pay to Bank:
(a)
Commitment Fee. A fully earned, non-refundable commitment fee of (i) $125,000 on the
Effective Date, and (ii) $110,000 on the first anniversary of the Effective Date; and
(b) Letter of Credit Fees. Bank’s customary fees and expenses for the issuance or renewal of
Letters of Credit, including, without limitation, a letter of credit fee of two percent (2.00%) per
annum of the Dollar Equivalent of the face amount of each Letter of Credit issued, upon the
issuance of such Letter of Credit, each anniversary of the issuance during the term of such Letter
of Credit, and upon the renewal of such Letter of Credit by Bank; and
(c) Collateral Monitoring Fee. A collateral monitoring fee of $1,000 for each month during
which either (i) the Streamline Period is not in effect for the entire month or (ii) an Event of
Default has occurred, payable in arrears on the last day of each month (prorated for any partial
month at the beginning and upon termination of this Agreement); and
(d) Unused Revolving Line Facility Fee. A fee (the “Unused Revolving Line Facility Fee”),
payable monthly, in arrears, on a calendar year basis, in an amount equal to 0.375% per annum of
the average unused portion of the Revolving Line, as determined by Bank. The unused portion of the
Revolving Line, for the purposes of this calculation, shall not include amounts utilized or
reserved with respect to products provided in connection with Cash Management Services, Letters of
Credit or pursuant to the Partial Term Loan Reserve or Full Term Loan Reserve, or the FX Reduction
Amounts. Borrower shall not be entitled to any credit, rebate or repayment of any Unused Revolving
Line Facility Fee previously earned by Bank pursuant to this Section notwithstanding any
termination of this Agreement or the suspension or termination of Bank’s obligation to make loans
and advances hereunder; and
(e) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and expenses,
and expenses for documentation and negotiation of this Agreement) incurred through and after the
Effective Date, when due (or, if there is no stated due date, upon demand by Bank).
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2.5 Payments; Application of Payments.
(a) All payments (including prepayments) to be made by Borrower under any Loan Document shall be
made in immediately available funds in U.S. Dollars, without setoff or counterclaim, before 12:00
p.m. Pacific time on the date when due. Payments of principal and/or interest received after 12:00
p.m. Pacific time are considered received at the opening of business on the next Business Day. When
a payment is due on a day that is not a Business Day, the payment shall be due the next Business
Day, and additional fees or interest, as applicable, shall continue to accrue until paid.
(b) All payments with respect to the Obligations may be applied in such order and manner as Bank
shall determine in its sole discretion. Borrower shall have no right to specify the order or the
accounts to which Bank shall allocate or apply any payments required to be made by Borrower to Bank
or otherwise received by Bank under this Agreement when any such allocation or application is not
specified elsewhere in this Agreement.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to New Term Loan Advance. Bank’s obligation to make the New Term Loan
Advance is subject to the condition precedent that Borrower shall have delivered, in form and
substance satisfactory to Bank, such documents, and completed such other matters, as Bank may
reasonably deem necessary or appropriate, including, without limitation:
(a) duly executed original signatures to the Loan Documents to which it is a party;
(b) duly executed original signatures to the Warrant;
(c) its Operating Documents and a good standing certificate of Borrower certified by the Secretary
of State of the State of Delaware as of a date no earlier than thirty (30) days prior to the
Effective Date;
(d) duly executed original signatures to the completed Borrowing Resolutions for Borrower;
(e) if any loan agreement has been entered into between Borrower and PFG, duly executed original
signatures to a subordination agreement by PFG, in favor of Bank and acceptable to Bank in its sole
discretion, and consented to by Borrower, whereby PFG subordinates the repayment of, and any liens
securing, any indebtedness of Borrower to PFG, and agrees not to exercise any of its rights or
remedies in connection therewith for a period of time acceptable to Bank;
(f) 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;
(g) a new, updated, Perfection Certificate executed by Borrower;
(h) a copy of its Registration Rights Agreement and any amendments thereto;
(i) a landlord’s consent in favor of Bank for each of Borrower’s locations by the respective
landlords thereof, together with the duly executed original signatures thereto (provided that
Borrower may have up to 30 days after the Effective Date to provide the same to Bank); and
(j) payment of the fees and Bank Expenses then due as specified in Section 2.4 hereof.
3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make each Credit
Extension, including the initial Credit Extension, is subject to the following conditions
precedent:
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(a) (i) to obtain an Advance, except as otherwise provided in Section 3.4, timely receipt of an
executed Transaction Report, and (ii) to obtain the New Term Loan Advance, timely receipt of an
executed Payment/Advance Form;
(b) the representations and warranties in this Agreement shall be true in all material respects on
the date of the Transaction Report or Payment/Advance Form (as applicable) and on the Funding Date
of each Credit Extension; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or modified by
materiality in the text thereof and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in all material
respects as of such date, and no Event of Default shall have occurred and be continuing or result
from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that
date that the representations and warranties in this Agreement remain true in all material
respects; provided, however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties expressly referring to a
specific date shall be true, accurate and complete in all material respects as of such date; and
(c) in Bank’s good faith business judgment, there has not been a Material Adverse Change.
3.3 Covenant to Deliver.
Borrower agrees to deliver to Bank each item required to be delivered to Bank under this Agreement
as a condition 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
Borrower’s obligation to deliver such item, and any such Credit Extension in the absence of a
required item shall be made in Bank’s sole discretion.
3.4 Procedures for Borrowing Advances. Subject to the prior satisfaction of all other applicable
conditions to the making of an Advance set forth in this Agreement, to obtain an Advance, Borrower
shall notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or telephone
by 12:00 p.m. Pacific time on the Funding Date of the Advance. Together with such notification,
Borrower must promptly deliver to Bank by electronic mail or facsimile a completed Transaction
Report executed by a Responsible Officer or his or her designee. Bank shall credit Advances to the
Designated Deposit Account. Bank may make Advances under this Agreement based on instructions from
a Responsible Officer or his or her designee or without instructions if the Advances are necessary
to meet Obligations which have become due. Bank may rely on any telephone notice given by a person
whom Bank believes is a Responsible Officer or designee.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and performance
in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the
Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds
and products thereof. Borrower represents, warrants, and covenants that the security interest
granted herein is and shall at all times continue to be a first priority perfected security
interest in the Collateral (subject only to Permitted Liens that may have superior priority to
Bank’s Lien under this Agreement). If Borrower shall acquire a commercial tort claim, Borrower
shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant
to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms
of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.
The grant of security interest and pledge by Borrower contained herein is without limitation on any
security interest granted by Borrower under any other Loan Document and without limitation on the
security interests granted by Borrower under the Prior LSA, which security interests granted under
the Prior LSA shall continue, uninterrupted, as amended and restated by this Agreement.
If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the Obligations
(other than inchoate indemnity obligations) are repaid in full in cash. Upon payment in full in
cash of the Obligations (other than inchoate indemnity obligations) and at such time as Bank’s
obligation to make Credit Extensions has terminated, Bank shall, at Borrower’s sole cost and
expense, release its Liens in the Collateral and all rights therein shall revert to Borrower.
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4.2 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing
statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect
Bank’s interest or rights hereunder, including a notice that any disposition of the Collateral, by
either Borrower or any other Person, shall be deemed to violate the rights of Bank under the Code.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents, warrants and agrees as follows:
5.1 Due Organization and Authorization. Borrower is duly existing and in good standing in its
jurisdiction of formation and is qualified and licensed to do business and is in good standing in
any jurisdiction in which the conduct of its business or its ownership of property requires that it
be qualified except where the failure to do so could not reasonably be expected to cause a Material
Adverse Change. In connection with this Agreement, Borrower has delivered to Bank a completed
certificate signed by Borrower entitled “Perfection Certificate”. Borrower represents and warrants
to Bank that (a) Borrower’s exact legal name is that indicated on the Perfection Certificate and on
the signature page hereof; (b) Borrower is an organization of the type and is organized in the
jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately
sets forth Borrower’s organizational identification number or accurately states that Borrower has
none; (d) the Perfection Certificate accurately sets forth Borrower’s place of business, or, if
more than one, its chief executive office as well as Borrower’s mailing address (if different than
its chief executive office); (e) Borrower (and each of its predecessors) has not, in the past five
(5) years, changed its jurisdiction of formation, organizational structure or type, or any
organizational number assigned by its jurisdiction (except as previously consented to in writing by
Bank); 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 Borrower’s organizational identification number.
