Exhibit 10.11

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (as the same may from time to time be amended,
modified, supplemented or restated, this “Agreement”) dated as of March 18, 2016
(the “Effective Date”) among OXFORD FINANCE LLC, a Delaware limited liability
company with an office located at 133 North Fairfax Street, Alexandria, Virginia
22314 (“Oxford”), as collateral agent (in such capacity, “Collateral Agent”),
the Lenders listed on Schedule 1.1 hereof or otherwise a party hereto from time
to time including Oxford in its capacity as a Lender and SILICON VALLEY BANK, a
California corporation with an office located at 3003 Tasman Drive, Santa Clara,
CA 95054 (“Bank” or “SVB”) (each a “Lender” and collectively, the “Lenders”),
and Nuvectra Corporation, a Delaware corporation (“Nuvectra”), ALGOSTIM, LLC, a
Delaware limited liability company (“Algostim”), PelviStim LLC, a Delaware
limited liability company (“PelviStim”), and NeuroNexus Technologies, Inc., a
Michigan corporation (“NeuroNexus”), each with offices located at 5830 Granite
Parkway, Suite 1100, Plano, TX 75024 (Nuvectra, Algostim, PelviStim and
NeuroNexus are individually and collectively, jointly and severally,
“Borrower”), provides the terms on which the Lenders shall lend to Borrower and
Borrower shall repay the Lenders. The parties agree as follows:

 

1.     ACCOUNTING AND OTHER TERMS

 

1.1     Accounting terms not defined in this Agreement shall be construed in
accordance with GAAP. Calculations and determinations must be made in accordance
with GAAP. Capitalized terms not otherwise defined in this Agreement shall have
the meanings set forth in Section 13. All other terms contained in this
Agreement, unless otherwise indicated, shall have the meaning provided by the
Code to the extent such terms are defined therein. All references to “Dollars”
or “$” are United States Dollars, unless otherwise noted.

 

2.     LOANS AND TERMS OF PAYMENT

 

2.1     Promise to Pay. Borrower hereby unconditionally promises to pay each
Lender, the outstanding principal amount of all Term Loans advanced to Borrower
by such Lender and accrued and unpaid interest thereon and any other amounts due
hereunder as and when due in accordance with this Agreement.

 

2.2     Term Loans

 

(a)     Availability. (i) Subject to the terms and conditions of this Agreement,
the Lenders agree, severally and not jointly, to make term loans to Borrower on
the Effective Date in an aggregate amount of Fifteen Million Dollars
($15,000,000.00) according to each Lender’s Term A Loan Commitment as set forth
on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a
“Term A Loan”, and collectively as the “Term A Loans”). After repayment, no
Term A Loan may be re-borrowed.

 

(ii)     Subject to the terms and conditions of this Agreement, the Lenders
agree, severally and not jointly, during the Second Draw Period, to make term
loans to Borrower in an aggregate amount equal to Twelve Million Five Hundred
Thousand Dollars ($12,500,000.00) and disbursed in a single advance according to
each Lender’s Term B Loan Commitment as set forth on Schedule 1.1 hereto (such
term loans are hereinafter referred to singly as a “Term B Loan”, and
collectively as the “Term B Loans”). After repayment, no Term B Loan may be
re-borrowed.

 

(iii)     Subject to the terms and conditions of this Agreement, the Lenders
agree, severally and not jointly, during the Third Draw Period, to make term
loans to Borrower in an aggregate amount equal to Twelve Million Five Hundred
Thousand Dollars ($12,500,000.00) and disbursed in a single advance according to
each Lender’s Term C Loan Commitment as set forth on Schedule 1.1 hereto (such
term loans are hereinafter referred to singly as a “Term C Loan”, and
collectively as the “Term C Loans”; each Term A Loan, Term B Loan or Term C Loan
is hereinafter referred to singly as a “Term Loan” and the Term A Loans, Term B
Loans and Term C Loans are hereinafter referred to collectively as the “Term
Loans”). After repayment, no Term C Loan may be re-borrowed.

 

 
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(b)     Repayment. Borrower shall make monthly payments of interest only
commencing on the first (1st) Payment Date following the Funding Date of each
Term Loan, and continuing on the Payment Date of each successive month
thereafter through and including the Payment Date immediately preceding the
Amortization Date. Borrower agrees to pay, on the Funding Date of each Term
Loan, any initial partial monthly interest payment otherwise due for the period
between the Funding Date of such Term Loan and the first Payment Date thereof.
Commencing on the Amortization Date, and continuing on the Payment Date of each
month thereafter, Borrower shall make consecutive equal monthly payments of
principal, together with applicable interest, in arrears, to each Lender, as
calculated by Collateral Agent (which calculations shall be deemed correct
absent manifest error) based upon: (1) the amount of such Lender’s Term Loan,
(2) the effective rate of interest, as determined in Section 2.4(a), and (3) a
repayment schedule (i) with respect to the Term A Loans, equal to (A) thirty
(30) months, if the Term B Loans are funded prior to the end of the Second Draw
Period, or (B) thirty-six (36) months, if the Term B Loans are not funded prior
to the end of the Second Draw Period, (ii) with respect to the Term B Loans,
equal to thirty (30) months, and (iii) with respect to the Term C Loans, equal
to (A) thirty (30) months, if the Term B Loans are funded prior to the end of
the Second Draw Period, or (B) if the Term B Loans are not funded prior to the
end of the Second Draw Period, the number of months remaining during the period
commencing on the second (2nd) Payment Date following the Funding Date of the
Term C Loans and ending on the Maturity Date. All unpaid principal and accrued
and unpaid interest with respect to each Term Loan is due and payable in full on
the Maturity Date. Each Term Loan may only be prepaid in accordance with
Sections 2.2(c) and 2.2(d).

 

(c)     Mandatory Prepayments. If the Term Loans are accelerated following the
occurrence of an Event of Default, Borrower shall immediately pay to Lenders,
payable to each Lender in accordance with its respective Pro Rata Share, an
amount equal to the sum of: (i) all outstanding principal of the Term Loans plus
accrued and unpaid interest thereon through the prepayment date, (ii) the Final
Payment, (iii) the Prepayment Fee, plus (iv) all other Obligations that are due
and payable, including Lenders’ Expenses and interest at the Default Rate with
respect to any past due amounts. Notwithstanding (but without duplication with)
the foregoing, on the Maturity Date, if the Final Payment had not previously
been paid in full in connection with the prepayment of the Term Loans in full,
Borrower shall pay to Collateral Agent, for payment to each Lender in accordance
with its respective Pro Rata Share, the Final Payment in respect of the Term
Loans.

 

(d)     Permitted Prepayment of Term Loans. Borrower shall have the option to
prepay all, but not less than all, of the Term Loans advanced by the Lenders
under this Agreement, provided Borrower (i) provides written notice to
Collateral Agent of its election to prepay the Term Loans at least thirty (30)
days prior to such prepayment, and (ii) pays to the Lenders on the date of such
prepayment, payable to each Lender in accordance with its respective Pro Rata
Share, an amount equal to the sum of (A) all outstanding principal of the Term
Loans plus accrued and unpaid interest thereon through the prepayment date, (B)
the Final Payment, (C) the Prepayment Fee, plus (D) all other Obligations that
are due and payable, including Lenders’ Expenses and interest at the Default
Rate with respect to any past due amounts.

 

2.3     Revolving Advances.

 

(a)     Availability. Subject to the terms and conditions of this Agreement and
to deduction of Reserves, Lenders agree, severally and not jointly, to lend to
Borrower from time to time prior to the Revolving Line Maturity Date, according
to each Lender’s pro rata share of the Revolving Line (based upon the respective
Revolving Line Commitment Percentage of each Lender), Revolving Advances not to
exceed the Availability Amount. Amounts borrowed under the Revolving Line may be
repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to
the applicable terms and conditions precedent herein.

 

(b)     Termination; Repayment. The Revolving Line terminates on the Revolving
Line Maturity Date, when the principal amount of all Revolving Advances, the
unpaid interest thereon, and all other Obligations relating to the Revolving
Line shall be immediately due and payable.

 

(c)     Overadvances. If, at any time, the outstanding principal amount of any
Revolving Advances exceeds the lesser of either the Revolving Line or the
Borrowing Base, Borrower shall immediately pay to Collateral Agent, for the
ratable benefit of the Lenders, in cash the amount of such excess (such excess,
the “Overadvance”). Without limiting Borrower’s obligation to repay any
Overadvance, Borrower agrees to pay Collateral Agent, for the ratable benefit of
the Lenders, interest on the outstanding amount of any Overadvance, on demand,
at the Default Rate.

 

 
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2.4     Payment of Interest on the Credit Extensions.

 

(a)     Interest Rate. Subject to Section 2.4(b), the principal amount of the
outstanding Credit Extensions shall accrue interest at a floating per annum rate
equal to the Basic Rate, determined by Collateral Agent on the Funding Date,
which interest shall be payable monthly in arrears in accordance with Sections
2.2(b) and 2.4(e). Interest shall accrue on each Credit Extension commencing on,
and including, the Funding Date of such Credit Extension, and shall accrue on
the principal amount outstanding thereunder through and including the day on
which such Credit Extension is paid in full.

 

(b)     Default Rate. Immediately upon the occurrence and during the continuance
of an Event of Default, Obligations shall accrue interest at a floating per
annum rate equal to the rate that is otherwise applicable thereto plus five
percentage points (5.00%) (the “Default Rate”). Payment or acceptance of the
increased interest rate provided in this Section 2.4(b) is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of Collateral
Agent.

 

(c)     360-Day Year. Interest shall be computed on the basis of a three hundred
sixty (360) day year, and the actual number of days elapsed.

 

(d)     Debit of Accounts. Collateral Agent and each Lender may debit (or ACH)
any deposit accounts, maintained by Borrower or any of its Subsidiaries,
including the Designated Deposit Account, for principal and interest payments or
any other amounts Borrower owes the Lenders under the Loan Documents when due.
Any such debits (or ACH activity) shall not constitute a set-off.

 

(e)     Payments. Except as otherwise expressly provided herein, all payments by
Borrower under the Loan Documents shall be made to the respective Lender to
which such payments are owed, at such Lender’s office in immediately available
funds on the date specified herein. Unless otherwise provided, interest is
payable monthly on the Payment Date of each month. Payments of principal and/or
interest received after 12:00 noon Eastern Time are considered received at the
opening of business on the next Business Day. When a payment is due on a day
that is not a Business Day, the payment is due the next Business Day and
additional fees or interest, as applicable, shall continue to accrue until paid.
All payments to be made by Borrower hereunder or under any other Loan Document,
including payments of principal and interest, and all fees, expenses,
indemnities and reimbursements, shall be made without set-off, recoupment or
counterclaim, in lawful money of the United States and in immediately available
funds.

 

2.5     Secured Promissory Notes. The Term Loans and Revolving Line shall be
evidenced by Secured Promissory Notes in the form attached as Exhibit D hereto
(each a “Secured Promissory Note”), and shall be repayable as set forth in this
Agreement. Borrower irrevocably authorizes each Lender to make or cause to be
made, on or about the Funding Date of any Credit Extension or at the time of
receipt of any payment of principal on such Lender’s Secured Promissory Note, an
appropriate notation on such Lender’s Secured Promissory Note Record reflecting
the making of such Term Loan, Revolving Advance or (as the case may be) the
receipt of such payment. The outstanding amount of each Term Loan and each
Revolving Advance set forth on such Lender’s Secured Promissory Note Record
shall be prima facie evidence of the principal amount thereof owing and unpaid
to such Lender, but the failure to record, or any error in so recording, any
such amount on such Lender’s Secured Promissory Note Record shall not limit or
otherwise affect the obligations of Borrower under any Secured Promissory Note
or any other Loan Document to make payments of principal of or interest on any
Secured Promissory Note when due. Upon receipt of an affidavit of an officer of
a Lender as to the loss, theft, destruction, or mutilation of its Secured
Promissory Note, Borrower shall issue, in lieu thereof, a replacement Secured
Promissory Note in the same principal amount thereof and of like tenor.

 

 
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2.6     Fees. Borrower shall pay to Collateral Agent:

 

(a)     Term Loan Facility Fee. A fully earned, non-refundable Term Loan
facility fee of Two Hundred Thousand Dollars ($200,000.00) to be shared between
the Lenders pursuant to their respective Term Loan Commitment Percentages
payable on the Effective Date;

 

(b)     Revolving Line Facility Fee. A fully earned, non-refundable Revolving
Line facility fee of Twenty-Five Thousand Dollars ($25,000.00) to be shared
between the Lenders pursuant to their respective Revolving Line Commitment
Percentages payable as follows: (i) Twelve Thousand Five Hundred Dollars
($12,500.00) of such facility fee shall be due and payable on the Effective Date
and (ii) the remaining Twelve Thousand Five Hundred Dollars ($12,500.00) of such
facility fee shall be due and payable on the first (1st) anniversary of the
Effective Date;

 

(c)     Final Payment. The Final Payment, when due hereunder, to be shared
between the Lenders in accordance with their respective Pro Rata Shares;

 

(d)     Prepayment Fee. The Prepayment Fee, when due hereunder, to be shared
between the Lenders in accordance with their respective Pro Rata Shares;

 

(e)     Non-Use Fees. The Non-Use Fees, when due hereunder, to be shared between
the Lenders in accordance with their respective Pro Rata Shares; and

 

(f)     Lenders’ Expenses. All Lenders’ Expenses (including reasonable and
invoiced attorneys’ fees and expenses for documentation and negotiation of this
Agreement) incurred through and after the Effective Date, when due.

 

(g)     Good Faith Deposit. Borrower has paid to the Lenders a deposit of Sixty
Thousand Dollars ($60,000.00), which will be applied to Lenders’ Expenses, with
any remaining amount to be applied to the Term Loan facility fee set forth in
Section 2.6(a), on the Effective Date.

 

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

 

3.     CONDITIONS OF LOANS

 

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

 

(a)     original Loan Documents, each duly executed by Borrower and each
Subsidiary, as applicable;

 

 
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(b)     duly executed original Control Agreements with respect to any Collateral
Accounts maintained by Borrower or any of its Subsidiaries;

 

(c)     duly executed original Secured Promissory Notes in favor of each Lender
according to its Term A Loan Commitment Percentage and Revolving Line Commitment
Percentage;

 

(d)     the certificate(s) for the Shares, to the extent certificated, together
with Assignment(s) Separate from Certificate, duly executed in blank;

 

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

 

(f)     a completed Perfection Certificate for Borrower and each of its
Subsidiaries;

 

(g)     the Annual Projections, for the current calendar year;

 

(h)     duly executed original officer’s certificate for Borrower and each
Subsidiary that is a party to the Loan Documents, in a form acceptable to
Collateral Agent and the Lenders;

 

(i)     certified copies, dated as of date no earlier than thirty (30) days
prior to the Effective Date, of financing statement searches, as Collateral
Agent shall request, accompanied by written evidence (including any UCC
termination statements) that the Liens indicated in any such financing
statements either constitute Permitted Liens or have been or, in connection with
the initial Credit Extension, will be terminated or released;

 

(j)     a landlord’s consent executed in favor of Collateral Agent in respect of
all of Borrower’s and each Subsidiaries’ leased locations (other than Borrower’s
leased location in Denver, Colorado, which lease shall expire in April 2016)
where Borrower or any Subsidiary maintains (i) any of Borrower’s Books or (ii)
Collateral having a book value in excess of Seven Hundred Fifty Thousand Dollars
($750,000.00);

 

(k)     a bailee waiver executed in favor of Collateral Agent in respect of each
third party bailee where Borrower or any Subsidiary maintains Collateral having
a book value in excess of Seven Hundred Fifty Thousand Dollars ($750,000.00);

 

(l)     a duly executed legal opinion of counsel to Borrower dated as of the
Effective Date;

 

(m)     evidence satisfactory to Collateral Agent and the Lenders that the
insurance policies required by Section 6.5 hereof are in full force and effect,
together with appropriate evidence showing loss payable and/or additional
insured clauses or endorsements in favor of Collateral Agent, for the ratable
benefit of the Lenders;

 

(n)     receipt by the Title Company of the fully executed and notarized
Mortgage, providing for first priority mortgage lien in respect of the Mortgaged
Premises in favor of Collateral Agent and such other documents which are
customary in commercial mortgage transactions in Minnesota, each in form and
substance satisfactory to Collateral Agent;

 

(o)     issuance of a title commitment from the Title Company in respect of the
Mortgaged Premises that is acceptable to Collateral Agent and satisfaction of
the conditions to effectiveness of such title commitment;

 

(p)     the First Tranche Milestone has occurred; and

 

(q)     payment of the fees and Lenders’ Expenses then due as specified in
Section 2.6 hereof.

