Exhibit 10.3

 

Silicon Valley Bank

 

Loan and Security Agreement

 

(Exim Program)

 

Borrower:

Endocardial Solutions, Inc.

Address:

1350 Energy Lane, Suite 110

 

St. Paul, MN  55108

 

 

Date:

September 24, 2003

 

THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK (“Silicon”), whose address is 3003 Tasman Drive, Santa
Clara, California  95054 and the borrower(s) named above (jointly and severally,
the “Borrower”), whose chief executive office is located at the above address
(“Borrower’s Address”). The Schedule to this Agreement (the “Schedule”) shall
for all purposes be deemed to be a part of this Agreement, and the same is an
integral part of this Agreement.  (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)

 

1.     LOANS.

 

1.1  Loans.  Silicon will make loans to Borrower (the “Loans”) up to the amounts
(the “Credit Limit”) shown on the Schedule, provided no Default or Event of
Default has occurred and is continuing, and subject to deduction of Reserves for
accrued interest and such other Reserves as Silicon deems proper from time to
time in its good faith business judgment.

 

1.2  Interest.  All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule, except where expressly set forth to the
contrary in this Agreement.  Interest shall be payable monthly, on the last day
of the month.  Interest may, in Silicon’s discretion, be charged as a Loan
hereunder to Borrower’s loan account, and the same shall thereafter bear
interest at the same rate as the other Loans.  Silicon may alternatively, in its
discretion, charge interest to Borrower’s Deposit Accounts maintained with
Silicon.  Regardless of the amount of Obligations that may be outstanding from
time to time, Borrower shall pay Silicon minimum monthly interest during the
term of this Agreement in the amount set forth on the Schedule (the “Minimum
Monthly Interest”).

 

1.3  Overadvances.  If at any time or for any reason the total of all
outstanding Loans and all other monetary Obligations exceeds the Credit Limit
(an “Overadvance”), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand, provided that under ordinary circumstances,
but without any obligation to do so, Silicon will use its best efforts to
contact the Borrower regarding the payment of any such Overadvance.  Without
limiting Borrower’s obligation to repay to Silicon the amount of any
Overadvance, Borrower agrees to pay Silicon interest on the outstanding amount
of any Overadvance, on demand, at the Default Rate.

 

1.4  Fees.  Borrower shall pay Silicon the fees shown on the Schedule, which are
in addition to all interest and other sums payable to Silicon and are not
refundable.

 

1.5 Loan Requests. To obtain a Loan, Borrower shall make a request to Silicon by
facsimile or telephone. Loan requests received after 12:00 Noon will not be
considered by Silicon until the next Business Day. Silicon may rely on any
telephone request for a Loan given by a person whom Silicon believes is an
authorized representative of Borrower, and Borrower will indemnify Silicon for
any loss Silicon suffers as a result of that reliance.

 

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1.6  Letters of Credit.   [Not Applicable.]

 

2.  SECURITY INTEREST. TO SECURE THE PAYMENT AND PERFORMANCE OF ALL OF THE
OBLIGATIONS WHEN DUE, BORROWER HEREBY GRANTS TO SILICON A SECURITY INTEREST IN
ALL OF THE FOLLOWING (COLLECTIVELY, THE “COLLATERAL”):  ALL RIGHT, TITLE AND
INTEREST OF BORROWER IN AND TO ALL OF THE FOLLOWING, WHETHER NOW OWNED OR
HEREAFTER ARISING OR ACQUIRED AND WHEREVER LOCATED: ALL ACCOUNTS; ALL INVENTORY;
ALL EQUIPMENT; ALL DEPOSIT ACCOUNTS; ALL GENERAL INTANGIBLES (INCLUDING WITHOUT
LIMITATION ALL INTELLECTUAL PROPERTY); ALL INVESTMENT PROPERTY; ALL OTHER
PROPERTY; AND ANY AND ALL CLAIMS, RIGHTS AND INTERESTS IN ANY OF THE ABOVE, AND
ALL GUARANTIES AND SECURITY FOR ANY OF THE ABOVE, AND ALL SUBSTITUTIONS AND
REPLACEMENTS FOR, ADDITIONS, ACCESSIONS, ATTACHMENTS, ACCESSORIES, AND
IMPROVEMENTS TO, AND PROCEEDS  (INCLUDING PROCEEDS OF ANY INSURANCE POLICIES,
PROCEEDS OF PROCEEDS AND CLAIMS AGAINST THIRD PARTIES) OF, ANY AND ALL OF THE
ABOVE, AND ALL BORROWER’S BOOKS RELATING TO ANY AND ALL OF THE ABOVE.  SILICON
AGREES TO ENTER INTO SUBORDINATION AGREEMENTS WITH RESPECT TO EQUIPMENT
FINANCING TRANSACTIONS OF THE BORROWER ENTERED INTO ON OR AFTER THE DATE HEREOF,
WITH RESPECT TO EQUIPMENT BEING PURCHASED OR ACQUIRED SUBSTANTIALLY CONCURRENTLY
WITH SUCH FINANCING TRANSACTIONS, PROVIDED THAT (I) THE FORM OF SAID AGREEMENT
IS ACCEPTABLE TO SILICON IN ITS GOOD FAITH BUSINESS JUDGMENT, AND (II) THE LIENS
TO WHICH SILICON’S SECURITY INTEREST IS TO BE SUBORDINATED ARE CONFINED SOLELY
TO THE EQUIPMENT SO FINANCED AND THE PROCEEDS THEREOF AND OTHERWISE CONSTITUTE
PERMITTED LIENS.

 

3.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

 

In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants, throughout the
term of this Agreement and until all Obligations have been paid and performed in
full (other than inchoate indemnity obligations of Borrower hereunder that
survive any termination of this Agreement):

 

3.1  Corporate Existence and Authority.  Borrower is and will continue to be,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.  Borrower is and will continue to be
qualified and licensed to do business in all jurisdictions in which any failure
to do so would result in a Material Adverse Change.  The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are enforceable against
Borrower in accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to creditors’ rights generally), and (iii) do not
violate Borrower’s articles or certificate of incorporation, or Borrower’s
by-laws, or any law or any  material agreement or instrument which is binding
upon Borrower or its property, and (iv) do not constitute grounds for
acceleration of any material indebtedness or obligation under any agreement or
instrument which is binding upon Borrower or its property.

 

3.2  Name; Trade Names and Styles.  The name of Borrower set forth in the
heading to this Agreement is its correct name.  Listed in the Representations
are all prior names of Borrower and all of Borrower’s present and prior trade
names.  Borrower shall give Silicon 30 days’ prior written notice before
changing its name or doing business under any other name.  Borrower has
complied, and will in the future comply, in all material respects, with all laws
relating to the conduct of business under a fictitious business name, except
where the failure to so comply would not reasonably be expected to result in a
Material Adverse Change.

 

3.3  Place of Business; Location of Collateral.  The address set forth in the
heading to this Agreement is Borrower’s chief executive office.  In addition,
Borrower has places of business and Collateral is located only at the locations
set forth in the Representations.  Borrower will give Silicon at least 30 days
prior written notice before opening any additional place of business, changing
its chief executive office, or moving any of the Collateral to a location other
than Borrower’s Address or one of the locations set forth in the
Representations, except that Borrower may maintain sales offices in the ordinary
course of business at which not more than a total of $10,000 fair market value
of Equipment is located.

 

3.4  Title to Collateral; Perfection; Permitted Liens.

 

(a)   Borrower is now, and will at all times in the future be, the sole owner of
all the Collateral, except for items of Equipment which are leased to Borrower. 
The Collateral now is and will remain free and clear of any and all liens,
charges, security interests, encumbrances and adverse claims, except for
Permitted Liens.  Silicon now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral, subject
only to the Permitted Liens, and Borrower will at all times defend Silicon and
the Collateral against all claims of others (other than for rightful claims
pertaining to the holders of Permitted Liens).