The execution, delivery and performance by Borrower of the Loan Documents to which it is a party
have been duly authorized, and do not (i) conflict with any of Borrower’s organizational documents,
(ii) contravene, conflict with, constitute a default under or violate any material Requirement of
Law, (iii) contravene, conflict or violate any 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 cause a Material Adverse
Change.
5.2 Collateral. Borrower has good title to the Collateral, free of Liens except Permitted Liens.
Borrower has no Collateral Accounts other than (a) the Collateral Accounts with Bank and (b) the
Collateral Accounts, if any, described in the Perfection Certificate delivered to Bank in
connection herewith, or of which Borrower has given Bank notice, for which Borrower has taken such
actions as are necessary to give Bank a perfected security interest therein, pursuant to
documentation reasonably acceptable to Bank. The Accounts are bona fide, existing obligations of
the Account Debtors.
The Collateral is not in the possession of any third party bailee (such as a warehouse) except as
otherwise provided in the Perfection Certificate. None of the components of the Collateral shall be
maintained at locations other than as provided in the Perfection Certificate or as permitted
pursuant to Section 7.2. In the event that Borrower, after the date hereof, intends to store or
otherwise deliver any portion of the Collateral to a bailee, then Borrower will first receive the
written consent of Bank and such bailee must execute and deliver a bailee agreement in form and
substance satisfactory to Bank in its sole discretion.
All Inventory is in all material respects of good and marketable quality, free from material
defects.
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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 Borrower’s business is valid and
enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and
which is material to Borrower’s business has been judged invalid or unenforceable, in whole or in
part. To the best of Borrower’s 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 Borrower’s business.
Except as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound by, any
Restricted License.
5.3 Accounts Receivable; Inventory.
(a) For each Account with respect to which Advances are requested, on the date each Advance is
requested and made, such Account shall be an Eligible Account.
(b) All statements made and all unpaid balances appearing in all invoices, instruments and other
documents evidencing the Accounts are and shall be true and correct and all such invoices,
instruments and other documents, and all of Borrower’s Books are genuine and in all respects what
they purport to be. All sales and other transactions underlying or giving rise to each Eligible
Account shall comply in all material respects with all applicable laws and governmental rules and
regulations. Borrower has and will have no knowledge of any actual or imminent Insolvency
Proceeding of any Account Debtor whose accounts are shown as Eligible Accounts in any Transaction
Report. To the best of Borrower’s knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Accounts are and will be genuine, and all such
documents, instruments and agreements are and will be legally enforceable in accordance with their
terms.
(c) For any item of Inventory consisting of Eligible Inventory in any Transaction Report, such
Inventory (i) consists of raw materials or finished goods, in good, new, and salable condition,
which is not perishable, returned, consigned, obsolete, not sellable, slow moving, damaged, or
defective, and is not comprised of demonstrative or custom inventory, works in progress, packaging
or shipping materials, or supplies; (ii) meets all applicable governmental standards; (iii) has
been manufactured in compliance with the Fair Labor Standards Act; (iv) is not subject to any
Liens, except the first priority Liens granted or in favor of Bank under this Agreement or any of
the other Loan Documents; and (v) is located at the locations identified by Borrower in the
Perfection Certificate where it maintains Inventory (or at any location permitted under Section
7.2).
5.4 Litigation. There are no actions or proceedings pending or, to the knowledge of the Responsible
Officers, threatened in writing by or against Borrower or any of its Subsidiaries involving more
than $250,000, except as disclosed in the Perfection Certificate.
5.5 Financial Statements; Financial Condition. All consolidated financial statements for Borrower
and any of its Subsidiaries delivered to Bank fairly present in all material respects Borrower’s
consolidated financial condition and Borrower’s consolidated results of operations. There has not
been any material deterioration in Borrower’s consolidated financial condition since the date of
the most recent financial statements submitted to Bank.
5.6 Solvency. The fair salable value of Borrower’s assets (including goodwill minus disposition
costs) exceeds the fair value of its liabilities; Borrower is not left with unreasonably small
capital after the transactions in this Agreement; and Borrower is able to pay its debts (including
trade debts) as they mature.
5.7 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. Neither Borrower nor any of its Subsidiaries is a “holding
company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company”
as each term is defined and used in the Public Utility Holding
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Company Act of 2005. 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 Borrower’s or any of
its Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to the best
of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or
transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries have
obtained all consents, approvals and authorizations of, made all declarations or filings with, and
given all notices to, all Government Authorities that are necessary to continue their respective
businesses as currently conducted.
5.8 Subsidiaries; Investments. Other than as disclosed in the Perfection Certificate, Borrower does
not have any Subsidiaries, other than Subsidiaries organized with the prior written consent of
Bank, and does not own any stock, partnership interest or other equity securities in any other
Person, except for Permitted Investments.
5.9 Tax Returns and Payments; Pension Contributions. Borrower has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower. Borrower may defer payment of any
contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Bank in
writing of the commencement of, and any material development in, the proceedings, (c) posts bonds
or takes any other steps required to prevent the governmental authority levying such contested
taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien”.
Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years
which could result in 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 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely as working
capital, and to fund its general business requirements and not for personal, family, household or
agricultural purposes.
5.11 Full Disclosure. No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank, as of the date such representation, warranty, or
other statement was made, taken together with all such written certificates and written statements
given to Bank, contains any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained in the certificates or statements not misleading (it
being recognized by Bank that the projections and forecasts provided by Borrower in good faith and
based upon reasonable assumptions are not viewed as facts and that actual results during the period
or periods covered by such projections and forecasts may differ from the projected or forecasted
results).
5.12 UBS Loan. On August 21, 2008, Borrower received net proceeds of $11,000,000 from a loan by UBS
Bank USA to Borrower, and as of the Effective Date, including such loan Borrower has loans
outstanding from UBS Bank USA in the aggregate of $19,168,793, including principal and accrued
interest, and Borrower can borrow additional amounts from UBS Bank USA that would allow such
aggregate amount of loans outstanding to increase to $19,325,000 of principal and accrued interest
(collectively, the “UBS Loans”). Borrower has provided Bank copies of all of the agreements,
instruments and documents relating to the UBS Loans, including Borrower’s acceptance on November 7,
2008 of an offer of Rights to sell the ARS to UBS during the period June 30, 2010 through July 2,
2012, at par value (the “UBS Loan Documents”). The UBS Loans are secured only by the Auction Rate
Securities (UBS), and the UBS Loan Documents do not require Borrower to provide or contemplate
Borrower providing any additional collateral or proceeds from any other Borrower assets, except
that the UBS Loan Documents require Borrower to repay the UBS Loans in the event that Borrower
receives net proceeds exceeding $50,000,000 from an initial public offering of Borrower’s stock.
5.13 Indebtedness. Borrower is not liable for any Indebtedness other than Permitted Indebtedness.
5.14 Definition of “Knowledge.” For purposes of the Loan Documents, whenever a representation or
warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or
with a similar
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qualification, knowledge or awareness means the actual knowledge, after reasonable investigation,
of the Responsible Officers.
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 Government Compliance.
(a) Maintain its and all its Subsidiaries’ legal existence and good standing in their respective
jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to
so qualify would reasonably be expected to cause a Material Adverse Change. 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 cause a Material Adverse Change.
(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. At Bank’s request, Borrower shall promptly provide copies of any such
obtained Governmental Approvals to Bank.
6.2 Financial Statements, Reports, Certificates.
(a) Borrower shall provide Bank with the following:
| (i) | a Transaction Report (and any schedules related thereto) (y) weekly and at the time of each request for an Advance if a Streamline Period is not in effect or an Event of Default has occurred and is continuing, and (z) within thirty (30) days after the end of each month if a Streamline Period is in effect and no Event of Default has occurred and is continuing; | ||
| (ii) | within thirty (30) days after the end of each month, |
| (A) | monthly accounts receivable agings, aged by invoice date, | ||
| (B) | monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, | ||
| (C) | monthly reconciliations of accounts receivable agings (aged by invoice date), transaction reports, and general ledger, and | ||
| (D) | a Deferred Revenue report providing such information concerning Deferred Revenue as Bank shall reasonably request; |
| (iii) | as soon as available, and in any event within thirty (30) days after the end of each month, monthly unaudited financial statements; | ||
| (iv) | within thirty (30) days after the end of each month a monthly Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Bank shall reasonably request, including, without limitation, a statement that at the end of such month there were no held checks, to the extent such check amounts are not included in the Borrower’s accounts payable; | ||
| (v) | [Reserved]; | ||
| (vi) | within thirty (30) days after the beginning of each fiscal year of Borrower, (A) annual operating budgets (including income statements, balance sheets and cash |
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| flow statements, by month) for such fiscal year of Borrower, and (B) annual financial projections for such fiscal year (on a quarterly basis), as approved by Borrower’s board of directors, together with any related business forecasts used in the preparation of such annual financial projections; and |
| (vii) | as soon as available, and in any event within 90 days following the end of Borrower’s fiscal year, annual financial statements certified by, and with an unqualified opinion of, independent certified public accountants acceptable to Bank, except that the opinion may be qualified for uncertainty of the Borrower’s ability to continue as a going concern. |
(b) At all times that Borrower is subject to the reporting requirements under the Securities
Exchange Act of 1934, as amended, within five (5) days after filing, all reports on Form 10-K, l0-Q
and 8-K filed with the Securities and Exchange Commission or a link thereto on Borrower’s or
another website on the Internet.