 

 
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3.2     Conditions Precedent to all Credit Extensions. The obligation of each
Lender to make each Credit Extension, including the initial Credit Extension, is
subject to the following conditions precedent:

 

(a)     receipt by (i) the Lenders of an executed Disbursement Letter in the
form of Exhibit B-1 attached hereto; and (ii) SVB of an executed Loan
Payment/Advance Request Form in the form of Exhibit B-2 attached hereto;

 

(b)     the representations and warranties in Section 5 hereof shall be true,
accurate and complete in all material respects on the date of the Disbursement
Letter (and the Loan Payment/Advance Request Form and any Transaction Report)
and on the Funding Date of each Credit Extension; provided, however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date, and no Event of Default shall have
occurred and be continuing or result from the Credit Extension. Each Credit
Extension is Borrower’s representation and warranty on that date that the
representations and warranties in Section 5 hereof are true, accurate and
complete in all material respects; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date;

 

(c)     in such Lender’s sole discretion, there has not been any Material
Adverse Change;

 

(d)     after giving effect to such Credit Extension, the total outstanding
Revolving Advances does not exceed the Availability Amount;

 

(e)     with respect to the initial Revolving Advance, (i) the completion of the
Initial Audit with results satisfactory to the Lenders in their sole and
absolute discretion and (ii) an executed Transaction Report;

 

(f)     to the extent not delivered at the Effective Date, duly executed
original Secured Promissory Notes and Warrants, in number, form and content
acceptable to each Lender, and in favor of each Lender according to its Term
Loan Commitment Percentage or Revolving Line Commitment Percentage, as
applicable, with respect to each Credit Extension made by such Lender after the
Effective Date; and

 

(g)     payment of the fees and Lenders’ Expenses then due as specified in
Section 2.6 hereof.

 

3.3     Covenant to Deliver. Borrower agrees to deliver to Collateral Agent and
the Lenders each item required to be delivered to Collateral Agent under this
Agreement as a condition precedent to any Credit Extension. Borrower expressly
agrees that a Credit Extension made prior to the receipt by Collateral Agent or
any Lender of any such item shall not constitute a waiver by Collateral Agent or
any Lender of Borrower’s obligation to deliver such item, and any such Credit
Extension in the absence of a required item shall be made in each Lender’s sole
discretion.

 

3.4     Procedures for Borrowing.

 

(a)     Term Loans. Subject to the prior satisfaction of all other applicable
conditions to the making of a Term Loan set forth in this Agreement, to obtain a
Term Loan, Nuvectra, on behalf of itself and all other Borrowers, shall notify
the Lenders (which notice shall be irrevocable) by electronic mail, facsimile,
or telephone by 12:00 noon Pacific Time five (5) Business Days prior to the date
the Term Loan is to be made. Together with any such electronic, facsimile or
telephonic notification, Nuvectra, on behalf of itself and all other Borrowers,
shall deliver to the Lenders by electronic mail or facsimile a completed
Disbursement Letter (and the Loan Payment/Advance Request Form, with respect to
SVB) executed by a Responsible Officer or his or her designee. The Lenders may
rely on any telephone notice given by a person whom a Lender reasonably believes
is a Responsible Officer or designee. On the applicable Funding Date, each
Lender shall credit and/or transfer (as applicable) to the Designated Deposit
Account, an amount equal to its Term Loan Commitment.

 

 
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(b)     Revolving Advances. Subject to the prior satisfaction of all other
applicable conditions to the making of a Revolving Advance set forth in this
Agreement, to obtain a Revolving Advance, Nuvectra, on behalf of itself and all
other Borrowers, shall notify the Lenders (which notice shall be irrevocable) by
electronic mail, facsimile, or telephone by 12:00 noon Eastern time three (3)
Business Days prior to the Funding Date of the Revolving Advance. Together with
any such electronic, facsimile or telephonic notification, Nuvectra, on behalf
of itself and all other Borrowers, shall deliver to the Lenders by electronic
mail or facsimile a completed Borrowing Base Certificate and Transaction Report
(provided that a Borrowing Base Certificate and Transaction Report shall not be
required if a Borrowing Base Certificate and Transaction Report were delivered
during the most recently ended month), together with any schedules related
thereto, and a completed Loan Payment/Advance Request executed by a Responsible
Officer or his or her designee. The Lenders may rely on any telephone notice
given by a person whom a Lender reasonably believes is a Responsible Officer or
his or her designee. Bank, on behalf of Collateral Agent and Lenders, shall
credit Revolving Advances to the Designated Deposit Account and such Revolving
Advances shall be deemed to be Revolving Advances by each of the Lenders in the
amount of their respective Revolving Line Commitment Percentages. Bank,
Collateral Agent and the Lenders shall make reasonable efforts to make Revolving
Advances on the Funding Date requested by Borrower. The Lenders shall reimburse
Bank for Revolving Advances made by Bank. (The Lenders, Collateral Agent and
Bank, as among themselves, agree that unless Lenders have already funded their
respective Revolving Line Commitment Percentages of a Revolving Advance, Bank
shall provide the Lenders with a participation settlement report by 12:00 noon
Eastern time on the second Business Day of each week following the week in which
a Revolving Advance has been funded by Bank and that such reimbursement shall
occur by the third Business Day of such week; the Borrower is not a party to or
a beneficiary of this sentence and it may be amended without Borrower’s
consent.) Bank, on behalf of the Collateral Agent and the Lenders, may make
Revolving Advances under this Agreement based on instructions from a Responsible
Officer or his or her designee or without instructions if the Revolving Advances
are necessary to meet Obligations which have become due.

 

4.     CREATION OF SECURITY INTEREST

 

4.1     Grant of Security Interest. Borrower hereby grants Collateral Agent, for
the ratable benefit of the Lenders, to secure the payment and performance in
full of all of the Obligations, a continuing security interest in, and pledges
to Collateral Agent, for the ratable benefit of the Lenders, the Collateral,
wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof. Borrower represents, warrants, and covenants that
the security interest granted herein is and shall at all times continue to be a
first priority perfected security interest in the Collateral, subject only to
Permitted Liens that are permitted by the terms of this Agreement to have
priority to Collateral Agent’s Lien. If Borrower shall acquire a commercial tort
claim (as defined in the Code) with a value in excess of One Hundred Thousand
Dollars ($100,000.00), Borrower shall promptly notify Collateral Agent in a
writing signed by Borrower, as the case may be, of the general details thereof
(and further details as may be required by Collateral Agent) and grant to
Collateral Agent, for the ratable benefit of the Lenders, in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance reasonably
satisfactory to Collateral Agent.

 

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

 

If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations (other
than inchoate indemnity obligations) and at such time as the Lenders’ obligation
to make Credit Extensions has terminated, Collateral Agent shall, at the sole
cost and expense of Borrower, release its Liens in the Collateral and all rights
therein shall revert to Borrower. In the event (x) all Obligations (other than
inchoate indemnity obligations), except for Bank Services, are satisfied in
full, and (y) this Agreement is terminated, Collateral Agent shall terminate the
security interest granted herein upon Borrower providing cash collateral
acceptable to Bank in its good faith business judgment for Bank Services, if
any. In the event such Bank Services consist of outstanding Letters of Credit,
Borrower shall provide to Bank cash collateral in an amount equal to (x) if such
Letters of Credit are denominated in Dollars, then one hundred three percent
(103%); and (y) if such Letters of Credit are denominated in a Foreign Currency,
then one hundred five percent (105%), of the Dollar Equivalent of the face
amount of all such Letters of Credit plus all interest, fees, and costs due or
to become due in connection therewith (as estimated by Bank in its good faith
business judgment), to secure all of the Obligations relating to such Letters of
Credit.

 

 
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4.2     Authorization to File Financing Statements. Borrower hereby authorizes
Collateral Agent to file financing statements or take any other action required
to perfect Collateral Agent’s security interests in the Collateral, without
notice to Borrower, with all appropriate jurisdictions to perfect or protect
Collateral Agent’s interest or rights under the Loan Documents, including a
notice that any disposition of the Collateral, except to the extent permitted by
the terms of this Agreement, by Borrower, or any other Person, shall be deemed
to violate the rights of Collateral Agent under the Code.

 

4.3     Pledge of Collateral. Borrower hereby pledges, assigns and grants to
Collateral Agent, for the ratable benefit of the Lenders, a security interest in
all the Shares, together with all proceeds and substitutions thereof, all cash,
stock and other moneys and property paid thereon, all rights to subscribe for
securities declared or granted in connection therewith, and all other cash and
noncash proceeds of the foregoing, as security for the performance of the
Obligations. On the Effective Date, or, to the extent not certificated as of the
Effective Date, within ten (10) days of the certification of any Shares, the
certificate or certificates for the Shares will be delivered to Collateral
Agent, accompanied by an instrument of assignment duly executed in blank by
Borrower. To the extent required by the terms and conditions governing the
Shares, Borrower shall cause the books of each entity whose Shares are part of
the Collateral and any transfer agent to reflect the pledge of the Shares. Upon
the occurrence and during the continuance of an Event of Default hereunder,
Collateral Agent may effect the transfer of any securities included in the
Collateral (including but not limited to the Shares) into the name of Collateral
Agent and cause new (as applicable) certificates representing such securities to
be issued in the name of Collateral Agent or its transferee. Borrower will
execute and deliver such documents, and take or cause to be taken such actions,
as Collateral Agent may reasonably request to perfect or continue the perfection
of Collateral Agent’s security interest in the Shares. Unless an Event of
Default shall have occurred and be continuing, Borrower shall be entitled to
exercise any voting rights with respect to the Shares and to give consents,
waivers and ratifications in respect thereof, provided that no vote shall be
cast or consent, waiver or ratification given or action taken which would be
inconsistent with any of the terms of this Agreement or which would constitute
or create any violation of any of such terms. All such rights to vote and give
consents, waivers and ratifications shall terminate upon the occurrence and
continuance of an Event of Default.

 

5.     REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants to Collateral Agent and the Lenders as follows:

 

5.1     Due Organization, Authorization: Power and Authority. Borrower and each
of its Subsidiaries is duly existing and in good standing as a Registered
Organization in its jurisdictions of organization or formation and Borrower and
each of its Subsidiaries is qualified and licensed to do business and is in good
standing in any jurisdiction in which the conduct of its businesses or its
ownership of property requires that it be qualified except where the failure to
do so could not reasonably be expected to have a Material Adverse Change. In
connection with this Agreement, Borrower and each of its Subsidiaries has
delivered to Collateral Agent a completed perfection certificate signed by an
officer of Borrower or such Subsidiary (each a “Perfection Certificate” and
collectively, the “Perfection Certificates”). Borrower represents and warrants
that (a) Borrower and each of its Subsidiaries’ exact legal name is that which
is indicated on its respective Perfection Certificate and on the signature page
of each Loan Document to which it is a party; (b) Borrower and each of its
Subsidiaries is an organization of the type and is organized in the jurisdiction
set forth on its respective Perfection Certificate; (c) each Perfection
Certificate accurately sets forth each of Borrower’s and its Subsidiaries’
organizational identification number or accurately states that Borrower or such
Subsidiary has none; (d) each Perfection Certificate accurately sets forth
Borrower’s and each of its Subsidiaries’ place of business, or, if more than
one, its chief executive office as well as Borrower’s and each of its
Subsidiaries’ mailing address (if different than its chief executive office);
(e) Borrower and each of its Subsidiaries (and each of its respective
predecessors) have not, in the past five (5) years, changed its jurisdiction of
organization, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on the
Perfection Certificates pertaining to Borrower and each of its Subsidiaries, is
accurate and complete in all material respects (it being understood and agreed
that Borrower and each of its Subsidiaries may from time to time update certain
information in the Perfection Certificates (including the information set forth
in clause (d) above) after the Effective Date to the extent permitted by one or
more specific provisions in this Agreement); such updated Perfection
Certificates subject to the review and approval of Collateral Agent. If Borrower
or any of its Subsidiaries is not now a Registered Organization but later
becomes one, Borrower shall notify Collateral Agent of such occurrence and
provide Collateral Agent with such Person’s organizational identification number
within five (5) Business Days of receiving such organizational identification
number.

 

 
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The execution, delivery and performance by Borrower and each of its Subsidiaries
of the Loan Documents to which it is a party have been duly authorized, and do
not (i) conflict with any of Borrower’s or such Subsidiaries’ organizational
documents, including its respective Operating Documents, (ii) contravene,
conflict with, constitute a default under or violate any material Requirement of
Law applicable thereto, (iii) contravene, conflict or violate any applicable
order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority by which Borrower or such Subsidiary, or any of their
property or assets may be bound or affected, (iv) require any action by, filing,
registration, or qualification with, or Governmental Approval from, any
Governmental Authority (except such Governmental Approvals which have already
been obtained and are in full force and effect) or are being obtained pursuant
to Section 6.1(b), or (v) constitute an event of default under any material
agreement by which Borrower or any of such Subsidiaries, or their respective
properties, is bound. Neither Borrower nor any of its Subsidiaries is in default
under any agreement to which it is a party or by which it or any of its assets
is bound in which such default could reasonably be expected to have a Material
Adverse Change.

 

5.2     Collateral.

 

(a)     Borrower and each of its Subsidiaries have good title to, have rights
in, and the power to transfer each item of the Collateral upon which it purports
to grant a Lien under the Loan Documents, free and clear of any and all Liens
except Permitted Liens, and neither Borrower nor any of its Subsidiaries have
any Deposit Accounts, Securities Accounts, Commodity Accounts or other
investment accounts other than the Collateral Accounts or the other investment
accounts, if any, described in the Perfection Certificates delivered to
Collateral Agent in connection herewith with respect of which Borrower or such
Subsidiary has given Collateral Agent notice and taken such actions as are
necessary to give Collateral Agent a perfected security interest therein. The
Accounts are bona fide, existing obligations of the Account Debtors.

 

(b)     On the Effective Date, and except as disclosed on the Perfection
Certificate (i) the Collateral is not in the possession of any third party
bailee (such as a warehouse), and (ii)  no such third party bailee possesses
components of the Collateral in excess of Seven Hundred Fifty Thousand Dollars
($750,000.00). None of the components of the Collateral shall be maintained at
locations other than as disclosed in the Perfection Certificates on the
Effective Date or as permitted pursuant to Section 6.11.

 

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

 

(d)     Borrower and each of its Subsidiaries is the sole owner of the
Intellectual Property each respectively purports to own, free and clear of all
Liens other than Permitted Liens. Except as noted on the Perfection
Certificates, neither Borrower nor any of its Subsidiaries is a party to, nor is
bound by, any material license or other material agreement with respect to which
Borrower or such Subsidiary is the licensee that (i) prohibits or otherwise
restricts Borrower or its Subsidiaries from granting a security interest in
Borrower’s or such Subsidiaries’ interest in such material license or material
agreement or any other property, or (ii) for which a default under or
termination of could interfere with Collateral Agent’s or any Lender’s right to
sell any Collateral. Borrower shall provide written notice to Collateral Agent
and each Lender within ten (10) days of Borrower or any of its Subsidiaries
entering into or becoming bound by any license or agreement with respect to
which Borrower or any Subsidiary is the licensee (other than over-the-counter
software that is commercially available to the public).

 

5.3     Litigation. Except as disclosed (i) on the Perfection Certificates, or
(ii) in accordance with Section 6.9 hereof, there are no actions, suits,
investigations, or proceedings pending or, to the knowledge of the Responsible
Officers, threatened in writing by or against Borrower or any of its
Subsidiaries involving more than Two Hundred Fifty Thousand Dollars
($250,000.00).

 

 
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5.4     No Material Deterioration in Financial Condition; Financial Statements.
All consolidated financial statements for Borrower and its Subsidiaries,
delivered to Collateral Agent fairly present, in conformity with GAAP, in all
material respects the consolidated financial condition of Borrower and its
Subsidiaries, and the consolidated results of operations of Borrower and its
Subsidiaries. There has not been any material deterioration in the consolidated
financial condition of Borrower and its Subsidiaries since the date of the most
recent financial statements submitted to any Lender.