 

(b)   Borrower has set forth in the Representations all of Borrower’s Deposit
Accounts, and Borrower will give Silicon five Business Days advance written
notice before establishing any new Deposit Accounts and will cause the
institution where any such new Deposit Account is maintained to execute and
deliver to Silicon a control agreement in form sufficient to perfect Silicon’s
security interest in the Deposit Account and otherwise satisfactory to Silicon
in its good faith business

 

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judgment.  Nothing herein limits any requirements which may be set forth in the
Schedule as to where Deposit Accounts will be maintained.

 

(c)   In the event that Borrower shall at any time after the date hereof have
any commercial tort claims against others, which it is asserting or intends to
assert, and in which the potential recovery exceeds $100,000, Borrower shall
promptly notify Silicon thereof in writing and provide Silicon with such
information regarding the same as Silicon shall request (unless providing such
information would waive the Borrower’s attorney-client privilege).  Such
notification to Silicon shall constitute a grant of a security interest in the
commercial tort claim and all proceeds thereof to Silicon, and Borrower shall
execute and deliver all such documents and take all such actions as Silicon
shall reasonably request in connection therewith.

 

(d)   None of the Collateral now is or will be affixed to any real property in
such a manner, or with such intent, as to become a fixture.  Borrower is not and
will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower’s
right to remove any Collateral from the leased premises.  Whenever any
Collateral is located upon premises in which any third party has an interest,
Borrower shall, whenever requested by Silicon, use its best efforts to cause
such third party to execute and deliver to Silicon, in form acceptable to
Silicon in its good faith business judgment, such waivers and subordinations as
Silicon shall specify in its good faith business judgment, except when any such
Collateral is in transit or located at any subcontractor’s facility.  Borrower
will keep in full force and effect, and will comply with all material terms of,
any lease of real property where any of the Collateral now or in the future may
be located.

 

3.5  Maintenance of Collateral.  Borrower will not use the Collateral for any
unlawful purpose and will maintain the Collateral in good working condition
(ordinary wear and tear excepted), subject, however, to any dispositions of
Collateral that are otherwise specifically permitted and authorized hereunder. 
Borrower will immediately advise Silicon in writing of any material loss or
damage in excess of $150,000 to the Collateral.

 

3.6  Books and Records.  Borrower has maintained and will maintain at Borrower’s
Address complete and accurate books and records, comprising an accounting system
in accordance with GAAP.

 

3.7  Financial Condition, Statements and Reports.  All financial statements now
or in the future delivered to Silicon have been, and will be, prepared in
conformity with GAAP and now and in the future will fairly present the results
of operations and financial condition of Borrower, in accordance with GAAP, at
the times and for the periods therein stated, provided that, interim financial
statements may be subject to year end adjustments, although the lack of any such
adjustments in any such interim financial statements shall not, in the
reasonable judgment of the certifying officer at the time, render the interim
financial statements misleading or reflect anything other than a fair
presentation of such results of operations and the financial condition of
Borrower.  Between the last date covered by any such statement provided to
Silicon and the date hereof, there has been no Material Adverse Change.

 

3.8  Tax Returns and Payments; Pension Contributions.  Borrower has timely
filed, and will timely file, all required tax returns and reports, and Borrower
has timely paid, and will timely pay, all foreign, federal, state and local
taxes, assessments, deposits and contributions now or in the future owed by
Borrower.  Borrower may, however, defer payment of any contested taxes, provided
that Borrower (i) in good faith contests Borrower’s obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted,
(ii) notifies Silicon in writing of the commencement of, and any material
development in, any such proceedings involving more than $100,000, and (iii)
posts bonds or takes any other steps required to keep the contested taxes from
becoming a lien upon any of the Collateral.  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,
and shall continue to pay all amounts necessary to fund all present and future
pension, profit sharing and deferred compensation plans in accordance with their
terms, and Borrower has not and will not withdraw from participation in, permit
partial or complete termination of, or permit 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.

 

3.9  Compliance with Law.  Borrower has, to the best of its knowledge, complied,
and will comply, in all material respects, with all provisions of all foreign,
federal, state and local laws and regulations applicable to Borrower, including,
but not limited to, those relating to Borrower’s ownership of real or personal
property, the conduct and licensing of Borrower’s business, and all
environmental matters.

 

3.10  Litigation.  There is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower’s knowledge) threatened against or
affecting Borrower in any court or before any governmental agency (or any basis
therefor known to Borrower) which could reasonably be expected to result, either
separately or in the aggregate, in any Material Adverse Change.  Borrower will
promptly inform Silicon in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted against Borrower involving
any single claim of $50,000 or more, or involving $100,000 or more in the
aggregate.

 

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3.11  Use of Proceeds.  All proceeds of all Loans shall be used solely for
lawful business purposes.  Borrower is not purchasing or carrying any “margin
stock” (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any “margin stock” or to extend credit to others for the purpose of
purchasing or carrying any “margin stock.”

 

4.  ACCOUNTS.

 

4.1  Representations Relating to Accounts.  Borrower represents and warrants to
Silicon as follows:  Each Account with respect to which Loans are requested by
Borrower shall, on the date each Loan is requested and made, (i) represent an
undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery, and per Borrower’s contracts, the deemed
acceptance of goods (which Borrower sends FOB point of shipping) or the
rendition of services, or the non-exclusive licensing of Intellectual Property,
in the ordinary course of Borrower’s business, and (ii) meet the Minimum
Eligibility Requirements set forth in  Section 8 below.

 

4.2  Representations Relating to Documents and Legal Compliance.  Borrower
represents and warrants to Silicon as follows:  To the best of Borrower’s
knowledge, all statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing the Accounts are and shall
be true and correct and all such invoices, instruments and other documents and
all of Borrower’s books and records are and shall be genuine and in all respects
what they purport to be.  To the best of Borrower’s knowledge, all sales and
other transactions underlying or giving rise to each Account shall comply in all
material respects with all applicable laws and governmental rules and
regulations.  To the best of Borrower’s knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Accounts are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.

 

4.3  Schedules and Documents relating to Accounts.  Borrower shall deliver to
Silicon transaction reports and schedules of collections, as provided in the
Schedule, on Silicon’s standard forms; provided, however, that Borrower’s
failure to execute and deliver the same shall not affect or limit Silicon’s
security interest and other rights in all of Borrower’s Accounts, nor shall
Silicon’s failure to advance or lend against a specific Account affect or limit
Silicon’s security interest and other rights therein. If requested by Silicon,
Borrower shall furnish Silicon with copies (or, at Silicon’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, and Borrower warrants the genuineness of all of the foregoing (to the
best of its knowledge).  Borrower shall also furnish to Silicon an aged accounts
receivable trial balance as provided in the Schedule.  In addition, Borrower
shall deliver to Silicon, on its reasonable 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.

 

4.4  Collection of Accounts.  Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing.  Whether or not an Event of Default has occurred and is continuing,
Borrower shall hold all payments on, and proceeds of, Accounts in trust for
Silicon, and Borrower shall immediately (with term “immediately” meaning in this
context within One Business Day) deliver all such payments and proceeds to
Silicon in their original form, duly endorsed, by depositing the same into the
lockbox or “blocked account” referred to below, to be applied to the Obligations
in such order as Silicon shall determine.  Silicon will require that all
proceeds of Collateral be deposited by Borrower into a lockbox account, or such
other “blocked account” as Silicon may specify, pursuant to a blocked account
agreement in such form as Silicon may specify in its good faith business
judgment.

 

4.5.  Remittance of Proceeds.  All proceeds arising from the disposition of any
Collateral shall be delivered, in kind, by Borrower to Silicon 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 in such order as
Silicon shall determine; provided that, if no Default or Event of Default has
occurred and is continuing, Borrower shall not be obligated to remit to Silicon
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 $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 Silicon. 
Nothing in this Section limits the restrictions on disposition of Collateral set
forth elsewhere in this Agreement.