(c) Prompt written notice of (i) any material change in the composition of the Intellectual
Property, (ii) the registration of any Copyright, including any subsequent ownership right of
Borrower in or to any Copyright, Patent or Trademark not previously disclosed to Bank in writing,
or (iii) Borrower’s knowledge of an event that materially adversely affects the value of the
Intellectual Property.
(d) Prompt written report of any legal action pending or threatened in writing against Borrower or
any of its Subsidiaries that could result in damages or costs to Borrower or any of its
Subsidiaries of more than Two Hundred Fifty Thousand Dollars ($250,000), individually or when
aggregated with all other legal actions pending or threatened in writing against Borrower or any of
its Subsidiaries that have not previously been disclosed to Bank pursuant to the Perfection
Certificate or other written report.
(e) Other financial information reasonably requested by Bank.
6.3 Accounts Receivable.
(a) Schedules and Documents Relating to Accounts. Borrower shall deliver to Bank
Transaction Reports and schedules of collections, as provided in Section 6.2, on Bank’s standard
forms; provided, however, that Borrower’s failure to execute and deliver the same shall not affect
or limit Bank’s Lien and other rights in all of Borrower’s Accounts, nor shall Bank’s failure to
advance or lend against a specific Account affect or limit Bank’s Lien and other rights therein. If
requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s request, originals) of
all contracts, orders, invoices, and other similar documents, and all shipping instructions,
delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or
disposition of which gave rise to such Accounts. In addition, Borrower shall deliver to Bank, on
its request, the originals of all instruments, chattel paper, security agreements, guarantees and
other documents and property evidencing or securing any Accounts, in the same form as received,
with all necessary endorsements, and copies of all credit memos.
(b) Disputes. Borrower shall promptly notify Bank of all disputes or claims relating to
Accounts. Borrower may forgive (completely or partially), compromise, or settle any Account for
less than payment in full, or agree to do any of the foregoing so long as (i) Borrower does so in
good faith, in a commercially reasonable manner, in the ordinary course of business, in
arm’s-length transactions, and reports the same to Bank in the regular reports provided to Bank;
and (ii) no Default or Event of Default has occurred and is continuing; and (iii) after taking into
account all such discounts, settlements and forgiveness, no Credit Extension(s) shall exceed any
limit thereon contained herein.
(c) Collection of Accounts. Until payment in full in cash of all Advances and all other
Obligations relating to the Revolving Line (other than inchoate indemnity obligations) and Bank’s
obligations to make Advances and any other Credit Extensions relating to the Revolving Line have
terminated (provided that Borrower’s obligation under this sentence shall not end at a time when
any Event of Default exists), Borrower shall be a party to a three party agreement (the “Lockbox
Agreement”) with Bank and a lockbox provider (the “Lockbox Provider”). The Lockbox Agreement and
Lockbox Provider shall be acceptable to Bank. Borrower shall use the lockbox address as the payment
address on all invoices issued by Borrower and shall direct all its Account Debtors
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to remit their payments to the lockbox address. The Lockbox Agreement shall provide that the
Lockbox Provider shall remit all collections received in the lockbox to Bank. Upon Bank’s receipt
of such collections, Bank shall apply the same as follows:
| (i) | If a Streamline Period is in effect, Bank shall deposit such proceeds into the operating account of Borrower at Bank that has been designated by Borrower; and | ||
| (ii) | If a Streamline Period is not in effect, Bank shall apply such proceeds to the outstanding Advances, and if all outstanding Advances have been paid in full, Bank shall deposit the remainder into the operating account of Borrower at Bank that has been designated by Borrower; and | ||
| (iii) | If a Default or Event of Default has occurred and is continuing, without limiting Bank’s other rights and remedies, Bank shall have the right to apply such proceeds to the outstanding Obligations in such order as it shall determine in its discretion. |
It is understood and agreed by Borrower that this Section does not impose any affirmative duty on
Bank to do any act other than to turn over such amounts. Without limitation on the foregoing,
whether or not an Event of Default has occurred and is continuing, Borrower shall immediately
deliver all payments on and proceeds of Accounts to an account maintained with Bank to be applied
(i) prior to an Event of Default, pursuant to the terms of Section 2.5(b) hereof, and (ii) after
the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section
9.4 hereof.
(d) Returns. Provided no Event of Default has occurred and is continuing, if any Account
Debtor returns any Inventory to Borrower, Borrower shall promptly (i) determine the reason for such
return, (ii) issue a credit memorandum to the Account Debtor in the appropriate amount, and (iii)
provide a copy of such credit memorandum to Bank, upon request from Bank. In the event any
attempted return occurs after the occurrence and during the continuance of any Event of Default,
Borrower shall immediately notify Bank of the return of the Inventory.
(e) Verification. Bank may, from time to time, verify directly with the respective Account
Debtors the validity, amount and other matters relating to the Accounts, either in the name of
Borrower or Bank or such other name as Bank may choose.
(f) No Liability. Bank shall not be responsible or liable for any shortage or discrepancy
in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives
rise to an Account, or for any error, act, omission, or delay of any kind occurring in the
settlement, failure to settle, collection or failure to collect any Account, or for settling any
Account in good faith for less than the full amount thereof, nor shall Bank be deemed to be
responsible for any of Borrower’s obligations under any contract or agreement giving rise to an
Account. Nothing herein shall, however, relieve Bank from liability for its own gross negligence or
willful misconduct.
6.4 Remittance of Proceeds. Except as otherwise provided in Section 6.3(c), deliver, in kind, all
proceeds arising from the disposition of any Collateral to Bank in the original form in which
received by Borrower not later than the following Business Day after receipt by Borrower, to be
applied to the Obligations pursuant to the terms of this Agreement; provided that, if no Default or
Event of Default has occurred and is continuing, Borrower shall not be obligated to remit to Bank
the proceeds of (a) the sale of surplus, worn out or obsolete Equipment disposed of by Borrower in
good faith in an arm’s length transaction for an aggregate purchase price of $25,000 or less (for
all such transactions in any fiscal year), or (b) the disposition of marketable securities that are
held with or managed by Bank or Bank’s Affiliates, provided that if such proceeds are to be moved
from the account in which the marketable securities were held immediately prior to such
disposition, they are only moved to an operating account of Borrower with Bank for use thereafter
in the ordinary course of Borrower’s business. Borrower agrees
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that it will maintain all proceeds of Collateral in an account maintained with Bank. Nothing in
this Section limits the restrictions on disposition of Collateral set forth elsewhere in this
Agreement.
6.5 Taxes; Pensions. Timely file, and require each of its Subsidiaries to timely file, all required
tax returns and reports, and timely pay, and require each of its Subsidiaries to timely pay, all
foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower
and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the
terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate certificates
attesting to such payments, and pay all amounts necessary to fund all present pension, profit
sharing and deferred compensation plans in accordance with their terms.
6.6 Access to Collateral; Books and Records. At reasonable times, on five (5) Business Day’s notice
(provided no notice is required if an Event of Default has occurred and is continuing), Bank, or
its agents, shall have the right to inspect the Collateral and the right to audit and copy
Borrower’s Books. The foregoing inspections and audits shall be at Borrower’s expense, and the
charge therefor shall be $850 per person per day (or such higher amount as shall represent Bank’s
then-current standard charge for the same), plus reasonable out-of- pocket expenses. In the event
Borrower and Bank schedule an audit more than ten (10) days in advance, and Borrower cancels or
seeks to reschedules the audit with less than ten (10) days written notice to Bank, then (without
limiting any of Bank’s rights or remedies), Borrower shall pay Bank a fee of $1,000 plus any
out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses
of the cancellation or rescheduling.
