Exhibit 10.5

 

BUSINESS FINANCING MODIFICATION AGREEMENT

(Third Amendment to Business Financing Agreement)

This Business Financing Modification Agreement (this “Modification Agreement”)
is entered into as of October 22, 2018, by and between Biolase, Inc., a Delaware
corporation (“Parent”), BL Acquisition Corp., a Delaware corporation (“BL
Acquisition”), and BL Acquisition II Inc., a Delaware corporation (“BL
Acquisition II” and together with Parent and BL Acquisition, individually and
collectively, jointly and severally, “Borrower”) and Western Alliance Bank, an
Arizona corporation (“Lender”).

1.DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among
other documents, a Business Financing Agreement, dated March 6, 2018, by and
between Borrower and Lender, as the same has been and may be further amended
from time to time (the “Business Financing Agreement”).  Capitalized terms used
without definition herein shall have the meanings assigned to them in the
Business Financing Agreement.  

Hereinafter, all indebtedness owing by Borrower to Lender shall be referred to
as the “Indebtedness” and the Business Financing Agreement and any and all other
documents executed by Borrower in favor of Lender shall be referred to as the
“Existing Documents.”

2.ACKNOWLEDGEMENT OF EXISTING DEFAULTS.  Borrower hereby acknowledges that, as
of the date hereof, Borrower is currently in default of the Business Financing
Agreement for (i) failing to comply with the covenant set forth in Section
4.20(a) of the Business Financing Agreement for the periods ended July 31, 2018,
August 31, 2018, and September 30, 2018, and (ii) failing to comply with the
covenant set forth in Section 4.20(b) of the Business Financing Agreement, as in
effect prior to the date hereof, for the period beginning October 4, 2018,
through October 9, 2018, and the period beginning October 17, 2018, through
October 22, 2018 (all defaults under (i) and (ii), collectively, the “Existing
Defaults”).  Borrower has requested that Lender waive its rights and remedies
against Borrower, limited specifically to the Existing Defaults.  Although
Lender is under no obligation to do so, Lender is willing to not exercise its
rights and remedies against Borrower related to the specific Existing Defaults
on the terms and conditions set forth in this Modification Agreement, so long as
Borrower complies with the terms, covenants and conditions set forth in this
Modification Agreement.

3.WAIVER OF COVENANT DEFAULTS.  Lender hereby waives the Existing Defaults under
the Business Financing Agreement.  Lender’s waiver of Borrower’s compliance of
these covenants shall apply only to the foregoing periods.  Accordingly,
hereinafter, Borrower shall be in compliance with these covenants, as amended
hereby.  Lender’s agreement to waive the Existing Defaults (1) in no way shall
be deemed an agreement by Lender to waive Borrower’s compliance with the
above-described covenants as of all other dates, (2) shall not limit or impair
Lender’s right to demand strict performance of these covenants as of all other
dates, and (3) shall not limit or impair Lender’s right to demand strict
performance of all other covenants as of any date.

4.DESCRIPTION OF CHANGE IN TERMS.

A.Modifications to Business Financing Agreement:

i.Section 4.20.  Section 4.20(b) is amended in its entirety and replaced with
the following:

 

(b)

Unrestricted cash on deposit with Lender not at any time less than $300,000.

 

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ii.Exhibit A: Compliance Certificate.  Exhibit A to the Business Financing
Agreement is amended in its entirety and replaced with Exhibit A attached
hereto.

B.Acknowledgement:

i.Notwithstanding anything in the Business Financing Agreement to the contrary,
Lender agrees that Borrower shall not be required to deliver the reporting items
set forth in Sections 4.14(g) and 4.14(h) of the Business Financing Agreement
for the period ended October 15, 2018.

5.CONSISTENT CHANGES.  The Existing Documents are each hereby amended wherever
necessary to reflect the changes described above.

6.PAYMENT OF DOCUMENTATION EXPENSES. Borrower shall pay to Lender all of
Lender’s out-of-pocket expenses incurred in connection with the amendment and
modification of the Business Financing Agreement (the “Modification Expenses”).

7.NO DEFENSES OF BORROWER/GENERAL Release.  Borrower agrees that, as of this
date, it has no defenses against the obligations to pay any amounts under the
Indebtedness.  Borrower (“Releasing Party”) acknowledges that Lender would not
enter into this Modification Agreement without Releasing Party’s assurance that
it has no claims against Lender or any of Lender’s officers, directors,
employees or agents.  Except for the obligations arising hereafter under this
Modification Agreement, Releasing Party releases Lender, and each of Lender’s
and entity’s officers, directors and employees from any known or unknown claims
that Releasing Party now has against Lender of any nature, including any claims
that Releasing Party, its successors, counsel, and advisors may in the future
discover they would have now had if they had known facts not now known to them,
whether founded in contract, in tort or pursuant to any other theory of
liability, including but not limited to any claims arising out of or related to
the Business Financing Agreement or the transactions contemplated
thereby.  Releasing Party waives the provisions of California Civil Code section
1542, which states:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER, MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.

The provisions, waivers and releases set forth in this section are binding upon
Releasing Party and its shareholders, agents, employees, assigns and successors
in interest.  The provisions, waivers and releases of this section shall inure
to the benefit of Lender and its agents, employees, officers, directors, assigns
and successors in interest.  The provisions of this section shall survive
payment in full of the Obligations, full performance of all the terms of this
Modification Agreement and the Business Financing Agreement, and/or Lender’s
actions to exercise any remedy available under the Business Financing Agreement
or otherwise.