 

4.6  Disputes.  Borrower shall notify Silicon promptly of all disputes or claims
in excess of $35,000 relating to Accounts.  Borrower shall not forgive
(completely or partially), compromise or settle any Account for less than
payment in full, or agree to do any of the foregoing, except that Borrower may
do so, provided that: (i) Borrower does so in good faith, in a commercially
reasonable manner, in the ordinary course of business, and in arm’s length
transactions, which are reported to Silicon on the regular reports provided to
Silicon; (ii) no Default or Event of Default has occurred and is continuing; and
(iii) taking into account all such discounts, settlements and forgiveness, the
total outstanding Loans will not exceed the Credit Limit.

 

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4.7  Returns.  Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower, Borrower shall promptly
determine the reason for such return and if such return is customarily
acceptable to Borrower under the circumstances, then Borrower shall promptly
issue a credit memorandum to the Account Debtor in the appropriate amount.  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 Silicon, and immediately notify Silicon of the return of the
Inventory.

 

4.8  Verification.  Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Accounts, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.

 

4.9  No Liability.  Silicon 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 Silicon 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 Silicon from
liability for its own gross negligence or willful misconduct.

 

5.  ADDITIONAL DUTIES OF BORROWER.

 

5.1  Financial and Other Covenants.  Borrower shall at all times comply with the
financial and other covenants set forth in the Schedule.

 

5.2  Insurance.  Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require and that are customary and in accordance with standard
practices for Borrower’s industry and locations, and Borrower shall provide
evidence of such insurance to Silicon.  All such property insurance policies
shall name Silicon as an additional loss payee, and shall contain a lenders loss
payee endorsement in form reasonably acceptable to Silicon.  Upon receipt of the
proceeds of any such insurance, Silicon shall promptly apply such proceeds in
reduction of the Obligations in accordance with Silicon’s standard procedures,
except that, provided no Default or Event of Default has occurred and is
continuing, Silicon shall release to Borrower insurance proceeds with respect to
Equipment totaling less than $100,000, which shall be utilized by Borrower for
the replacement of the Equipment assets with respect to which the insurance
proceeds were paid.  Silicon may require reasonable assurance that the insurance
proceeds so released will be so used.  If Borrower fails to provide or pay for
any insurance as described in this Section 5.2 or as may be otherwise required
under the Loan Documents, Silicon may, but is not obligated to, obtain the same
at Borrower’s expense.  Borrower shall promptly deliver to Silicon copies of all
material reports made to insurance companies.  Silicon hereby acknowledges that
existing insurance policies are acceptable and comport with Section 5.2.

 

5.3  Reports.  Borrower, at its expense, shall provide Silicon with the written
reports set forth in the Schedule, and such other written reports with respect
to Borrower (including budgets, sales projections, operating plans and other
financial documentation), as Silicon shall from time to time specify in its good
faith business judgment.

 

5.4  Access to Collateral, Books and Records.  At reasonable times, and on one
Business Day’s prior notice, Silicon, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower’s books and
records. The parties contemplate that such audits will be performed no more
frequently than quarterly, but nothing herein restricts Silicon’s right to
conduct such audits more frequently if (i) Silicon believes that it is advisable
to do so in Silicon’s good faith business judgment, or (ii) Silicon believes in
good faith that an event of default or an event which, with notice or passage of
time or both would constitute an event of default, has occurred and is
continuing. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Silicon shall have the
right to disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process.  The foregoing
inspections and audits shall be at Borrower’s expense and the charge therefor
shall be $750 per person per day (or such higher amount as shall represent
Silicon’s then current standard charge for the same), plus reasonable
out-of-pocket expenses. In the event Borrower and Silicon schedule an audit more
than 10 days in advance, and Borrower seeks to reschedule the audit with less
than five days’ written notice to Silicon, then (without limiting any of
Silicon’s rights or remedies), Borrower shall pay Silicon a cancellation fee of
$1,000 plus any out-of-pocket expenses incurred by Silicon, to compensate
Silicon for the anticipated costs and expenses of the cancellation.

 

5.5  Negative Covenants.  Except as may be permitted in the Schedule, Borrower
shall not, without Silicon’s prior written consent (which shall be a matter of
its good faith business judgment), do any of the following:  (i) merge or
consolidate with another corporation or entity; (ii) acquire any assets, except
in the ordinary course of business; (iii) enter into any other transaction
outside the ordinary course of business; (iv) sell or transfer any Collateral,
except for the sale of finished Inventory in the ordinary course of Borrower’s
business, and except for the sale of obsolete or unneeded Equipment in the
ordinary

 

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course of business and non-exclusive licenses and similar non-exclusive
arrangements for the use of Intellectual Property; (v) store any Inventory or
other Collateral with any warehouseman or other third party which has not
executed and delivered to Silicon a bailee agreement or other similar agreement
acceptable to Silicon in its good faith business judgment with respect to
finished goods inventory, except when any such Collateral or Inventory is in
transit or located at a subcontractor’s facility; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis other
than for such customary and ordinary course return transactions arising from
Borrower’s product warranties; (vii) make any loans of any money or other
assets, other than (a) travel advances to Borrower’s employees in the ordinary
course of business consistent with past business practices (including without
limitation, for travel entertainment and relocation expenses) and in aggregate
amounts consistent with past ordinary course business practices of Borrower; (b)
extension of trade credit in the ordinary course of business to non-affiliated
entities; (c) other loans and advances to employees, officers and directors, in
the ordinary course of business in an aggregate principal amount not to exceed
$25,000, at any time outstanding for all such loans to all employees, officers
and directors, provided, no new such loans and advances shall be made while any
Default or Event of Default is then occurring; (viii) incur any debts, outside
the ordinary course of business, which results in a Material Adverse Change;
(ix) guarantee or otherwise become liable with respect to the obligations of
another party or entity; (x) pay or declare any dividends on Borrower’s stock
(except for dividends payable solely in stock of Borrower); (xi) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any of Borrower’s stock,
except that Borrower may repurchase its stock in accordance with Borrower’s
employee stock option plan, provided that the aggregate amount of consideration
paid by Borrower for such repurchases shall not exceed $100,000 in the aggregate
in any fiscal year, and before and after giving effect to any such repurchase no
Default or Event of Default has occurred and is continuing; (xii) make any
change in Borrower’s capital structure which would result in a Material Adverse
Change; or (xiii) engage, directly or indirectly, in any business other than the
businesses currently engaged in by Borrower or reasonably related thereto; or
(xiv) dissolve or elect to dissolve.  Transactions permitted by the foregoing
provisions of this Section are only permitted if no Default or Event of Default
would occur as a result of such transaction.

 

5.6  Litigation Cooperation.  Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or relating to
Borrower, Borrower shall, upon reasonable notice, without expense to Silicon,
make available Borrower and its officers, employees and agents and Borrower’s
books and records, to the extent that Silicon may deem them reasonably necessary
in order to prosecute or defend any such suit or proceeding.

 

5.7  Further Assurances.  Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may, in its
good faith business judgment, deem reasonably necessary or useful in order to
perfect and maintain Silicon’s perfected first-priority security interest in the
Collateral (subject to Permitted Liens), and in order to fully consummate the
transactions contemplated by this Agreement.

 

6.   TERM.

 

6.1  Maturity Date.  This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the “Maturity Date”), subject to Section 6.3
below.

 

6.2  Early Termination.  This Agreement may be terminated prior to the Maturity
Date as follows:  (i) by Borrower, effective three Business Days after written
notice of termination is given to Silicon; or (ii) by Silicon at any time after
the occurrence and during the continuance of an Event of Default, without
notice, effective immediately.  If this Agreement is terminated by Borrower or
by Silicon under this Section 6.2, Borrower shall pay to Silicon a termination
fee as set forth in the Non-Exim Agreement (as defined in the Schedule) of
approximate even date herewith, provided that no termination fee shall be
charged if the credit facility hereunder is replaced with a new facility from
another division of Silicon Valley Bank.  The termination fee shall be due and
payable on the effective date of termination and thereafter shall bear interest
at a rate equal to the highest rate applicable to any of the Obligations.