6.7 Insurance. Keep its business and the Collateral insured for risks and in amounts standard for
companies in Borrower’s industry and location and as Bank may reasonably request. Insurance
policies shall be in a form, with companies, and in amounts that are satisfactory to Bank. All
property policies shall have a lender’s loss payable endorsement showing Bank as an additional
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 loss payable and
additional insured endorsements) shall provide that the insurer must give Bank at least twenty (20)
days notice before canceling, amending, or declining to renew its policy. At Bank’s request,
Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy shall, at Bank’s 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 Fifty Thousand
Dollars ($50,000) with respect to any loss, but not exceeding One Hundred Thousand Dollars
($100,000) in the aggregate for all losses under all casualty policies in any one year, 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, 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. If Borrower fails to obtain insurance as required under this Section 6.7 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 6.7, and take any
action under the policies Bank deems prudent.
6.8 Operating Accounts.
(a) Maintain all of its and all of its Subsidiaries’ operating and other deposit accounts,
securities accounts, and any other accounts at which Borrower or its Subsidiaries maintain funds or
investments (including without limitation any Collateral Accounts, but excluding the Auction Rate
Securities (UBS)) with Bank and Bank’s Affiliates.
(b) Without limitation on subsection “a” above, (i) provide Bank five (5) days prior written notice
before establishing any Collateral Account at or with any bank or financial institution other than
Bank or Bank’s Affiliates, and (ii) for each Collateral Account that Borrower at any time
maintains, Borrower shall cause the applicable bank or financial institution (other than Bank) at
or with which any Collateral Account is maintained to execute and deliver a Control Agreement or
other appropriate instrument with respect to such Collateral Account to perfect Bank’s Lien in such
Collateral Account in accordance with the terms hereunder. The provisions of “ii” of the previous
sentence shall not apply to (y) deposit accounts exclusively used for payroll, payroll taxes and
other
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employee wage and benefit payments to or for the benefit of Borrower’s employees and identified to
Bank by Borrower as such, or (z) the Auction Rate Securities (UBS).
6.9 Financial Covenants. Borrower shall maintain at all times, to be tested as of the last day of
each month, unless otherwise noted, on a consolidated basis:
(a) Liquidity
Ratio. A Liquidity Ratio of greater than 1.50 to 1.00, to be tested as of the last
day of each month during which any Advances were outstanding. In addition, if, at the time an
Advance is requested by the Borrower, the Liquidity Ratio has not been tested with respect to the
monthly financial statements of Borrower most recently received by Bank, then the Liquidity Ratio
shall be tested with respect to such financial statements prior to the Advance being made.
(b) EBITDA. Maintain EBITDA as of the last day of each month, for the three month period ending as
of last day of such month, of at least the following for each such period ending during the
following intervals:
| Minimum EBITDA | ||||
| Interval | (Amounts are Negative) | |||
Effective Date through March 31, 2010 |
[$7,800,000] | |||
April 1,2010 through June 30, 2010 |
[$6,500,000] | |||
July 1, 2010 through September 30, 2010 |
[$5,700,000] | |||
October 1,2010 through December 31, 2010 |
[$4,300,000] | |||
January 1,2011 through March 31, 2011 |
[$3,400,000] | |||
April 1,2011 and thereafter |
[$2,000,000] | |||
(c) Fixed Charge Coverage Ratio. A Fixed Charge Coverage Ratio of greater than 1.25 to
1.00, to be tested as of the last day of each month, provided that Borrower shall not be required
to maintain the foregoing Fixed Charge Coverage Ratio until on and after the date that the Partial
Term Loan Reserve becomes zero.
(d) Waiver Regarding Performance to Plan Covenant. Reference is made to the fact that the
Section 6.9(b) of the Prior LSA contained a requirement that Borrower’s monthly net revenue equal
or exceed certain projections and that Borrower failed to satisfy’ such requirements with respect
to December 2009, January 2010, February, 2010 and March, 2010 (if the Effective Date is after
March 31, 2010). Bank hereby waives any Default or Event of Default that may have occurred as a
result of such failure.
6.10 Intellectual Property Rights.
(a) (i) Protect, defend and maintain the validity and enforceability of its Intellectual
Property; (ii) promptly advise Bank in writing of material infringements of its
Intellectual Property; and (iii) not allow any Intellectual Property material to Borrower’s
business to be abandoned, forfeited or dedicated to the public without Bank’s 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 Bank’s rights and remedies under this
Agreement and the other Loan Documents.
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(c) If Borrower (i) obtains any Patent, registered Trademark, registered Copyright, registered mask
work, or any pending application for any of the foregoing, whether as owner, licensee or otherwise,
or (ii) applies for any Patent or the registration of any Trademark, then Borrower shall
immediately provide written notice thereof to Bank and shall execute such intellectual property
security agreements and other documents and take such other actions as Bank shall request in its
good faith business judgment to perfect and maintain a perfected security interest in favor of Bank
in such property subject to senior Permitted Liens. If Borrower decides to register any Copyrights
or mask works in the United States Copyright Office, Borrower shall: (x) provide Bank with at least
fifteen (15) days prior written notice of Borrower’s intent to register such Copyrights or mask
works together with a copy of the application it intends to file with the United States Copyright
Office (excluding exhibits thereto); (y) execute an intellectual property security agreement and
such other documents and take such other actions as Bank may request in its good faith business
judgment to perfect and maintain a perfected security interest in favor of Bank in the Copyrights
or mask works intended to be registered with the United States Copyright Office subject only to
senior Permitted Liens; and (z) record such intellectual property security agreement with the
United States Copyright Office contemporaneously with filing the Copyright or mask work
application(s) with the United States Copyright Office. Borrower shall promptly provide to Bank
copies of all applications that it files for Patents or for the registration of Trademarks,
Copyrights or mask works, together with evidence of the recording of the intellectual property
security agreement necessary for Bank to perfect and maintain a perfected security interest in such
property subject only to senior Permitted Liens.
6.11 Litigation Cooperation. From the date hereof and continuing through the termination of this
Agreement, make available to Bank, without expense to Bank, Borrower and its officers, employees
and agents and Borrower’s books and records, to the extent that Bank may deem them reasonably
necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank
with respect to any Collateral or relating to Borrower.
6.12 Further Assurances. Borrower shall execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the
purposes of this Agreement.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without Bank’s prior written consent:
7.1 Dispositions. Convey, sell, lease, transfer, or otherwise dispose of (collectively,
“Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or
property, except for (a) Transfers of Inventory in the ordinary course of business; (b) Transfers
of worn-out or obsolete Equipment; and (c) Transfers consisting of Permitted Liens and Permitted
Investments; and (d) Transfers 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, Ownership, 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; or
(c) permit or suffer any Change in Control; or
(d) without at least thirty (30) days prior written notice to Bank: (1) add any new offices or
business locations, including warehouses (unless such new offices or business locations contain
assets and property of Borrower with an aggregate value of less than $10,000) or deliver any
portion of the Collateral valued, individually or in the aggregate, in excess of Fifty Thousand
Dollars ($50,000) to a bailee at a location other than to a bailee and at a location already
disclosed in the Perfection Certificate, (2) change its jurisdiction of organization, (3) change
its organizational structure or type, (4) change its legal name, or (5) change its organizational
number (if any) assigned by its jurisdiction of organization. If Borrower intends to deliver any
portion of the Collateral valued,
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individually or in the aggregate, in excess of Fifty Thousand Dollars ($50,000) to a bailee, and
Bank and such bailee are not already parties to a bailee agreement governing both the Collateral
and the location to which Borrower intends to deliver the Collateral, then Borrower will first
receive the written consent of Bank, and such bailee shall execute and deliver a bailee agreement
in form and substance satisfactory to Bank in its sole discretion.
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, except that a Subsidiary
of Borrower may merge or consolidate into another Subsidiary of 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 assets, 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 Borrower’s or
any Subsidiary’s Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and
the definition of “Permitted Lien” herein.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the
terms of Section 6.8 hereof.
7.7 Investments; Distributions. (a) Directly or indirectly make any Investment 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 (i) Borrower
may convert any of its convertible securities into other securities pursuant to the terms of such
convertible securities or otherwise in exchange thereof, (ii) Borrower may pay dividends solely in
common stock, (iii) Borrower may repurchase the stock of former employees or consultants pursuant
to stock repurchase agreements so long as no Default or Event of Default has occurred at the time
of such repurchase and would not exist after giving effect to such repurchase, provided such
repurchase does not exceed an aggregate of $50,000 in any fiscal year, and (iv) upon the exercise
of non-qualified stock option grants to purchase Borrower stock by an option holder who is, or upon
the vesting of restricted stock grants for Borrower stock to, an employee, member of the Board of
Directors or consultant of Borrower, Borrower may issue shares pursuant to such exercise or vesting
on a net issuance basis and pay the applicable withholding taxes to taxing authorities on behalf of
such employee, member of the Board of Directors or consultant of Borrower receiving such shares.