 

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8.CONTINUING VALIDITY.  Borrower understands and agrees that in modifying the
existing Indebtedness and waiving the Existing Defaults, Lender is relying upon
Borrower’s representations, warranties, and agreements, as set forth in the
Existing Documents.  Except as expressly modified pursuant to this Modification
Agreement, the terms of the Existing Documents remain unchanged and in full
force and effect.  Lender’s agreement to modifications to the existing
Indebtedness and to waive the Existing Defaults pursuant to this Modification
Agreement in no way shall obligate Lender to make any future waivers or
modifications to the Indebtedness.  Nothing in this Modification Agreement shall
constitute a satisfaction of the Indebtedness.  It is the intention of Lender
and Borrower to retain as liable parties all makers and endorsers of Existing
Documents, unless the party is expressly released by Lender in writing.  No
maker, endorser, or guarantor will be released by virtue of this Modification
Agreement.  The terms of this paragraph apply not only to this Modification
Agreement, but also to any subsequent business financing modification
agreements.

9.CONDITIONS.  The effectiveness of this Modification Agreement is conditioned
upon payment of the Modification Expenses.

10.NOTICE OF FINAL AGREEMENT. BY SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND
AGREES THAT: (A) THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES, (B) THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES, AND
(C) THIS WRITTEN AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.

11.COUNTERSIGNATURE.  This Modification Agreement shall become effective only
when executed by Lender and Borrower.

[Signature Page Follows]

 

 

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BORROWER:

LENDER:

BIOLASE, INC.

WESTERN ALLIANCE BANK, AN ARIZONA CORPORATION

 

By:

 

/s/ John R. Beaver

 

By:

 

/s/ Grant Simon

Name:

 

John R. Beaver

 

Name:

 

Grant Simon

Title:

 

EVP & CFO

 

Title:

 

Assistant Vice President

 

Dated: October 26, 2018

 

BL ACQUISITION CORP.

 

 

By:

 

/s/ John R. Beaver

Name:

 

John R. Beaver

Title:

 

EVP & CFO

 

 

 

Dated: October 26, 2018

 

 

 

 

 

 

BL ACQUISITION II INC.

 

 

 

 

 

 

By:

 

/s/ John R. Beaver

Name:

 

John R. Beaver

Title:

 

EVP & CFO

 

 

 

 

 

 

Dated: October 26, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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EXHIBIT A

 

COMPLIANCE CERTIFICATE

 

TO:

WESTERN ALLIANCE BANK, an Arizona corporation (“Lender”)

FROM:

BIOLASE, INC. (“Parent”), BL ACQUISITION CORP. (“BL Acquisition”), and BL
ACQUISITION II INC. (“BL Acquisition II”, and together with Parent and BL
Acquisition, individually and collectively, jointly and severally, “Borrower”)

The undersigned authorized officer of Biolase, Inc., on behalf of all Borrowers,
hereby certifies that in accordance with the terms and conditions of the
Business Financing Agreement between Borrower and Lender (the “Agreement”), (i)
Borrower is in complete compliance for the period ending _______________ with
all required covenants except as noted below and (ii) all representations and
warranties of Borrower stated in the Agreement are true and correct as of the
date hereof.  Attached herewith are the required documents supporting the above
certification.  The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

Reporting Covenant

 

Required

 

Complies

 

 

 

 

 

 

 

Monthly financial statements and Compliance Certificate

 

Monthly within 30 days

 

Yes

 

No

 

 

 

 

 

 

 

Annual corporate tax returns

 

Within 5 days of filing

 

Yes

 

No

 

 

 

 

 

 

 

10-Q, 10-K and 8-K

 

Within 5 days of filing

 

Yes

 

No

 

 

 

 

 

 

 

A/R & A/P Agings (by invoice date and due date), Borrowing Base Certificates,
Deferred Revenue report, Sales or billings journal, Cash receipts report

 

Within 5 business days of the 15th and last day of each month (or monthly within
5 business days if RML ≥ 9) and with each Advance request

 

Yes

 

No

 

 

 

 

 

 

 

Annual financial projections (Board-approved)

 

FYE within 30 days

 

Yes

 

No

 

 

 

 

 

 

 

Quarterly invoice sampling

 

Quarterly within 30 days

 

Yes

 

No

 

 

 

 

 

 

 

Weekly cash flow forecast

 

Within 3 business days of each Friday

 

Yes

 

No

 

Financial Covenant

 

Required

Actual

 

Complies

 

 

 

 

 

 

 

 

Adjusted Quick Ratio

 

0.70:1.00

_____:1.00

 

Yes

 

No

 

 

 

 

 

 

 

 

Unrestricted cash at Lender

 

$300,000

$__________

 

Yes

 

No

 

 

 

 

 

 

 

 

Term Sheet Milestone (for $5,000,000 in proceeds)

 

10/15/18

___/___/___

 

Yes

 

No

 

 

 

 

 

 

 

 

Capital Raise Milestone (by 11/15/18)

 

$5,000,000

$__________

 

Yes

 

No

 

Comments Regarding Exceptions:  See Attached.

 

 

 

 

 

 

 

 

Sincerely,

 

 

 

 

 

 

 

 

 

 

 

SIGNATURE

 

 

 

 

 

 

 

 

TITLE

 

 

 

 

 

 

 

 

 

 

DATE

 

 

 

 

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