 

6.3  Payment of Obligations.  On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations
(other than for any inchoate indemnity obligations of Borrower hereunder that
survive termination of this Agreement), whether evidenced by installment notes
or otherwise, and whether or not all or any part of such Obligations are
otherwise then due and payable.  Without limiting the generality of the
foregoing, if on the Maturity Date, or on any earlier effective date of
termination, there are any outstanding Letters of Credit issued by Silicon or
issued by another institution based upon an application, guarantee, indemnity or
similar agreement on the part of Silicon, then on such date Borrower shall
provide to Silicon cash collateral in an amount equal to 105% of the face amount
of all such Letters of Credit plus all interest, fees and cost due or to become
due in connection therewith (as estimated by Silicon in its good faith business
judgment, taking into account the excess of cash collateral over 100% of the
face amount of such Letters of Credit), to secure all of the Obligations
relating to said Letters of Credit, pursuant to Silicon’s then standard form
cash pledge agreement.  Notwithstanding any termination of this Agreement, all
of Silicon’s security interests in all of the Collateral and all of the terms
and provisions of this Agreement shall continue in full force and effect until
all Obligations have been paid and performed in full; provided that Silicon may,
in its sole discretion, refuse to make any further Loans after termination.  No

 

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termination shall in any way affect or impair any right or remedy of Silicon,
nor shall any such termination relieve Borrower of any Obligation to Silicon,
until all of the Obligations (other than for any inchoate indemnity obligations
of Borrower hereunder that survive termination of this Agreement) have been paid
and performed in full.  Upon payment and performance in full of all the
Obligations and termination of this Agreement, Silicon shall promptly terminate
its financing statements with respect to the Borrower and deliver to Borrower
such other documents as may be required to fully terminate Silicon’s security
interests and Silicon shall further reassign and redeliver (or cause to be
reassigned or redelivered) to Borrower, or to such person as Borrower shall
designate, against receipt, such of the Borrower’s assets delivered to Silicon
as shall have not been sold or otherwise applied by Silicon pursuant to the
terms of the Loan Documents that are still then held by Silicon.

 

7.  EVENTS OF DEFAULT AND REMEDIES.

 

7.1  Events of Default.  The occurrence of any of the following events shall
constitute an “Event of Default” under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower’s officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect when made or deemed to be made; or
(b) Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation; or (c) the total Loans and other Obligations
outstanding at any time shall exceed the Credit Limit provided, however, if an
Overadvance results directly from a change by Silicon of either the amount of
Reserves or of the “Minimum Eligibility Requirements”, then if Borrower fails to
pay such Overadvance within three Business Days of the occurrence of the
Overadvance; or (d) Borrower shall fail to comply with any of the financial
covenants set forth in the Schedule, or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured, or shall fail to
permit Silicon to conduct an inspection or audit as specified in Section 5.4
hereof; or (e) Borrower shall fail to perform any other non-monetary Obligation,
which failure is not cured within five Business Days after the date due; or (f)
any levy, assessment, attachment, seizure, lien or encumbrance (other than a
Permitted Lien) is made on all or any part of the Collateral which is not cured
within 10 days after the occurrence of the same; or (g) any default or event of
default occurs under any obligation in excess of $100,000, secured by a
Permitted Lien, which is not cured within any applicable cure period or waived
in writing by the holder of the Permitted Lien; or (h) Borrower breaches any
material contract or obligation, which has resulted or may reasonably be
expected to result in a Material Adverse Change; or (i) Dissolution, termination
of existence, insolvency or business failure of Borrower; or appointment of a
receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding by Borrower under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, which is not dismissed within
45 days after the date commenced; or (j) the commencement of any proceeding
against Borrower or any guarantor of any of the Obligations under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, which is not cured by the dismissal thereof within 45 days
after the date commenced; or (k) revocation or termination of, or limitation or
denial of liability upon, any guaranty of the Obligations or any attempt to do
any of the foregoing, or commencement of proceedings by any guarantor of any of
the Obligations under any bankruptcy or insolvency law; or (l) revocation or
termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset of any kind
pledged by any third party to secure any or all of the Obligations, or any
attempt to do any of the foregoing, or commencement of proceedings by or against
any such third party under any bankruptcy or insolvency law; or (m) Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such indebtedness
or obligations terminates or in any way limits his subordination agreement; or
(n) if a Person or group of affiliated Persons shall acquire, beneficially or of
record, more than 30% of the outstanding shares of stock of Borrower, in one or
more transactions, and such Person or group of affiliated Persons has “control”
of the Borrower (which shall mean the effective ability to elect a majority of
the Board of Directors of Borrower) (such acquisition and control referred to
herein as a “Change in Control”), then Borrower shall notify Silicon of the
Change in Control within five Business Days after Borrower has actual knowledge
of the Change in Control, and if Silicon shall give written notice to Borrower
that, in the exercise of its good faith business judgment it does not consent to
the Change in Control then the same shall constitute an Event of Default; or (o)
Borrower shall generally not pay its debts as they become due, or Borrower shall
conceal, remove or transfer any part of its property, with intent to hinder,
delay or defraud its creditors, or make or suffer any transfer of any of its
property which may be fraudulent under any bankruptcy, fraudulent conveyance or
similar law; or (p) a Material Adverse Change shall occur.  Silicon may cease
making any Loans hereunder during any of the above cure periods, and thereafter
if an Event of Default has occurred and is continuing.

 

7.2  Remedies.  Upon the occurrence and during the continuance of any Event of
Default, and at any time thereafter, Silicon, at its option, and without notice
or demand of any kind (all of which are hereby expressly waived by Borrower, to
the extent permitted by law), may do any one or more of the following: (a) Cease
making Loans or otherwise extending credit to Borrower under this Agreement or
any other Loan Document; (b) Accelerate and declare all or any part of the
Obligations to be immediately due, payable, and performable, notwithstanding any
deferred or installment payments allowed by any instrument evidencing or
relating to any Obligation; (c) Take possession of any or all of the Collateral
wherever it may be

 

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found, and for that purpose Borrower hereby authorizes Silicon without judicial
process (subject to the rights of any landlord regarding any of Borrower’s
leased premises) to enter onto any of Borrower’s premises without interference
to search for, take possession of, keep, store, or remove any of the Collateral,
and remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof, without charge for so long as Silicon deems it
necessary, in its good faith business judgment, in order to complete the
enforcement of its rights under this Agreement or any other agreement; provided,
however, that should Silicon seek to take possession of any of the Collateral by
court process, Borrower hereby irrevocably waives: (i) any bond and any surety
or security relating thereto required by any statute, court rule or otherwise as
an incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii) any
requirement that Silicon retain possession of, and not dispose of, any such
Collateral until after trial or final judgment; (d) Require Borrower to assemble
any or all of the Collateral and make it available to Silicon at places
designated by Silicon which are reasonably convenient to Silicon and Borrower,
and to remove the Collateral to such locations as Silicon may deem advisable;
(e) Complete the processing, manufacturing or repair of any Collateral prior to
a disposition thereof and, for such purpose and for the purpose of removal,
Silicon shall have the right to use Borrower’s premises, vehicles, hoists,
lifts, cranes, and other Equipment and all other property without charge; (f)
Sell, lease or otherwise dispose of any of the Collateral, in its condition at
the time Silicon obtains possession of it or after further manufacturing,
processing or repair, at one or more public and/or private sales, in lots or in
bulk, for cash, exchange or other property, or on credit, and to adjourn any
such sale from time to time without notice other than oral announcement at the
time scheduled for sale.  Silicon shall have the right to conduct such
disposition on Borrower’s premises (subject to the rights of any landlord
regarding any of Borrower’s leased premises) without charge, for such time or
times as Silicon deems reasonable, or on Silicon’s premises, or elsewhere and
the Collateral need not be located at the place of disposition.  Silicon may
directly or through any affiliated company purchase or lease any Collateral at
any such public disposition, and if permissible under applicable law, at any
private disposition.  Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Accounts and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower’s name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Silicon’s good faith
business judgment, to grant extensions of time to pay, compromise claims and
settle Accounts and the like for less than face value; (h) Offset against any
sums in any of Borrower’s general, special or other Deposit Accounts with
Silicon against any or all of the Obligations; and (i) Demand and receive
possession of any of Borrower’s federal and state income tax returns and the
books and records utilized in the preparation thereof or referring thereto.  All
reasonable attorneys’ fees, expenses, costs, liabilities and obligations
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations. 
Without limiting any of Silicon’s rights and remedies, from and after the
occurrence and during the continuance of any Event of Default, the interest rate
applicable to the Obligations shall be increased by an additional four percent
per annum (the “Default Rate”).