 

5.5     Solvency. Nuvectra, and Nuvectra and its Subsidiaries taken as a whole,
is Solvent.

 

5.6     Regulatory Compliance. Neither Borrower nor any of its Subsidiaries is
an “investment company” or a company “controlled” by an “investment company”
under the Investment Company Act of 1940, as amended. Neither Borrower nor any
of its Subsidiaries is engaged as one of its important activities in extending
credit for margin stock (under Regulations X, T and U of the Federal Reserve
Board of Governors). Borrower and each of its Subsidiaries has complied in all
material respects with the Federal Fair Labor Standards Act. Neither Borrower
nor any of its Subsidiaries is a “holding company” or an “affiliate” of a
“holding company” or a “subsidiary company” of a “holding company” as each term
is defined and used in the Public Utility Holding Company Act of 2005. Neither
Borrower nor any of its Subsidiaries has violated any laws, ordinances or rules,
the violation of which could reasonably be expected to have a Material Adverse
Change. Neither Borrower’s nor any of its Subsidiaries’ properties or assets has
been used by Borrower or such Subsidiary or, to Borrower’s knowledge, by
previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than in material compliance with applicable laws.
Borrower and each of its Subsidiaries has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all Governmental Authorities that are necessary to continue their respective
businesses as currently conducted.

 

None of Borrower, any of its Subsidiaries, or any of Borrower’s or its
Subsidiaries’ Affiliates or any of their respective agents acting or benefiting
in any capacity in connection with the transactions contemplated by this
Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or
conspiring to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person. None of
Borrower, any of its Subsidiaries, or to the knowledge of Borrower and any of
their Affiliates or agents, acting or benefiting in any capacity in connection
with the transactions contemplated by this Agreement, (x) conducts any business
or engages in making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person, or (y) deals in, or otherwise
engages in any transaction relating to, any property or interest in property
blocked pursuant to Executive Order No. 13224, any similar executive order or
other Anti-Terrorism Law.

 

5.7     Investments. Neither Borrower nor any of its Subsidiaries owns any
stock, shares, partnership interests or other equity securities except for
Permitted Investments.

 

5.8     Tax Returns and Payments; Pension Contributions. Borrower and each of
its Subsidiaries has timely filed all required tax returns and reports, and
Borrower and each of its Subsidiaries, has timely paid all foreign, federal,
state, and local taxes, assessments, deposits and contributions owed by Borrower
and such Subsidiaries, in all jurisdictions in which Borrower or any such
Subsidiary is subject to taxes, including the United States, (a) except if such
taxes, assessments, deposits and contributions do not, individually or in the
aggregate, exceed Ten Thousand Dollars ($10,000.00) or (b) unless such taxes are
being contested in accordance with the following sentence. Borrower and each of
its Subsidiaries, may defer payment of any contested taxes, provided that
Borrower or such Subsidiary, (i) in good faith contests its obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (ii) notifies Collateral Agent in writing of the commencement of, and
any material development in, the proceedings, and (iii) posts bonds or takes any
other steps required to prevent the Governmental Authority levying such
contested taxes from obtaining a Lien upon any of the Collateral that is other
than a “Permitted Lien.” Neither Borrower nor any of its Subsidiaries is aware
of any claims or adjustments proposed for any of Borrower’s or such
Subsidiaries’, prior tax years which could result in additional taxes becoming
due and payable by Borrower or its Subsidiaries. Borrower and each of its
Subsidiaries have paid all amounts necessary to fund all present pension, profit
sharing and deferred compensation plans in accordance with their terms, and
neither Borrower nor any of its Subsidiaries have, withdrawn from participation
in, and have not permitted partial or complete termination of, or permitted the
occurrence of any other event with respect to, any such plan which could
reasonably be expected to result in any liability of Borrower or its
Subsidiaries, including any liability to the Pension Benefit Guaranty
Corporation or its successors or any other Governmental Authority.

 

 
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5.9     Use of Proceeds. Borrower shall use the proceeds of the Credit
Extensions solely as working capital and to fund its general business
requirements in accordance with the provisions of this Agreement, and not for
personal, family, household or agricultural purposes.

 

5.10     Shares. Borrower has full power and authority to create a first lien on
the Shares and no disability or contractual obligation exists that would
prohibit Borrower from pledging the Shares pursuant to this Agreement. To
Borrower’s knowledge, other than the Warrants issued in connection with this
Agreement, there are no subscriptions, warrants, rights of first refusal or
other restrictions on transfer relative to, or options exercisable with respect
to the Shares. The Shares have been and will be duly authorized and validly
issued, and are fully paid and non-assessable. To Borrower’s knowledge, the
Shares are not the subject of any present or threatened suit, action,
arbitration, administrative or other proceeding, and Borrower knows of no
reasonable grounds for the institution of any such proceedings.

 

5.11     Accounts Receivable.

 

(a)     For each Account with respect to which Revolving Advances are requested,
on the date each Revolving Advance is requested and made, such Account shall be
an Eligible Account.

 

(b)     All statements made and all unpaid balances appearing in all invoices,
instruments and other documents evidencing the Eligible Accounts are and shall
be true and correct and all such invoices, instruments and other documents, and
all of Borrower’s Books are genuine and in all material respects what they
purport to be. Whether or not an Event of Default has occurred and is
continuing, Collateral Agent may notify any Account Debtor owing Borrower money
of Collateral Agent’s security interest in such funds and verify the amount of
such Eligible Account; provided, however, that so long as no Event of Default
has occurred and is continuing, Collateral Agent will endeavor in good faith to
notify Borrower in advance of such verification, provided that the failure to do
so shall not be a breach of this Agreement or give rise to any liability to
Collateral Agent or any Lender. All sales and other transactions underlying or
giving rise to each Eligible Account shall comply in all material respects with
all applicable laws and governmental rules and regulations. Borrower has no
knowledge of any actual or imminent Insolvency Proceeding of any Account Debtor
whose accounts are Eligible Accounts in any Borrowing Base Certificate or
Transaction Report. To the best of Borrower’s knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Eligible Accounts are genuine, and all such documents, instruments and
agreements are legally enforceable in accordance with their terms.

 

5.12     Full Disclosure. No written representation, warranty or other statement
of Borrower or any of its Subsidiaries in any certificate or written statement
given to Collateral Agent or any Lender, as of the date such representation,
warranty, or other statement was made, taken together with all such written
certificates and written statements given to Collateral Agent or any Lender,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).

 

5.13     Definition of “Knowledge.” For purposes of the Loan Documents, whenever
a representation or warranty is made to Borrower’s knowledge or awareness, to
the “best of” Borrower’s knowledge, or with a similar qualification, knowledge
or awareness means the actual knowledge, after reasonable investigation, of the
Responsible Officers.

 

6.     AFFIRMATIVE COVENANTS

 

Borrower shall, and shall cause each of its Subsidiaries to, do all of the
following:

 

 
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6.1     Government Compliance.

 

(a)     Maintain its and all its Subsidiaries’ legal existence and good standing
in their respective jurisdictions of organization and maintain qualification in
each jurisdiction in which the failure to so qualify could reasonably be
expected to have a Material Adverse Change. Comply with all laws, ordinances and
regulations to which Borrower or any of its Subsidiaries is subject, the
noncompliance with which could reasonably be expected to have a Material Adverse
Change.

 

(b)     Obtain and keep in full force and effect, all of the material
Governmental Approvals necessary for the performance by Borrower and its
Subsidiaries of their respective businesses and obligations under the Loan
Documents and the grant of a security interest to Collateral Agent for the
ratable benefit of the Lenders, in all of the Collateral. Borrower shall
promptly provide copies to Collateral Agent of any material Governmental
Approvals obtained by Borrower or any of its Subsidiaries.

 

6.2     Financial Statements, Reports, Certificates.

 

(a)     Deliver to each Lender:

 

(i)     as soon as available, but no later than five (5) days after filing with
the SEC, a company prepared quarterly consolidated balance sheet, income
statement and cash flow statement covering the consolidated operations of
Borrower and its Subsidiaries for such quarter certified by a Responsible
Officer and in a form reasonably acceptable to Collateral Agent;

 

(ii)     as soon as available, but no later than the earlier of one hundred
eighty (180) days after the last day of Borrower’s fiscal year or within five
(5) days of filing with the SEC, audited consolidated financial statements
prepared under GAAP, consistently applied, together with an unqualified opinion
on the financial statements from an independent certified public accounting firm
acceptable to Collateral Agent in its reasonable discretion;

 

(iii)     as soon as available after approval thereof by Borrower’s Board of
Directors, but no later than the earlier of ninety (90) days after the last day
of each of Borrower’s fiscal years or within seven (7) Business Days of approval
by Borrower’s Board of Directors, Borrower’s annual financial projections for
the entire current fiscal year as approved by Borrower’s Board of Directors,
which such annual financial projections shall be set forth in a month-by-month
format (such annual financial projections as originally delivered to Collateral
Agent and the Lenders are referred to herein as the “Annual Projections”;
provided that, any revisions of the Annual Projections approved by Borrower’s
Board of Directors shall be delivered to Collateral Agent and the Lenders no
later than seven (7) Business Days after such approval);

 

(iv)     within five (5) days of delivery, copies of all statements, reports and
notices made available to Borrower’s security holders or holders of Subordinated
Debt;

 

(v)     in the event that Borrower becomes subject to the reporting requirements
under the Securities Exchange Act of 1934, as amended, within five (5) days of
filing, all reports on Form 10-K, 10-Q and 8-K filed with the SEC;

 

(vi)     prompt notice of any amendments of or other changes to the
capitalization table of any Subsidiary or to the Operating Documents of Borrower
or any of its Subsidiaries, together with any copies reflecting such amendments
or changes with respect thereto;

 

(vii)     prompt notice of any event that could reasonably be expected to
materially and adversely affect the value of the Intellectual Property;

 

(viii)     as soon as available, but no later than thirty (30) days after the
last day of each month, copies of the month-end account statements for each
Collateral Account maintained by Borrower or its Subsidiaries, which statements
may be provided to Collateral Agent and each Lender by Borrower or directly from
the applicable institution(s);

 

 
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(ix)     with each request for a Revolving Advance (unless such documents were
delivered during the most recently ended month) and within thirty (30) days
after the end of each month during which any Revolving Advances are outstanding,
(A) aged listings of accounts receivable and accounts payable (by invoice date),
(B) an inventory report, (C) a deferred revenue report (if applicable), (D) a
Transaction Report (and any schedules related thereto), and (E) a duly completed
Borrowing Base Certificate signed by a Responsible Officer; and

 

(x)     other information as reasonably requested by Collateral Agent or any
Lender.

 

Notwithstanding the foregoing, documents required to be delivered pursuant to
the terms hereof (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date on which Borrower
posts such documents, or provides a link thereto, on Borrower’s website on the
internet at Borrower’s website address.

 

(b)     Concurrently with the delivery of the quarterly financial statements and
the audited annual financial statements specified in Sections 6.2(a)(i) and
6.2(a)(ii) above but no later than five (5) days after the filing of such
financial statements with the SEC, deliver to each Lender, a duly completed
Compliance Certificate signed by a Responsible Officer.

 

(c)     Keep proper books of record and account in accordance with GAAP in all
material respects, in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities. Borrower
shall, and shall cause each of its Subsidiaries to, allow, at the sole cost of
Borrower, Collateral Agent or any Lender, during regular business hours upon
reasonable prior notice (provided that no notice shall be required when an Event
of Default has occurred and is continuing), to visit and inspect any of its
properties, to examine and make abstracts or copies from any of its books and
records, and to conduct a collateral audit and analysis of its operations and
the Collateral. Such audits shall be conducted no more often than once every
twelve (12) months or more frequently as conditions may warrant, unless (and
more frequently if) an Event of Default has occurred and is continuing. The
foregoing inspections and audits shall be at Borrower’s expense, and the charge
therefor shall be Eight Hundred Fifty Dollars ($850.00) per person per day (or
such higher amount as shall represent Lenders’ then-current standard charge for
the same), plus reasonable out-of-pocket expenses; provided that unless an Event
of Default has occurred and is continuing, the aggregate charge for each audit
shall not exceed Ten Thousand Dollars ($10,000.00) so long as Borrower’s Books
are in good order and the duration of such audit does not extend beyond three
(3) days. In the event Borrower and Collateral Agent or any Lender schedule an
audit more than five (5) days in advance, and Borrower cancels or seeks to
reschedule the audit with less than five (5) days written notice to Collateral
Agent or any such Lender, then (without limiting any of Collateral Agent’s
rights or remedies) Borrower shall pay Collateral Agent or such Lender a fee of
Five Hundred Dollars ($500.00) plus any out-of-pocket expenses incurred by
Collateral Agent or such Lender to compensate Collateral Agent or such Lender
for the anticipated costs and expenses of the cancellation or rescheduling.

 

6.3     Inventory; Returns. Keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between Borrower, or any of
its Subsidiaries, and their respective Account Debtors shall follow Borrower’s,
or such Subsidiary’s, customary practices as they exist at the Effective Date.
Borrower must promptly notify Collateral Agent and the Lenders of all returns,
recoveries, disputes and claims that involve more than Five Hundred Thousand
Dollars ($500,000.00) individually or in the aggregate in any calendar year.

 

6.4     Taxes; Pensions. Timely file and require each of its Subsidiaries to
timely file, all required tax returns and reports and timely pay, and require
each of its Subsidiaries to timely file, all foreign, federal, state, and local
taxes, assessments, deposits and contributions owed by Borrower or its
Subsidiaries, except for (a) such taxes, assessments, deposits and contributions
that do not, individually or in the aggregate, exceed Ten Thousand Dollars
($10,000.00) and (b) deferred payment of any taxes contested pursuant to the
terms of Section 5.8 hereof, and shall deliver to Lenders, on demand,
appropriate certificates attesting to such payments, and pay all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with the terms of such plans.

 

 
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6.5     Insurance. Keep Borrower’s and its Subsidiaries’ business and the
Collateral insured for risks and in amounts standard for companies in Borrower’s
and its Subsidiaries’ industry and location and as Collateral Agent may
reasonably request. Insurance policies shall be in a form, with companies, and
in amounts that are reasonably satisfactory to Collateral Agent and Lenders. All
property policies shall have a lender’s loss payable endorsement showing
Collateral Agent as lender loss payee and waive subrogation against Collateral
Agent, and all liability policies shall show, or have endorsements showing,
Collateral Agent, as additional insured. The Collateral Agent shall be named as
lender loss payee and/or additional insured with respect to any such insurance
providing coverage in respect of any Collateral, and each provider of any such
insurance shall agree, by endorsement upon the policy or policies issued by it
or by independent instruments furnished to the Collateral Agent, that it will
give the Collateral Agent thirty (30) days prior written notice before any such
policy or policies shall be materially altered or canceled. At Collateral
Agent’s request, Borrower shall deliver certified copies of policies and
evidence of all premium payments. Proceeds payable under any policy shall, at
Collateral Agent’s option, be payable to Collateral Agent, for the ratable
benefit of the Lenders, on account of the Obligations. Notwithstanding the
foregoing, (a) so long as no Event of Default has occurred and is continuing,
Borrower shall have the option of applying the proceeds of any casualty policy
up to Five Hundred Thousand Dollars ($500,000.00) with respect to any loss, but
not exceeding Five Hundred Thousand Dollars ($500,000.00), in the aggregate for
all losses under all casualty policies in any one year, toward the replacement
or repair of destroyed or damaged property; provided that any such replaced or
repaired property (i) shall be of equal or like value as the replaced or
repaired Collateral and (ii) shall be deemed Collateral in which Collateral
Agent has been granted a first priority security interest, and (b) after the
occurrence and during the continuance of an Event of Default, all proceeds
payable under such casualty policy shall, at the option of Collateral Agent, be
payable to Collateral Agent, for the ratable benefit of the Lenders, on account
of the Obligations. If Borrower or any of its Subsidiaries fails to obtain
insurance as required under this Section 6.5 or to pay any amount or furnish any
required proof of payment to third persons, Collateral Agent and/or any Lender
may make, at Borrower’s expense, all or part of such payment or obtain such
insurance policies required in this Section 6.5, and take any action under the
policies Collateral Agent or such Lender deems prudent. In the event of a
conflict between the provisions of the Mortgage relating to insurance required
in connection with the Mortgaged Premises and the provision contained herein,
the provisions of the Mortgage shall control.