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower, except for transactions that are in the ordinary course
of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than
would be obtained in an arm’s length transaction with a non-affiliated Person.
7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the
terms of the subordination, intercreditor, or other similar agreement to which such Subordinated
Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which
would increase the amount thereof or the amount of any permitted payments thereunder or adversely
affect the subordination thereof to Obligations owed to Bank. Nothing in this Section 7.9 restricts
Borrower from converting any of the Subordinated Debt to PFG to equity securities of Borrower in
accordance with its Loan Agreement with PFG, and borrowing from PFG an amount equal to the
Subordinated Debt so converted, provided that the total amount of outstanding Subordinated Debt to
PFG shall not at any time exceed $4,000,000.
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
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Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet
the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as
defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any
other law or regulation, if the violation could reasonably be expected to cause a Material Adverse
Change, 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.
7.11 UBS Loans. Borrower shall not make any payments of principal with respect to the UBS Loans
other than payments from proceeds from the sale of Auction Rate Securities (UBS) and except that
the Borrower may repay the UBS Loans in the event Borrower receives net proceeds exceeding
$50,000,000 from an initial public offering of Borrower’s stock. The Borrower shall not provide any
collateral or other security for the UBS Loans other than the Auction Rate Securities (UBS).
Neither the UBS Loans nor the UBS Loan Documents shall be amended to increase the rate of interest
or any fees, costs or expenses, or to accelerate the payment of the principal or interest or any.
other amount with respect to the UBS Loans or the UBS Loan Documents.
7.12 Capital Expenditures. Contract for, purchase or make any expenditure or commitments for
unfinanced Capital Expenditures in any fiscal year in an aggregate amount in excess of $2,000,000.
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 (a) make any payment of principal or interest on any Credit
Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after
such Obligations are due and payable. During the cure period, the failure to make or pay any
payment specified under clause (a) or (b) hereunder is not an Event of Default (but no Credit
Extension will be made during the cure period);
8.2 Covenant Default.
(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.3, 6.4, 6.5, 6.6, 6.7,
6.8, or 6.9, or violates any covenant in Section 7; or
(b) Borrower fails or neglects to perform, keep, or observe any other term, provision, condition,
covenant or agreement contained in this Agreement or any Loan Documents, and as to any default
(other than those specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within ten (10) days after
the occurrence thereof; provided, however, that if the default cannot by its nature be cured within
the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10)
day period, and such default is likely to be cured within a reasonable time, then Borrower shall
have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to cure the default shall not be
deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Cure
periods provided under this section shall not apply, among other things, to financial covenants or
any other covenants set forth in subsection (a) above;
8.3 Material Adverse Change. 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 control of Borrower
(including a Subsidiary) on deposit or otherwise maintained with Bank or any Bank Affiliate, or
(ii) a notice of lien, levy, or assessment is filed against any of Borrower’s 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
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(b) (i) any material portion of Borrower’s 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 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 thirty (30) days (but no
Credit Extensions shall be made while of 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 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 $200,000; or (b) any default by Borrower that could result in a Material
Adverse Change with respect to Borrower; provided, however, that the Event of Default under this
Section 8.6 caused by the occurrence of a default under such other agreement shall be cured or
waived for purposes of this Agreement upon Bank receiving written notice from the party asserting
such default of such cure or waiver of the default under such other agreement, if at the time of
such cure or waiver under such other agreement (x) Bank has not declared an Event of Default under
this Agreement and/or exercised any rights with respect thereto; (y) any such cure or waiver does
not result in an Event of Default under any other provision of this Agreement or any Loan Document;
and (z) in connection with any such cure or waiver under such other agreement, the terms of any
agreement with such third party are not modified or amended in any manner which could in the good
faith judgment of Bank be materially less advantageous to Borrower;
8.7 Judgments. One or more judgments, orders, or decrees for the payment of money in an amount,
individually or in the aggregate, of $200,000 or more (not covered by independent third-party
insurance as to which liability has been accepted by such insurance carrier) shall be rendered
against Borrower and shall remain unsatisfied, unvacated, or unstayed for a period of ten (10) days
after the entry thereof (provided that no Credit Extensions will be made prior to the satisfaction,
vacation, or stay 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 or Lien. 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; a
default or breach occurs under any agreement between Borrower and any creditor of Borrower that
signed a subordination, intercreditor, or other similar agreement with Bank, or any creditor that
has signed such an agreement with Bank breaches any terms of such agreement; or the Obligations
shall for any reason be subordinated or shall not have the priority contemplated by this Agreement
or any such subordination, intercreditor, or other similar agreement; or
8.10 [intentionally omitted]
8.11 UBS Loan. A default or breach occurs with respect to the UBS Loans or the UBS Loan Documents.
9 BANK’S RIGHTS AND REMEDIES
9.1 Rights and Remedies. If an Event of Default has occurred and is continuing, Bank may, without
notice or demand, do any or all of the following:
(a) declare all Obligations immediately due and payable (but if an Event of Default described in
Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);
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(b) stop advancing money or extending credit for Borrower’s 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 105% 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) terminate any FX Forward Contracts;
(e) verify the amount of, demand payment of and performance under, and collect any Accounts and
General Intangibles, settle or adjust disputes and claims directly with Account Debtors for amounts
on terms and in any order that Bank considers advisable, notify any Person owing Borrower money of
Bank’s security interest in such funds;
(f) make any payments and do any acts it considers necessary or reasonable to protect the
Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral
if Bank requests and make it available as Bank designates. Bank may 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, to exercise any of Bank’s rights or remedies;
(g) apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount
held by Bank owing to or for the credit or the account of Borrower;
(h) 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, Borrower’s 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 Bank’s exercise of its rights under this Section, Borrower’s
rights under all licenses and all franchise agreements inure to Bank’s benefit;
(i) 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;
(j) demand and receive possession of Borrower’s Books; and
(k) 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 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact,
exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse
Borrower’s name on any checks or other forms of payment or security; (b) sign Borrower’s name on
any invoice or xxxx of lading for any Account or drafts against Account Debtors; (c) settle and
adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on
terms Bank determines reasonable; (d) make, settle, and adjust all claims under any of Borrower’s
insurance policies that relate to any of the Collateral; (e) pay, contest or settle any Lien,
charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment
based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer
the Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints
Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of Bank’s security interest in the
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Collateral regardless of whether an Event of Default has occurred until all Obligations (other than
inchoate indemnity obligations) have been satisfied in full and Bank is under no further obligation
to make Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s attorney in fact,
and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all
Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and
Bank’s obligation to provide Credit Extensions terminates.
9.3 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.7 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 Bank’s waiver of any Event of Default.
9.4
Application of Payments and Proceeds. Borrower shall have no right to specify the order or
the accounts to which Bank shall allocate or apply any payments required to be made by Borrower to
Bank or otherwise received by Bank under this Agreement when any such allocation or application is
not specified elsewhere in this Agreement. If an Event of Default has occurred and is continuing,
Bank may apply any funds in its possession, whether from Borrower account balances, payments,
proceeds realized as the result of any collection of Accounts or other disposition of the
Collateral, or otherwise, to the Obligations in such order as Bank shall determine in its sole
discretion. If with respect to any payment or other credit Bank has the right under this Agreement
or the other Loan Documents to determine the application of such payment or credit, then Bank may
apply and reverse and reapply such payment or credit to the Obligations in such manner as Bank
shall determine in its sole discretion. Any surplus shall be paid to Borrower by credit to the
Designated Deposit Account or to other Persons legally entitled thereto; Borrower shall remain
liable to Bank for any deficiency. If Bank, in its good faith business judgment, directly or
indirectly enters into a deferred payment or other credit transaction with any purchaser at any
sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the
Obligations by the principal amount of the purchase price or deferring the reduction of the
Obligations until the actual receipt by Bank of cash therefor.
9.5 Bank’s 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.
9.6 No Waiver; Remedies Cumulative. Bank’s 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.
Bank’s 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. Bank’s 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 Bank’s waiver of any Event
of Default is not a continuing waiver. Bank’s delay in exercising any remedy is not a waiver,
election, or acquiescence.