 

7.3  Standards for Determining Commercial Reasonableness.  Borrower and Silicon
agree that a sale or other disposition (collectively, “sale”) of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable:  (i) Notice of the sale is given to Borrower at least
ten days prior to the sale, and, in the case of a public sale, notice of the
sale is published at least five days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, non-specific terms; (iii) The sale is
conducted at a place designated by Silicon, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m. (in
the time zone where collateral is located);  (v) Payment of the purchase price
in cash or by cashier’s check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Silicon may (but is not obligated to) direct
any prospective purchaser to ascertain directly from Borrower any and all
information concerning the same.  Silicon shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.

 

7.4  Power of Attorney.  Upon the occurrence and during the continuance of any
Event of Default, without limiting Silicon’s other rights and remedies, Borrower
grants to Silicon an irrevocable power of attorney coupled with an interest,
authorizing and permitting Silicon (acting through any of its employees,
attorneys or agents) at any time, at its option, but without obligation, with or
without notice to Borrower, and at Borrower’s expense, to do any or all of the
following, in Borrower’s name or otherwise, but Silicon agrees that if it
exercises any right hereunder, it will do so in good faith and in a commercially
reasonable manner:  (a) Execute on behalf of Borrower any documents that Silicon
may, in its good faith business judgment, deem advisable in order to perfect and
maintain Silicon’s security interest in the Collateral, or in order to exercise
a right of Borrower or Silicon, or in order to fully consummate all the
transactions contemplated under this Agreement, and all other Loan Documents;
(b) Execute on behalf of Borrower, any invoices relating to any Account, any
draft against any Account Debtor and any notice to any Account Debtor, any proof
of claim in bankruptcy, any Notice of Lien, claim of mechanic’s, materialman’s
or other lien, or assignment or satisfaction of mechanic’s, materialman’s or
other lien; (c)

 

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Take control in any manner of any cash or non-cash items of payment or proceeds
of Collateral; endorse the name of Borrower upon any instruments, or documents,
evidence of payment or Collateral that may come into Silicon’s possession; (d)
Endorse all checks and other forms of remittances received by Silicon; (e) Pay,
contest or settle any lien, charge, encumbrance, security interest and adverse
claim in or to any of the Collateral, or any judgment based thereon, or
otherwise take any action to terminate or discharge the same; (f) Grant
extensions of time to pay, compromise claims and settle Accounts and General
Intangibles for less than face value and execute all releases and other
documents in connection therewith; (g) Pay any sums required on account of
Borrower’s taxes or to secure the release of any liens therefor, or both; (h)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (i) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give Silicon the same rights of access and other rights with respect
thereto as Silicon has under this Agreement; and (j) Take any action or pay any
sum required of Borrower pursuant to this Agreement and any other Loan
Documents.  Any and all reasonable sums paid and any and all reasonable costs,
expenses, liabilities, obligations and attorneys’ fees incurred by Silicon with
respect to the foregoing shall be added to and become part of the Obligations,
shall be payable on demand, and shall bear interest at a rate equal to the
highest interest rate applicable to any of the Obligations.  In no event shall
Silicon’s rights under the foregoing power of attorney or any of Silicon’s other
rights under this Agreement be deemed to indicate that Silicon is in control of
the business, management or properties of Borrower.  The foregoing power of
attorney shall expire upon payment in full of the Obligations (other than for
inchoate indemnity obligations which survive the termination of this Agreement)
and the termination of this Agreement.

 

7.5  Application of Proceeds.  All proceeds realized as the result of any sale
of the Collateral shall be applied by Silicon first to the reasonable costs,
expenses, liabilities, obligations and attorneys’ fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due upon
any of the Obligations, and third to the principal of the Obligations, in such
order as Silicon shall determine in its sole discretion.  Any surplus shall be
paid to Borrower or other persons legally entitled thereto; Borrower shall
remain liable to Silicon for any deficiency.  If, Silicon, in its good faith
business judgment, directly or indirectly enters into a deferred payment or
other credit transaction with any purchaser at any sale of Collateral, Silicon
shall have the option, exercisable at any time, in its good faith business
judgment, of either reducing the Obligations by the principal amount of purchase
price or deferring the reduction of the Obligations until the actual receipt by
Silicon of the cash therefor.

 

7.6  Remedies Cumulative.  In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive.  Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies.  The failure or delay of Silicon to exercise any
rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations
have been fully paid and performed.

 

8.     DEFINITIONS.  AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS HAVE THE
FOLLOWING MEANINGS:

 

“Account Debtor” means the obligor on an Account.

 

“Accounts” means all present and future “accounts” as defined in the California
Uniform Commercial Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all accounts
receivable and other sums owing to Borrower.

 

 “Affiliate” means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.

 

“Business Day” means a day on which Silicon is open for business.

 

“Code” means the Uniform Commercial Code as adopted and in effect in the State
of California  from time to time.

 

“Collateral” has the meaning set forth in Section 2 above.

 

“continuing” and “during the continuance of” when used with reference to a
Default or Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by Silicon or cured within
any applicable cure period.

 

“Default” means any event which with notice or passage of time or both, would
constitute an Event of Default.

 

“Default Rate” has the meaning set forth in Section 7.2 above.

 

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“Deposit Accounts” means all present and future “deposit accounts” as defined in
the California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all general and special bank accounts, demand accounts, checking accounts,
savings accounts and certificates of deposit.

 

“Eligible Accounts” means Accounts and General Intangibles arising in the
ordinary course of Borrower’s business from the sale of goods or the rendition
of services, or the non-exclusive licensing of Intellectual Property, which
Silicon, in its good faith business judgment, shall deem eligible for borrowing
and which constitutes “Eligible Export-Related Accounts Receivable” (as defined
in the Exim Borrower Agreement referred to in the Schedule).  Without limiting
the fact that the determination of which Accounts are eligible for borrowing is
a matter of Silicon’s good faith business judgment, the following (the “Minimum
Eligibility Requirements”) are the minimum requirements for a Account to be an
Eligible Account:  (i) the Account must not be on terms of more than net 90 days
from its invoice date and must not be outstanding for more than 60 days past its
due date as set forth in the applicable invoice (the “Eligibility Period”), (ii)
the Account must not represent progress billings, or be due under a fulfillment
or requirements contract with the Account Debtor, (iii) the Account must not be
subject to any contingencies (including Accounts arising from sales on
consignment, guaranteed sale or other terms pursuant to which payment by the
Account Debtor may be conditional) other than for potential customary and
ordinary course returns arising from Borrower’s product warranties, (iv) the
Account must not be owing from an Account Debtor with whom Borrower has any
dispute (whether or not relating to the particular Account), (v) the Account
must not be owing from an Affiliate of Borrower, (vi) the Account must not be
owing from an Account Debtor which is subject to any insolvency or bankruptcy
proceeding, or whose financial condition is not acceptable to Silicon, or which,
fails or goes out of a material portion of its business, (vii) the Account must
not be owing from the United States or any department, agency or instrumentality
thereof (unless there has been compliance, to Silicon’s satisfaction, with the
United States Assignment of Claims Act), (viii) [intentionally omitted],  (ix)
the Account must not be owing from an Account Debtor to whom Borrower is or may
be liable for goods purchased from such Account Debtor or otherwise (but, in
such case, the Account will be deemed not eligible only to the extent of any
amounts owed by Borrower to such Account Debtor). Accounts owing from one
Account Debtor will not be deemed Eligible Accounts to the extent they exceed
25% of the total Accounts outstanding (except that, in the case of Nihon Kohden,
said percentage shall be 75%).  In addition, if more than 50% of the Accounts
owing from an Account Debtor are outstanding for a period longer than their
Eligibility Period (without regard to unapplied credits) or are otherwise not
eligible Accounts, then all Accounts owing from that Account Debtor will be
deemed ineligible for borrowing.  Silicon may, from time to time, in its good
faith business judgment, revise the Minimum Eligibility Requirements, upon
written notice to Borrower.