 

6.6     Operating Accounts.

 

(a)     Maintain (i) all of Borrower’s and its Subsidiaries’ Collateral Accounts
in accounts which are subject to a Control Agreement in favor of Collateral
Agent and (ii) within ninety (90) days of the Effective Date, all of Borrower’s
and its Subsidiaries’ primary Collateral Accounts with Bank or its Affiliates.
Notwithstanding the foregoing, Borrower shall be permitted to maintain any
direct or indirect deposit accounts or banking relationships to the extent
required in order to comply with Borrower’s transition services agreement with
Greatbatch, Inc. (the “Transition Services Accounts”).

 

(b)     Borrower shall provide Collateral Agent five (5) days’ prior written
notice before Borrower or any of its Subsidiaries establishes any Collateral
Account at or with any Person other than Bank or its Affiliates. In addition,
for each Collateral Account that Borrower or any of its Subsidiaries, at any
time maintains, Borrower or such Subsidiary shall cause the applicable bank or
financial institution at or with which such Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Collateral Agent’s Lien in such
Collateral Account in accordance with the terms hereunder prior to the
establishment of such Collateral Account, which Control Agreement may not be
terminated without prior written consent of Collateral Agent. The provisions of
the previous sentence shall not apply to (i) deposit accounts exclusively used
for payroll, payroll taxes and other employee wage and benefit payments to or
for the benefit of Borrower’s, or any of its Subsidiaries’, employees and
identified to Collateral Agent by Borrower as such in the Perfection
Certificates, (ii) the Transition Services Accounts so long as the aggregate
balance in all such accounts does not exceed Five Hundred Thousand Dollars
($500,000.00) at any time and (iii) for a period of up to ninety (90) days after
the Effective Date, deposit accounts maintained with financial institutions
other than Bank or Bank’s Affiliates so long as the aggregate balance in all
such accounts does not exceed Five Hundred Thousand Dollars ($500,000.00) at any
time.

 

(c)     Neither Borrower nor any of its Subsidiaries shall maintain any
Collateral Accounts except Collateral Accounts maintained in accordance with
Sections 6.6(a) and (b).

 

6.7     Protection of Intellectual Property Rights. Borrower and each of its
Subsidiaries shall: (a) use commercially reasonable efforts to protect, defend
and maintain the validity and enforceability of its Intellectual Property that
is material to Borrower’s business; (b) promptly advise Collateral Agent in
writing of material infringement by a third party of its Intellectual Property;
and (c) not allow any Intellectual Property material to Borrower’s business to
be abandoned, forfeited or dedicated to the public without Collateral Agent’s
prior written consent.

 

 
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6.8     Litigation Cooperation. Commencing on the Effective Date and continuing
through the termination of this Agreement, make available to Collateral Agent
and the Lenders, without expense to Collateral Agent or the Lenders, Borrower
and each of Borrower’s officers, employees and agents and Borrower’s Books, to
the extent that Collateral Agent or any Lender may reasonably deem them
necessary to prosecute or defend any third-party suit or proceeding instituted
by or against Collateral Agent or any Lender with respect to any Collateral or
relating to Borrower.

 

6.9     Notices of Litigation and Default. Borrower will give prompt written
notice to Collateral Agent and the Lenders of any litigation or governmental
proceedings pending or threatened (in writing) against Borrower or any of its
Subsidiaries, which could reasonably be expected to result in damages or costs
to Borrower or any of its Subsidiaries of Two Hundred Fifty Thousand Dollars
($250,000.00) or more or which could reasonably be expected to have a Material
Adverse Change. Without limiting or contradicting any other more specific
provision of this Agreement, promptly (and in any event within three (3)
Business Days) upon Borrower becoming aware of the existence of any Event of
Default or event which, with the giving of notice or passage of time, or both,
would constitute an Event of Default, Borrower shall give written notice to
Collateral Agent and the Lenders of such occurrence, which such notice shall
include a reasonably detailed description of such Event of Default or event
which, with the giving of notice or passage of time, or both, would constitute
an Event of Default.

 

6.10     Financial Covenant. If the Term B Loans (or Term C Loans if no Term B
Loans have been previously advanced) are advanced to Borrower, Borrower shall,
tested on the last day of the fiscal quarter in which the Term B Loans (or Term
C Loans, if applicable) are advanced and tested on the last day of each fiscal
quarter ended thereafter, have revenues for such quarter ended of at least
seventy-five percent (75%) of the revenues projected for such quarter in the
Annual Projections delivered to Collateral Agent and the Lenders pursuant to
Section 6.2(a)(iii), which Annual Projections must be delivered to and approved
by Collateral Agent and Lenders prior to the draw of any Term B Loans (or the
draw of any Term C Loans if no Term B Loans have been previously advanced).

 

6.11     Landlord Waivers; Bailee Waivers. In the event that Borrower or any of
its Subsidiaries, after the Effective Date, intends to add any new offices or
business locations, including warehouses, or otherwise store any portion of the
Collateral with, or deliver any portion of the Collateral to, a bailee, in each
case pursuant to Section 7.2, then Borrower or such Subsidiary will first
receive the written consent of Collateral Agent and, in the event that the new
location is the chief executive office of Borrower or such Subsidiary, any of
Borrower’s Books are (or are reasonably expected to be) kept at such new
location, or the Collateral at any such new location is valued (or is reasonably
expected to have value) in excess of Seven Hundred Fifty Thousand Dollars
($750,000.00) in the aggregate, such bailee or landlord, as applicable, must
execute and deliver a bailee waiver or landlord waiver, as applicable, in form
and substance reasonably satisfactory to Collateral Agent prior to the addition
of any new offices or business locations, or any such storage with or delivery
to any such bailee, as the case may be.

 

6.12     Creation/Acquisition of Subsidiaries. In the event Borrower, or any of
its Subsidiaries creates or acquires any Subsidiary, Borrower shall provide
prior written notice to Collateral Agent and each Lender of the creation or
acquisition of such new Subsidiary and take all such action as may be reasonably
required by Collateral Agent or any Lender to cause each such Subsidiary to
become a co-Borrower hereunder or to guarantee the Obligations of Borrower under
the Loan Documents and, in each case, grant a continuing pledge and security
interest in and to the assets of such Subsidiary (substantially as described on
Exhibit A hereto); and Borrower (or its Subsidiary, as applicable) shall grant
and pledge to Collateral Agent, for the ratable benefit of the Lenders, a
perfected security interest in the Shares of each such newly created Subsidiary.

 

6.13     Further Assurances.

 

(a)     Execute any further instruments and take further action as Collateral
Agent or any Lender reasonably requests to perfect or continue Collateral
Agent’s Lien in the Collateral or to effect the purposes of this Agreement.

 

 
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(b)     Deliver to Collateral Agent and Lenders, within five (5) days after the
same are sent or received, copies of all material correspondence, reports,
documents and other filings with any Governmental Authority that could
reasonably be expected to have a material adverse effect on any of the
Governmental Approvals material to Borrower’s business or otherwise could
reasonably be expected to have a Material Adverse Change.

 

6.14     Accounts Receivable.

 

(a)     Schedules and Documents Relating to Accounts. Borrower shall deliver to
Collateral Agent, with a copy to Lenders, transaction reports and schedules of
collections, as provided in Section 6.2, on Collateral Agent’s standard forms;
provided, however, that Borrower’s failure to execute and deliver the same shall
not affect or limit Collateral Agent’s Lien and other rights in all of
Borrower’s Accounts, nor shall Collateral Agent’s failure to advance or lend
against a specific Account affect or limit Collateral Agent’s Lien and other
rights therein. If reasonably requested by Collateral Agent or any Lender,
Borrower shall furnish Collateral Agent, with a copy to Lenders, with copies
(or, at Collateral Agent’s request, originals) of all contracts, orders,
invoices, and other similar documents, and all shipping instructions, delivery
receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Accounts. In addition, Borrower
shall deliver to Collateral Agent, with a copy to Lenders, on any 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.

 

(b)     Disputes. Borrower shall promptly notify Collateral Agent and each
Lender of all disputes or claims relating to Accounts in excess of Five Hundred
Thousand Dollars ($500,000.00). Borrower may forgive (completely or partially),
compromise, or settle any Account for less than payment in full, or agree to do
any of the foregoing so long as (i) Borrower does so in good faith, in a
commercially reasonable manner, in the ordinary course of business, in
arm’s-length transactions, and reports the same to Collateral Agent, with a copy
to Lenders, in the Compliance Certificate; (ii) no Event of Default has occurred
and is continuing; and (iii) after taking into account all such discounts,
settlements and forgiveness, the total outstanding Revolving Advances will not
exceed the lesser of the Revolving Line or the Availability Amount.

 

(c)     Collection of Accounts. Borrower shall have the right to collect all
Accounts, unless and until an Event of Default has occurred and is continuing.
Borrower shall direct all Account Debtors to deliver or transmit all proceeds of
Accounts into a lockbox account, or via wire transfer, ACH or electronic deposit
capture into a “blocked account” as specified by Collateral Agent (either such
account, the “Cash Collateral Account”). Whether or not an Event of Default has
occurred and is continuing, Borrower shall immediately deliver all payments on
and proceeds of Accounts to the Cash Collateral Account to be applied to
immediately reduce the Obligations with respect to the Revolving Line on a daily
basis. It will be considered an immediate Event of Default if the Cash
Collateral Account is not established and operational prior to the earlier of
(i) the initial Revolving Advance and (ii) within ninety (90) days of the
Effective Date, and in either case, at all times thereafter.

 

(d)     Returns. Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower, Borrower shall promptly
(i) (A) determine the reason for such return and issue a credit memorandum to
the Account Debtor in the appropriate amount or (B) handle such return in a
customary and commercially reasonable manner consistent with past practices, and
(ii) with respect to any such returns involving more than Five Hundred Thousand
Dollars ($500,000.00) individually or in the aggregate, provide a copy of such
credit memorandum or other applicable documentation to Collateral Agent, with a
copy to Lenders. 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 Collateral Agent, and immediately notify
Collateral Agent and Lenders of the return of the Inventory.

 

(e)     Verification. Collateral Agent and Lenders may, from time to time,
verify directly with the respective Account Debtors the validity, amount and
other matters relating to the Accounts, either in the name of Borrower,
Collateral Agent or such Lender or such other name as Collateral Agent or such
Lender may choose, and notify any Account Debtor of Collateral Agent’s security
interest in such Account; provided, however, that so long as no Event of Default
has occurred and is continuing, Collateral Agent will endeavor in good faith to
notify Borrower in advance of such verification, provided that the failure to do
so shall not be a breach of this Agreement or give rise to any liability to
Collateral Agent or any Lender.

 

 
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(f)     No Liability. Neither Collateral Agent nor any Lender shall 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 Collateral Agent or any Lender 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 Collateral Agent or any Lender
from liability for its own gross negligence or willful misconduct.

 

6.15     Remittance of Proceeds. Except as otherwise provided in Section
6.14(c), deliver, in kind, all proceeds arising from the disposition of any
Collateral to Collateral Agent, for the ratable benefit of the Lenders, in the
original form in which received by Borrower not later than five (5) Business
Days after receipt by Borrower, to be applied to the Obligations (a) prior to an
Event of Default, pursuant to the terms of Section 2.4(e) hereof, and (b) after
the occurrence and during the continuance of an Event of Default, pursuant to
the terms of Section 9.4 hereof; provided that, if no Event of Default has
occurred and is continuing, Borrower shall not be obligated to remit to
Collateral Agent 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 Five Hundred Thousand Dollars ($500,000.00) 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 Collateral Agent. Nothing in this
Section limits the restrictions on disposition of Collateral set forth elsewhere
in this Agreement.

 

7.     NEGATIVE COVENANTS

 

Borrower shall not, and shall not permit any of its Subsidiaries to, do any of
the following without the prior written consent of the Required Lenders:

 

7.1     Dispositions. Convey, sell, lease, transfer, assign, or otherwise
dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, except for Transfers (a)
of Inventory in the ordinary course of business; (b) of worn-out or obsolete
Equipment; and (c) in connection with Permitted Liens, Permitted Investments
and Permitted Licenses.

 

7.2     Changes in Business, Management, Ownership, or Business Locations.
(a) Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses engaged in by Borrower as of the Effective Date or
reasonably related thereto; (b) liquidate or dissolve; or (c) (i) any Key Person
shall cease to be actively engaged in the management of Borrower unless written
notice thereof is provided to Collateral Agent within five (5) days of such
change, (ii) enter into any transaction or series of related transactions in
which the stockholders of Nuvectra who were not stockholders immediately prior
to the first such transaction own more than forty nine percent (49%) of the
voting stock of Nuvectra immediately after giving effect to such transaction or
related series of such transactions (other than by the sale of Nuvectra’s equity
securities in a public offering, a private placement of public equity or to
venture capital investors so long as Borrower identifies to Collateral Agent the
venture capital investors prior to the closing of the transaction), or (iii)
enter into any transaction or series of related transactions as a result of
which Nuvectra ceases to own one hundred percent (100.00%) of Algostim,
PelviStim and NeuroNexus. Borrower shall not, without at least thirty (30) days’
prior written notice to Collateral Agent: (A) add any new offices or business
locations, including warehouses (unless such new offices or business locations
(i) do not contain any of Borrower’s Books, (ii) contain less than Seven Hundred
Fifty Thousand Dollars ($750,000.00) in assets or property of Borrower or any of
its Subsidiaries and (iii) are not Borrower’s or its Subsidiaries’ chief
executive office); (B) change its jurisdiction of organization, (C) change its
organizational structure or type, (D) change its legal name, or (E) change any
organizational number (if any) assigned by its jurisdiction of organization.

 

7.3     Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock, shares or property of another Person. A Subsidiary may merge or
consolidate into another Subsidiary (provided such surviving Subsidiary is a
“co-Borrower” hereunder or has provided a secured Guaranty of Borrower’s
Obligations hereunder) or with (or into) Borrower provided Borrower is the
surviving legal entity, and as long as no Event of Default is occurring prior
thereto or arises as a result therefrom. Without limiting the foregoing,
Borrower shall not, without Collateral Agent’s prior written consent, enter into
any binding contractual arrangement with any Person to attempt to facilitate a
merger or acquisition of Borrower, unless (i) no Event of Default exists when
such agreement is entered into by Borrower, (ii) such agreement does not give
such Person the right to claim any consideration, fees, payments or damages from
Borrower in excess of Seven Hundred Fifty Thousand Dollars ($750,000.00), and
(iii) Borrower notifies Collateral Agent in advance of entering into such an
agreement.

 

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

 

7.5     Encumbrance. Create, incur, allow, or suffer any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein (except for Permitted Liens that are permitted by the
terms of this Agreement to have priority over Collateral Agent’s Lien), or enter
into any agreement, document, instrument or other arrangement (except with or in
favor of Collateral Agent, for the ratable benefit of the Lenders) with any
Person which directly or indirectly prohibits or has the effect of prohibiting
Borrower, or any of its Subsidiaries, from assigning, mortgaging, pledging,
granting a security interest in or upon, or encumbering any of Borrower’s or
such Subsidiary’s Intellectual Property, except as is otherwise permitted in
Section 7.1 hereof and the definition of “Permitted Liens” herein.

 

7.6     Maintenance of Collateral Accounts. Maintain any Collateral Account
except pursuant to the terms of Section 6.6 hereof.

 

7.7     Distributions; Investments. (a) Pay any dividends (other than dividends
payable solely in capital stock) or make any distribution or payment in respect
of or redeem, retire or purchase any capital stock (other than repurchases
pursuant to the terms of employee stock purchase plans, employee restricted
stock agreements, stockholder rights plans, director or consultant stock option
plans, or similar plans, provided such repurchases do not exceed Five Hundred
Thousand Dollars ($500,000.00) in the aggregate per fiscal year) or (b) directly
or indirectly make any Investment other than Permitted Investments, or permit
any of its Subsidiaries to do so. For the avoidance of doubt, Nuvectra shall be
permitted to issue shares of capital stock in accordance with its equity
incentive plan approved by Nuvectra’s Board of Directors.

 

7.8     Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower or any
of its Subsidiaries, except for (a) transactions that are in the ordinary course
of Borrower’s or such Subsidiary’s business, upon fair and reasonable terms that
are no less favorable to Borrower or such Subsidiary than would be obtained in
an arm’s length transaction with a non-affiliated Person, and (b) Subordinated
Debt or equity investments by Borrower’s investors in Borrower or its
Subsidiaries.

 

7.9     Subordinated Debt. (a) Make or permit any payment on any Subordinated
Debt, except under the terms of the subordination, intercreditor, or other
similar agreement to which such Subordinated Debt is subject, or (b) amend any
provision in any document relating to the Subordinated Debt which would increase
the amount thereof or adversely affect the subordination thereof to Obligations
owed to the Lenders.

