Exhibit 10.1

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated and effective as of
August 2, 2018 (the “Effective Date”) between SILICON VALLEY BANK, a California
corporation (“Bank”), and FLUIDIGM CORPORATION, a Delaware corporation
(“Borrower”), provides the terms on which Bank shall lend to Borrower and
Borrower shall repay Bank. The parties agree as follows:

 

1                     ACCOUNTING AND OTHER TERMS

 

Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP, provided,
however, that if at any time any change in GAAP would affect the computation of
any covenant or requirement set forth in any Loan Document, and either Borrower
or Lender shall so request, Borrower and Lender shall negotiate in good faith to
amend such covenant or requirement to preserve the original intent thereof in
light of such change in GAAP; provided, further, that, until so amended, (i)
such covenant or requirement shall continue to be computed in accordance with
GAAP prior to such change therein and (ii) Borrower shall provide Lender
financial statements and other documents required under this Agreement or as
reasonably requested hereunder setting forth a reconciliation between
calculations of such ratio or requirement made before and after giving effect to
such change in GAAP; provided, further, that (x) all obligations of any Person
that are or would have been treated as operating leases for purposes of GAAP
prior to the issuance by the Financial Accounting Standards Board on February
25, 2016 of an Accounting Standards Update (the “ASU”) shall continue to be
accounted for as operating leases for purposes of all financial definitions,
calculations and covenants for purpose of this Agreement (whether or not such
operating lease obligations were in effect on such date) notwithstanding the
fact that such obligations are required in accordance with the ASU (on a
prospective or retroactive basis or otherwise) to be treated as capitalized
lease obligations in accordance with GAAP. Notwithstanding the foregoing, all
financial covenant (if any) and other financial calculations shall be computed
with respect to Borrower only, and not on a consolidated basis. Notwithstanding
any terms in this Agreement to the contrary, for purposes of any financial
covenant (if any) and other financial calculations in this Agreement (other than
for purposes of updating the Borrowing Base) which are made in whole or in part
based upon the Availability Amount as of the last day of a particular month,
calculations relying on information from a Borrowing Base Report shall be
derived from the Borrowing Base Report delivered within seven (7) days of month
end pursuant to Section 6.2(a) (and not, for clarity, any more recent Borrowing
Base Report delivered after such period), and the actual delivery date of such
Borrowing Base Report shall be deemed to be the last day of the applicable
month. 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.

 

2.2                Revolving Line.

 

(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 under the Revolving Line may be repaid
and, prior to the Revolving Line Maturity Date, reborrowed, subject to the
applicable terms and conditions precedent herein.

 

(b)                 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.

 

2.3                Overadvances. If, at any time, the outstanding principal
amount of any Advances exceeds the lesser of either the Revolving Line or the
Borrowing Base, Borrower shall immediately pay to Bank in cash the amount of
such excess (such excess, the “Overadvance”). Without limiting Borrower’s
obligation to repay Bank any Overadvance, Borrower agrees to pay Bank interest
on the outstanding amount of any Overadvance, on demand, at a per annum rate
equal to the rate that is otherwise applicable to Advances plus five percent
(5.0%).

 

 

 

2.4                Payment of Interest on the Credit Extensions.

 

(a)                 Interest Rate. Subject to Section 2.4(b), the principal
amount outstanding under the Revolving Line shall accrue interest at the greater
of (i) a floating per annum rate equal to one half of one percentage point
(0.50%) above the Prime Rate or (ii) a fixed per annum rate equal to five and
one half percentage points (5.50%) which interest shall be payable monthly in
accordance with Section 2.4(d) below.

 

(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 percent (5.0%) above the rate that is otherwise
applicable thereto (the “Default Rate”). 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 2.4(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.

 

(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)                 Payment; Interest Computation. Interest is payable monthly
on the Payment Date of each month and shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed. 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.

 

2.5                Fees. Borrower shall pay to Bank:

 

(a)                 Revolving Line Commitment Fee. A fully earned,
non-refundable commitment fee of One Hundred Twelve Thousand Five Hundred
Dollars ($112,500) (the “Revolving Line Commitment Fee”) on (i) the Effective
Date and (ii) the earliest of (i) the first anniversary of the Effective Date,
(ii) the date on which Borrower terminates this Agreement or (iii) the
occurrence and continuance of an Event of Default;

 

(b)                 Termination Fee. Upon termination of this Agreement or the
termination of the Revolving Line for any reason prior to the Revolving Line
Maturity Date, in addition to the payment of any other amounts then-owing, a
termination fee in an amount equal to (i) two percent (2.00%) of the Revolving
Line if such termination occurs prior to the first anniversary of the Effective
Date, or (ii) one percent (1.00%) of the Revolving Line if such termination
occurs on or at any time after the first anniversary of the Effective Date (the
“Termination Fee”), provided that the Termination Fee shall not be charged if
the credit facility hereunder is replaced with a new facility from Bank;

 

(c)                 Unused Revolving Line Facility Fee. Payable quarterly in
arrears on the last day of each calendar quarter occurring thereafter prior to
the Revolving Line Maturity Date, and on the Revolving Line Maturity Date, a fee
(the “Unused Revolving Line Facility Fee”) in an amount equal to three quarters
of one percent (0.75%) per annum of the average unused portion of the Revolving
Line, as determined by Bank, computed on the basis of a year with the applicable
number of days as set forth in Section 2.4(d). The unused portion of the
Revolving Line, for purposes of this calculation, shall be calculated on a
calendar year basis and shall equal the difference between (i) the Revolving
Line, and (ii) the average for the period of the daily closing balance of the
Revolving Line outstanding;

 

(d)                 Good Faith Deposit. Borrower has paid to Bank a deposit of
Twenty-Five Thousand Dollars ($25,000) (the “Good Faith Deposit”) to initiate
Bank’s due diligence review process, which Good Faith Deposit shall be used to
pay Bank Expenses as of the Effective Date. If any amount of the Good Faith
Deposit is remaining following the payment of Bank Expenses on the Effective
Date, then such remaining amount shall be returned to Borrower.

 

 

 

(e)                 Bank Expenses. All Bank Expenses (including reasonable
attorneys’ fees and expenses for documentation and negotiation of this
Agreement) incurred through and after the Effective Date, when due (or, if no
stated due date, upon demand by Bank).

 

(f)                  Fees Fully Earned. Unless otherwise provided in this
Agreement or in a separate writing by Bank, Borrower shall not be entitled to
any credit, rebate, or repayment of any fees earned by Bank pursuant to this
Agreement notwithstanding any termination of this Agreement or the suspension or
termination of Bank’s obligation to make loans and advances hereunder. Bank may
deduct amounts owing by Borrower under the clauses of this Section 2.5 pursuant
to the terms of Section 2.6(c). Bank shall provide Borrower written notice of
deductions made from the Designated Deposit Account pursuant to the terms of the
clauses of this Section 2.5.

 

2.6                Payments; Application of Payments; Debit of Accounts.

 

(a)                 All payments to be made by Borrower under any Loan Document
shall be made in immediately available funds in 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)                 Bank has the exclusive right to determine the order and
manner in which all payments with respect to the Obligations may be applied.
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.

 

(c)                 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.

 

2.7                Withholding. Payments received by Bank from Borrower under
this Agreement will be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, duties, deductions, withholdings,
assessments, fees or other charges imposed by any Governmental Authority
(including any interest, additions to tax or penalties applicable thereto).
Specifically, however, if at any time any Governmental Authority, applicable
law, regulation or international agreement requires Borrower to make any
withholding or deduction from any such payment or other sum payable hereunder to
Bank, Borrower hereby covenants and agrees that the amount due from Borrower
with respect to such payment or other sum payable hereunder will be increased to
the extent necessary to ensure that, after the making of such required
withholding or deduction, Bank receives a net sum equal to the sum which it
would have received had no withholding or deduction been required, and Borrower
shall pay the full amount withheld or deducted to the relevant Governmental
Authority. Borrower will, upon request, furnish Bank with proof reasonably
satisfactory to Bank indicating that Borrower has made such withholding payment;
provided, however, that Borrower need not make any withholding payment if the
amount or validity of such withholding payment is contested in good faith by
appropriate and timely proceedings and as to which payment in full is bonded or
reserved against by Borrower. The agreements and obligations of Borrower
contained in this Section 2.7 shall survive the termination of this Agreement.

 

3                     CONDITIONS OF LOANS

 

3.1                Conditions Precedent to Initial Credit Extension. Bank’s
obligation to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, such documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate, including, without limitation:

 

 

 

(a)                 duly executed original signatures to the Loan Documents;

 

(b)                 the Operating Documents and long-form good standing
certificates of Borrower certified by the Secretary of State (or equivalent
agency) of Borrower’s jurisdiction of organization or formation and each
jurisdiction in which Borrower is qualified to conduct business, each as of a
date no earlier than thirty (30) days prior to the Effective Date;

 

(c)                 a secretary’s certificate of Borrower with respect to such
Borrower’s Operating Documents, incumbency, specimen signatures and resolutions
authorizing the execution and delivery of this Agreement and the other Loan
Documents to which it is a party;

 

(d)                 duly executed original signatures to the completed Borrowing
Resolutions for Borrower;

 

(e)                 certified copies, dated as of a recent date, of financing
statement searches, as Bank may 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;

 

(f)                  the Perfection Certificate of Borrower, together with the
duly executed original signature thereto;

 

(g)                 evidence satisfactory to Bank that the insurance policies
and endorsements required by Section 6.7 hereof are in full force and effect,
together with appropriate evidence showing lender loss payable and/or additional
insured clauses or endorsements in favor of Bank;

 

(h)                 the completion of the Initial Audit;

 

(i)                   each of the items set forth in Sections 3.3(b), (c), (d)
and (e) below;

 

(j)                  a completed Borrowing Base Report (and any schedules
related thereto and including any other information requested by Bank with
respect to Borrower’s Accounts); and

 

(k)                 payment of the fees and Bank Expenses then due as specified
in Section 2.5 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:

 

(a)                 timely receipt of the Credit Extension request and any
materials and documents required by Section 3.4;

 

(b)                 the representations and warranties in this Agreement shall
be true, accurate, and complete in all material respects on the date of the
proposed Credit Extension and/or of the 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, accurate, and
complete 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)                 Bank determines to its satisfaction that there has not been
a Material Adverse Change.

 

 

 

3.3                Covenant to Deliver.

 

(a)       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 the making of any Credit Extension in the
absence of a required item shall be in Bank’s sole discretion.

 

(b) As soon as possible, but in any event not later than forty-five (45) days
after the Effective Date, Borrower shall deliver to Bank a landlord’s consent in
favor of Bank for Borrower’s leased location at 7000 Shoreline Court, Suite 100,
San Francisco, CA 94080, by the respective landlord thereof, together with the
duly executed original signatures thereto.

 

(c) As soon as possible, but in any event not later than forty-five (45) days
after the Effective Date, Borrower shall deliver to Bank a bailee’s waiver in
favor of Bank for each location where Borrower maintains property with a third
party, by each such third party, together with the duly executed original
signatures thereto. For the avoidance of doubt, only Inventory stored at a
location that is subject to a landlord consent or bailee waiver in favor of Bank
shall be considered Eligible Inventory.