 

“Equipment” means all present and future “equipment” as defined in the
California Uniform Commercial Code in effect on the date hereof 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.

 

“Event of Default” means any of the events set forth in Section 7.1 of this
Agreement.

 

“GAAP” means generally accepted accounting principles consistently applied.

 

“General Intangibles” means all present and future “general intangibles” as
defined in the California Uniform Commercial 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, payment intangibles, royalties, contract
rights, goodwill, franchise agreements, purchase orders, customer lists, route
lists, telephone numbers, domain names, claims, income tax refunds, security and
other deposits, 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.

 

“good faith business judgment” means honesty in fact and good faith (as defined
in Section 1201 of the Code) in the exercise of Silicon’s business judgment.

 

“including” means including (but not limited to).

 

 “Intellectual Property” means all present and future (a) copyrights, copyright
rights, copyright applications, copyright registrations and like protections in
each work of authorship and derivative work thereof, whether published or
unpublished, (b) trade secret rights, including all rights to unpatented
inventions and know-how, and confidential information; (c) mask work or similar
rights available for the protection of semiconductor chips; (d) patents, patent
applications and like protections including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (e) trademarks, servicemarks, trade styles,
and trade names, whether or not any of the foregoing are registered, and all
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
any such trademarks; (f) computer software and computer software products; (g)
designs and design rights; (h) technology; (i) all claims for damages by way of
past, present and future infringement of any of the rights included above; (j)
all licenses or other rights to use any property or rights of a type described
above.

 

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“Inventory” means all present and future “inventory” as defined in the
California Uniform Commercial 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 Property” means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership interests,
limited liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets held
in any securities account or otherwise, and all options and warrants to purchase
any of the foregoing, wherever located, and all other securities of every kind,
whether certificated or uncertificated.

 

“Loan Documents” means, collectively, this Agreement, the Representations, and
all other present and future documents, instruments and agreements between
Silicon and Borrower, including, but not limited to those relating to this
Agreement, and all amendments and modifications thereto and replacements
therefor.

 

“Material Adverse Change” means any of the following: (i) a material adverse
change in the business, operations, or financial or other condition of the
Borrower, or (ii) a material impairment of the prospect of repayment of any
portion of the Obligations; or (iii) a material impairment of the value or
priority of Silicon’s security interests in the Collateral.

 

“Obligations” means all present and future Loans, advances, debts, liabilities,
obligations, guaranties, covenants, duties and indebtedness at any time owing by
Borrower to Silicon, whether evidenced by this Agreement or any note or other
instrument or document, or otherwise, whether arising from an extension of
credit, opening of a letter of credit, banker’s acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Silicon in
Borrower’s debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney’s
fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest
charges and any other sums chargeable to Borrower under this Agreement or under
any other Loan Documents.

 

“Other Property” means the following as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term as
may hereafter be made, and all rights relating thereto: all present and future
“commercial tort claims” (including without limitation any commercial tort
claims identified in the Representations), “documents”, “instruments”,
“promissory notes”, “chattel paper”, “letters of credit”, “letter-of-credit
rights”, “fixtures”, “farm products” and “money”; and all other goods and
personal property of every kind, tangible and intangible, whether or not
governed by the California Uniform Commercial Code.

 

 “Permitted Liens” means the following:  (i) purchase money security interests
in specific items of Equipment; (ii) leases of specific items of Equipment;
(iii) liens for taxes not yet payable; (iv) additional security interests and
liens consented to in writing by Silicon, which consent may be withheld in its
good faith business judgment; (v) security interests being terminated
substantially concurrently with this Agreement; (vi) liens of materialmen,
mechanics, warehousemen, carriers, or other similar liens arising in the
ordinary course of business and securing obligations which are not delinquent;
(vii) liens incurred in connection with the extension, renewal or refinancing of
the indebtedness secured by liens of the type described above in clauses (i) or
(ii) above, provided that any extension, renewal or replacement lien is limited
to the property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods.  Silicon will have
the right to require, as a condition to its consent under subparagraph (iv)
above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon’s then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.

 

“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, government, or any
agency or political division thereof, or any other entity.

 

“Representations” means the written Representations and Warranties provided by
Borrower to Silicon referred to in the Schedule.

 

“Reserves” means, as of any date of determination, such amounts as Silicon may
from time to time establish and revise in its good faith business judgment,
reducing the amount of Loans, Letters of Credit and other financial
accommodations which would otherwise be available to Borrower under the lending
formula(s) provided in the Schedule:  (a) to reflect events, conditions,
contingencies or risks which, as determined by Silicon 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

 

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security interests and other rights of Silicon in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect Silicon’s
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower or any Guarantor to Silicon is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Silicon determines in good faith constitutes an
Event of Default or may, with notice or passage of time or both, constitute an
Event of Default.

 

Other Terms.  All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP,
consistently applied.  All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the Code, to the extent
such terms are defined therein.

 

9.     GENERAL PROVISIONS.

 

9.1  Interest Computation.  In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Silicon (including
proceeds of Accounts and payment of the Obligations in full) shall be deemed
applied by Silicon on account of the Obligations two Business Days after receipt
by Silicon of immediately available funds, and, for purposes of the foregoing,
any such funds received after 12:00 Noon on any day shall be deemed received on
the next Business Day.  Silicon shall not, however, be required to credit
Borrower’s account for the amount of any item of payment which is unsatisfactory
to Silicon in its good faith business judgment, and Silicon may charge
Borrower’s loan account for the amount of any item of payment which is returned
to Silicon unpaid.

 

9.2  Application of Payments.  All payments with respect to the Obligations
shall be promptly applied in accordance with this Agreement and Silicon’s
standard procedures may be applied, and in Silicon’s good faith business
judgment may be reversed and re-applied, to the Obligations, in such order and
manner as Silicon shall determine in its good faith business judgment.

 

9.3  Charges to Accounts.  Silicon may, in its discretion, require that Borrower
pay monetary Obligations in cash to Silicon, or charge them to Borrower’s Loan
account, in which event they will bear interest at the same rate applicable to
the Loans.  Silicon may also, in its discretion, charge any monetary Obligations
to Borrower’s Deposit Accounts maintained with Silicon.

 

9.4  Monthly Accountings.  Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement.  Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within 90 days after such account is
rendered, describing the nature of any alleged errors or omissions.

 

9.5  Notices.  All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, or certified mail return receipt requested,
addressed to Silicon or Borrower at the addresses shown in the heading to this
Agreement, or at any other address designated in writing by one party to the
other party.  Notices to Silicon shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager.  All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.

 

9.6  Severability.  Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.

 

9.7  Integration.  This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and Silicon and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement.  There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.