 

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

 

 
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7.11     Compliance with Anti-Terrorism Laws. Collateral Agent hereby notifies
Borrower and each of its Subsidiaries that pursuant to the requirements of
Anti-Terrorism Laws, and Collateral Agent’s policies and practices, Collateral
Agent is required to obtain, verify and record certain information and
documentation that identifies Borrower and each of its Subsidiaries and their
principals, which information includes the name and address of Borrower and each
of its Subsidiaries and their principals and such other information that will
allow Collateral Agent to identify such party in accordance with Anti-Terrorism
Laws. Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or
any of its Subsidiaries permit any Affiliate to, directly or indirectly,
knowingly enter into any documents, instruments, agreements or contracts with
any Person listed on the OFAC Lists. Borrower and each of its Subsidiaries shall
immediately notify Collateral Agent if Borrower or such Subsidiary has knowledge
that Borrower, or any Subsidiary or Affiliate of Borrower, is listed on the OFAC
Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on,
or (d) is arraigned and held over on charges involving money laundering or
predicate crimes to money laundering. Neither Borrower nor any of its
Subsidiaries shall, nor shall Borrower or any of its Subsidiaries, permit any
Affiliate to, directly or indirectly, (i) conduct any business or engage in any
transaction or dealing with any Blocked Person, including, without limitation,
the making or receiving of any contribution of funds, goods or services to or
for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any
transaction relating to, any property or interests in property blocked pursuant
to Executive Order No. 13224 or any similar executive order or other
Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction
that evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in Executive Order No. 13224 or other
Anti-Terrorism Law.

 

8.     EVENTS OF DEFAULT

 

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

 

8.1     Payment Default. Borrower fails to (a) make any payment of principal or
interest on any Credit Extension on its due date, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable (which three (3) Business Day grace period shall not apply to payments
due on the Maturity Date or the Revolving Line Maturity Date or the date of
acceleration pursuant to Section 9.1 (a) hereof). During the cure period, the
failure to cure the payment default is not an Event of Default (but no Credit
Extension will be made during the cure period);

 

8.2     Covenant Default.

 

(a)     Borrower or any of its Subsidiaries fails or neglects to perform any
obligation in Sections 6.2 (Financial Statements, Reports, Certificates), 6.4
(Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.7 (Protection of
Intellectual Property Rights), 6.9 (Notice of Litigation and Default), 6.10
(Financial Covenant), 6.11 (Landlord Waivers; Bailee Waivers), 6.12
(Creation/Acquisition of Subsidiaries), 6.13 (Further Assurances) or 6.14
(Accounts Receivable) or Borrower violates any covenant in Section 7; or

 

(b)     Borrower, or any of its Subsidiaries, fails or neglects to perform,
keep, or observe any other term, provision, condition, covenant or agreement
contained in this Agreement or any Loan Documents, and as to any default (other
than those specified in this Section 8) under such other term, provision,
condition, covenant or agreement that can be cured, has failed to cure the
default within ten (10) days after the occurrence thereof; provided, however,
that if the default cannot by its nature be cured within the ten (10) day period
or cannot after diligent attempts by Borrower be cured within such ten (10) day
period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to cure the default shall not be deemed an Event of
Default (but no Credit Extensions shall be made during such cure period). Grace
periods provided under this Section shall not apply, among other things, to
financial covenants or any other covenants set forth in subsection (a) above;

 

8.3     Material Adverse Change. A Material Adverse Change occurs;

 

 
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8.4     Attachment; Levy; Restraint on Business.

 

(a)     (i) The service of process seeking to attach, by trustee or similar
process, any funds of Borrower or any of its Subsidiaries or of any entity under
control of Borrower or its Subsidiaries on deposit with any Lender or any
Lender’s Affiliate or any bank or other institution at which Borrower or any of
its Subsidiaries maintains a Collateral Account, or (ii) a notice of lien, levy,
or assessment is filed against Borrower or any of its Subsidiaries or their
respective assets by any government agency, and the same under subclauses
(i) and (ii) hereof are not, within ten (10) days after the occurrence thereof,
discharged or stayed (whether through the posting of a bond or otherwise);
provided, however, no Credit Extensions shall be made during any ten (10) day
cure period; and

 

(b)     (i) any material portion of Borrower’s or any of its Subsidiaries’
assets is attached, seized, levied on, or comes into possession of a trustee or
receiver, or (ii) any court order enjoins, restrains, or prevents Borrower or
any of its Subsidiaries from conducting any part of its business;

 

8.5     Insolvency. (a) Nuvectra, or Nuvectra and its Subsidiaries taken as a
whole, is or becomes Insolvent; (b) Nuvectra or any of its Subsidiaries begins
an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against
Nuvectra or any of its Subsidiaries and not dismissed or stayed within
forty-five (45) days (but no Credit Extensions shall be made while Nuvectra, or
Nuvectra and its Subsidiaries taken as a whole, is Insolvent and/or until any
Insolvency Proceeding is dismissed);

 

8.6     Other Agreements. There is a default in any agreement to which Borrower
or any of its Subsidiaries is a party with a third party or parties resulting in
a right by such third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness in an amount in excess of Seven Hundred Fifty
Thousand Dollars ($750,000.00) or that could reasonably be expected to have a
Material Adverse Change;

 

8.7     Judgments. One or more judgments, orders, or decrees for the payment of
money in an amount, individually or in the aggregate, of at least Seven Hundred
Fifty Thousand Dollars ($750,000.00) (not covered by independent third-party
insurance as to which liability has been accepted by such insurance carrier)
shall be rendered against Borrower or any of its Subsidiaries and shall remain
unsatisfied, unvacated, or unstayed for a period of ten (10) days after the
entry thereof (provided that no Credit Extensions will be made prior to the
satisfaction, vacation, or stay of such judgment, order or decree);

 

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

 

8.9     Subordinated Debt. A default or breach occurs under any agreement
between Borrower or any of its Subsidiaries and any creditor of Borrower or any
of its Subsidiaries that signed a subordination, intercreditor, or other similar
agreement with Collateral Agent or the Lenders, or any creditor that has signed
such an agreement with Collateral Agent or the Lenders breaches any terms of
such agreement;

 

8.10     Guaranty. (a) Any Guaranty terminates or ceases for any reason to be in
full force and effect; (b) any Guarantor does not perform any obligation or
covenant under any Guaranty; (c) any circumstance described in Sections 8.3,
8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor, or (d) the
liquidation, winding up, or termination of existence of any Guarantor;

 

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

 

8.12     Mortgage. An Event of Default occurs under the Mortgage;

 

8.13     Lien Priority. Any Lien created hereunder or by any other Loan Document
shall at any time fail to constitute a valid and perfected Lien on any of the
Collateral purported to be secured thereby, subject to no prior or equal Lien,
other than Permitted Liens which are permitted to have priority in accordance
with the terms of this Agreement; or

 

 
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8.14     Delisting. The shares of common stock of Borrower are delisted from
NASDAQ Capital Market or the NASDAQ Global Market because of failure to comply
with continued listing standards thereof or due to a voluntary delisting which
results in such shares not being listed on any other nationally recognized stock
exchange in the United States having listing standards at least as restrictive
as the NASDAQ Capital Market or the NASDAQ Global Market.

 

9.     RIGHTS AND REMEDIES

 

9.1     Rights and Remedies.

 

(a)     Upon the occurrence and during the continuance of an Event of Default,
Collateral Agent may, and at the written direction of Required Lenders shall,
without notice or demand, do any or all of the following: (i) deliver notice of
the Event of Default to Borrower, (ii) by notice to Borrower declare all
Obligations immediately due and payable (but if an Event of Default described in
Section 8.5 occurs all Obligations shall be immediately due and payable without
any action by Collateral Agent or the Lenders) or (iii) by notice to Borrower
suspend or terminate the obligations, if any, of the Lenders to advance money or
extend credit for Borrower’s benefit under this Agreement or under any other
agreement between Borrower and Collateral Agent and/or the Lenders (but if an
Event of Default described in Section 8.5 occurs all obligations, if any, of the
Lenders to advance money or extend credit for Borrower’s benefit under this
Agreement or under any other agreement between Borrower and Collateral Agent
and/or the Lenders shall be immediately terminated without any action by
Collateral Agent or the Lenders).

 

(b)     Without limiting the rights of Collateral Agent and the Lenders set
forth in Section 9.1(a) above, upon the occurrence and during the continuance of
an Event of Default, Collateral Agent shall have the right, without notice or
demand, to do any or all of the following:

 

(i)     foreclose upon and/or sell or otherwise liquidate, the Collateral;

 

(ii)     apply to the Obligations any (a) balances and deposits of Borrower that
Collateral Agent or any Lender holds or controls, or (b) any amount held or
controlled by Collateral Agent or any Lender owing to or for the credit or the
account of Borrower; and/or

 

(iii)     commence and prosecute an Insolvency Proceeding or consent to Borrower
commencing any Insolvency Proceeding.

 

(c)     Without limiting the rights of Collateral Agent and the Lenders set
forth in Sections 9.1(a) and (b) above, upon the occurrence and during the
continuance of an Event of Default, Collateral Agent shall have the right,
without notice or demand, to do any or all of the following:

 

(i)     settle or adjust disputes and claims directly with Account Debtors for
amounts on terms and in any order that Collateral Agent considers advisable,
notify any Person owing Borrower money of Collateral Agent’s security interest
in such funds, and verify the amount of such account;

 

(ii)     make any payments and do any acts it considers necessary or reasonable
to protect the Collateral and/or its security interest in the Collateral.
Borrower shall assemble the Collateral if Collateral Agent requests and make it
available in a location as Collateral Agent reasonably designates. Collateral
Agent may enter premises where the Collateral is located, take and maintain
possession of any part of the Collateral, and pay, purchase, contest, or
compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Collateral Agent a
license to enter and occupy any of its premises, without charge, to exercise any
of Collateral Agent’s rights or remedies;

 

 
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(iii)     ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, and/or advertise for sale, the Collateral. Collateral Agent is hereby
granted a non-exclusive, royalty-free license or other right to use, without
charge, Borrower’s and each of its Subsidiaries’ labels, patents, copyrights,
mask works, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any similar property as it pertains to
the Collateral, in completing production of, advertising for sale, and selling
any Collateral and, in connection with Collateral Agent’s exercise of its rights
under this Section 9.1, Borrower’s and each of its Subsidiaries’ rights under
all licenses and all franchise agreements inure to Collateral Agent, for the
benefit of the Lenders;

 

(iv)     place a “hold” on any account maintained with Collateral Agent or the
Lenders and/or deliver a notice of exclusive control, any entitlement order, or
other directions or instructions pursuant to any Control Agreement or similar
agreements providing control of any Collateral;

 

(v)     demand and receive possession of Borrower’s Books;

 

(vi)     appoint a receiver to seize, manage and realize any of the Collateral,
and such receiver shall have any right and authority as any competent court will
grant or authorize in accordance with any applicable law, including any power or
authority to manage the business of Borrower or any of its Subsidiaries;

 

(vii)     subject to clauses 9.1(a) and (b), exercise all rights and remedies
available to Collateral Agent and each Lender under the Loan Documents or at law
or equity, including all remedies provided under the Code (including disposal of
the Collateral pursuant to the terms thereof);

 

(viii)     for any Letters of Credit, demand that Borrower (i) deposit cash with
Bank in an amount equal to (x) if such Letters of Credit are denominated in
Dollars, then one hundred five percent (105%); and (y) if such Letters of Credit
are denominated in a Foreign Currency, then one hundred ten percent (110%), of
the Dollar Equivalent of the aggregate face amount of all Letters of Credit
remaining undrawn (plus all interest, fees, and costs due or to become due in
connection therewith (as estimated by Bank in its good faith business
judgment)), to secure all of the Obligations relating to such Letters of Credit,
as collateral security for the repayment of any future drawings under such
Letters of Credit, and Borrower shall forthwith deposit and pay such amounts,
and (ii) pay in advance all letter of credit fees scheduled to be paid or
payable over the remaining term of any Letters of Credit; and

 

(ix)     terminate any FX Contracts.

 

Notwithstanding any provision of this Section 9.1 to the contrary, upon the
occurrence of any Event of Default, Collateral Agent shall have the right to
exercise any and all remedies referenced in this Section 9.1 without the written
consent of Required Lenders following the occurrence of an Exigent Circumstance.
As used in the immediately preceding sentence, “Exigent Circumstance” means any
event or circumstance that, in the reasonable judgment of Collateral Agent,
imminently threatens the ability of Collateral Agent to realize upon all or any
material portion of the Collateral, such as, without limitation, fraudulent
removal, concealment, or abscondment thereof, destruction or material waste
thereof, or failure of Borrower or any of its Subsidiaries after reasonable
demand to maintain or reinstate adequate casualty insurance coverage, or which,
in the judgment of Collateral Agent, could reasonably be expected to result in a
material diminution in value of the Collateral.

 

9.2     Power of Attorney. Borrower hereby irrevocably appoints Collateral Agent
as its lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower’s or any of its
Subsidiaries’ name on any checks or other forms of payment or security; (b) sign
Borrower’s or any of its Subsidiaries’ name on any invoice or bill of lading for
any Account or drafts against Account Debtors; (c) settle and adjust disputes
and claims about the Accounts directly with Account Debtors, for amounts and on
terms Collateral Agent determines reasonable; (d) make, settle, and adjust all
claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien,
charge, encumbrance, security interest, and adverse claim in or to the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (f) transfer the Collateral into the name
of Collateral Agent or a third party as the Code or any applicable law permits.
Borrower hereby appoints Collateral Agent as its lawful attorney-in-fact to sign
Borrower’s or any of its Subsidiaries’ name on any documents necessary to
perfect or continue the perfection of Collateral Agent’s security interest in
the Collateral regardless of whether an Event of Default has occurred until all
Obligations (other than inchoate indemnity obligations) have been satisfied in
full and Collateral Agent and the Lenders are under no further obligation to
make Credit Extensions hereunder. Collateral Agent’s foregoing appointment as
Borrower’s or any of its Subsidiaries’ attorney in fact, and all of Collateral
Agent’s rights and powers, coupled with an interest, are irrevocable until all
Obligations (other than inchoate indemnity obligations) have been fully repaid
and performed and Collateral Agent’s and the Lenders’ obligation to provide
Credit Extensions terminates.

 

 
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9.3     Protective Payments. If Borrower or any of its Subsidiaries fail to
obtain the insurance called for by Section 6.5 or fails to pay any premium
thereon or fails to pay any other amount which Borrower or any of its
Subsidiaries is obligated to pay under this Agreement or any other Loan
Document, Collateral Agent may obtain such insurance or make such payment, and
all amounts so paid by Collateral Agent are Lenders’ Expenses and immediately
due and payable, bearing interest at the Default Rate, and secured by the
Collateral. Collateral Agent will make reasonable efforts to provide Borrower
with notice of Collateral Agent obtaining such insurance or making such payment
at the time it is obtained or paid or within a reasonable time thereafter. No
such payments by Collateral Agent are deemed an agreement to make similar
payments in the future or Collateral Agent’s waiver of any Event of Default.