9.7 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
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sent by electronic mail or facsimile transmission (provided that if transmission occurs after
normal business hours during a day, then upon the next Business Day); (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: | Cardiovascular Systems, Inc. | |||
| 000 Xxxxxx Xxxxx | ||||
| Xxxxx Xxxx, XX 00000 | ||||
| Attn: Xxxxx Xxxxxxxxx | ||||
| Fax: (000) 000-0000 | ||||
| Email: XXxxxxx0xx@xxx000.xxx | ||||
| If to Bank: | Silicon Valley Bank | |||
| 000 Xxxxxxx Xxxxxxx, Xxxxx 000 | ||||
| Xxxxxxxxxx, XX 00000 | ||||
| Attn: Xxx Xxxxxxx | ||||
| Fax: (000) 000-0000 | ||||
| Email: XXxxxxxx@xxx.xxx |
11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE.
California 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
Santa Xxxxx County, California; 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.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A
TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties
hereto agree that any and all disputes or controversies of any nature between them arising at any
time shall be decided by a reference to a private judge, mutually selected by the parties (or, if
they cannot agree, by the Presiding Judge of the Santa Xxxxx County, California Superior Court)
appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to
comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the
federal courts), sitting without a jury, in Santa Xxxxx County, California; and the parties hereby
submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to
and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1,
inclusive. The private judge shall have the power, among others, to grant provisional relief,
including without limitation, entering temporary restraining orders, issuing preliminary and
permanent injunctions and appointing receivers. All such proceedings shall be closed to the public
and confidential and all records relating thereto shall be permanently sealed. If during the course
of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at
that point pursuant to the judicial reference procedures, then such party may apply to the Santa
Xxxxx County,
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California Superior Court for such relief. The proceeding before the private judge shall be
conducted in the same manner as it would be before a court under the rules of evidence applicable
to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the
same manner as it would be before a court under the rules of discovery applicable to judicial
proceedings. The private judge shall oversee discovery and may enforce all discovery rules and
orders applicable to judicial proceedings in the same manner as a trial court judge. The parties
agree that the selected or appointed private judge shall have the power to decide all issues in the
action or proceeding, whether of fact or of law, and shall report a statement of decision thereon
pursuant to the California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit
the right of any party at any time to exercise self-help remedies, foreclose against collateral, or
obtain provisional remedies. The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph.
12 GENERAL PROVISIONS
12.1 [Reserved].
12.2 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 Bank’s prior written consent (which may be granted or withheld in
Bank’s 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,
Bank’s obligations, rights, and benefits under this Agreement and the other Loan Documents (other
than the Warrant, as to which assignment, transfer and other such actions are governed by the terms
of the Warrant).
12.3 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
contemplated by the Loan Documents (including reasonable attorneys’ fees and expenses), except for
Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful
misconduct.
12.4 Time of Essence. Time is of the essence for the performance of all Obligations in this
Agreement.
12.5 Severability of Provisions. Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.6 [Reserved].
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.
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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, are 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 satisfied. The obligation of Borrower in Section 12.3
to indemnify the Indemnified Persons shall survive until all statutes of limitation with respect to
the Claims, losses and expenses for which indemnity is given shall have run. The provisions of
Section 12.10 shall survive termination of this Agreement.
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 Bank’s Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together
with Bank, collectively, “Bank Entities”); (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use commercially reasonable
efforts to obtain such prospective transferee’s or purchaser’s agreement to the terms of this
provision); (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s regulators
or as otherwise required in connection with Bank’s 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 either: (i) is in the public domain or in Bank’s possession when disclosed
to Bank, or becomes part of the public domain after disclosure to Bank; or (ii) is disclosed to
Bank by a third party, 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 Attorneys’ Fees, Costs and Expenses. In any action or proceeding between Borrower and Bank
arising out of or relating to the Loan Documents, the prevailing party shall be entitled to recover
its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other
relief to which it may be entitled.
12.12 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.
12.13 Captions. The headings used in this Agreement are for convenience only and shall not affect
the interpretation of this Agreement.
12.14 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.
12.15 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 arm’s-length contract.
12.16 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
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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,
and the singular includes the plural. As used in this Agreement, the following 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 Debtor” is any “account debtor” as defined in the Code with such additions to such term as
may hereafter be made.
“Advance” or “Advances” means an advance (or advances) under the Revolving Line.
“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 Person’s senior executive officers, directors, partners and, for any Person that is a limited
liability company, that Person’s managers and members.
“Agreement” is defined in the preamble hereof.
“Auction Rate Securities” shall have the meaning commonly attributed thereto but shall include
without limitation any bonds sold by U.S. states, cities, and public authorities, funds,
corporations or student loan agencies with a long-term nominal maturity for which the interest rate
is reset through a dutch auction.
“Auction Rate Securities (UBS)” means the Auction Rate Securities owned by Borrower and held with
UBS Financial Services Inc. or its Affiliates and serving as collateral for the UBS Loans.
“Availability Amount” is (a) the lesser of (i) the Maximum Dollar Amount or (ii) the amount
available under the Borrowing Base, minus (b) the aggregate Dollar Equivalent amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) plus an amount
equal to the Letter of Credit Reserve, minus (c) the FX Reduction Amount, minus (d) any amounts
used for Cash Management Services, and minus (e) the outstanding principal balance of any Advances.
“Bank” is defined in the preamble hereof.
“Bank Expenses” are all audit fees and expenses, costs, and expenses (including reasonable
attorneys’ fees and expenses) for preparing, negotiating, amending, 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.
“Borrower” is defined in the preamble hereof.
“Borrower’s Books” are all Borrower’s books and records including ledgers, federal and state tax
returns, records regarding Borrower’s 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 (a) 80% of Eligible Accounts, plus
(b) the lesser of 40% of the value of
Borrower’s Eligible Inventory (valued at the lower of cost or
wholesale fair market value) or 25%
of Eligible Accounts or $2,500,000 (in the case of both “a” and “b”, as determined by Bank from
Borrower’s most recent Transaction Report), minus (c) the greater of the Partial Term Loan Reserve and the Full Term Loan Reserve, to
the extent the same are in effect. Bank may decrease the foregoing percentages in its good faith
business judgment based on
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events, conditions, contingencies, or risks which, as determined by Bank (after taking into account
any Reserves that Bank may have established as a consequence of such events, conditions,
contingencies, or risks), may adversely affect Collateral.
“Borrowing Resolutions” are, with respect to any Person, those resolutions adopted by such Person’s
Board of Directors 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 or assistant 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 such certificate contains 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.
“Capital Expenditure” means expenditures made or liabilities incurred for the acquisition of any
fixed assets or improvements, replacements, substitutions or additions thereto which have a useful
life of more than one year, including the total principal portion of capitalized lease obligations,
which, in accordance with GAAP, would be classified as capital expenditures.
“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 & Poor’s Ratings Group or Xxxxx’x
Investors Service, Inc., (c) Bank’s 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. For purposes of clarity, and without limitation, it is agreed that that “Cash
Equivalents” do not include any Auction Rate Securities.
“Cash Management Services” is defined in Section 2.1.4.
“Change in Control” means any event, transaction, or occurrence as a result of which any “person”
(as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934,
as an amended (the “Exchange Act”)), other than a trustee or other fiduciary holding securities
under an employee benefit plan of Borrower, is or becomes a beneficial owner (within the meaning
Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Borrower,
representing twenty
percent (20%) or more of the combined voting power of Borrower’s then outstanding securities.
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect
in the State of California; 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, Bank’s Lien on any
Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the
State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in
effect in such other jurisdiction solely for purposes on 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.
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“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 that certain certificate in the form attached hereto 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, in each case, 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 Deposit Account,
Securities Account, or Commodity Account.
“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and
like protections in each work or authorship and derivative work thereof, whether published or
unpublished and whether or not the same also constitutes a trade secret.
“Credit Extension” is any Advance, Letter of Credit, FX Forward Contract, amount utilized for Cash
Management Services, Term Loan, or any other extension of credit by Bank for Borrower’s benefit.
“Default” means any event which with notice or passage of time or both, would constitute an Event
of Default.
“Default Rate” is defined in Section 2.3(b).
“Deferred Revenue” is all amounts received or invoiced 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.
“Designated Deposit Account” is Borrower’s deposit account, account number 3300613328, maintained
with Bank.
“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.
“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.
“EBITDA” shall mean (a) Net Income minus any non-cash income, plus (b) Interest Expense, plus (c)
to the extent deducted in the calculation of Net Income, depreciation expense and amortization
expense, plus (d) income tax expense, plus (e) stock-based compensation expense (to the extent not
payable in cash), plus (f) non-cash
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expenses incurred from applying GAAP to the terms of this Agreement and related Warrant and to the
terms of the Subordinated Debt to PFG and related warrant, plus (g) any other non-cash charges.
“Effective Date” is defined in the preamble hereof.