 

(d)       As soon as possible, but in any event not later than thirty (30) days
after the Effective Date, Bank shall have received duly executed original
signatures to the Control Agreement(s) entered into for the benefit of Bank with
respect to the Bank of America Lockbox Accounts.

 

(e)       Borrower shall transfer cash from any securities or any other
investment property held at Morgan Stanley that mature or are otherwise
exchanged for cash no later than the earlier of five (5) Business Days after
such maturity or exchange or (ii) September 26, 2018 to Bank or Bank’s
Affiliates.

 

3.4                Procedures for Borrowing. 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 (via an individual duly authorized by
an Administrator) shall notify Bank (which notice shall be irrevocable) by
electronic mail by 12:00 p.m. Pacific time on the Funding Date of the Advance.
Such notice shall be made by Borrower through Bank’s online banking program,
provided, however, if Borrower is not utilizing Bank’s online banking program,
then such notice shall be in a written format acceptable to Bank that is
executed by an Authorized Signer. Bank shall have received satisfactory evidence
that the Board has approved that such Authorized Signer may provide such notices
and request Advances. In connection with any such notification, Borrower must
promptly deliver to Bank by electronic mail or through Bank’s online banking
program such reports and information, including without limitation, sales
journals, cash receipts journals, accounts receivable aging reports, as Bank may
request in its sole discretion. Bank shall credit proceeds of an Advance to the
Designated Deposit Account. Bank may make Advances under this Agreement based on
instructions from an Authorized Signer or without instructions if the Advances
are necessary to meet Obligations which have become due.

 

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 acknowledges that it previously has entered, and/or may in the future
enter, into Bank Services Agreements with Bank. Regardless of the terms of any
Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank
thereunder shall be deemed to be Obligations hereunder and that it is the intent
of Borrower and Bank to have all such Obligations secured by the first priority
perfected security interest in the Collateral granted herein (subject only to
Permitted Liens) and provided further that Permitted Liens which by operation of
law have superior priority to Bank’s Lien in this Agreement are permitted to be
senior to Bank’s Lien.

 

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 the sole cost and expense of
Borrower, release its Liens in the Collateral and all rights therein shall
revert to Borrower. In the event (x) all Obligations (other than inchoate
indemnity obligations), except for Bank Services, are satisfied in full, and (y)
this Agreement is terminated, Bank shall terminate the security interest granted
herein upon Borrower providing cash collateral acceptable to Bank in its good
faith business judgment for Bank Services, if any. In the event such Bank
Services consist of outstanding Letters of Credit, Borrower shall provide to
Bank cash collateral in an amount equal to (x) if such Letters of Credit are
denominated in Dollars, then at least one hundred five percent (105.0%); and (y)
if such Letters of Credit are denominated in a Foreign Currency, then at least
one hundred ten percent (110.0%), 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 business judgment), to
secure all of the Obligations relating to such Letters of Credit.

 

 

 

4.2                Priority of Security Interest. 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). 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.

 

4.3                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. Such financing statements may indicate the Collateral as “all
assets of the Debtor” or words of similar effect, or as being of an equal or
lesser scope, or with greater detail, all in Bank’s discretion.

 

5                     REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants as follows:

 

5.1                Due Organization, Authorization; Power and Authority.
Borrower is duly existing and in good standing as a Registered Organization 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 have a material adverse effect on
Borrower’s business. In connection with this Agreement, Borrower has delivered
to Bank a completed certificate signed by Borrower entitled “Perfection
Certificate” (the “Perfection Certificate”). Borrower represents and warrants to
Bank that, except as may have been updated by a notification to Bank pursuant to
Section 7.2, (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; 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) conflict with, contravene, constitute a default
or breach under, or result in or permit the termination or acceleration of, any
material agreement by which Borrower is bound. Borrower is not in default under
any agreement to which it is a party or by which it is bound in which the
default could reasonably be expected to have a material adverse effect on
Borrower’s business.

 

 

 

5.2                Collateral. Borrower has good title to, rights in, and the
power to transfer each item of the Collateral upon which it purports to grant a
Lien hereunder, free and clear of any and all Liens except Permitted Liens.
Borrower has no Collateral Accounts at or with any bank or financial institution
other than Bank or Bank’s Affiliates except for the Collateral Accounts
described in the Perfection Certificate delivered to Bank in connection herewith
and which Borrower has taken such actions as are necessary to give Bank a
perfected security interest therein, pursuant to the terms of Section 6.8(b).
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.

 

All Inventory is in all material respects of good and marketable quality, free
from material defects.

 

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) Intellectual Property licensed to
Borrower. 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 listed on the Perfection Certificate, or as notified to Bank pursuant
to Section 6.10, 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 Eligible 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 no knowledge of any
actual or imminent Insolvency Proceeding of any Account Debtor whose accounts
are Eligible Accounts in any Borrowing Base Report. To the best of Borrower’s
knowledge, all signatures and endorsements on all documents, instruments, and
agreements relating to all Eligible Accounts are genuine, and all such
documents, instruments and agreements are legally enforceable in accordance with
their terms.

 

(c)                 For any item of Inventory consisting of Eligible Inventory
in any Borrowing Base Report, such Inventory (i) consists of finished goods, in
good, new, and salable condition, which is not perishable, returned, consigned,
obsolete, not sellable, 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
in the United States at the locations identified by Borrower in the Perfection
Certificate where it maintains Inventory and subject to a landlord waiver,
bailee agreement or similar collateral access agreement in favor of Bank.

 

 

 

5.4                Litigation. Except as set forth in the Perfection
Certificate, there are no actions or proceedings pending or, to the knowledge of
any Responsible Officer, threatened in writing by or against Borrower or any of
its Subsidiaries that could, individually or in the aggregate, reasonably be
expected to result in expenses to Borrower of more than One Million Dollars
($1,000,000).

 

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 consolidated
assets (including goodwill minus disposition costs) exceeds the fair value of
Borrower’s 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 (a) has complied
in all material respects with all Requirements of Law, and (b) has not violated
any Requirements of Law the violation of which could reasonably be expected to
have a material adverse effect on its business. 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
in compliance with all applicable laws. Borrower and each of its Subsidiaries
have obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all Governmental
Authorities that are necessary to continue their respective businesses as
currently conducted.

 

5.8                Subsidiaries; Investments. Borrower does not own any stock,
partnership, or other ownership interest or other equity securities 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 except (a) to the extent such taxes are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, so long as such reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall have been made therefor
or (b) if such taxes, assessments, deposits and contributions do not,
individually or in the aggregate, exceed Fifty Thousand Dollars ($50,000).

 

To the extent Borrower defers payment of any contested taxes, Borrower shall (i)
notify Bank in writing of the commencement of, and any material development in,
the proceedings, and (ii) post bonds or take 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            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
qualification, knowledge or awareness means the actual knowledge, after
reasonable investigation, of any Responsible Officer.

 

6                     AFFIRMATIVE COVENANTS

 

Borrower shall do all of the following:

 

6.1                Government Compliance.

 

(a)                 Except as permitted by Section 7.3, maintain its and all its
Subsidiaries’ legal existence and good standing (or its foreign equivalent, if
any) in their respective jurisdictions of formation and maintain qualification
in each jurisdiction in which the failure to so qualify would reasonably be
expected to have a material adverse effect on Borrower’s business or operations.
Borrower shall comply, and have each Subsidiary comply, in all material
respects, with all laws, ordinances and regulations to which it is subject,
noncompliance with which could reasonably be expected to have a material adverse
effect on Borrower’s business.

 

(b)                 Obtain all of the Governmental Approvals necessary for the
performance by Borrower of its obligations under the Loan Documents to which it
is a party and the grant of a security interest by Borrower to Bank in the
Collateral. Borrower shall promptly provide copies of any such obtained
Governmental Approvals to Bank.

 

6.2                Financial Statements, Reports, Certificates. Provide Bank
with the following:

 

(a)                 a Borrowing Base Report (and any schedules related thereto
and including any other information requested by Bank with respect to Borrower’s
Accounts) (i) with each request for an Advance, and (ii) within seven (7) days
after the end of each month (provided however that if such seventh day is not a
Business Day, then such Borrowing Base Report shall be delivered on next
Business Day); provided however, upon the request of Bank, Borrower shall
deliver to Bank a Borrowing Base Report no later than Friday of each week;

 

(b)                 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 (C) monthly reconciliations of accounts
receivable agings (aged by invoice date) and general ledger, and (D) monthly
perpetual inventory reports for Inventory consisting of finished products valued
on a first-in, first-out basis at the lower of cost or market (in accordance
with GAAP) or such other inventory reports as are requested by Bank in its good
faith business judgment;

 

(c)                 as soon as available, but no later than thirty (30) days
after the last day of each month, a company prepared consolidated balance sheet
and income statement covering Borrower’s and each of its Subsidiary’s operations
for such month in a form acceptable to Bank (the “Monthly Financial
Statements”);

 

(d)                 within thirty (30) days after the last day of each month and
together with the Monthly Financial Statements, a duly completed 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 such other information as Bank may reasonably request;

 

(e)                 within thirty (30) days of the end of each fiscal year of
Borrower, and within seven (7) days of any updates or amendments thereto, (A)
consolidated annual operating budgets (including income statements, balance
sheets and cash flow statements, by quarter) for the then-current fiscal year of
Borrower and its Subsidiaries and (B) annual financial projections for the
then-current fiscal year (on a quarterly basis), in each case as approved by the
Board, together with any related business forecasts used in the preparation of
such annual financial projections;

 

 

 

(f)                  within five (5) days of filing, copies of all periodic and
other reports, proxy statements and other materials filed by Borrower and/or any
Guarantor with the SEC, any Governmental Authority succeeding to any or all of
the functions of the SEC or with any national securities exchange, or
distributed to its shareholders, as the case may be. Documents required to be
delivered pursuant to the terms hereof (to the extent any such documents are
included in materials otherwise filed with the SEC) may be delivered
electronically and if so delivered, shall be deemed to have been delivered on
the date on which Borrower posts such documents, or provides a link thereto, on
Borrower’s website on the internet at Borrower’s website address; provided,
however, Borrower shall promptly notify Bank in writing (which may be by
electronic mail) of the posting of any such documents;

 

(g)                 prompt report of any legal actions pending or threatened in
writing against Borrower or any of its Subsidiaries that could reasonably be
expected to result in damages or costs to Borrower or any of its Subsidiaries
of, individually or in the aggregate, One Million Dollars ($1,000,000) or more;

 

(h)                 within thirty (30) days of the end of each calendar quarter,
an update on the status of any litigation disclosed on the Perfection
Certificate along with such other information relating thereto as reasonably
requested by Bank;

 

(i)                   prompt written notice of any changes to the beneficial
ownership information set out in Section 13 to the Perfection Certificate.
Borrower understands and acknowledges that Bank relies on such true, accurate
and up-to-date beneficial ownership information to meet Bank’s regulatory
obligations to obtain, verify and record information about the beneficial owners
of its legal entity customers; and

 

(j)                  promptly, from time to time, such other information
regarding Borrower or compliance with the terms of any Loan Documents as
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 indorsements, and
copies of all credit memos.