 

9.8  Waivers; Indemnity.  The failure of Silicon at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other Loan Document shall not waive or diminish any right of Silicon later to
demand and receive strict compliance therewith.  Any waiver of any default shall
not waive or affect any other default, whether prior or subsequent, and whether
or not similar.  None of the provisions of this Agreement or any other Loan
Document shall be deemed to have been waived by any act or knowledge of Silicon
or its agents or employees, but only by a specific written waiver signed by an
authorized officer of Silicon and delivered to Borrower.  Borrower waives the
benefit of all statutes of limitations relating to any of the Obligations or
this Agreement or any other Loan Document, and Borrower waives demand, protest,
notice of protest and notice of default or dishonor, notice of payment and
nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, instrument, account, General Intangible, document or guaranty
at any time held by Silicon on which Borrower is or may in any way be liable,
and notice of any action taken by Silicon, unless

 

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expressly required by this Agreement. Borrower hereby agrees to indemnify
Silicon and its affiliates, subsidiaries, parent, directors, officers,
employees, agents, and attorneys, and to hold them harmless from and against any
and all claims, debts, liabilities, demands, obligations, actions, causes of
action, penalties, costs and expenses (including reasonable attorneys’ fees), of
every kind, which they may sustain or incur based upon or arising out of any of
the Obligations, or any relationship or agreement between Silicon and Borrower,
or any other matter, relating to Borrower or the Obligations; provided that this
indemnity shall  not extend to damages proximately caused by the indemnitee’s
own gross negligence or willful misconduct.  A Person seeking to be indemnified
under this Section 9.8 shall make commercially reasonable efforts to notify
Borrower of any event requiring indemnification within a reasonable time
following such Person’s receipt of notice of commencement of any action or
proceeding giving rise to a claim for indemnification hereunder, provided that
(i) there shall be no obligation to so notify Borrower if an Event of Default
has occurred and is continuing, (ii) neither Silicon nor any such Person shall
have any liability or obligation for any inadvertent failure to provide such
notice, (iii) no failure to provide such notice shall affect Borrower’s
obligation to provide indemnity hereunder and (iv) in any event, nothing herein
shall impose on Silicon any duty or obligation to impair the confidentiality or
sanctity of its attorney client relationship.  In such proceeding, such Person
shall use commercially reasonable efforts to keep Borrower reasonably informed
of its defense and any settlement of any such action or proceeding and
negotiations to settle or otherwise resolve any claim, provided that (i) such
Person shall have the exclusive right to decide to accept or reject any
settlement offer, (ii) there shall be no obligation to keep Borrower so informed
if an Event of Default has occurred and is continuing, (iii) neither Silicon nor
any such Person shall have any liability or obligation for any inadvertent
failure to keep Borrower so informed, (iv) no failure to keep Borrower so
informed shall affect Borrower’s obligation to provide indemnity hereunder and
(v) in any event, nothing herein shall impose on Silicon any duty or obligation
to impair the confidentiality or sanctity of its attorney client relationship. 
Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section shall survive any termination of this
Agreement and shall for all purposes continue in full force and effect.

 

9.9  No Liability for Ordinary Negligence.  Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Silicon, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon, but nothing herein shall relieve Silicon from
liability for its own gross negligence or willful misconduct.

 

9.10  Amendment.  The terms and provisions of this Agreement may not be waived
or amended, except in a writing executed by Borrower and a duly authorized
officer of Silicon.

 

9.11  Time of Essence.  Time is of the essence in the performance by Borrower of
each and every obligation under this Agreement.

 

9.12  Attorneys Fees and Costs.  Borrower shall reimburse Silicon for all
reasonable attorneys’ fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys’ fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and all present and future documents relating to this Agreement;
obtain legal advice in connection with this Agreement or Borrower; enforce, or
seek to enforce, any of its rights; prosecute actions against, or defend actions
by, Account Debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower’s books and records; protect, obtain possession of, lease, dispose of,
or otherwise enforce Silicon’s security interest in, the Collateral; and
otherwise represent Silicon in any litigation relating to Borrower.  In
satisfying Borrower’s obligation hereunder to reimburse Silicon for attorneys
fees, Borrower may, for convenience, issue checks directly to Silicon’s
attorneys, Levy, Small & Lallas, but Borrower acknowledges and agrees that Levy,
Small & Lallas is representing only Silicon and not Borrower in connection with
this Agreement.  If either Silicon or Borrower files any lawsuit against the
other predicated on a breach of this Agreement, the prevailing party in such
action shall be entitled to recover its reasonable costs and attorneys’ fees,
including (but not limited to) reasonable attorneys’ fees and costs incurred in
the enforcement of, execution upon or defense of any order, decree, award or
judgment.  All attorneys’ fees and costs to which Silicon may be entitled
pursuant to this Paragraph shall immediately become part of Borrower’s
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.

 

9.13  Benefit of Agreement.  The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Silicon; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Silicon, and any prohibited assignment
shall be void.  No consent by Silicon to any assignment shall release Borrower
from its liability for the Obligations.

 

13

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9.14  Joint and Several Liability.  If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.

 

9.15  Limitation of Actions.  Any claim or cause of action by Borrower against
Silicon, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Loan Agreement, or any other Loan
Document, or any other transaction contemplated hereby or thereby or relating
hereto or thereto, or any other matter, cause or thing whatsoever, occurred,
done, omitted or suffered to be done by Silicon, its directors, officers,
employees, agents, accountants or attorneys, shall be barred unless asserted by
Borrower by the commencement of an action or proceeding in a court of competent
jurisdiction by the filing of a complaint within one year after the first act,
occurrence or omission upon which such claim or cause of action, or any part
thereof, is based, and the service of a summons and complaint on an officer of
Silicon, or on any other person authorized to accept service on behalf of
Silicon, within thirty (30) days thereafter.  Borrower agrees that such one-year
period is a reasonable and sufficient time for

 Borrower to investigate and act upon any such claim or cause of action.  The
one-year period provided herein shall not be waived, tolled, or extended except
by the written consent of Silicon in its sole discretion.  This provision shall
survive any termination of this Loan Agreement or any other Loan Document.

 

9.16  Paragraph Headings; Construction.  Paragraph headings are only used in
this Agreement for convenience.  Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly
against Silicon or Borrower under any rule of construction or otherwise.

 

9.17  Governing Law; Jurisdiction; Venue.  This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California.  As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon’s option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa Clara County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.

 

9.18  Mutual Waiver of Jury Trial.  BORROWER AND SILICON EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

 

Borrower:

Silicon:

 

 

 

ENDOCARDIAL SOLUTIONS, INC.

SILICON VALLEY BANK

 

 

 

By

  /s/ J. Robert Paulson, Jr.

 

By

 /s/ J. Anthony Clarkson

 

Vice President, CFO

Title

Vice President Market Manager

 

 

 

 

 

 

By

  /s/ J. Robert Paulson, Jr.

 

 

Ass’t Secretary

 

 

14

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Silicon Valley Bank

 

Schedule to

 

Loan and Security Agreement

(Exim Program)

 

Borrower:

Endocardial Solutions, Inc.

Address:

1350 Energy Lane, Suite 110

 

St. Paul, MN  55108

 

 

Date:

September 24, 2003

 

This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.

 

1.  CREDIT LIMIT

(Section 1.1):                                                 An amount not to
exceed the lesser of (i) $1,500,000 at any one time outstanding (the “Maximum
Credit Limit”), or (ii) 80% of the amount of Borrower’s Eligible Receivables (as
defined in Section 8 above).

 

2.  INTEREST.

 

Interest Rate (Section 1.2):

 

A rate equal to the “Prime Rate” in effect from time to time, plus 1.50% per
annum, provided that the interest rate in effect on any day shall not be less
than 5.75% per annum.  Interest shall be calculated on the basis of a 360-day
year for the actual number of days elapsed.  As used in this Agreement, “Prime
Rate” means the interest rate announced from time to time by Silicon as its
“prime rate” (which is a base rate upon which other rates charged by Silicon are
based, and it is not necessarily the best rate available at Silicon).  The
interest rate applicable to the Obligations shall change on each date there is a
change in the Prime Rate.

 

Minimum Monthly

Interest (Section 1.2):                          $5,000 per month in the
aggregate as between this Agreement and the Non-Exim Agreement.

 

 

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3.  FEES (Section 1.4):

 

Loan Fee:                                               See Non-Exim Agreement
(as defined below) of approximate even date herewith.

 

Collateral Monitoring

Fee:                                                         $1,250, per month
in the aggregate as between this Agreement and the Non-Exim Agreement, payable
in arrears (prorated for any partial month at the beginning and at termination
of this Agreement).