“Eligible Accounts” means Accounts which arise in the ordinary course of Borrower’s business that
meet all Borrower’s representations and warranties in Section 5.3. Bank reserves the right at any
time and from time to time after the Effective Date, to adjust any of the criteria set forth below
and to establish new criteria in its good faith business judgment. Unless Bank agrees otherwise in
writing, Eligible Accounts shall not include:
(a) Accounts for which the Account Debtor is Borrower’s Affiliate, officer, employee, or agent;
(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, to the extent of such
credit balance;
(d) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose Accounts have not
been paid within ninety (90) days of invoice date;
(e) Accounts owing from an Account Debtor which does not have its principal place of business in
the United States or Canada;
(f) Accounts billed or payable outside of the United States;
(g) 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;
(h) Accounts owing from an Account Debtor whose total obligations to Borrower exceed twenty-five
percent (25%) of all Accounts, for the amounts that exceed that percentage, unless Bank approves in
writing;
(i) Accounts owing from an Account Debtor which is a United States government entity or any
department, agency, or instrumentality thereof, unless both (i) the Account has been pre-approved
by Bank in writing, and (ii) 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;
(j) 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 Debtor’s
payment may be conditional;
(k) Accounts owing from an Account Debtor that has not been invoiced or where goods or services
have not yet been rendered to the Account Debtor (sometimes called memo xxxxxxxx or pre-xxxxxxxx);
(l) Accounts subject to contractual arrangements between Borrower and an Account Debtor where
payments shall be scheduled or due according to completion or fulfillment requirements where the
Account Debtor has a right of offset for damages suffered as a result of Borrower’s failure to
perform in accordance with the contract (sometimes called contracts accounts receivable, progress
xxxxxxxx, milestone xxxxxxxx, or fulfillment contracts);
(m) Accounts owing from an Account Debtor the amount of which may be subject to withholding based
on the Account Debtor’s satisfaction of Borrower’s complete performance (but only to the extent of
the amount withheld; sometimes called retainage xxxxxxxx);
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(n) Accounts subject to trust provisions, subrogation rights of a bonding company, or a statutory
trust;
(o) 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 “xxxx and hold” accounts);
(p) Accounts for which the Account Debtor has not been invoiced;
(q) Accounts that represent non-trade receivables or that are derived by means other than in the
ordinary course of Borrower’s business;
(r) [intentionally omitted];
(s) Accounts subject to chargebacks, debit memos or others payment deductions taken by an Account
Debtor (but only to the extent of the chargebacks or deductions);
(t) Accounts arising from product returns and/or exchanges (sometimes called “warranty” or “RMA”
accounts);
(u) Accounts owing from an Account Debtor with respect to which Borrower has received Deferred
Revenue (but only to the extent of such Deferred Revenue);
(v) 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; and
(w) Accounts for which Bank in its good faith business judgment determines collection to be
doubtful, including, without limitation, accounts represented by “refreshed” or “recycled”
invoices.
“Eligible Inventory” means Inventory that meets all of Borrower’s representations and warranties in
Section 5.3 and is otherwise acceptable to Bank in all respects, in Bank’s good faith business
judgment.
“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.
“Event of Default” is defined in Section 8.
“Final Payment” is a payment (in addition to and not a substitution for the regular monthly
payments of principal plus accrued interest) due with respect to the Term Loan on the earlier to
occur of (a) the Term Loan Maturity Date, (b) the acceleration of the Term Loan, or (c) the
prepayment of the Term Loan, equal to the Term Loan Commitment Amount multiplied by the Final
Payment Percentage.
“Final Payment Percentage” is one percent (1.0%)
“Fixed Charge Coverage Ratio” is the ratio of (a) EBITDA for the 12 month period ending as of the
date for which it is being measured, minus the sum of Capital Expenditures, cash taxes paid and
dividends and distributions made (other than dividends or distributions by a Person payable in its
stock, or split-ups or reclassifications of its stock) for such period calculated on a consolidated
basis for Borrower and its Subsidiaries, divided by (b) the sum of principal payments made on
Indebtedness during and Interest Expense (to the extent such
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Interest Expense is to be settled in cash) for such period calculated on a consolidated basis for
Borrower and its Subsidiaries.
“Foreign Currency” means lawful money of a country other than the United States.
“Full Term Loan Reserve” means, as of any date of determination, (a) when a Streamline Period is in
effect, an amount equal to zero and (b) when a Streamline Period is not in effect, an amount equal
to 100% of the outstanding principal balance of the Term Loan as of such date of determination.
“Funding Date” is any date on which a Credit Extension is made to or for the account of Borrower
which shall be a Business Day.
“FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is conducting its normal
business and (b) the Foreign Currency being purchased or sold by Borrower is available to Bank from
the entity from which Bank shall buy or sell such Foreign Currency.
“FX Forward Contract” is defined in Section 2.1.3.
“FX Reduction Amount” is defined in Section 2.1.3.
“FX Reserve” is defined in Section 2.1.3.
“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.
“General Intangibles” is all “general intangibles” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes without limitation,
all Intellectual Property, claims, income and other tax refunds, security and other deposits,
payment intangibles, contract rights, options to purchase or sell real or personal property, rights
in all litigation presently or hereafter pending (whether in contract, tort or otherwise),
insurance policies (including without limitation key man, property damage, and business
interruption insurance), payments of insurance and rights to payment of any kind.
“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.
“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 12.3.
“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 a Person’s right, title, and interest in and to the following:
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(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 such Person;
(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 xxx 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.
“Interest Expense” means for any fiscal period, interest expense (whether cash or non-cash)
determined in accordance with GAAP for the relevant period ending on such date, including, in any
event, interest expense with respect to any Credit Extension and other Indebtedness of Borrower and
its Subsidiaries, including, without limitation or duplication, all commissions, discounts, or
related amortization and other fees and charges with respect to letters of credit and bankers’
acceptance financing and the net costs associated with interest rate swap, cap, and similar
arrangements, and the interest portion of any deferred payment obligation (including leases of all
types).
“Inventory” is all “inventory” as defined in the Code in effect on the date hereof 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 Borrower’s 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 interest in any Person (including stock, partnership
interest or other securities), and any loan, advance or capital contribution to any Person.
“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 as set forth in
Section 2.1.2.
“Letter of Credit Application” is defined in Section 2.1.2(b).
“Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(e).
“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.
“Liquidity Ratio” is the ratio of (a) Borrower’s unrestricted cash and Cash Equivalents held with
Bank and Bank’s Affiliates plus Borrower’s Eligible Accounts, divided by (b) the sum of the
outstanding principal amount of any Advances (including any amounts used for Cash Management
Services), plus the face amount of any outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve), plus the FX Reduction Amount,
plus all other indebtedness for borrowed money (other than the UBS Loans and the Subordinated Debt
to PFG) or the deferred price of property or services (other than unsecured indebtedness to trade
creditors incurred in the ordinary course of business).
“Liquidity Ratio Condition” is the condition that Borrower maintain at all times a Liquidity Ratio
of greater than 2.25 to 1.00.
“Loan Documents” are, collectively, this Agreement, the Warrant, the Perfection Certificate, the
letter agreement dated September 9, 2009 between Borrower and Bank with respect to the Pearland
Economic
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Development Corporation, any note, or notes or guaranties executed by Borrower, and any other
present or future agreement by Borrower with or for the benefit of Bank in connection with this
Agreement or the Prior LSA, all as amended, restated, or otherwise modified.
“Lockbox Agreement” is defined in Section 6.3(c).
“Lockbox Provider” is defined in Section 6.3(c).
“Make-Whole Event Date” shall mean (a) in the case of a prepayment pursuant to Section 2.1.5(d)
hereof, the date of such prepayment, and (b) in the case of all or a portion of the Term Loan
becoming due and payable according to the terms hereof because of the occurrence and continuance of
an Event of Default, the date such amount of the Term Loan has become due and payable according to
the terms hereof.
“Make-Whole Premium” is an amount equal to 3% of the Term Loan Commitment Amount if the Make-Whole
Event Date occurs on or before the first anniversary of the Effective Date; 2% of the Term Loan
Commitment Amount if the Make-Whole Event Date occurs after the first anniversary of the Effective
Date but on or before the second anniversary of the Effective Date; and 1% of Term Loan Commitment
Amount if the Make-Whole Event Date occurs after the second anniversary of the Effective Date but
before the Term Loan Maturity Date.
“Material Adverse Change” is (a) a material impairment in the perfection or priority of Bank’s 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; or (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 reasonable
likelihood that Borrower shall fail to comply with one or more of the financial covenants in
Section 6.9 during the next succeeding financial reporting period.