 

(b)                 Disputes. Borrower shall promptly notify Bank of all
disputes or claims relating to Accounts (i) that are included in the Borrowing
Base, where the amount at stake is in excess of Fifty Thousand Dollars ($50,000)
or (ii) that are not included in the Borrowing Base where the amount at stake is
in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate. 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; (ii) no Event of Default has
occurred and is continuing; and (iii) after taking into account all such
discounts, settlements and forgiveness, the total outstanding Advances will not
exceed the lesser of the Revolving Line or the Borrowing Base.

 

(c)                 Collection of Accounts. Borrower shall direct Account
Debtors to deliver or transmit all proceeds of Accounts into either (i) the Bank
of America Lockbox Accounts, (ii) a lockbox account at Bank, or (iii) via
electronic deposit capture into a “blocked account” as specified by Bank (either
such account specified in clauses (ii) and (iii) above, the “Cash Collateral
Account”). Whether or not an Event of Default has occurred and is continuing,
Borrower shall immediately deliver all payments on and proceeds of Accounts to
the Cash Collateral Account. All collections into the Bank of America Lockbox
Accounts shall be transferred to the Cash Collateral Account on a daily basis.
Subject to Bank’s right to maintain a reserve pursuant to Section 6.3(d), all
amounts received in the Cash Collateral Account shall be (i) when a Streamline
Period is not in effect, applied to immediately reduce the Obligations under the
Revolving Line (unless Bank, in its sole discretion, elects not to so apply such
amounts), or (ii) when a Streamline Period is in effect, transferred on a daily
basis to Borrower’s operating account with Bank. Borrower hereby authorizes Bank
to transfer to the Cash Collateral Account any amounts that Bank reasonably
determines are proceeds of the Accounts (provided that Bank is under no
obligation to do so and this allowance shall in no event relieve Borrower of its
obligations hereunder).

 

 

 

(d)                 Reserves. Notwithstanding any terms in this Agreement to the
contrary, at times when an Event of Default exists, Bank may hold any proceeds
of the Accounts and any amounts in the Cash Collateral Account that are not
applied to the Obligations pursuant to Section 6.3(c) above (including amounts
otherwise required to be transferred to Borrower’s operating account with Bank
when a Streamline Period is in effect) as a reserve to be applied to any
Obligations regardless of whether such Obligations are then due and payable.

 

(e)                 Returns. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in excess of
Five Hundred Thousand Dollars ($500,000) in the aggregate, 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 hold the returned Inventory in trust for Bank,
and immediately notify Bank of the return of the Inventory.

 

(f)                  Verifications; Confirmations; Credit Quality;
Notifications. After the occurrence and during the continuance of an Event of
Default, Bank may, from time to time, (i) verify and confirm 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, and notify any Account Debtor of Bank’s security interest in such
Account and/or (ii) conduct a credit check of any Account Debtor to approve any
such Account Debtor’s credit.

 

(g)                 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 cash 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 (a) prior to an Event of Default, pursuant to the terms of
Section 6.3(c) hereof, and (b) after the occurrence and during the continuance
of an Event of Default, pursuant to the terms of Section 9.4 hereof; provided
that, if no Event of Default has occurred and is continuing, Borrower shall not
be obligated to remit to Bank the proceeds of the sale of worn out or obsolete
Equipment disposed of by Borrower in good faith in an arm’s length transaction
for an aggregate purchase price of Twenty-Five Thousand Dollars ($25,000) or
less (for all such transactions in any fiscal year). Borrower agrees that it
will not commingle proceeds of Collateral with any of Borrower’s other funds or
property, but will hold such proceeds separate and apart from such other funds
and property and in an express trust for Bank. Nothing in this Section 6.4
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 Days’ 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 conducted no more often
than once every twelve (12) months (or more frequently as Bank in its reasonable
discretion determines that conditions warrant) unless an Event of Default has
occurred and is continuing in which case such inspections and audits shall occur
as often as Bank shall determine is necessary. The foregoing inspections and
audits shall be conducted at Borrower’s expense and the charge therefor shall be
One Thousand Dollars ($1,000) 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 eight (8) days in advance, and Borrower cancels or seeks to or reschedules
the audit with less than eight (8) days written notice to Bank, then (without
limiting any of Bank’s rights or remedies) Borrower shall pay Bank a fee of Two
Thousand Dollars ($2,000) 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.

 

(a)                 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
financially sound and reputable insurance companies that are not Affiliates of
Borrower, and in amounts that are satisfactory to Bank. All property policies
shall have a lender’s loss payable endorsement showing Bank as lender loss
payee. All liability policies shall show, or have endorsements showing, Bank as
an additional insured. Bank shall be named as lender loss payee and/or
additional insured with respect to any such insurance providing coverage in
respect of any Collateral.

 

(b)                 Ensure that proceeds payable under any property policy are,
at Bank’s option, payable to Bank on account of the Obligations. Notwithstanding
the foregoing, 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 Five Hundred Thousand Dollars ($500,000) toward the replacement or repair
of destroyed or damaged property or the purchase of other property useful to
Borrower’s business; provided that any such replaced or repaired property or
other property shall be deemed Collateral in which Bank has been granted a first
priority security interest.

 

(c)                 At Bank’s request, Borrower shall deliver certified copies
of insurance policies and evidence of all premium payments. Each provider of any
such insurance required under this Section 6.7 shall agree, by endorsement upon
the policy or policies issued by it or by independent instruments furnished to
Bank, that it will give Bank thirty (30) days prior written notice before any
such policy or policies shall be materially altered or canceled. 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                Accounts.

 

(a)                 Maintain its and all of its Subsidiaries’ operating and
other deposit accounts, the Cash Collateral Account and excess cash with Bank
and Bank’s Affiliates; provided, however, notwithstanding the foregoing, (I)
Borrower may maintain (a) subject to a Control Agreement entered into for the
benefit of Bank, its existing collections accounts at Bank of America listed on
the Perfection Certificate delivered by Borrower to Bank on or prior to the
Effective Date (the “Bank of America Lockbox Accounts”) so long as such accounts
are blocked and all amounts in such accounts are swept to the Cash Collateral
Account on a daily basis, (b) subject to a Control Agreement entered into for
the benefit of Bank, depository accounts (other than the Bank of America Payroll
Account) at Bank of America (the “Bank of America Deposit Accounts”) so long as
the aggregate amount of cash in such accounts does not, at any time, exceed
Three Million Five Hundred Thousand Dollars ($3,500,000) in the aggregate, (c)
its existing payroll account at Bank of America listed on the Perfection
Certificate delivered by Borrower to Bank on or prior to the Effective Date (the
“Bank of America Payroll Account”) so long as the aggregate amount of cash in
such accounts does not, at any time, exceed an amount equal to one hundred
percent (100%) of the next payroll (including but not limited to any bonuses
payable), (d) for a period of time not to exceed twelve (12) months following
the Effective Date, its existing account at Wells Fargo Bank listed on the
Perfection Certificate delivered by Borrower to Bank on or prior to the
Effective Date (the “Wells Fargo Account”) so long as the aggregate amount of
cash in such account does not, at any time, exceed Four Hundred Thousand Dollars
($400,000) in the aggregate, and (e) for a period of time not to exceed (12)
months following the Effective Date, its existing account at Bridge Bank listed
on the Perfection Certificate delivered by Borrower to Bank on or prior to the
Effective Date (the “Bridge Bank Account”) so long as the aggregate amount of
cash in such account does not, at any time, exceed Sixty Thousand Dollars
($60,000) in the aggregate and (II) Borrower’s Foreign Subsidiaries may maintain
accounts with banks outside of the United States so long as the aggregate amount
of cash in such account does not, at any time, exceed the lesser of (i) Eight
Million Dollars ($8,000,000) or (ii) thirty percent (30%) of all of Borrower’s
and its Subsidiaries’ cash in the aggregate. In addition, Borrower (i) shall use
its best efforts to use Bank Services provided such Bank Services meet
Borrower’s ordinary course of business needs and (ii) Borrower shall maintain
all its credit cards with Bank.

 

 

 

(b)                 In addition to and without limiting the restrictions in (a),
Borrower shall 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. 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 which Control
Agreement may not be terminated without the prior written consent of Bank. The
provisions of the previous sentence shall not apply to (i) the Bridge Bank
Account, (ii) the Wells Fargo Account or (iii) deposit accounts exclusively used
for payroll, payroll taxes, and other employee wage and benefit payments to or
for the benefit of Borrower’s employees and identified to Bank by Borrower as
such (including but not limited to the Bank of America Payroll Account).

 

6.9                Intentionally Omitted.

 

6.10            Protection of Intellectual Property Rights.

 

(a)                 (i) Protect, defend and maintain the validity and
enforceability of its Intellectual Property material to Borrower’s business;
(ii) promptly advise Bank in writing of material infringements or any other
event that could reasonably be expected to materially and adversely affect the
value of its Intellectual Property material to Borrower’s business; 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 on the next Compliance
Certificate required to be delivered hereunder 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.

 

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            Online Banking.

 

(a)                 Utilize Bank’s online banking platform for all matters
requested by Bank which shall include, without limitation (and without request
by Bank for the following matters), uploading information pertaining to Accounts
and Account Debtors, requesting approval for exceptions, requesting Credit
Extensions, and uploading financial statements and other reports required to be
delivered by this Agreement (including, without limitation, those described in
Section 6.2 of this Agreement).

 

(b)                 Comply with the terms of Bank’s Online Banking Agreement as
in effect from time to time and ensure that all persons utilizing Bank’s online
banking platform are duly authorized to do so by an Administrator. Bank shall be
entitled to assume the authenticity, accuracy and completeness on any
information, instruction or request for a Credit Extension submitted via Bank’s
online banking platform and to further assume that any submissions or requests
made via Bank’s online banking platform have been duly authorized by an
Administrator.

 

 

 

6.13            Formation or Acquisition of Subsidiaries. Notwithstanding and
without limiting the negative covenants contained in Sections 7.3 and 7.7
hereof, at the time that Borrower or any Guarantor forms any direct or indirect
Subsidiary or acquires any direct or indirect Subsidiary after the Effective
Date, Borrower and such Guarantor shall (a) with respect to Domestic
Subsidiaries only, cause such new Domestic Subsidiary to provide to Bank a
joinder to this Agreement to become a co-borrower hereunder or a Guaranty to
become a Guarantor hereunder, together with such appropriate financing
statements and/or Control Agreements, all in form and substance satisfactory to
Bank (including being sufficient to grant Bank a first priority Lien (subject to
Permitted Liens) in and to the assets of such newly formed or acquired Domestic
Subsidiary), (b) provide to Bank appropriate certificates and powers and
financing statements, pledging all of the direct or beneficial ownership
interest in such new Subsidiary, in form and substance satisfactory to Bank,
provided, however, that Borrower shall not be required to pledge more than
sixty-five percent (65%) of the direct or beneficial ownership interest of any
Foreign Subsidiary; and (c) provide to Bank all other documentation in form and
substance satisfactory to Bank, including one or more opinions of counsel
satisfactory to Bank, which in its opinion is appropriate with respect to the
execution and delivery of the applicable documentation referred to above. Any
document, agreement, or instrument executed or issued pursuant to this Section
6.13 shall be a Loan Document.