 

4.  MATURITY DATE

(Section 6.1):                                                 The first
anniversary of the date of this Agreement.

 

5.  FINANCIAL COVENANTS

(Section 5.1):                                                 Borrower shall
comply with each of the financial covenants set forth in the Non-Exim Agreement
(defined below).

 

6.  REPORTING.

(Section 5.3):

 

Borrower shall provide Silicon with the following:

 

1.     Transaction reports and schedules of collections, each week and at the
time of each Loan request, on Silicon’s standard form

 

2.     Monthly accounts receivable agings, aged by invoice date, within twenty
days after the end of each month.

 

3.     Monthly accounts payable agings, aged by invoice date, and outstanding or
held check registers, if any, within twenty days after the end of each month.

 

4.     Monthly reconciliations of accounts receivable agings (aged by invoice
date), transaction reports, and general ledger, within twenty days after the end
of each month.

 

5.     A copy of the Board of Director’s Report each time a Board of Director’s
meeting is held and, in any event, within thirty days of the date of such
meeting.

 

6.     Monthly unaudited financial statements, as soon as available, and in any
event within thirty days after the end of each month.

 

7.     Monthly Compliance Certificates, within thirty days after the end of each
month, in such form as Silicon shall reasonably specify, signed by the Chief
Financial Officer of Borrower, certifying that as of the end of such month
Borrower was in full compliance with

 

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all of the terms and conditions of this Agreement, and setting forth
calculations showing compliance with the financial covenants set forth in this
Agreement and such other information as Silicon shall reasonably request,
including, without limitation, a statement that at the end of such month there
were no held checks.

 

8.     Quarterly unaudited financial statements, as soon as available, and in
any event within forty-five days after the end of each fiscal quarter of
Borrower.

 

9.     Annual operating budgets (including income statements, balance sheets and
cash flow statements, by month) for the upcoming fiscal year of Borrower within
thirty days prior to the end of each fiscal year of Borrower.

 

10.   Annual financial statements, as soon as available, and in any event within
120 days following the end of Borrower’s fiscal year, certified by, and with an
unqualified opinion of, independent certified public accountants acceptable to
Silicon.

 

 

7.  BORROWER INFORMATION:

 

Borrower represents and warrants that the information set forth in the
Representations and Warranties of the Borrower dated July 27, 2003, previously
submitted to Silicon (the “Representations”) is true and correct as of the date
hereof.

 

8.  ADDITIONAL PROVISIONS

 

 

(1)   Banking Relationship.  Borrower shall at all times maintain its primary
banking relationship, including without limitation its primary operating
account, with Silicon.  Without limiting the generality of the foregoing,
Borrower shall, at all times, maintain not less than 100% of its total cash and
investments on deposit with Silicon.

 

(2)   Subordination of Inside Debt.  All present and future indebtedness of
Borrower to its officers, directors and shareholders (“Inside Debt”) shall, at
all times, be subordinated to the Obligations pursuant to a subordination
agreement on Silicon’s standard form.  Borrower represents and warrants that
there is no Inside Debt presently outstanding, except for the following: None. 
Prior to incurring any Inside Debt in the future, Borrower shall cause the
person to whom such Inside Debt will be owed to execute and deliver to Silicon a
subordination agreement on Silicon’s standard form.

 

 

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9. EXIM PROVISIONS:

 

(1)   Exim Guaranty.  Prior to the first disbursement of any Loans hereunder,
Borrower shall cause the Export Import Bank of the United States (the “Exim
Bank”) to guarantee the Loans made under this Agreement, pursuant to a Master
Guarantee Agreement, Loan Authorization Agreement and (to the extent applicable)
Delegated Authority Letter Agreement (collectively, the “Exim Guaranty”), and
Borrower shall cause the Exim Guaranty to be in full force and effect throughout
the term of this Agreement and so long as any Loans hereunder are outstanding. 
If, for any reason, the Exim Guaranty shall cease to be in full force and
effect, or if the Exim Bank declares the Exim Guaranty void or revokes any
obligations thereunder or denies liability thereunder, any such event shall
constitute an Event of Default under this Agreement.  Nothing in any
confidentiality agreement in this Agreement or in any other agreement shall
restrict Silicon’s right to make disclosures and provide information to the Exim
Bank in connection with the Exim Guaranty.

 

(2)   Exim Borrower Agreement; Costs.  Borrower shall, concurrently execute and
deliver a Borrower Agreement, in the form specified by the Exim Bank, in favor
of Silicon and the Exim Bank  (the “Exim Borrower Agreement”). This Agreement is
subject to all of the terms and conditions of the Exim Borrower Agreement, all
of which are hereby incorporated herein by this reference.  Borrower expressly
agrees to perform all of the obligations and comply with all of the affirmative
and negative covenants and all other terms and conditions set forth in the Exim
Borrower Agreement as though the same were expressly set forth herein.  In the
event of any conflict between the terms of the Exim Borrower Agreement and the
other terms of this Agreement, whichever terms are more restrictive shall
apply.  Borrower acknowledges and agrees that it has received a copy of the Loan
Authorization Agreement which is referred to in the Exim Borrower Agreement. 
Borrower agrees to be bound by the terms of the Loan Authorization Agreement,
including, without limitation, by any additions or revisions made prior to its
execution on behalf of Exim Bank.  Upon the execution of the Loan Authorization
Agreement by Exim Bank and Silicon, it shall become an attachment to the Exim
Borrower Agreement.  Borrower shall reimburse Silicon for all fees and all out
of pocket costs and expenses incurred by Silicon with respect to the Exim
Guaranty and the Exim Borrower Agreement, including without limitation all
facility fees and usage fees, and Silicon is

 

4

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authorized to debit Borrower’s account with Silicon for such fees, costs and
expenses when paid by Silicon.

 

(3)   Non-Exim Agreement; Cross-Collateralization; Cross-Default. Silicon and
the Borrower are parties to that certain Loan and Security Agreement of
approximate even date herewith (as amended from time to time, the “Non-Exim
Agreement”).  Both this Agreement and the Non-Exim Agreement shall continue in
full force and effect, and all rights and remedies under this Agreement and the
Non-Exim Agreement are cumulative.  The term “Obligations” as used in this
Agreement and in the Non-Exim Agreement shall include without limitation the
obligation to pay when due all Loans made pursuant to this Agreement (the “Exim
Loans”) and all interest thereon and the obligation to pay when due all Loans
made pursuant to the Non-Exim Agreement (the “Non-Exim Loans”) and all interest
thereon.  Without limiting the generality of the foregoing, all “Collateral” as
defined in this Agreement and as defined in the Non-Exim Agreement shall secure
all Exim Loans and all Non-Exim Loans and all interest thereon, and all other
Obligations.  Any Event of Default under this Agreement shall also constitute an
Event of Default under the Non-Exim Agreement, and any Event of Default under
the Non-Exim Agreement shall also constitute an Event of Default under this
Agreement.  In the event Silicon assigns its rights under this Agreement and/or
under any Note evidencing Exim Loans and/or its rights under the Non-Exim
Agreement and/or under any Note evidencing Non-Exim Loans, to any third party,
including without limitation the Exim Bank, whether before or after the
occurrence of any Event of Default, Silicon shall have the right (but not any
obligation), in its sole discretion, to allocate and apportion Collateral to the
Agreement and/or Note assigned and to specify the priorities of the respective
security interests in such Collateral between itself and the assignee, all
without notice to or consent of the Borrower.

 

Borrower:

Silicon:

 

 

ENDOCARDIAL SOLUTIONS, INC.

SILICON VALLEY BANK

 

 

 

 

By

 /s/ J. Robert Paulson, Jr.

 

By

  /s/ J. Anthony Clarkson

 

Vice President, CFO

Title

Vice President Market Manager

 

 

 

 

 

By

 /s/ J. Robert Paulson, Jr.

 

 

Ass’t Secretary

 

 

 

 

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