 

9.4     Application of Payments and Proceeds. Notwithstanding anything to the
contrary contained in this Agreement, upon the occurrence and during the
continuance of an Event of Default, (a) Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times thereafter
received by Collateral Agent from or on behalf of Borrower or any of its
Subsidiaries of all or any part of the Obligations, and, as between Borrower on
the one hand and Collateral Agent and Lenders on the other, Collateral Agent
shall have the continuing and exclusive right to apply and to reapply any and
all payments received against the Obligations in such manner as Collateral Agent
may deem advisable notwithstanding any previous application by Collateral Agent,
and (b) the proceeds of any sale of, or other realization upon all or any part
of the Collateral shall be applied: first, to the Lenders’ Expenses; second, to
accrued and unpaid interest on the Obligations (including any interest which,
but for the provisions of the United States Bankruptcy Code, would have accrued
on such amounts); third, to the principal amount of the Obligations outstanding;
and fourth, to any other indebtedness or obligations of Borrower owing to
Collateral Agent or any Lender under the Loan Documents. Any balance remaining
shall be delivered to Borrower or to whoever may be lawfully entitled to receive
such balance or as a court of competent jurisdiction may direct. In carrying out
the foregoing, (x) amounts received shall be applied in the numerical order
provided until exhausted prior to the application to the next succeeding
category, and (y) each of the Persons entitled to receive a payment in any
particular category shall receive an amount equal to its pro rata share of
amounts available to be applied pursuant thereto for such category. Any
reference in this Agreement to an allocation between or sharing by the Lenders
of any right, interest or obligation “ratably,” “proportionally” or in similar
terms shall refer to Pro Rata Share unless expressly provided otherwise.
Collateral Agent, or if applicable, each Lender, shall promptly remit to the
other Lenders such sums as may be necessary to ensure the ratable repayment of
each Lender’s portion of any Term Loan, Revolving Advance and the ratable
distribution of interest, fees and reimbursements paid or made by Borrower.
Notwithstanding the foregoing, a Lender receiving a scheduled payment shall not
be responsible for determining whether the other Lenders also received their
scheduled payment on such date; provided, however, if it is later determined
that a Lender received more than its ratable share of scheduled payments made on
any date or dates, then such Lender shall remit to Collateral Agent or other
Lenders such sums as may be necessary to ensure the ratable payment of such
scheduled payments, as instructed by Collateral Agent. If any payment or
distribution of any kind or character, whether in cash, properties or
securities, shall be received by a Lender in excess of its ratable share, then
the portion of such payment or distribution in excess of such Lender’s ratable
share shall be received by such Lender in trust for and shall be promptly paid
over to the other Lender for application to the payments of amounts due on the
other Lenders’ claims. To the extent any payment for the account of Borrower is
required to be returned as a voidable transfer or otherwise, the Lenders shall
contribute to one another as is necessary to ensure that such return of payment
is on a pro rata basis. If any Lender shall obtain possession of any Collateral,
it shall hold such Collateral for itself and as agent and bailee for Collateral
Agent and other Lenders for purposes of perfecting Collateral Agent’s security
interest therein.

 

9.5     Liability for Collateral. So long as Collateral Agent and the Lenders
comply with reasonable banking practices regarding the safekeeping of the
Collateral in the possession or under the control of Collateral Agent and the
Lenders, Collateral Agent and the Lenders shall not be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person. Borrower bears
all risk of loss, damage or destruction of the Collateral.

 

 
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9.6     No Waiver; Remedies Cumulative. Failure by Collateral Agent or any
Lender, at any time or times, to require strict performance by Borrower of any
provision of this Agreement or any other Loan Document shall not waive, affect,
or diminish any right of Collateral Agent or any Lender thereafter to demand
strict performance and compliance herewith or therewith. No waiver hereunder
shall be effective unless signed by Collateral Agent and the Required Lenders
and then is only effective for the specific instance and purpose for which it is
given. The rights and remedies of Collateral Agent and the Lenders under this
Agreement and the other Loan Documents are cumulative. Collateral Agent and the
Lenders have all rights and remedies provided under the Code, any applicable
law, by law, or in equity. The exercise by Collateral Agent or any Lender of one
right or remedy is not an election, and Collateral Agent’s or any Lender’s
waiver of any Event of Default is not a continuing waiver. Collateral Agent’s or
any Lender’s delay in exercising any remedy is not a waiver, election, or
acquiescence.

 

9.7     Demand Waiver. Borrower waives, to the fullest extent permitted by law,
demand, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees held by Collateral Agent or any Lender on which Borrower or any
Subsidiary is liable.

 

10.     NOTICES

 

All notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”) by any party to this Agreement or any other Loan
Document must be in writing and shall be deemed to have been validly served,
given, or delivered: (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the U.S. mail, first class, registered or
certified mail return receipt requested, with proper postage prepaid; (b) upon
transmission, when sent by facsimile transmission; (c) one (1) Business Day
after deposit with a reputable overnight courier with all charges prepaid; or
(d) when delivered, if hand-delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address, facsimile number,
or email address indicated below. Any of Collateral Agent, Lender or Borrower
may change its mailing address or facsimile number by giving the other party
written notice thereof in accordance with the terms of this Section 10.

 

If to Borrower:

NUVECTRA CORPORATION

5830 Granite Parkway, Suite 1100

Plano, TX 75024

Attn: Walter Berger

Fax: (469) 362-8441

Email: wberger@nuvectramed.com

     

NUVECTRA CORPORATION

5830 Granite Parkway, Suite 1100

Plano, TX 75024

Attn: Melissa G. Beare

Fax: (469) 362-8441

Email: mbeare@nuvectramed.com

   

with a copy (which shall not constitute notice) to:

Norton Rose Fulbright

2200 Ross Avenue, Suite 3600

Dallas, TX 75201

Attn: Laura Kalesnik

Fax: (214) 855-8200

Email: laura.kalesnik@nortonrosefulbright.com

 

 
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If to Collateral Agent:

OXFORD FINANCE LLC

133 North Fairfax Street

Alexandria, Virginia 22314

Attention: Legal Department

Fax: (703) 519-5225

Email: LegalDepartment@oxfordfinance.com

   

with a copy to

SILICON VALLEY BANK

4370 La Jolla Village Drive, Suite 1050

San Diego, CA 92122

Attn: Anthony Flores

Fax: (858) 622-1424

Email: AFlores@svb.com

   

with a copy (which shall not constitute notice) to:

VLP LAW GROUP LLP

2947 Eskridge Road

Fairfax, VA 22031

Attn: Denise Zack

Fax: (703) 260-6551

Email: DZack@VLPLawGroup.com

 

 

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

 

California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower, Collateral Agent and each Lender each submit to the
exclusive jurisdiction of the State and Federal courts in Santa Clara County,
California; provided, however, that nothing in this Agreement shall be deemed to
operate to preclude Collateral Agent or any Lender from bringing suit or taking
other legal action in any other jurisdiction to realize on the Collateral or any
other security for the Obligations, or to enforce a judgment or other court
order in favor of Collateral Agent or any Lender. Borrower expressly submits and
consents in advance to such jurisdiction in any action or suit commenced in any
such court, and Borrower hereby waives any objection that it may have based upon
lack of personal jurisdiction, improper venue, or forum non conveniens and
hereby consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in,
or subsequently provided by Borrower in accordance with, Section 10 of this
Agreement and that service so made shall be deemed completed upon the earlier to
occur of Borrower’s actual receipt thereof or three (3) days after deposit in
the U.S. mails, proper postage prepaid.

 

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT
AND EACH LENDER EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

 
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WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial
by jury is not enforceable, the parties hereto agree that any and all disputes
or controversies of any nature between them arising at any time shall be decided
by a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court. The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure §§ 638 through 645.1, inclusive. The private judge shall have the
power, among others, to grant provisional relief, including without limitation,
entering temporary restraining orders, issuing preliminary and permanent
injunctions and appointing receivers. All such proceedings shall be closed to
the public and confidential and all records relating thereto shall be
permanently sealed. If during the course of any dispute, a party desires to seek
provisional relief, but a judge has not been appointed at that point pursuant to
the judicial reference procedures, then such party may apply to the Santa Clara
County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a
court under the rules of evidence applicable to judicial proceedings. The
parties shall be entitled to discovery which shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and orders applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this
paragraph shall limit the right of any party at any time to exercise self-help
remedies, foreclose against collateral, or obtain provisional remedies. The
private judge shall also determine all issues relating to the applicability,
interpretation, and enforceability of this paragraph.

 

12.     GENERAL PROVISIONS

 

12.1     Successors and Assigns. This Agreement binds and is for the benefit of
the successors and permitted assigns of each party. Borrower may not transfer,
pledge or assign this Agreement or any rights or obligations under it without
Collateral Agent’s and each Lender’s prior written consent (which may be granted
or withheld in Collateral Agent’s and each Lender’s discretion, subject to
Section 12.6). The Lenders have the right, without the consent of or notice to
Borrower, to sell, transfer, assign, pledge, negotiate, or grant participation
in (any such sale, transfer, assignment, negotiation, or grant of a
participation, a “Lender Transfer”) all or any part of, or any interest in, the
Lenders’ obligations, rights, and benefits under this Agreement and the other
Loan Documents; provided, however, that any such Lender Transfer (other than a
transfer, pledge, sale or assignment to an Eligible Assignee) of its
obligations, rights, and benefits under this Agreement and the other Loan
Documents shall require the prior written consent of the Required Lenders (such
approved assignee, an “Approved Lender”). Borrower and Collateral Agent shall be
entitled to continue to deal solely and directly with such Lender in connection
with the interests so assigned until Collateral Agent shall have received and
accepted an effective assignment agreement in form satisfactory to Collateral
Agent executed, delivered and fully completed by the applicable parties thereto,
and shall have received such other information regarding such Eligible Assignee
or Approved Lender as Collateral Agent reasonably shall require. Notwithstanding
anything to the contrary contained herein, so long as no Event of Default has
occurred and is continuing, no Lender Transfer (other than a Lender Transfer
(i) in respect of the Warrants or (ii) in connection with (x) assignments by a
Lender due to a forced divestiture at the request of any regulatory agency; or
(y) upon the occurrence of a default, event of default or similar occurrence
with respect to a Lender’s own financing or securitization transactions) shall
be permitted, without Borrower’s consent, to any Person which is an Affiliate or
Subsidiary of Borrower, a direct competitor of Borrower or a vulture hedge fund,
each as determined by Collateral Agent.

 

12.2     Indemnification. Borrower agrees to indemnify, defend and hold
Collateral Agent and the Lenders and their respective directors, officers,
employees, agents, attorneys, or any other Person affiliated with or
representing Collateral Agent or the Lenders (each, an “Indemnified Person”)
harmless against: (a) all obligations, demands, claims, and liabilities
(collectively, “Claims”) asserted by any other party in connection with; related
to; following; or arising from, out of or under, the transactions contemplated
by the Loan Documents; and (b) all losses or Lenders’ Expenses incurred, or paid
by Indemnified Person in connection with; related to; following; or arising
from, out of or under, the transactions contemplated by the Loan Documents
between Collateral Agent, and/or the Lenders and Borrower (including reasonable
and invoiced attorneys’ fees and expenses), except for Claims and/or losses
directly caused by such Indemnified Person’s gross negligence or willful
misconduct. Borrower hereby further indemnifies, defends and holds each
Indemnified Person harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including
the fees and disbursements of counsel for such Indemnified Person) in connection
with any investigative, response, remedial, administrative or judicial matter or
proceeding, whether or not such Indemnified Person shall be designated a party
thereto and including any such proceeding initiated by or on behalf of Borrower,
and the reasonable expenses of investigation by engineers, environmental
consultants and similar technical personnel and any commission, fee or
compensation claimed by any broker (other than any broker retained by Collateral
Agent or Lenders) asserting any right to payment for the transactions
contemplated hereby which may be imposed on, incurred by or asserted against
such Indemnified Person as a result of or in connection with the transactions
contemplated hereby and the use or intended use of the proceeds of the loan
proceeds except for liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements directly
caused by such Indemnified Person’s gross negligence or willful misconduct.

 

 
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12.3     Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.

 

12.4     Severability of Provisions. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.

 

12.5     Correction of Loan Documents. Collateral Agent and the Lenders may
correct patent errors and fill in any blanks in this Agreement and the other
Loan Documents consistent with the agreement of the parties.

 

12.6     Amendments in Writing; Integration. (a) No amendment, modification,
termination or waiver of any provision of this Agreement or any other Loan
Document, no approval or consent thereunder, or any consent to any departure by
Borrower or any of its Subsidiaries therefrom, shall in any event be effective
unless the same shall be in writing and signed by Borrower, Collateral Agent and
the Required Lenders provided that:

 

(i)     no such amendment, waiver or other modification that would have the
effect of increasing or reducing a Lender’s Term Loan Commitment, Term Loan
Commitment Percentage or Revolving Line Commitment Percentage shall be effective
as to such Lender without such Lender’s written consent;

 

(ii)     no such amendment, waiver or modification that would affect the rights
and duties of Collateral Agent shall be effective without Collateral Agent’s
written consent or signature;

 

(iii)     no such amendment, waiver or other modification shall, unless signed
by all the Lenders directly affected thereby, (A) reduce the principal of, rate
of interest on or any fees with respect to any Term Loan or Revolving Advance or
forgive any principal, interest (other than default interest) or fees (other
than late charges) with respect to any Term Loan or Revolving Advance (B)
postpone the date fixed for, or waive, any payment of principal of any Term Loan
or Revolving Advance or of interest on any Term Loan or Revolving Advance (other
than default interest) or any fees provided for hereunder (other than late
charges or for any termination of any commitment); (C) change the definition of
the term “Required Lenders” or the percentage of Lenders which shall be required
for the Lenders to take any action hereunder; (D) release all or substantially
all of any material portion of the Collateral, authorize Borrower to sell or
otherwise dispose of all or substantially all or any material portion of the
Collateral or release any Guarantor of all or any portion of the Obligations or
its guaranty obligations with respect thereto, except, in each case with respect
to this clause (D), as otherwise may be expressly permitted under this Agreement
or the other Loan Documents (including in connection with any disposition
permitted hereunder); (E) amend, waive or otherwise modify this Section 12.6 or
the definitions of the terms used in this Section 12.6 insofar as the
definitions affect the substance of this Section 12.6; (F) consent to the
assignment, delegation or other transfer by Borrower of any of its rights and
obligations under any Loan Document or release Borrower of its payment
obligations under any Loan Document, except, in each case with respect to this
clause (F), pursuant to a merger or consolidation permitted pursuant to this
Agreement; (G) amend any of the provisions of Section 9.4 or amend any of the
definitions of Pro Rata Share, Term Loan Commitment, Term Loan Commitment
Percentage, Revolving Line Commitment or Revolving Line Commitment Percentage or
that provide for the Lenders to receive their Pro Rata Shares of any fees,
payments, setoffs or proceeds of Collateral hereunder; (H) subordinate the Liens
granted in favor of Collateral Agent securing the Obligations; or (I) amend any
of the provisions of Section 12.10. It is hereby understood and agreed that all
Lenders shall be deemed directly affected by an amendment, waiver or other
modification of the type described in the preceding clauses (C), (D), (E), (F),
(G) and (H) of the preceding sentence;

 

(iv)     the provisions of the foregoing clauses (i), (ii) and (iii) are subject
to the provisions of any interlender or agency agreement among the Lenders and
Collateral Agent pursuant to which any Lender may agree to give its consent in
connection with any amendment, waiver or modification of the Loan Documents only
in the event of the unanimous agreement of all Lenders.

 

 
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(b)     Other than as expressly provided for in Section 12.6(a)(i)-(iii),
Collateral Agent may, if requested by the Required Lenders, from time to
time designate covenants in this Agreement less restrictive by notification to a
representative of Borrower.

 

(c)     This Agreement and the Loan Documents represent the entire agreement
about this subject matter and supersede prior negotiations or agreements. All
prior agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement and the Loan
Documents merge into this Agreement and the Loan Documents.

 

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

 

12.8     Survival. All covenants, representations and warranties made in this
Agreement continue in full force and effect until this Agreement has terminated
pursuant to its terms and all Obligations (other than inchoate indemnity
obligations and any other obligations which, by their terms, are to survive the
termination of this Agreement) have been satisfied. Without limiting the
foregoing, except as otherwise provided in Section 4.1, the grant of security
interest by Borrower in Section 4.1 shall survive until the termination of all
Bank Services Agreements. The obligation of Borrower in Section 12.2 to
indemnify each Lender and Collateral Agent, as well as the confidentiality
provisions in Section 12.9 below, shall survive until the statute of limitations
with respect to such claim or cause of action shall have run.

 

12.9     Confidentiality. In handling any confidential information of Borrower,
the Lenders and Collateral Agent shall exercise the same degree of care that it
exercises for their own proprietary information, but disclosure of information
may be made: (a) subject to the terms and conditions of this Agreement, to the
Lenders’ and Collateral Agent’s Subsidiaries or Affiliates, or in connection
with a Lender’s own financing or securitization transactions and upon the
occurrence of a default, event of default or similar occurrence with respect to
such financing or securitization transaction; (b) to prospective transferees
(other than those identified in (a) above) or purchasers of any interest in the
Credit Extensions (provided, however, the Lenders and Collateral Agent shall,
except upon the occurrence and during the continuance of an Event of Default,
obtain such prospective transferee’s or purchaser’s agreement to the terms of
this provision or to similar confidentiality terms); (c) as required by law,
regulation, subpoena, or other order; (d) to Lenders’ or Collateral Agent’s
regulators or as otherwise required in connection with an examination or audit;
(e) as Collateral Agent reasonably considers appropriate in exercising remedies
under the Loan Documents; and (f) to third party service providers of the
Lenders and/or Collateral Agent so long as such service providers have executed
a confidentiality agreement with the Lenders and Collateral Agent with terms no
less restrictive than those contained herein. Confidential information does not
include information that either: (i) is in the public domain or in the Lenders’
and/or Collateral Agent’s possession when disclosed to the Lenders and/or
Collateral Agent, or becomes part of the public domain after disclosure to the
Lenders and/or Collateral Agent; or (ii) is disclosed to the Lenders and/or
Collateral Agent by a third party, if the Lenders and/or Collateral Agent does
not know that the third party is prohibited from disclosing the information.
Collateral Agent and the Lenders may use confidential information for any
purpose, including, without limitation, for the development of client databases,
reporting purposes, and market analysis. The provisions of the immediately
preceding sentence shall survive the termination of this Agreement. The
agreements provided under this Section 12.9 supersede all prior agreements,
understanding, representations, warranties, and negotiations between the parties
about the subject matter of this Section 12.9.