 

6.14            Further Assurances. 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. Deliver to Bank,
within ten (10) days after the same are sent or received, copies of all
correspondence, reports, documents and other filings with any Governmental
Authority regarding compliance with or maintenance of Governmental Approvals or
Requirements of Law or that could reasonably be expected to have a material
adverse effect on any of the Governmental Approvals or otherwise on the
operations of Borrower or any of its Subsidiaries.

 

7                     NEGATIVE COVENANTS

 

Borrower shall not do any of the following without Bank’s prior written consent:

 

7.1                Dispositions. Convey, sell, lease, transfer, assign, 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 Transfers (a) of Inventory in the ordinary course of business; (b) of
worn-out or obsolete Equipment that is, in the reasonable judgment of Borrower,
no longer economically practicable to maintain or useful in the ordinary course
of business of Borrower; (c) consisting of Permitted Liens and Permitted
Investments; (d) consisting of the sale or issuance of any stock of Borrower
permitted under Section 7.2 of this Agreement; (e) dispositions of Intellectual
Property that are permitted pursuant to Section 6.10(a); (f) consisting of
Borrower’s use or transfer of money or Cash Equivalents in a manner that is not
prohibited by the terms of this Agreement or the other Loan Documents; (g) of
non-exclusive licenses for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business and licenses that could not
result in a legal transfer of title of the licensed property but that may be
exclusive in respects other than territory and that may be exclusive as to
territory only as to discrete geographical areas outside of the United States;
and (h) of other property with a book value not to exceed Five Hundred Thousand
Dollars ($500,000) in the aggregate in any fiscal year.

 

7.2                Changes in Business, Management, Control, or Business
Locations. (a) Engage in or permit any of its Subsidiaries to engage in any
business other than the businesses currently engaged in by Borrower and such
Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or
dissolve; (c) fail to provide notice to Bank of any Key Person departing from or
ceasing to be employed by Borrower within five (5) days after his or her
departure from Borrower; or (d) permit or suffer any Change in Control.

 

Borrower shall not, without at least thirty (30) days prior written notice to
Bank: (1) add any new offices or business locations, including warehouses
(unless such new offices or business locations contain less than Five Hundred
Thousand Dollars ($500,000) in Borrower’s assets or property) or deliver any
portion of the Collateral valued, individually or in the aggregate, in excess of
Five Hundred Thousand Dollars ($500,000) 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 any organizational number (if
any) assigned by its jurisdiction of organization. If Borrower intends to add
any new offices or business locations, including warehouses, containing in
excess of Five Hundred Thousand Dollars ($500,000) of Borrower's assets or
property, then Borrower will first receive the written consent of Bank, and the
landlord of any such new offices or business locations, including warehouses,
shall execute and deliver a landlord consent in form and substance satisfactory
to Bank. If Borrower intends to deliver any portion of the Collateral valued,
individually or in the aggregate, in excess of Five Hundred Thousand Dollars
($500,000) 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.

 

 

 

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 (including, without limitation, by
the formation of any Subsidiary). Notwithstanding the foregoing, (a) a
Subsidiary may merge or consolidate into another Subsidiary or into Borrower and
(b) Borrower may consummate Permitted Acquisitions.

 

7.4                Indebtedness. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.

 

7.5                Encumbrance. Create, incur, allow, or suffer any Lien on any
of its property, or assign or convey any right to receive income, including the
sale of any Accounts, or permit any of its Subsidiaries to do so, except for
Permitted Liens, permit any Collateral not to be subject to the first priority
security interest granted herein (which Collateral may be subject to Permitted
Liens), 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 (i) in Section 7.1 hereof, (ii) by the definition of
“Permitted Liens” herein and (iii) restrictions in merger or acquisition
agreements, provided that such covenants do not prohibit Borrower from granting
a security interest in such Borrower’s property in favor of Bank and provided
further that the counter-parties to such covenants are not permitted to receive
a security interest in Borrower’s property.

 

7.6                Maintenance of Collateral Accounts. Maintain any Collateral
Account except pursuant to the terms of Section 6.8(b) hereof.

 

7.7                Distributions; Investments. (a) Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital stock of
Borrower provided that Borrower may (i) convert any of its convertible
securities into other securities pursuant to the terms of such convertible
securities or otherwise in exchange thereof, (ii) pay dividends solely in common
stock; (iii) pay cash in lieu of fractional shares in connection with any
distribution, payment or redemption permitted pursuant to this Section 7.7; (iv)
non-cash purchases or withholding of capital stock in connection with the
exercise of stock options or stock appreciation rights by way of cashless
exercise or the vesting of restricted stock units or in connection with the
satisfaction of withholding tax obligations; and (v) other payments,
distributions, redemptions, retirements or purchases in an aggregate amount not
to exceed Five Hundred Thousand Dollars ($500,000) in any fiscal year so long as
an Event of Default does not exist at the time of any such payment,
distribution, redemption, retirement or purchase and would not exist after
giving effect thereto, or (b) directly or indirectly make any Investment
(including, without limitation, by the formation of any Subsidiary) other than
Permitted Investments, or permit any of its Subsidiaries to do so.

 

7.8                Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower,
except (i) 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, (ii) employee agreements or arrangements, indemnification agreements and
compensation arrangements approved by the Board (or a committee thereof), (iii)
transactions of the type described in and permitted in Section 7.7 and Permitted
Investments and (iv) equity or Subordinated Debt financing transactions with
existing investors that are not otherwise prohibited by this Agreement.

 

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, provide for earlier or greater principal,
interest, or other payments thereon, or adversely affect the subordination
thereof to Obligations owed to Bank.

 

 

 

7.10            Compliance. Become an “investment company” or a company
controlled by an “investment company”, under the Investment Company Act of 1940,
as amended, or undertake as one of its important activities extending credit to
purchase or carry margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System), or use the proceeds of any Credit
Extension for that purpose; fail to meet the minimum funding requirements of
ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA,
to occur; fail to comply with the Federal Fair Labor Standards Act or violate
any other law or regulation, if the violation could reasonably be expected to
have a material adverse effect on Borrower’s business, or permit any of its
Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from
participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any present pension, profit
sharing and deferred compensation plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental agency.

 

8                     EVENTS OF DEFAULT

 

Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:

 

8.1                Payment Default. Borrower fails to (a) make any payment of
principal or interest on any Credit Extension when due, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable (which three (3) Business Day cure period shall not apply to payments
due on the Revolving Line Maturity Date). During the cure period, the failure to
make or pay any payment specified under clause (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, 6.10, 6.12, 6.13, or 6.14 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 fifteen (15) days after
the occurrence thereof; provided, however, that if the default cannot by its
nature be cured within the fifteen (15) day period or cannot after diligent
attempts by Borrower be cured within such fifteen (15) 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 clause (a) above;

 

8.3                Material Adverse Change. A Material Adverse Change occurs;

 

8.4                Attachment; Levy; Restraint on Business.

 

(a)                 (i) The service of process seeking to attach, by trustee or
similar process, any funds of Borrower or of any entity under the control of
Borrower (including a Subsidiary), or (ii) a notice of lien or levy is filed
against any of Borrower’s assets by any Governmental Authority, and the same
under subclauses (i) and (ii) hereof are not, within ten (10) days after the
occurrence thereof, discharged or stayed (whether through the posting of a bond
or otherwise); provided, however, no Credit Extensions shall be made during any
ten (10) day cure period; or

 

(b)                 (i) any material portion of 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 all or
any material part of its business;

 

 

 

8.5                Insolvency. (a) Borrower or any of its Subsidiaries is unable
to pay its debts (including trade debts) as they become due or otherwise becomes
insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency
Proceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of
its Subsidiaries and is not dismissed or stayed within forty five (45) days (but
no Credit Extensions shall be made while any of the conditions described in
clause (a) exist and/or until any Insolvency Proceeding is dismissed);

 

8.6                Other Agreements. There is, under any agreement to which
Borrower or any Guarantor is a party with a third party or parties, (a) any
default resulting in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness in an amount
individually or in the aggregate in excess of Five Hundred Thousand Dollars
($500,000); or (b) any breach or default by Borrower or Guarantor, the result of
which could have a material adverse effect on Borrower’s or any Guarantor’s
business; provided, however, that the Event of Default under this Section 8.6
caused by the occurrence of a breach or 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 breach or default of such cure or waiver of
the breach or 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 business judgment of Bank be materially less advantageous to
Borrower;

 

8.7                Judgments; Penalties. One or more fines, penalties or final
judgments, orders or decrees for the payment of money in an amount, individually
or in the aggregate, of at least Five Hundred Thousand Dollars ($500,000) (not
covered by independent third-party insurance as to which liability has been
accepted by such insurance carrier) shall be rendered against Borrower by any
Governmental Authority, and the same are not, within ten (10) days after the
entry, assessment or issuance thereof, discharged, satisfied, or paid, or after
execution thereof, stayed or bonded pending appeal, or such judgments are not
discharged prior to the expiration of any such stay (provided that no Credit
Extensions will be made prior to the satisfaction, payment, discharge, stay, or
bonding of such fine, penalty, judgment, order or decree);

 

8.8                Misrepresentations. Borrower or any Person acting for
Borrower makes any representation, warranty, or other statement now or later in
this Agreement, any Loan Document or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document, and such
representation, warranty, or other statement is incorrect in any material
respect when made;

 

8.9                Subordinated Debt. Any document, instrument, or agreement
evidencing any Subordinated Debt shall for any reason be revoked or invalidated
or otherwise cease to be in full force and effect, any Person shall be in breach
thereof or contest in any manner the validity or enforceability thereof or deny
that it has any further liability or obligation thereunder, or the Obligations
shall for any reason be subordinated or shall not have the priority contemplated
by this Agreement or any applicable subordination or intercreditor agreement;

 

8.10            Guaranty. (a) Any guaranty of any Obligations terminates or
ceases for any reason to be in full force and effect; (b) any Guarantor does not
perform any obligation or covenant under any guaranty of the Obligations; (c)
any circumstance described in Sections 8.3, 8.4, 8.5, 8.6, 8.7, or 8.8 of this
Agreement occurs with respect to any Guarantor, (d) the death, liquidation,
winding up, or termination of existence of any Guarantor; or (e) (i) a material
impairment in the perfection or priority of Bank’s Lien in the collateral
provided by Guarantor or in the value of such collateral or (ii) a material
adverse change in the general affairs, management, results of operation,
condition (financial or otherwise) or the prospect of repayment of the
Obligations occurs with respect to any Guarantor; or

 

8.11            Governmental Approvals. Any Governmental Approval shall have
been revoked, rescinded, suspended, modified in an adverse manner or not renewed
in the ordinary course for a full term and such decision or such revocation,
rescission, suspension, modification or non-renewal could reasonably be expected
to cause, a Material Adverse Change.