“Maximum Dollar Amount” is $15,000,000.
“Net Income” means, as calculated on a consolidated basis for Borrower and its Subsidiaries for any
period as at any date of determination, the net profit (or loss), after provision for taxes, of
Borrower and its Subsidiaries for such period taken as a single accounting period.
“New Term Loan Advance” is defined in Section 2.1.5(a).
“Obligations” are Borrower’s obligations to pay when due any debts, principal, interest, Bank
Expenses and other amounts Borrower owes Bank now or later, whether under this Agreement, the Loan
Documents, or otherwise, including, without limitation, all obligations relating to letters of
credit (including reimbursement obligations for drawn
and undrawn letters of credit), cash management services, and foreign exchange contracts, if any,
and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and to perform Borrower’s duties under the Loan
Documents.
“Operating Documents” are, for any Person, such Person’s formation documents, as certified with the
Secretary of State of such Person’s state of formation on a date that is no earlier than 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.
“Overadvance” is defined in Section 2.2.
“Partial Term Loan Reserve” means, as of any date of determination, an amount equal to 50% of the
outstanding principal balance of the Term Loan as of such date; provided that, on and after the
date that Borrower has maintained a Fixed Charge Coverage Ratio of greater than 1.50 to 1.00 as of
the last day of each of two consecutive fiscal quarters, Borrower has provided to Bank financial
statements and Compliance Certificates
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confirming the same, and Bank has had a reasonable time to review the same, the Partial Term Loan
Reserve shall be zero.
“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” means all checks, wire transfers and other items of payment received by Bank (including
proceeds of Accounts and payment of the Obligations in full) for credit to Borrower’s outstanding
Credit Extensions or, if the balance of the Credit Extensions has been reduced to zero, for credit
to its deposit accounts.
“Payment/Advance
Form” is that certain form attached hereto as
Exhibit C.
“Perfection Certificate” is defined in Section 5.1.
“Permitted Indebtedness” is:
(a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan Documents;
(b) Indebtedness existing on the Effective Date and shown on the Perfection Certificate;
(c) Subordinated Debt to PFG in an amount not to exceed $4,000,000, and other Subordinated Debt;
(d) the UBS Loans;
(e) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(f) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary
course of business;
(g) Indebtedness secured by Permitted Liens described in subparts b-f of the definition of
Permitted Liens;
(h) other Indebtedness not exceeding $50,000 in the aggregate outstanding at any time; and
(i) extensions, refinancings, modifications, amendments and restatements of any items of Permitted
Indebtedness (a) through (e) 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 shown on the Perfection Certificate and existing on the Effective Date;
(b) 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 Collateral Accounts in which Bank has a perfected security interest;
(e) Investments consisting of (i) travel advances and employee relocation loans and other employee
loans and advances in the ordinary course of business, and (ii) loans to employees, officers or
directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower’s Board of Directors, not
exceeding $100,000 in the aggregate for the foregoing “i” and “ii” outstanding at any time;
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(f) 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;
(g) 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 shall not apply to Investments of Borrower in any Subsidiary;
(h) other Investments not exceeding $50,000 in the aggregate outstanding at any time.
“Permitted Liens” are:
(a) Liens existing on the Effective Date and 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 not delinquent
or being contested in good faith and for which Borrower maintains adequate reserves on its 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 $100,000 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, have no
priority over Bank’s security interest, and 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), provided, they have no priority over any of Bank’s Liens;
(f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens
described in (a) through (c), 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 business, and leases,
subleases, non-exclusive licenses or sublicenses of property (other than real property or
Intellectual Property) granted in the ordinary course of
Borrower’s business, if the leases,
subleases, licenses and sublicenses do not prohibit granting Bank a security interest therein;
(h) non-exclusive license 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 or 8.7;
(j) Liens in favor of UBS Bank USA against the Auction Rate Securities (UBS) securing the UBS
Loans;
(k) Liens securing Subordinated Debt if such liens are subordinated to the Liens in favor of Bank
pursuant to a subordination, intercreditor, or other similar agreement in form and substance
satisfactory to Bank
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(except that the security interest of PFG in the Intellectual Property may have priority over the
security interest of the Bank therein pursuant to a subordination agreement between PFG and Bank in
form and substance acceptable to the Bank in its good faith business judgment); and
(l) Liens in favor of Pearland Economic Development Corporation against equipment and furniture
within Borrower’s facility in Pearland, Texas, provided that such Liens are subject to the
Subordination Agreement, dated September 9, 2009, between Bank and Pearland Economic Development
Corporation.
“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.
“PFG” means Partners for Growth II, L.P., a Delaware limited partnership.
“Prime Rate” is Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest rate.
“Prior LSA” is defined in the preamble hereof.
“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.
“Reserves” means, as of any date of determination, such amounts as Bank may from time to time
establish and revise in its good faith business judgment, reducing the amount of Advances and other
financial accommodations which would otherwise be available to Borrower (a) to reflect events,
conditions, contingencies or risks which, as determined by Bank in its good faith business
judgment, do or may adversely affect (i) the Collateral or any other property which is security for
the Obligations or its value (including without limitation any increase in delinquencies of
Accounts), (ii) the assets, business or prospects of Borrower, or (iii) the security interests and
other rights of Bank in the Collateral (including the enforceability, perfection and priority
thereof); or (b) to reflect Bank’s good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower to Bank is or may have been incomplete,
inaccurate or misleading in any material respect; or (c) in respect of any state of facts which
Bank determines in good faith constitutes an Event of Default or may, with notice or passage of
time or both, constitute an Event of Default.
“Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial Officer,
Chief Administrative 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 Borrower’s interest in such license or agreement or any other property, or (b) for which a
default under or termination of could interfere with the Bank’s right to sell any Collateral.
“Revolving Line” is an Advance or Advances in an aggregate amount of up to the Maximum Dollar
Amount outstanding at any time.
“Revolving Line Maturity Date” is March 29, 2012.
“Securities Account” is any “securities account” as defined in the Code with such additions to such
term as may hereafter be made.
“Settlement Date” is defined in Section 2.1.3.
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“Streamline Period” is defined in Section 2.1.1(b).
“Streamline Requirements” are all of the following: (a) no Default or Event of Default exists and
(b) Borrower meets the Liquidity Ratio Condition.
“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now
existing or hereafter arising 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 in its sole discretion. “Subordinated Debt” shall
include indebtedness up to the principal amount of $4,000,000 owed by Borrower to PFG, provided
that PFG has executed and delivered to Bank such a subordination agreement.
“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.
“Term Loan” is defined in Section 2.1.5(a).
“Term Loan Commitment Amount” is $10,000,000.
“Term Loan Maturity Date” is March 29, 2013.
“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 connected with and symbolized by such trademarks.
“Transaction Report” is that certain report of transactions and schedule of collections in the form
attached hereto as Exhibit D.
“Transfer” is defined in Section 7.1.
“UBS Loan” is defined in Section 5.12.
“UBS Loan Documents” is defined in Section 5.12.
“Unused Revolving Line Facility Fee” is defined in Section 2.4(d).
“Warrant” is that certain Warrant to Purchase Stock of substantially even date executed by Borrower
in favor of Bank, which Warrant amends, restates and replaces the Warrant delivered by Borrower to
Bank in connection with the Prior LSA.
[Signature page follows.]
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IN
WITNESS WHEREOF, the parties here to have caused this Agreement to be executed
as of the Effective Date.
BORROWER:
CARDIOVASCULAR SYSTEMS, INC.
| By: | /s/ Xxxxxxxx X. Xxxxxxxxx | |||
| Name: | XXXXXXXX X. XXXXXXXXX | |||
| Title: | CFO | |||
BANK:
| SILICON VALLEY BANK |
||||
| By: | /s/ Xxxxx Xxxxxxx | |||
| Name: | Xxxxx Xxxxxxx | |||
| Title: | Relationship Manager | |||
[Signature page to Loan and Security Agreement]
EXHIBIT A
COLLATERAL
The Collateral consists of all of Borrower’s right, title and interest in and to the following
personal property:
All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or
rights to payment of money, leases, license agreements, franchise agreements, General Intangibles
(except as provided below), commercial tort claims, 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), securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and
All Borrower’s 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 does not include any of the following, whether now
owned or hereafter acquired: Auction Rate Securities (UBS).
Pursuant to the terms of a certain negative pledge arrangement with Bank, Borrower has agreed not
to encumber any of its Auction Rate Securities (UBS), except in favor of UBS Bank USA or its
Affiliates to secure the UBS Loans.
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