 

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

 

 
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12.11     Silicon Valley Bank as Agent. Collateral Agent hereby appoints Silicon
Valley Bank (“SVB”) as its agent (and SVB hereby accepts such appointment) for
the purpose of perfecting Collateral Agent’s Liens in assets which, in
accordance with Article 8 or Article 9, as applicable, of the Code can be
perfected by possession or control, including without limitation, all deposit
accounts maintained at SVB.

 

12.12     Cooperation of Borrower. If necessary, Borrower agrees to (i) execute
any documents (including new Secured Promissory Notes) reasonably required to
effectuate and acknowledge each assignment of a Term Loan Commitment, Revolving
Line Commitment or Credit Extension to an assignee in accordance with
Section 12.1, (ii) make Borrower’s management available to meet with Collateral
Agent and prospective participants and assignees of Term Loan Commitments,
Revolving Line Commitments or Credit Extensions (which meetings shall be
conducted no more often than twice every twelve months unless an Event of
Default has occurred and is continuing), and (iii) assist Collateral Agent or
the Lenders in the preparation of information relating to the financial affairs
of Borrower as any prospective participant or assignee of a Term Loan
Commitment, Revolving Line Commitment or Credit Extensions reasonably may
request. Subject to the provisions of Section 12.9, Borrower authorizes each
Lender to disclose to any prospective participant or assignee of a Term Loan
Commitment or Revolving Line Commitment, any and all information in such
Lender’s possession concerning Borrower and its financial affairs which has been
delivered to such Lender by or on behalf of Borrower pursuant to this Agreement,
or which has been delivered to such Lender by or on behalf of Borrower in
connection with such Lender’s credit evaluation of Borrower prior to entering
into this Agreement.

 

12.13     Borrower Liability. Each Borrower may, acting singly, request Credit
Extensions hereunder. Each Borrower hereby appoints the other as agent for the
other for all purposes hereunder, including with respect to requesting Credit
Extensions hereunder. Each Borrower hereunder shall be jointly and severally
obligated to repay all Credit Extensions made hereunder, regardless of which
Borrower actually receives said Credit Extension, as if each Borrower hereunder
directly received all Credit Extensions. Each Borrower waives (a) any suretyship
defenses available to it under the Code or any other applicable law, including,
without limitation, the benefit of California Civil Code Section 2815 permitting
revocation as to future transactions and the benefit of California Civil Code
Sections 1432, 2809, 2810, 2819, 2839, 2845, 2847, 2848, 2849, 2850, and 2899
and 3433, and (b) any right to require Collateral Agent or any Lender to:
(i) proceed against any Borrower or any other person; (ii) proceed against or
exhaust any security; or (iii) pursue any other remedy. Collateral Agent and or
any Lender may exercise or not exercise any right or remedy it has against any
Borrower or any security it holds (including the right to foreclose by judicial
or non-judicial sale) without affecting any Borrower’s liability.
Notwithstanding any other provision of this Agreement or other related document,
each Borrower irrevocably waives all rights that it may have at law or in equity
(including, without limitation, any law subrogating Borrower to the rights of
Collateral Agent and the Lenders under this Agreement) to seek contribution,
indemnification or any other form of reimbursement from any other Borrower, or
any other Person now or hereafter primarily or secondarily liable for any of the
Obligations, for any payment made by Borrower with respect to the Obligations in
connection with this Agreement or otherwise and all rights that it might have to
benefit from, or to participate in, any security for the Obligations as a result
of any payment made by Borrower with respect to the Obligations in connection
with this Agreement or otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this Section shall be
null and void. If any payment is made to a Borrower in contravention of this
Section, such Borrower shall hold such payment in trust for Collateral Agent and
the Lenders and such payment shall be promptly delivered to Collateral Agent for
application to the Obligations, whether matured or unmatured.

 

13.     DEFINITIONS

 

13.1     Definitions. As used in this Agreement, the following terms have the
following meanings:

 

“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.

 

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

 

 
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“Affiliate” of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person’s senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person’s managers and members.

 

“Agreement” is defined in the preamble hereof.

 

“Algostim” is defined in the preamble hereof.

 

“Amortization Date” is, (i) with respect to the Term A Loans, (A) April 1, 2018,
if the Term B Loans are funded prior to the end of the Second Draw Period, or
(B) October 1, 2017, if the Term B Loans are not funded prior to the end of the
Second Draw Period, (ii) with respect to the Term B Loans, April 1, 2018, and
(iii) with respect to the Term C Loans, (A) April 1, 2018, if the Term B Loans
are funded prior to the end of the Second Draw Period, or (B) if the Term B
Loans are not funded prior to the end of the Second Draw Period, the first (1st)
Payment Date following the Funding Date of the Term C Loans.

 

“Annual Projections” is defined in Section 6.2(a)(iii).

 

“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering,
including Executive Order No. 13224 (effective September 24, 2001), the USA
PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the
laws administered by OFAC.

 

“Approved Fund” is any (i) investment company, fund, trust, securitization
vehicle or conduit that is (or will be) engaged in making, purchasing, holding
or otherwise investing in commercial loans and similar extensions of credit in
the ordinary course of its business or (ii) any Person (other than a natural
person) which temporarily warehouses loans for any Lender or any entity
described in the preceding clause (i) and that, with respect to each of the
preceding clauses (i) and (ii), is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) a Person (other than a natural person) or an
Affiliate of a Person (other than a natural person) that administers or manages
a Lender.

 

“Approved Lender” is defined in Section 12.1.

 

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

 

“Bank” is defined in the preamble hereof.

 

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

 

“Basic Rate” is (a) with respect to a Term Loan, the floating per annum rate of
interest (based on a year of three hundred sixty (360) days) equal to the
greater of (i) seven and sixty-five hundredths of one percent (7.65%) and
(ii) the sum of (A) the “prime rate” reported in the Wall Street Journal on the
date occurring on the last Business Day of the month that immediately precedes
the month in which the interest will accrue, plus (B) four and fifteen
hundredths of one percent (4.15%), and (b) with respect to a Revolving Advance,
the floating per annum rate of interest (based on a year of three hundred sixty
(360) days) equal to the greater of (i) six and ninety-five hundredths of one
percent (6.95%) and (ii) the sum of (A) the “prime rate” reported in the Wall
Street Journal on the date occurring on the last Business Day of the month that
immediately precedes the month in which the interest will accrue, plus (B) three
and forty-five hundredths of one percent (3.45%). Notwithstanding the foregoing,
the Basic Rate for the Term A Loans for the period from the Effective Date
through and including March 31, 2016 shall be seven and sixty-five hundredths of
one percent (7.65%).

 

 
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“Blocked Person” is any Person: (a) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (b) a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order No.
13224, (c) a Person with which any Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person
that commits, threatens or conspires to commit or supports “terrorism” as
defined in Executive Order No. 13224, or (e) a Person that is named a “specially
designated national” or “blocked person” on the most current list published by
OFAC or other similar list.

 

“Borrower” is defined in the preamble hereof.

 

“Borrower’s Books” are Borrower’s or any of its Subsidiaries’ books and records
including ledgers, federal, and state tax returns, records regarding Borrower’s
or its Subsidiaries’ assets or liabilities, the Collateral, business operations
or financial condition, and all computer programs or storage or any equipment
containing such information.

 

“Borrowing Base” is eighty percent (80%) of Eligible Accounts, as determined by
the Lenders from Borrower’s most recent Borrowing Base Certificate and
Transaction Report; provided, however, that the Lenders may decrease the
foregoing percentage based on the quality and dilution of Eligible Accounts as
determined by the Lenders in their good faith business judgment by initial and
ongoing periodic collateral field examinations; provided further, however, that
the Lenders may decrease the foregoing percentage in their good faith business
judgment based on events, conditions, contingencies, or risks which, as
determined by the Lenders, may adversely affect the Collateral or its value.

 

“Borrowing Base Certificate” is that certain certificate in the form attached
hereto as Exhibit E.

 

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

 

“Cash Collateral Account” is defined in Section 6.14(c).

 

“Cash Equivalents” are (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc., and (c) certificates of deposit
maturing no more than one (1) year after issue provided that the account in
which any such certificate of deposit is maintained is subject to a Control
Agreement in favor of Collateral Agent. For the avoidance of doubt, the direct
purchase by Borrower or any of its Subsidiaries of any Auction Rate Securities,
or purchasing participations in, or entering into any type of swap or other
derivative transaction, or otherwise holding or engaging in any ownership
interest in any type of Auction Rate Security by Borrower or any of its
Subsidiaries shall be conclusively determined by the Lenders as an ineligible
Cash Equivalent, and any such transaction shall expressly violate each other
provision of this Agreement governing Permitted Investments. Notwithstanding the
foregoing, Cash Equivalents does not include and Borrower, and each of its
Subsidiaries, are prohibited from purchasing, purchasing participations in,
entering into any type of swap or other equivalent derivative transaction other
than swaps permitted under clause (h) of the definition of “Permitted
Indebtedness”, or otherwise holding or engaging in any ownership interest in any
type of debt instrument, including, without limitation, any corporate or
municipal bonds with a long-term nominal maturity for which the interest rate is
reset through a dutch auction and more commonly referred to as an auction rate
security (each, an “Auction Rate Security”).

 

“Claims” are defined in Section 12.2.

 

“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of California; provided, that, to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Collateral Agent’s Lien on any Collateral is governed by the Uniform
Commercial Code in effect in a jurisdiction other than the State of California,
the term “Code” shall mean the Uniform Commercial Code as enacted and in effect
in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority, or remedies and for purposes
of definitions relating to such provisions.

 

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

 

“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account, or any other bank account maintained by Borrower or any Subsidiary at
any time.

 

“Collateral Agent” is Oxford, not in its individual capacity, but solely in its
capacity as agent on behalf of and for the benefit of the Lenders.

 

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

 

“Communication” is defined in Section 10.

 

“Compliance Certificate” is that certain certificate in the form attached hereto
as Exhibit C.

 

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (b) any
obligations for undrawn letters of credit for the account of that Person; and
(c) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but “Contingent Obligation”
does not include endorsements in the ordinary course of business. The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
any guarantee or other support arrangement.

 

“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower or any of its Subsidiaries maintains a Deposit
Account or the securities intermediary or commodity intermediary at which
Borrower or any of its Subsidiaries maintains a Securities Account or a
Commodity Account, Borrower and such Subsidiary, and Collateral Agent pursuant
to which Collateral Agent obtains control (within the meaning of the Code) for
the benefit of the Lenders over such Deposit Account, Securities Account, or
Commodity Account.

 

“Copyrights” are any and all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret.

 

“Credit Extension” is any Term Loan, any Revolving Advance or any other
extension of credit by Collateral Agent or Lenders for Borrower’s benefit.

 

“Default Rate” is defined in Section 2.4(b).

 

“Deferred Revenue” is all amounts received or invoiced in advance of performance
under contracts and not yet recognized as revenue.

 

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

 

“Designated Deposit Account” is Borrower’s deposit account, account number
*******___, maintained with Bank.

 

 
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“Disbursement Letter” is that certain form attached hereto as Exhibit B-1.

 

“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated
in Dollars, such amount, and (b) with respect to any amount denominated in a
Foreign Currency, the equivalent amount therefor in Dollars as determined by
Bank at such time on the basis of the then-prevailing rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.

 

“Dollars,” “dollars” and “$” each mean lawful money of the United States.

 

“Effective Date” is defined in the preamble of this Agreement.

 

“Eligible Accounts” means Accounts which arise in the ordinary course of
Borrower’s business that meet all Borrower’s representations and warranties in
Section 5.11. Collateral Agent and the Lenders reserve the right at any time
after the Effective Date to adjust any of the criteria set forth below and to
establish new criteria in their good faith business judgment. Unless Collateral
Agent and Required Lenders otherwise agree in writing, Eligible Accounts shall
not include:

 

(a)     Accounts for which the Account Debtor is Borrower’s Affiliate, officer,
employee, or agent;

 

(b)     Accounts that the Account Debtor has not paid within one hundred twenty
(120) days of invoice date regardless of invoice payment period terms;

 

(c)     Accounts with credit balances over one hundred twenty (120) days from
invoice date;

 

(d)     Accounts owing from an Account Debtor, in which fifty percent (50%) or
more of the Accounts have not been paid within one hundred twenty (120) days of
invoice date;

 

(e)     Accounts owing from an Account Debtor which does not have its principal
place of business in the United States unless (i) covered in full by credit
insurance satisfactory to the Lenders, less any deductible, or (ii) otherwise
approved in writing by Collateral Agent and Required Lenders in their sole
discretion on a case by case basis;

 

(f)     Accounts billed and/or payable outside of the United States (sometimes
called foreign invoiced accounts);

 

(g)     Accounts owing from an Account Debtor to the extent that Borrower is
indebted or obligated in any manner to the Account Debtor (as creditor, lessor,
supplier or otherwise sometimes called “contra” accounts, accounts payable,
customer deposits or credit accounts).

 

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

 

(i)     Accounts for demonstration or promotional equipment, or in which goods
are consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on
approval”, or other terms if Account Debtor’s payment may be conditional;

 

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

 

(k)     Accounts subject to contractual arrangements between Borrower and an
Account Debtor where payments shall be scheduled or due according to completion
or fulfillment requirements where the Account Debtor has a right of offset for
damages suffered as a result of Borrower’s failure to perform in accordance with
the contract (sometimes called contracts accounts receivable, progress billings,
milestone billings, or fulfillment contracts);

 

 
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(l)     Accounts owing from an Account Debtor the amount of which may be subject
to withholding based on the Account Debtor’s satisfaction of Borrower’s complete
performance (but only to the extent of the amount withheld; sometimes called
retainage billings);

 

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

 

(n)     Accounts owing from an Account Debtor that has been invoiced for goods
that have not been shipped to the Account Debtor unless Collateral Agent,
Borrower, and the Account Debtor have entered into an agreement acceptable to
Collateral Agent and Required Lenders in their sole discretion wherein the
Account Debtor acknowledges that (i) it has title to and has ownership of the
goods wherever located, (ii) a bona fide sale of the goods has occurred, and
(iii) it owes payment for such goods in accordance with invoices from Borrower
(sometimes called “bill and hold” accounts);

 

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

 

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

 

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

 

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

 

(s)     Accounts in which the Account Debtor disputes liability or makes any
claim (but only up to the disputed or claimed amount), or if the Account Debtor
is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of
business;

 

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

 

(u)     Accounts owing from an Account Debtor, whose total obligations to
Borrower exceed twenty-five percent (25%) of all Accounts, for the amounts that
exceed that percentage, unless otherwise approved in writing by Collateral Agent
and Required Lenders in their sole discretion on a case by case basis;

 

(v)     Accounts owing from an Account Debtor that is an individual; and

 

(w)     Accounts for which Collateral Agent and/or Required Lenders in their
good faith business judgment determines collection to be doubtful, including,
without limitation, accounts represented by “refreshed” or “recycled” invoices.