 

 

 

9                     BANK’S RIGHTS AND REMEDIES

 

9.1                Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, 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);

 

(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 at least (A) one hundred five percent (105.0%) of the Dollar Equivalent
of the aggregate face amount of all Letters of Credit denominated in Dollars
remaining undrawn, and (B) one hundred ten percent (110.0%) of the Dollar
Equivalent of the aggregate face amount of all Letters of Credit denominated in
a Foreign Currency remaining undrawn (plus, in each case, 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 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, and notify any Person owing Borrower
money of Bank’s security interest in such funds. Borrower shall collect all
payments in trust for Bank and, if requested by Bank, immediately deliver the
payments to Bank in the form received from the Account Debtor, with proper
endorsements for deposit;

 

(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) 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 9.1, 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 following the occurrence and during
the continuance of an Event of Default, to: (a) endorse Borrower’s name on any
checks, payment instruments, or other forms of payment or security; (b) sign
Borrower’s name on any invoice or bill of lading for any Account or drafts
against Account Debtors; (c) demand, collect, sue, and give releases to any
Account Debtor for monies due, settle and adjust disputes and claims about the
Accounts directly with Account Debtors, and compromise, prosecute, or defend any
action, claim, case, or proceeding about any Collateral (including filing a
claim or voting a claim in any bankruptcy case in Bank’s or Borrower’s name, as
Bank chooses); (d) make, settle, and adjust all claims under Borrower’s
insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance,
security interest, or other 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 Collateral regardless of whether an Event of
Default has occurred until all Obligations (other than inchoate indemnity
obligations, and any other obligations which, by their terms, are to survive the
termination of this Agreement, and any Obligations under Bank Services
Agreements that are cash collateralized in accordance with Section 4.1 of this
Agreement) have been satisfied in full and the Loan Documents have been
terminated. 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, and any other
obligations which, by their terms, are to survive the termination of this
Agreement, and any Obligations under Bank Services Agreements that are cash
collateralized in accordance with Section 4.1 of this Agreement) have been fully
repaid and performed and the Loan Documents have been terminated.

 

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 or which may be required to preserve the Collateral,
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. If an Event of Default
has occurred and is continuing (or at any time on the terms set forth in Section
6.3(c), regardless of whether an Event of Default exists), Bank shall have the
right to apply in any order 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. Bank shall pay any surplus 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, 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, other than
those losses directly caused by Bank’s gross negligence or willful misconduct.

 

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 sent by electronic mail or
facsimile transmission; (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email address indicated
below. Bank or Borrower may change its mailing or electronic mail address or
facsimile number by giving the other party written notice thereof in accordance
with the terms of this Section 10.

 

If to Borrower:  FLUIDIGM CORPORATION    7000 Shoreline Court, Suite 100    San
Francisco, CA 94080    Attn: Vikram Jog, Chief Financial Officer    Email:
vikram.jog@fluidigm.com

 

 

If to Bank:  SILICON VALLEY BANK    505 Howard Street, Suite 300    San
Francisco, CA 94105    Attn: Kristina Peralta, Vice President    Email:
kperalta@svb.com

 

11                 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL
REFERENCE

 

Except as otherwise expressly provided in any of the Loan Documents, 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 Clara 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. Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in,
or subsequently provided by Borrower in accordance with, Section 10 of this
Agreement and that service so made shall be deemed completed upon the earlier to
occur of Borrower’s actual receipt thereof or three (3) days after deposit in
the U.S. mails, proper postage prepaid.

 

TO THE FULLEST 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 Clara 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 Clara 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 Sections 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 Clara
County, 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 California Code of Civil Procedure Section 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.

 

 

 

This Section 11 shall survive the termination of this Agreement.

 

12                 GENERAL PROVISIONS

 

12.1            Termination Prior to Maturity Date; Survival. All covenants,
representations and warranties made in this Agreement shall 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, and any Obligations under Bank Services Agreements that are cash
collateralized in accordance with Section 4.1 of this Agreement) have been
satisfied. So long as Borrower has satisfied the Obligations (other than
inchoate indemnity obligations, and any other obligations which, by their terms,
are to survive the termination of this Agreement, and any Obligations under Bank
Services Agreements that are cash collateralized in accordance with Section 4.1
of this Agreement), this Agreement may be terminated prior to the Revolving Line
Maturity Date by Borrower, effective three (3) Business Days after written
notice of termination is given to Bank, which notice may be conditioned upon the
consummation of a financing or other events and may be revoked by Borrower if
such condition has or will not occur on the proposed termination date. Those
obligations that are expressly specified in this Agreement as surviving this
Agreement’s termination shall continue to survive notwithstanding this
Agreement’s termination.

 

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.

 

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: (i) 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 (ii) all losses or
expenses (including Bank Expenses) in any way suffered, incurred, or paid by
such Indemnified Person as a result of, following from, consequential to, or
arising from transactions between Bank and Borrower (including reasonable
attorneys’ fees and expenses), except for Claims and/or losses directly caused
by such Indemnified Person’s gross negligence or willful misconduct.

 

 

 

This Section 12.3 shall survive until all statutes of limitation with respect to
the Claims, losses, and expenses for which indemnity is given shall have run.

 

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            Correction of Loan Documents. Bank may correct patent errors and
fill in any blanks in the Loan Documents consistent with the agreement of the
parties so long as Bank provides Borrower with written notice of such correction
and allows Borrower at least ten (10) days to object to such correction. In the
event of such objection, such correction shall not be made except by an
amendment signed by both Bank and Borrower.

 

12.7            Amendments in Writing; Waiver; Integration. No purported
amendment or modification of any Loan Document, or waiver, discharge or
termination of any obligation under any Loan Document, shall be enforceable or
admissible unless, and only to the extent, expressly set forth in a writing
signed by the party against which enforcement or admission is sought. Without
limiting the generality of the foregoing, no oral promise or statement, nor any
action, inaction, delay, failure to require performance or course of conduct
shall operate as, or evidence, an amendment, supplement or waiver or have any
other effect on any Loan Document. Any waiver granted shall be limited to the
specific circumstance expressly described in it, and shall not apply to any
subsequent or other circumstance, whether similar or dissimilar, or give rise
to, or evidence, any obligation or commitment to grant any further waiver. The
Loan Documents represent the entire agreement about this subject matter and
supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of the Loan Documents merge into the Loan
Documents.

 

12.8            Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, is an original, and all taken together, constitute
one Agreement.

 

12.9            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 its best efforts to obtain any 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 is
either: (i) in the public domain or in Bank’s possession when disclosed to Bank,
or becomes part of the public domain (other than as a result of its disclosure
by Bank in violation of this Agreement) after disclosure to Bank; or (ii)
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 anonymous forms of confidential information for aggregate
datasets, for analyses or reporting, and for any other uses not expressly
prohibited in writing by Borrower. The provisions of the immediately preceding
sentence shall survive the termination of this Agreement.

 

12.10         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.

 

 

 

12.11         Electronic Execution of Documents. The words “execution,”
“signed,” “signature” and words of like import in any Loan Document shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity and
enforceability as a manually executed signature or the use of a paper-based
recordkeeping systems, as the case may be, to the extent and as provided for in
any applicable law, including, without limitation, any state law based on the
Uniform Electronic Transactions Act.

 

12.12         Right of Setoff. Borrower hereby grants to Bank a Lien and a right
of setoff as security for all Obligations to Bank, whether now existing or
hereafter arising upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
Bank or any entity under the control of Bank (including a subsidiary of Bank) or
in transit to any of them. At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Bank may setoff
the same or any part thereof and apply the same to any liability or Obligation
of Borrower even though unmatured and regardless of the adequacy of any other
collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.

 

12.13         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 person not an express party to this Agreement; or
(c) give any person not an express party to this Agreement any right of
subrogation or action against any party to this Agreement.

 

13                 DEFINITIONS

 

13.1            Definitions. As used in the Loan Documents, the word “shall” is
mandatory, the word “may” is permissive, the word “or” is not exclusive, the
words “includes” and “including” are not limiting, the singular includes the
plural, and numbers denoting amounts that are set off in brackets are negative.
As used in this Agreement, the following capitalized terms have the following
meanings:

 

“Account” is, as to any Person, any “account” of such Person as “account” is
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 such Person.

 

“Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.

 

“Administrator” is an individual that is named:

 

(a)                 as an “Administrator” in the “SVB Online Services” form
completed by Borrower with the authority to determine who will be authorized to
use SVB Online Services (as defined in Bank’s Online Banking Agreement as in
effect from time to time) on behalf of Borrower; and

 

 

 

(b)                 as an Authorized Signer of Borrower in an approval by the
Board.

 

“Advance” or “Advances” means a revolving credit loan (or revolving credit
loans) under the Revolving Line.

 

“Affiliate” is, with respect to any Person, each other 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. For purposes
of the definition of Eligible Accounts, Affiliate shall include a Specified
Affiliate.

 

“Agreement” is defined in the preamble hereof.

 

“Authorized Signer” is any individual listed in Borrower’s Borrowing Resolution
who is authorized to execute the Loan Documents, including making (and executing
if applicable) any Credit Extension request, on behalf of Borrower.

 

“Availability Amount” is (a) the lesser of (i) the Revolving Line or (ii) the
amount available under the Borrowing Base minus (b) the outstanding principal
balance of any Advances.

 

“Bank” is defined in the preamble hereof.

 

“Bank Entities” is defined in Section 12.9.

 

“Bank Expenses” are all audit fees and expenses, costs, and expenses (including
reasonable attorneys’ fees and expenses) for preparing, amending, negotiating,
administering, defending and enforcing the Loan Documents (including, without
limitation, those incurred in connection with appeals or Insolvency Proceedings)
or otherwise incurred with respect to Borrower or any Guarantor.

 

“Bank of America Lockbox Accounts” is defined in Section 6.8(a).

 

“Bank Services” are any products, credit services, and/or financial
accommodations previously, now, or hereafter provided to Borrower or any of its
Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any
letters of credit, cash management services (including, without limitation,
merchant services, direct deposit of payroll, business credit cards, and check
cashing services), interest rate swap arrangements, and foreign exchange
services as any such products or services may be identified in Bank’s various
agreements related thereto (each, a “Bank Services Agreement”).

 

“Bank Services Agreement” is defined in the definition of Bank Services.

 

“Board” is Borrower’s board of directors.

 

“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 eighty-five percent (85%) of Eligible Accounts plus the
least of (i) fifty percent (50%) of Eligible Inventory (valued at the lower of
cost or wholesale fair market value), (ii) Three Million Seven Hundred Fifty
Thousand Dollars ($3,750,000) or (iii) an amount that would represent
twenty-five percent (25%) of the total Availability Amount, all as determined by
Bank from Borrower’s most recent Borrowing Base Report (and as may subsequently
be updated by Bank based upon information received by Bank including, without
limitation, Accounts that are paid and/or billed following the date of the
Borrowing Base Report); provided, however, that Bank has the right to decrease
the foregoing amounts and percentages in its good faith business judgment to
mitigate the impact of events, conditions, contingencies, or risks which may
materially and adversely affect the Collateral or its value. Bank shall use
commercially reasonable efforts to notify Borrower of any such decrease.

 

 

 

“Borrowing Base Report” is that certain report of the value of certain
Collateral in the form specified by Bank to Borrower from time to time.

 

“Borrowing Resolutions” are, with respect to any Person, those resolutions
adopted by such Person’s board of directors (and, if required under the terms of
such Person’s Operating Documents, stockholders) and delivered by such Person to
Bank approving the Loan Documents to which such Person is a party and the
transactions contemplated thereby, together with a certificate executed by its
secretary on behalf of such Person certifying (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 set forth as a part of or attached as
an exhibit to such certificate is a true, correct, and complete copy of the
resolutions then in full force and effect authorizing and ratifying the
execution, delivery, and performance by such Person of the Loan Documents to
which it is a party, (c) the name(s) of the Person(s) authorized to execute the
Loan Documents, including making (and executing if applicable) any Credit
Extension request, 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.

 

“Bridge Bank Account” is defined in Section 6.8(a).

 

“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank
is closed.

 

“Cash Collateral Account” is defined in Section 6.3(c).

 

“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 Moody’s 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.

 

“CFC” means a “controlled foreign corporation” within the meaning of Section 957
of the Internal Revenue Code.

 

“Change in Control” means (a) at any time, any “person” or “group” (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act), shall become,
or obtain rights (whether by means of warrants, options or otherwise) to become,
the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the
Exchange Act), directly or indirectly, of forty percent (40%) or more of the
ordinary voting power for the election of directors of Borrower (determined on a
fully diluted basis); (b) during any period of twelve (12) consecutive months, a
majority of the members of the board of directors or other equivalent governing
body of Borrower cease to be composed of individuals (i) who were members of
that board or equivalent governing body on the first day of such period,
(ii) whose election or nomination to that board or equivalent governing body was
approved by individuals referred to in clause (i) above constituting at the time
of such election or nomination at least a majority of that board or equivalent
governing body or (iii) whose election or nomination to that board or other
equivalent governing body was approved by individuals referred to in clauses
(i) and (ii) above constituting at the time of such election or nomination at
least a majority of that board or equivalent governing body; or (c) at any time,
Borrower shall cease to own and control, of record and beneficially, directly or
indirectly, one hundred percent (100%) of each class of outstanding capital
stock of each Subsidiary of Borrower (other than director’s qualifying shares)
free and clear of all Liens (except Liens created by this Agreement).

 

“Claims” is defined in Section 12.3.

 

“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 of the provisions thereof relating to
such attachment, perfection, priority, or remedies and for purposes of
definitions relating to such provisions.

 

 

 

“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.

 

“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account.

 

“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 (each, a “Swap
Agreement”); 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 of authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret.

 

“Credit Extension” is any Advance, any Overadvance, amount utilized for cash
management services, or any other extension of credit by Bank for Borrower’s
benefit.

 

“Currency” is coined money and such other banknotes or other paper money as are
authorized by law and circulate as a medium of exchange.

 

“Default Rate” is defined in Section 2.4(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 the account number ending XXX-XXXX-777
maintained by Borrower with Bank (provided, however, if no such account number
is included, then the Designated Deposit Account shall be any deposit account of
Borrower maintained with Bank as chosen by 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.

 

“Domestic Subsidiary” means a Subsidiary organized under the laws of the United
States or any state or territory thereof or the District of Columbia (excluding
any FSHCO).

 

“Effective Date” is defined in the preamble hereof.

 

“Eligible Accounts” means Accounts owing to Borrower which arise in the ordinary
course of Borrower’s business that meet all Borrower’s representations and
warranties in Section 5.3, that have been, at the option of Bank, confirmed in
accordance with Section 6.3(f) of this Agreement, and are due and owing from
Account Debtors deemed creditworthy by Bank in its good faith business judgment.
Bank reserves the right at any 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. Bank shall use commercially reasonable efforts to notify
Borrower of any such adjustment. Unless Bank otherwise agrees in writing,
Eligible Accounts shall not include:

 

(a)                 Accounts (i) for which the Account Debtor is Borrower’s
Affiliate, officer, employee, investor, or agent, or (ii) that are intercompany
Accounts;

 

(b)                 Accounts that the Account Debtor has not paid within ninety
(90) days of invoice date regardless of invoice payment period terms;

 

(c)                 Accounts with credit balances over ninety (90) days from
invoice date;

 

(d)                 Accounts owing from an Account Debtor if fifty percent (50%)
or more of the Accounts owing from such Account Debtor have not been paid within
ninety (90) days of invoice date;

 

(e)                 Accounts billed from and/or payable to Borrower outside of
the United States (sometimes called foreign invoiced accounts) or (ii) whose
billing address (as set forth in the applicable invoice for such Account) is not
in the United States, unless in the case of both (i) and (ii) such Accounts are
otherwise approved by Bank in writing on a case-by-case basis in its sole
discretion;

 

(f)                  Accounts in which Bank does not have a first priority,
perfected security interest under all applicable laws;

 

(g)                 Accounts billed and/or payable in a Currency other than
Dollars;

 

(h)                 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);

 

(i)                   Accounts with or in respect of accruals for marketing
allowances, incentive rebates, price protection, cooperative advertising and
other similar marketing credits, unless otherwise approved by Bank in writing;

 

(j)                  Accounts owing from an Account Debtor which is a United
States government entity or any department, agency, or instrumentality thereof
unless Borrower has assigned its payment rights to Bank and the assignment has
been acknowledged under the Federal Assignment of Claims Act of 1940, as
amended;

 

 

 

(k)                 Accounts with customer deposits and/or with respect to which
Borrower has received an upfront payment, to the extent of such customer deposit
and/or upfront payment;

 

(l)                   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;

 

(m)               Accounts owing from an Account Debtor where goods or services
have not yet been rendered to the Account Debtor (sometimes called memo billings
or pre-billings);

 

(n)                 Accounts subject to contractual arrangements between
Borrower and an Account Debtor where payments shall be scheduled or due
according to completion or fulfillment requirements (sometimes called contracts
accounts receivable, progress billings, milestone billings, or fulfillment
contracts);

 

(o)                 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 billings);

 

(p)                 Accounts subject to trust provisions, subrogation rights of
a bonding company, or a statutory trust;

 

(q)                 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 wherein the Account Debtor acknowledges that (i) it has title to and has
ownership of the goods wherever located, (ii) a bona fide sale of the goods has
occurred, and (iii) it owes payment for such goods in accordance with invoices
from Borrower (sometimes called “bill and hold” accounts);

 

(r)                  Accounts for which the Account Debtor has not been
invoiced;

 

(s)                  Accounts that represent non-trade receivables or that are
derived by means other than in the ordinary course of Borrower’s business;

 

(t)                  Accounts for which Borrower has permitted Account Debtor’s
payment to extend beyond ninety (90) days (including Accounts with a due date
that is more than ninety (90) days from invoice date);

 

(u)                 Accounts arising from chargebacks, debit memos or other
payment deductions taken by an Account Debtor;

 

(v)                 Accounts arising from product returns and/or exchanges
(sometimes called “warranty” or “RMA” accounts);

 

(w)                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 (whether voluntary or
involuntary), or becomes insolvent, or goes out of business;

 

(x)                 Accounts owing from an Account Debtor with respect to which
Borrower has received Deferred Revenue (but only to the extent of such Deferred
Revenue);

 

(y)                 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; and

 

(z)                 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.

 

“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.

 

“Exchange Act” is the Securities Exchange Act of 1934, as amended.

 

“Foreign Currency” means lawful money of a country other than the United States.

 

“Foreign Subsidiary” means a Subsidiary that is not a Domestic Subsidiary.

 

“FSHCO” means any Subsidiary organized under the laws of any political
subdivision of the United States (including any disregarded entity for U.S.
federal income tax purposes), substantially all of the assets of which consist
of, directly or indirectly, equity securities of one or more CFCs or
Indebtedness of such CFCs.

 

“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 Contract” is any foreign exchange contract by and between Borrower and Bank
under which Borrower commits to purchase from or sell to Bank a specific amount
of Foreign Currency on a specified date.

 

“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.

 

“Guarantor” is any Person providing a Guaranty in favor of Bank.

 

“Guaranty” is any guarantee of all or any part of the Obligations, as the same
may from time to time be amended, restated, modified or otherwise supplemented.

 

 

 

“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.

 

“Indentures” means, collectively, (i) that certain Indenture between Borrower as
issuer and U.S. Bank National Association as Indenture Trustee dated as of
February 4, 2014, (ii) that certain First Supplemental Indenture between
Borrower as issuer and U.S. Bank National Association as Indenture Trustee dated
as of February 4, 2014, and (iii) that certain Second Supplemental Indenture
between Borrower as issuer and U.S. Bank National Association as Indenture
Trustee dated as of March 6, 2018, which provide for the issuance from time to
time of debentures, notes or other debt instruments of Borrower, to be issued in
one or more series.

 

“Initial Audit” is Bank’s inspection of Borrower’s Accounts, the Collateral, and
Borrower’s Books, with results satisfactory to Bank in its sole and absolute
discretion.

 

“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, with respect to any Person, all of such Person’s
right, title, and interest in and to the following:

 

(a)                 its Copyrights, Trademarks and Patents;

 

(b)                 any and all trade secrets and trade secret rights,
including, without limitation, any rights to unpatented inventions, know-how and
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 sue for and collect such damages for said use or infringement of
the Intellectual Property rights identified above; and

 

(f)                  all amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents.

 

“Inventory” is all “inventory” as defined in the Code in effect on the 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.

 

“Key Person” is each of Borrower’s (a) Chief Executive Officer, who is Stephen
Christopher Linthwaite as of the Effective Date, and (b) Chief Financial
Officer, who is Vikram Jog as of the Effective Date.

 

“Letter of Credit” is a standby or commercial letter of credit issued by Bank
upon request of Borrower based upon an application, guarantee, indemnity, or
similar agreement.

 

“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” is (i) unrestricted cash at Bank, plus (ii) unrestricted cash at
accounts outside Bank but subject to a Control Agreement, plus (iii) the
Availability Amount.

 

“Loan Documents” are, collectively, this Agreement and any schedules, exhibits,
certificates, notices, and any other documents related to this Agreement, any
Bank Services Agreement, any subordination agreement, any note, or notes or
guaranties executed by Borrower or any Guarantor, and any other present or
future agreement by Borrower and/or any Guarantor with or for the benefit of
Bank, all as amended, restated, or otherwise modified.

 

“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.

 

“Monthly Financial Statements” is defined in Section 6.2(c).

 

“Obligations” are Borrower’s obligations to pay when due any debts, principal,
interest, fees, Bank Expenses, the Revolving Line Commitment Fee, the
Termination Fee, the Unused Revolving Line Facility Fee, and other amounts
Borrower owes Bank now or later, whether under this Agreement, the other Loan
Documents, or otherwise, including, without limitation, all obligations relating
to Bank Services and 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 by the Secretary of State (or equivalent agency) of such Person’s
jurisdiction of organization on a date that is no earlier than thirty (30) days
prior to the Effective Date, and, (a) if such Person is a corporation, its
bylaws in current form, (b) if such Person is a limited liability company, its
limited liability company agreement (or similar agreement), and (c) if such
Person is a partnership, its partnership agreement (or similar agreement), each
of the foregoing with all current amendments or modifications thereto.

 

“Overadvance” is defined in Section 2.3.

 

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

 

“Payment/Advance Form” is that certain form in the form attached hereto as
Exhibit C.

 

“Payment Date” is the last calendar day of each month.

 

“Perfection Certificate” is defined in Section 5.1.

 

“Permitted Acquisition” is an acquisition of all or substantially all of the
equity interests or assets (or all or substantially all of the assets
constituting a business unit, division, product line or line of business) of a
Person, provided:

 

(a)                 the Person acquired or assets acquired is a type of business
(or the assets are used in a type of business) permitted to be engaged by
Borrower under this Agreement;

 

(b)                 the acquisition is non-hostile in nature;

 

(c)                 the Person or Persons to be acquired shall be solely
organized in the United States and shall conduct their principal operations in
the United States;

 

(d)                 no Event of Default exists at the time of such acquisition
or would exist after giving effect to such acquisition;

 

 

 

(e)                 the acquisition of the Person does not materially and
adversely effect Borrower’s earnings;

 

(f)                  the consideration paid in connection with all such
acquisitions consists solely of (i) Borrower’s equity securities, (ii) the net
proceeds received by Borrower or its Subsidiaries in connection with a
contemporaneous issuance of equity securities solely for the purpose of
consummating such acquisition or (iii) a combination of the foregoing
sub-clauses (i) and (ii) ;

 

(g)                 Bank shall have received at least thirty (30) days prior
written notice of the closing date for such acquisition;

 

(h)                 Borrower shall remain a surviving legal entity; and

 

(i)                   any Person that is acquired and remains a separate legal
entity shall be organized in the United States and shall become a co-borrower
under this Agreement in accordance with Section 6.13 hereof.

 

“Permitted Indebtedness” is:

 

(a)                 Borrower’s Indebtedness to Bank under this Agreement and the
other Loan Documents (including, without limitation, Indebtedness arising in
connection with any Bank Services);

 

(b)                 Indebtedness existing on the Effective Date which is shown
on the Perfection Certificate;

 

(c)                 Subordinated Debt;

 

(d)                 unsecured Indebtedness to trade creditors incurred in the
ordinary course of business;

 

(e)                 Indebtedness incurred as a result of endorsing negotiable
instruments received in the ordinary course of business;

 

(f)                  Indebtedness secured by Liens permitted under clauses (a)
and (c) of the definition of “Permitted Liens” hereunder;

 

(g)                 Indebtedness in respect of performance bonds, bid bonds,
appeal bonds, surety bonds and similar obligations, in each case provided in the
ordinary course of business;

 

(h)                 unsecured Indebtedness pursuant to the Indentures in an
aggregate principal amount not to exceed Two Hundred One Million Dollars
($201,000,000);

 

(i)                   Indebtedness that otherwise constitutes a Permitted
Investment;

 

(j)                  Indebtedness consisting of reimbursement obligations in
respect of letters of credit, bank guarantees or bankers’ acceptances in foreign
jurisdictions in a face amount not to exceed Seven Hundred Thousand Dollars
($700,000);

 

(k)                 other unsecured Indebtedness not exceeding Five Hundred
Thousand Dollars ($500,000) in the aggregate outstanding at any time; and

 

(l)                   extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (j) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.

 

“Permitted Investments” are:

 

(a)                 Investments (including, without limitation, Subsidiaries)
existing on the Effective Date which are shown on the Perfection Certificate;

 

 

 

(b)                 Investments consisting of Cash Equivalents;

 

(c)                 Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of Borrower;

 

(d)                 Investments consisting of deposit accounts (but only to the
extent that Borrower is permitted to maintain such accounts pursuant to Section
6.8 of this Agreement) in which Bank has a first priority perfected security
interest;

 

(e)                 Investments accepted in connection with Transfers permitted
by Section 7.1;

 

(f)                  Investments consisting of the creation of a Subsidiary for
the purpose of consummating a merger transaction permitted by Section 7.3 of
this Agreement, which is otherwise a Permitted Investment;

 

(g)                 Investments (i) by Borrower in Subsidiaries not to exceed
Five Hundred Thousand Dollars ($500,000) in the aggregate in any fiscal year and
(ii) by Subsidiaries in other Subsidiaries in the ordinary course of business;

 

(h)                 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 the Board;

 

(i)                   Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of business;

 

(j)                  Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business; provided that this paragraph (j)
shall not apply to Investments of Borrower in any Subsidiary; and

 

(k)                 other Investments not otherwise permitted by Section 7.7 not
exceeding Five Hundred Thousand Dollars ($500,000) in the aggregate outstanding
at any time.

 

“Permitted Liens” are:

 

(a)                 Liens existing on the Effective Date which are shown on the
Perfection Certificate or arising under this Agreement or the other Loan
Documents (including, without limitation, Liens arising in connection with any
Bank Services);

 

(b)                 Liens for taxes, fees, assessments or other government
charges or levies, either (i) not due and payable or (ii) being contested in
good faith and for which Borrower maintains adequate reserves on Borrower’s
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)                 Liens securing capital leases and purchase money Liens (i)
on Equipment acquired or held by Borrower incurred for financing the acquisition
of the Equipment securing no more than Five Hundred Thousand Dollars ($500,000)
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, securing liabilities in the aggregate
amount not to exceed Five Hundred Thousand Dollars ($500,000) and which are not
delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;

 

 

 

(e)                 Liens to secure payment of workers’ compensation, employment
insurance, old-age pensions, social security and other like obligations incurred
in the ordinary course of business (other than Liens imposed by ERISA);

 

(f)                  Liens incurred in the extension, renewal or refinancing of
the Indebtedness secured by Liens described in (a) through (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 Borrower’s business (or, if referring to another Person, in the
ordinary course of such Person’s business), and leases, subleases, non-exclusive
licenses or sublicenses of personal property (other than Intellectual Property)
granted in the ordinary course of Borrower’s business (or, if referring to
another Person, in the ordinary course of such Person’s business);

 

(h)                 non-exclusive licenses of Intellectual Property in the
ordinary course of business, and licenses of Intellectual Property that could
not result in a legal transfer of title of the licensed property that may be
exclusive in respects other than territory and that may be exclusive as to
territory only as to discrete geographical areas outside of the United States;

 

(i)                   deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature, in each case in the ordinary
course of business;

 

(j)                  Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods;

 

(k)                 Liens consisting of cash collateral securing obligations
described in clause (j) of the definition of “Permitted Indebtedness” hereunder;

 

(l)                   Liens arising from attachments or judgments, orders, or
decrees in circumstances not constituting an Event of Default under Sections 8.4
and 8.7; and

 

(m)               Liens in favor of other financial institutions arising in
connection with Borrower’s deposit and/or securities accounts held at such
institutions, provided that (i) Bank has a first priority perfected security
interest in the amounts held in such deposit and/or securities accounts (ii)
such accounts are permitted to be maintained pursuant to Section 6.8 of this
Agreement.

 

“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

 

“Prime Rate” is the rate of interest per annum from time to time published in
the money rates section of The Wall Street Journal or any successor publication
thereto as the “prime rate” then in effect; provided that, in the event such
rate of interest is less than zero, such rate shall be deemed to be zero for
purposes of this Agreement; and provided further that if such rate of interest,
as set forth from time to time in the money rates section of The Wall Street
Journal, becomes unavailable for any reason as determined by Bank, the “Prime
Rate” shall mean the rate of interest per annum announced by Bank as its prime
rate in effect at its principal office in the State of California (such Bank
announced Prime Rate not being intended to be the lowest rate of interest
charged by Bank in connection with extensions of credit to debtors); provided
that, in the event such rate of interest is less than zero, such rate shall be
deemed to be zero for purposes of this Agreement.

 

“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made.

 

“Regulatory Change” means, with respect to Bank, any change on or after the date
of this Agreement in United States federal, state, or foreign laws or
regulations, including Regulation D, or the adoption or making on or after such
date of any interpretations, directives, or requests applying to a class of
lenders including Bank, of or under any United States federal or state, or any
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.

 

 

 

“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 any Guarantor, 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 reasonable belief that any collateral report or
financial information furnished by or on behalf of Borrower or any Guarantor 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
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 and Controller of Borrower.

 

“Restricted License” is any material license or other material agreement
(excluding any “shrink wrap” or other licenses that are generally commercially
available to the public) 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 in favor
of Bank, or (b) for which a default under or termination of could reasonably be
expected to interfere with Bank’s right to sell any Collateral.

 

“Revolving Line” is an aggregate principal amount equal to Fifteen Million
Dollars ($15,000,000).

 

“Revolving Line Commitment Fee” is defined in Section 2.5(a).

 

“Revolving Line Maturity Date” is August 2, 2020.

 

“SEC” shall mean the Securities and Exchange Commission, any successor thereto,
and any analogous Governmental Authority.

 

“Securities Account” is any “securities account” as defined in the Code with
such additions to such term as may hereafter be made.

 

“Specified Affiliate” is any Person (a) more than ten percent (10.0%) of whose
aggregate issued and outstanding equity or ownership securities or interests,
voting, non-voting or both, are owned or held directly or indirectly,
beneficially or of record, by Borrower, and/or (b) whose equity or ownership
securities or interests representing more than ten percent (10.0%) of such
Person’s total outstanding combined voting power are owned or held directly or
indirectly, beneficially or of record, by Borrower.

 

“Streamline Balance” is defined in the definition of Streamline Period.

 

“Streamline Period” is, on and after the Effective Date, provided no Event of
Default has occurred and is continuing, the period (a) commencing on the first
day of the month following the day that Borrower provides to Bank evidence,
satisfactory to Bank in its sole discretion, confirming that Borrower has
maintained Liquidity of greater than Twenty Million Dollars ($20,000,000) at all
times during the prior month (the “Streamline Balance”); and (b) terminating on
the earlier to occur of (i) the occurrence of an Event of Default, and (ii) the
first day of the first month following any month in which Borrower fails to
maintain the Streamline Balance, as determined by Bank in its discretion. Upon
the termination of a Streamline Period, Borrower must maintain the Streamline
Balance as of the last day of each calendar month for one (1) fiscal quarter
prior to entering into a subsequent Streamline Period. Borrower shall give Bank
prior written notice of Borrower’s election to enter into any such Streamline
Period, and each such Streamline Period shall commence on the first day of the
monthly period following the date Bank determines, in its reasonable discretion,
that the Streamline Balance has been achieved.

 

 

 

“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of
Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance satisfactory to
Bank entered into between Bank and the other creditor), on terms acceptable to
Bank.

 

“Subsidiary” is, as to any Person, a corporation, partnership, limited liability
company or other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries,
or both, by such Person. Unless the context otherwise requires, each reference
to a Subsidiary herein shall be a reference to a Subsidiary of Borrower.

 

“Termination Fee” is defined in Section 2.5(b).

 

“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.

 

“Transfer” is defined in Section 7.1.

 

“Unused Revolving Line Facility Fee” is defined in Section 2.5(c).

 

“Wells Fargo Account” is defined in Section 6.8(a).

 

[Signature page follows.]

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date.

 

 

  BORROWER:         FLUIDIGM CORPORATION               By /s/ Vikram Jog       
  Name: Vikram Jog          Title: Chief Financial Officer                     
BANK:         SILICON VALLEY BANK               By /s/ Kristina Peralta         
Name: Kristina Peralta          Title: Vice President 

 

 

[Signature Page to Loan and Security Agreement]

 

EXHIBIT A - COLLATERAL DESCRIPTION

 

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, 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 (a) with respect
to stock in Foreign Subsidiaries, more than sixty-five percent (65.0%) of the
presently existing and hereafter arising issued and outstanding shares of
capital stock owned by Borrower of any Foreign Subsidiary which shares entitle
the holder thereof to vote for directors or any other matter, (b) any interest
of Borrower as a lessee or sublessee under a real property lease or an Equipment
lease if Borrower is prohibited by the terms of such lease from granting a
security interest in such lease or under which such an assignment or Lien would
cause a default to occur under such lease (but only to the extent that such
prohibition is enforceable under all applicable laws including, without
limitation, the Code); provided, however, that upon termination of such
prohibition, such interest shall immediately become Collateral without any
action by Borrower or Bank or (c) any Intellectual Property; provided, however,
the Collateral shall include all Accounts and all proceeds of Intellectual
Property. If a judicial authority (including a U.S. Bankruptcy Court) would hold
that a security interest in the underlying Intellectual Property is necessary to
have a security interest in such Accounts and such property that are proceeds of
Intellectual Property, then the Collateral shall automatically, and effective as
of the Effective Date, include the Intellectual Property to the extent necessary
to permit perfection of Bank’s security interest in such Accounts and such other
property of Borrower that are proceeds of the Intellectual Property.

 

Pursuant to the terms of a certain negative pledge arrangement with Bank,
Borrower has agreed not to encumber any of its Intellectual Property without
Bank’s prior written consent.

 

 Exhibit A - 1 

 

EXHIBIT B

Compliance Certificate

 

TO:  SILICON VALLEY BANKDate:  

FROM:  FLUIDIGM CORPORATION

 

The undersigned authorized officer of FLUIDIGM CORPORATION (“Borrower”)
certifies that under the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the “Agreement”), (1) Borrower is in complete
compliance for the period ending _______________ with all required covenants
except as noted below, (2) there are no Events of Default, (3) all
representations and warranties in the Agreement are true and correct in all
material respects on this date except as noted below; 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, (4) except as noted below, Borrower, and
each of its Subsidiaries, 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 except as otherwise
permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no
Liens have been levied or claims made against Borrower or any of its
Subsidiaries, if any, relating to unpaid employee payroll or benefits of which
Borrower has not previously provided written notification to Bank. Attached are
the required documents supporting the certification. The undersigned certifies
that these are prepared in accordance with GAAP consistently applied from one
period to the next except as explained in an accompanying letter or footnotes
(and except with respect to unaudited financials for the absence of footnotes
and subject to year-end adjustments). The undersigned acknowledges that no
borrowings may be requested at any time or date of determination that Borrower
is not in compliance with any of the terms of the Agreement, and that compliance
is determined not just at the date this certificate is delivered. Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.

 

Please indicate compliance status by circling Yes/No under “Complies” column.  
Reporting Covenants Required Complies       Monthly financial statements with
Compliance Certificate Monthly within 30 days Yes   No 10-Q, 10-K and 8-K Within
5 days Yes   No

A/R & A/P agings and

Monthly perpetual inventory reports

Monthly within 30 days Yes   No Borrowing Base Report (i) With each request for
an Advance, and (ii) Monthly within 7 days Yes   No Board approved projections
Within 30 days of each fiscal year of Borrower, and within 7 days of any
updates/amendments Yes   No  

 

 

The following are the exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions to note.”)

 

 

 

 

Exhibit B 

 

FLUIDIGM CORPORATION   BANK USE ONLY                   Received by:       By:  
        authorized signer       Date:       Name:                   Verified:  
    Title:           authorized signer       Date:                        
Compliance Status:                Yes     No

 

 

 

Exhibit B 

 

EXHIBIT C

LOAN PAYMENT/ADVANCE REQUEST FORM

 

Deadline for same day processing is Noon Pacific Time

 

Fax To:  Date: _____________________

 

Loan Payment:

FLUIDIGM CORPORATION

 

 

From Account #      To Account #           (Deposit Account #)      (Loan
Account #)   Principal $      and/or Interest $      

 

Authorized Signature:      Phone Number:       Print Name/Title:             

 

 

Loan Advance:

 

Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.

 

From Account #      To Account #           (Loan Account #)      (Deposit
Account #)  

 

Amount of Advance $___________________________

 

All Borrower’s representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
request for an advance other than litigation which has been disclosed in writing
to Bank pursuant to Section 6.2(g) and which has been acknowledged and approved
in writing by Bank in its reasonable business judgment; 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:

 

Authorized Signature:      Phone Number:       Print Name/Title:             

 

 

Outgoing Wire Request:

Complete only if all or a portion of funds from the loan advance above is to be
wired.

Deadline for same day processing is noon, Pacific Time

 

Beneficiary Name:       Amount of Wire: $       Beneficiary Bank:       Account
Number:       City and State:              

 

 

Beneficiary Bank Transit (ABA) #:       Beneficiary Bank Code (Swift, Sort,
Chip, etc.):               (For International Wire Only)  

 

 

Intermediary Bank:       Transit (ABA) #:      

 

For Further Credit to:        

 

Special Instruction:      

 

By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).

 

 

Authorized Signature:       2nd Signature (if required):       Print Name/Title:
      Print Name/Title:       Telephone #:       Telephone #:      

 

 

Exhibit C 

 

EXHIBIT D

 

 [svb.jpg]

 

CORPORATE BORROWING certificatE

 

 

Borrower:  FLUIDIGM CORPORATION  Date: August 2, 2018 Bank:  SILICON VALLEY
BANK   

 

I hereby certify as follows, as of the date set forth above:

 

1.       I am the Secretary, Assistant Secretary or other officer of Borrower.
My title is as set forth below.

 

2.       Borrower’s exact legal name is set forth above. Borrower is a
corporation existing under the laws of the State of Delaware.

 

3.       Attached hereto are true, correct and complete copies of Borrower’s
Certificate of Incorporation (including amendments), as filed with the Secretary
of State of the state in which Borrower is incorporated as set forth above. Such
Certificate of Incorporation have not been amended, annulled, rescinded, revoked
or supplemented, and remain in full force and effect as of the date hereof.

 

4.       The following resolutions were duly and validly adopted by Borrower’s
Board of Directors at a duly held meeting of such directors (or pursuant to a
unanimous written consent or other authorized corporate action). Such
resolutions are in full force and effect as of the date hereof and have not been
in any way modified, repealed, rescinded, amended or revoked, and Silicon Valley
Bank (“Bank”) may rely on them until Bank receives written notice of revocation
from Borrower.

 

Resolved, that any one of the following officers or employees of Borrower, whose
names, titles and signatures are below, may act on behalf of Borrower:

 

Name   Title   Signature  

Authorized to
Add or Remove
Signatories

     

□

     

□

     

□

     

□

 

Resolved Further, that any one of the persons designated above with a checked
box beside his or her name may, from time to time, add or remove any individuals
to and from the above list of persons authorized to act on behalf of Borrower.

 

Resolved Further, that such individuals may, on behalf of Borrower:

 

Borrow Money. Borrow money from Bank.

Execute Loan Documents. Execute any loan documents Bank requires.

Grant Security. Grant Bank a security interest in any of Borrower’s assets.

Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory
notes, or other indebtedness in which Borrower has an interest and receive cash
or otherwise use the proceeds.

Apply for Letters of Credit. Apply for letters of credit from Bank.

 

 

Enter Derivative Transactions. Execute spot or forward foreign exchange
contracts, interest rate swap agreements, or other derivative transactions.

Further Acts. Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrower’s right to a jury trial) they believe to be
necessary to effect these resolutions.

 

Resolved Further, that all acts authorized by the above resolutions and any
prior acts relating thereto are ratified.

 

5.       The persons listed above are Borrower's officers or employees with
their titles and signatures shown next to their names.

 

 

  By:     Name:     Title:  

 

 

*** If the Secretary, Assistant Secretary or other certifying officer executing
above is designated by the resolutions set forth in paragraph 4 as one of the
authorized signing officers, this Certificate must also be signed by a second
authorized officer or director of Borrower.

 

 

I, the __________________________ of Borrower, hereby certify as to paragraphs 1
through 5 above, as of the date set forth above.

 

 

  By:     Name:     Title:  

 

 

 

 

[svb.jpg] 

 

MARKETING CONSENT FORM

 

 

Marketing Consent Form

SVB Financial Group is proud of our business relationships and occasionally
likes to promote these relationships. We would like to use your company’s
information and logo for promotional and marketing purposes in SVB Financial
Group member businesses (collectively “SVB”) materials. While we would
appreciate your consent to all of the uses listed below, please review and
select all of the uses that you consent to below.

 

 

 

 

 

 

Indicate your selection(s) by checking the boxes below

¨Marketing: You consent to SVB’s use of Company’s name, logo and images provided
to us in written and oral presentations, advertising, marketing and PR
materials, professional lists and websites.

¨Deal Terms: You consent to SVB’s inclusion of the size and type of any loan or
credit facility alongside your company’s name in any oral presentations,
advertising, marketing and PR materials, customer lists, and websites.

¨Reference: You consent to SVB’s use of Company and representatives’ names as a
reference for SVB.

¨Testimonial: You consent to SVB’s use of Company and representatives’ names and
quotations in written and oral presentations, marketing and PR materials, and
websites. Our practice is to send you a draft of any quotation concerning
Company prior to publishing.

¨News release: You consent to SVB’s use of Company’s name, trademarks, service
marks, quotations and images provided to us in the SVB’s news releases
concerning Company. Our practice is to send you a draft of any news release
concerning Company prior to publishing.

 

 

 

 

In order to maintain the integrity of your logos, please provide them in:

‣ Full color and black and white versions, with or without taglines

‣ At least 300 dpi in PNG, EPS, TIF, or JPG formats (please do not send PDF or
website logos).

 

 

 

 

Please make sure to print the Company name, and any individual names and titles
as you would like them displayed in materials or lists.

 

Company name FLUIDIGM CORPORATION Additional names    

You grant to SVB a limited license to use the information for the limited
purposes above, which you can revoke upon written notice to SVB. The signer
below acknowledges that he or she has authority to bind the Company to this
consent. SVB will not be responsible for versions that were printed

prior to receiving notice revoking any such consent. Company is solely
responsible for defense and maintenance of its intellectual property.

Please contact your Relationship Advisor or SVB representative if you have any
questions.

 

Accepted or Agreed on Behalf Of Company or Yourself Name   Title   Signature  
Today’s date August 2, 2018 Address       Phone number   Email  

 

 

Return this completed form and any attachments to your Relationship Advisor or
SVB via email at logo@svb.com.

©2014 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member
of FDIC and Federal Reserve System. SVB>, SVB>Find a way, SVB Financial Group,
and Silicon Valley Bank are registered trademarks. B_SAM-14-13427 rev. 06-25-14.

 

 

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