 

“Eligible Assignee” is (i) a Lender, (ii) an Affiliate of a Lender, (iii) an
Approved Fund and (iv) any commercial bank, savings and loan association or
savings bank or any other entity which is an “accredited investor” (as defined
in Regulation D under the Securities Act of 1933, as amended) and which extends
credit or buys loans as one of its businesses, including insurance companies,
mutual funds, lease financing companies and commercial finance companies, in
each case, which either (A) has a rating of BBB or higher from Standard & Poor’s
Rating Group and a rating of Baa2 or higher from Moody’s Investors Service, Inc.
at the date that it becomes a Lender or (B) has total assets in excess of Five
Billion Dollars ($5,000,000,000.00), and in each case of clauses (i) through
(iv), which, through its applicable lending office, is capable of lending to
Borrower without the imposition of any withholding or similar taxes; provided
that notwithstanding the foregoing, “Eligible Assignee” shall not include,
unless an Event of Default has occurred and is continuing, (i) Borrower or any
of Borrower’s Affiliates or Subsidiaries or (ii) a direct competitor of Borrower
or a vulture hedge fund, each as determined by Collateral Agent. Notwithstanding
the foregoing, (x) in connection with assignments by a Lender due to a forced
divestiture at the request of any regulatory agency, the restrictions set forth
herein shall not apply and Eligible Assignee shall mean any Person or party and
(y) in connection with a Lender’s own financing or securitization transactions,
the restrictions set forth herein shall not apply and Eligible Assignee shall
mean any Person or party providing such financing or formed to undertake such
securitization transaction and any transferee of such Person or party upon the
occurrence of a default, event of default or similar occurrence with respect to
such financing or securitization transaction; provided that no such sale,
transfer, pledge or assignment under this clause (y) shall release such Lender
from any of its obligations hereunder or substitute any such Person or party for
such Lender as a party hereto until Collateral Agent shall have received and
accepted an effective assignment agreement from such Person or party in form
satisfactory to Collateral Agent executed, delivered and fully completed by the
applicable parties thereto, and shall have received such other information
regarding such Eligible Assignee as Collateral Agent reasonably shall require.

 

 
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“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

 

“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and
its regulations.

 

“Event of Default” is defined in Section 8.

 

“Final Payment” is a payment (in addition to and not a substitution for the
regular monthly payments of principal plus accrued interest) due on the earliest
to occur of (a) the Maturity Date, or (b) the acceleration of any Term Loan, or
(c) the prepayment of a Term Loan pursuant to Section 2.2(c) or (d), equal to
the original principal amount of such Term Loan multiplied by the Final Payment
Percentage, payable to Lenders in accordance with their respective Pro Rata
Shares.

 

“Final Payment Percentage” is seven and three-quarters percent (7.75%).

 

“First Tranche Milestone” is the Lenders receipt of evidence satisfactory to the
Lenders that Borrower (a) is duly listed on the NASDAQ Capital Market or the
NASDAQ Global Market and (b) has received net cash proceeds of at least
Seventy-Five Million Dollars ($75,000,000) pursuant to terms and conditions,
satisfactory to the Lenders.

 

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

 

“Foreign Subsidiary” is a Subsidiary that is not an entity organized under the
laws of the United States or any territory thereof.

 

“Funding Date” is any date on which a Credit Extension is made to or on account
of Borrower which shall be a Business Day.

 

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

 

“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession in the
United States, which are applicable to the circumstances as of the date of
determination.

 

“General Intangibles” are all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
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.

 

 
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“Governmental Approval” is any consent, authorization, approval, order, license,
franchise, permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any Governmental
Authority.

 

“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.

 

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

 

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

 

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and
(d) Contingent Obligations.

 

“Indemnified Person” is defined in Section 12.2.

 

“Initial Audit” is the Lenders’ inspection of Borrower’s Accounts, the
Collateral, and Borrower’s Books.

 

“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

 

“Insolvent” means not Solvent.

 

“Intellectual Property” means all of Borrower’s or any Subsidiary’s right, title
and interest in and to the following:

 

(a)     its Copyrights, Trademarks and Patents;

 

(b)     any and all trade secrets and trade secret rights, including, without
limitation, any rights to unpatented inventions, know-how, operating manuals;

 

(c)     any and all source code;

 

(d)     any and all design rights which may be available to Borrower;

 

(e)     any and all claims for damages by way of past, present and future
infringement of any of the foregoing, with the right, but not the obligation, to
sue for and collect such damages for said use or infringement of the
Intellectual Property rights identified above; and

 

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

 

“Inventory” is all “inventory” as defined in the Code in effect on the 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 any Person’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

 

 
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“Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance, payment
or capital contribution to any Person.

 

“Key Person” is each of Borrower’s (i) President and Chief Executive Officer,
who is Scott F. Drees as of the Effective Date, and (ii) Chief Financial
Officer, who is Walter F. Berger as of the Effective Date.

 

“Lender” is any one of the Lenders.

 

“Lenders” are the Persons identified on Schedule 1.1 hereto and each assignee
that becomes a party to this Agreement pursuant to Section 12.1.

 

“Lenders’ Expenses” are all audit fees and expenses, costs, and expenses
(including reasonable and invoiced attorneys’ fees and expenses, as well as
appraisal fees, fees incurred on account of lien searches, inspection fees, and
filing fees) for preparing, amending, negotiating, administering, defending and
enforcing the Loan Documents (including, without limitation, those incurred in
connection with appeals or Insolvency Proceedings) or otherwise incurred by
Collateral Agent and/or the Lenders in connection with the Loan Documents.

 

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

 

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest, or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.

 

“Loan Documents” are, collectively, this Agreement, the Warrants, the Mortgage,
the Perfection Certificates, each Compliance Certificate, each Disbursement
Letter, each Loan Payment/Advance Request Form, the Post Closing Letter, and any
Bank Services Agreement, any subordination agreements, any note, or notes or
guaranties executed by Borrower or any other Person, and any other present or
future agreement entered into by Borrower, any Guarantor or any other Person for
the benefit of the Lenders and Collateral Agent in connection with this
Agreement; all as amended, restated, or otherwise modified.

 

“Loan Payment/Advance Request Form” is that certain form attached hereto as
Exhibit B-2.

 

“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Collateral Agent’s Lien in the Collateral or in the value of such
Collateral; (b) a material adverse change in the business, operations or
condition (financial or otherwise) of Borrower or any Subsidiary; (c) a material
impairment in the perfection or priority of Collateral Agent’s Lien in the
Mortgaged Premises; or (d) a material impairment of the prospect of repayment of
any portion of the Obligations.

 

“Maturity Date” is September 1, 2020.

 

“Mortgage” is that certain first lien Mortgage and Absolute Assignment of Leases
and Rents in respect of the Mortgaged Premises in favor of Collateral Agent to
secure the Obligations.

 

“Mortgaged Premises” is the real property owned by Nuvectra located at 10675
Naples St. NE, Blaine, Minnesota 55449.

 

“Non-Use Fees” means (i) if the Second Tranche Milestone Event occurs but the
Term B Loans are not drawn prior to the end of the Second Draw Period, a fully
earned, non-refundable non-use fee equal to Two Hundred Fifty Thousand Dollars
($250,000.00), which non-use fee shall be due and payable on the last day of the
Second Draw Period; and (ii) if the Third Tranche Milestone Event occurs but the
Term C Loans are not drawn prior to the end of the Third Draw Period, a fully
earned, non-refundable non-use fee equal to Two Hundred Fifty Thousand Dollars
($250,000.00), which non-use fee shall be due and payable on the last day of the
Third Draw Period.

 

 
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“NeuroNexus” is defined in the preamble hereof.

 

“Nuvectra” is defined in the preamble hereof.

 

“Obligations” are all of Borrower’s obligations to pay when due any debts,
principal, interest, Lenders’ Expenses, the Prepayment Fee, the Final Payment,
the Non-Use Fees, the facility fees and other amounts Borrower owes the Lenders
now or later, in connection with, related to, following, or arising from, out of
or under, this Agreement or, the other Loan Documents (other than the Warrants),
or otherwise, including, without limitation, all obligations relating to letters
of credit (including reimbursement obligations for drawn and undrawn letters of
credit), cash management services, and foreign exchange contracts, if any, and
including interest accruing after Insolvency Proceedings begin (whether or not
allowed) and debts, liabilities, or obligations of Borrower assigned to the
Lenders and/or Collateral Agent, and the performance of Borrower’s duties under
the Loan Documents (other than the Warrants).

 

“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.

 

“OFAC Lists” are, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed.
Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other
restricted Persons maintained pursuant to any of the rules and regulations of
OFAC or pursuant to any other applicable Executive Orders.

 

“Operating Documents” are, for any Person, such Person’s formation documents, as
certified by the Secretary of State (or equivalent agency) of such Person’s
jurisdiction of organization on a date that is no earlier than thirty (30) days
prior to the Effective Date, and, (a) if such Person is a corporation, its
bylaws in current form, (b) if such Person is a limited liability company, its
limited liability company agreement (or similar agreement), and (c) if such
Person is a partnership, its partnership agreement (or similar agreement), each
of the foregoing with all current amendments or modifications thereto.

 

“Overadvance” is defined in Section 2.3(c).

 

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

 

“Payment Date” is the first (1st) calendar day of each calendar month,
commencing on May 1, 2016.

 

“PelviStim” is defined in the preamble hereof.

 

“Perfection Certificate” and “Perfection Certificates” is defined in
Section 5.1.

 

“Permitted Indebtedness” is:

 

(a)     Borrower’s Indebtedness to the Lenders and Collateral Agent under this
Agreement and the other Loan Documents;

 

(b)     Indebtedness existing on the Effective Date and disclosed on the
Perfection Certificate(s);

 

(c)     Subordinated Debt;

 

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

 

(e)     Indebtedness consisting of capitalized lease obligations and purchase
money Indebtedness, in each case incurred by Borrower or any of its Subsidiaries
to finance the acquisition, repair, improvement or construction of fixed or
capital assets of such person, provided that (i) the aggregate outstanding
principal amount of all such Indebtedness does not exceed Seven Hundred Fifty
Thousand Dollars ($750,000.00) at any time and (ii) the principal amount of such
Indebtedness does not exceed the lower of the cost or fair market value of the
property so acquired or built or of such repairs or improvements financed with
such Indebtedness (each measured at the time of such acquisition, repair,
improvement or construction is made);

 

 
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(f)     Indebtedness of any Borrower to any other Borrower;

 

(g)     Indebtedness in respect of performance bonds, bid bonds, appeal bonds,
surety bonds and similar obligations in an aggregate amount not to exceed Two
Hundred Fifty Thousand Dollars ($250,000.00) at any time, in each case, incurred
in the ordinary course of business and not representing an obligation for
borrowed money;

 

(h)     Indebtedness in respect of swaps entered into in the ordinary course of
business for purposes of hedging interest rate or foreign exchange risk and not
for speculative purposes; provided that the aggregate outstanding principal
amount of all such Indebtedness does not exceed Seven Hundred Fifty Thousand
Dollars ($750,000.00) at any time;

 

(i)     Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of Borrower’s business; and

 

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

 

“Permitted Investments” are:

 

(a)     Investments disclosed on the Perfection Certificate(s) and existing on
the Effective Date;

 

(b)     (i) Investments consisting of cash and Cash Equivalents, and (ii) any
other Investments permitted by Borrower’s investment policy, as amended from
time to time, provided that such investment policy (and any such amendment
thereto) has been approved in writing by Collateral Agent;

 

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

 

(d)     Investments consisting of deposit accounts in which Collateral Agent has
a perfected security interest;

 

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

 

(f)     Investments consisting of (i) travel advances and employee relocation
loans and other employee loans and advances in the ordinary course of business,
and (ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of Directors; not to
exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate for (i) and
(ii) in any fiscal year;

 

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

 

(h)     Investments consisting of swaps permitted under clause (h) of the
definition of “Permitted Indebtedness”;

 

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

 

 
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(j)     non-cash Investments in joint ventures or strategic alliances in the
ordinary course of Borrower’s business consisting of the non-exclusive licensing
of technology, the development of technology or the providing of technical
support.

 

“Permitted Licenses” are (A) licenses of over-the-counter software that is
commercially available to the public, (B) licenses of technology to Aleva
Neurotherapeutics, S.A. in connection with that certain Development Agreement
dated as of February 1, 2016, and (C) non-exclusive and exclusive licenses for
the use of the Intellectual Property of Borrower or any of its Subsidiaries
entered into in the ordinary course of business, provided, that, with respect to
each such license described in clause (C), (i) no Event of Default has occurred
or is continuing at the time of such license; (ii) the license constitutes an
arms-length transaction, the terms of which, on their face, do not provide for a
sale or assignment of any Intellectual Property and do not restrict the ability
of Borrower or any of its Subsidiaries, as applicable, to pledge, grant a
security interest in or lien on, or assign or otherwise Transfer any
Intellectual Property; (iii) in the case of any exclusive license, (x) Borrower
delivers ten (10) days’ prior written notice and a brief summary of the terms of
the proposed license to Collateral Agent and the Lenders and delivers to
Collateral Agent and the Lenders copies of the final executed licensing
documents in connection with the exclusive license promptly upon consummation
thereof, and (y) any such license could not result in a legal transfer of title
of the licensed property but may be exclusive in respects other than territory
and may be exclusive as to territory only as to discrete geographical areas
outside of the United States; and (iv) all upfront payments, royalties,
milestone payments or other proceeds arising from the licensing agreement that
are payable to Borrower or any of its Subsidiaries are paid to a Deposit Account
that is governed by a Control Agreement.

 

“Permitted Liens” are:

 

(a)     Liens existing on the Effective Date and disclosed on the Perfection
Certificates or arising under this Agreement and the other Loan Documents;

 

(b)     Liens for taxes, fees, assessments or other government charges or
levies, either (i) not due and payable or (ii) being contested in good faith and
for which Borrower maintains adequate reserves on its Books, provided that no
notice of any such Lien has been filed or recorded under the Internal Revenue
Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

 

(c)     liens securing Indebtedness permitted under clause (e) of the definition
of “Permitted Indebtedness,” provided that (i) such liens exist prior to the
acquisition of, or attach substantially simultaneous with, or within twenty
(20) days after the, acquisition, lease, repair, improvement or construction of,
such property financed or leased by such Indebtedness and (ii) such liens do not
extend to any property of Borrower other than the property (and proceeds
thereof) acquired, leased or built, or the improvements or repairs, financed by
such Indebtedness;

 

(d)     Liens of carriers, warehousemen, suppliers, or other Persons that are
possessory in nature arising in the ordinary course of business so long as such
Liens attach only to Inventory, securing liabilities in the aggregate amount not
to exceed Seven Hundred Fifty Thousand Dollars ($750,000.00), and which are not
delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;

 

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

 

(f)     Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;

 

(g)     precautionary UCC filings (or similar filings under applicable law)
regarding operating leases;

 

 
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(h)     leases or subleases of real property granted in the ordinary course of
Borrower’s business (or, if referring to another Person, in the ordinary course
of such Person’s business), and leases, subleases, non-exclusive licenses or
sublicenses of personal property (other than Intellectual Property) granted in
the ordinary course of Borrower’s business (or, if referring to another Person,
in the ordinary course of such Person’s business), if the leases, subleases,
licenses and sublicenses do not prohibit granting Collateral Agent or any Lender
a security interest therein;

 

(i)     banker’s liens, rights of setoff and Liens in favor of financial
institutions incurred in the ordinary course of business arising in connection
with Borrower’s deposit accounts or securities accounts held at such
institutions solely to secure payment of fees and similar costs and expenses and
provided such accounts are maintained in compliance with Section 6.6(b) hereof;

 

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

 

(k)     Liens consisting of Permitted Licenses.

 

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

 

“Post Closing Letter” is that certain Post Closing Letter dated as of the
Effective Date by and between Collateral Agent and Borrower.

 

“Prepayment Fee” is, with respect to any Term Loan subject to prepayment prior
to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration
or otherwise, an additional fee payable to the Lenders in amount equal to:

 

(i)     for a prepayment made on or after the Funding Date of such Term Loan
through and including the first anniversary of the Funding Date of such Term
Loan, three percent (3.00%) of the principal amount of such Term Loan prepaid;

 

(ii)     for a prepayment made after the first anniversary of the Funding Date
of such Term Loan through and including the second anniversary of the Funding
Date of such Term Loan, two percent (2.00%) of the principal amount of the Term
Loans prepaid; and

 

(iii)     for a prepayment made after the second anniversary of the Funding Date
of such Term Loan and prior to the Maturity Date, one percent (1.00%) of the
principal amount of the Term Loans prepaid.

 

“Pro Rata Share” is, as of any date of determination, with respect to each
Lender, a percentage (expressed as a decimal, rounded to the ninth decimal
place) determined by dividing the outstanding principal amount of Term Loans
held by such Lender by the aggregate outstanding principal amount of all Term
Loans.

 

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

 

“Required Lenders” means (i) for so long as all of the Persons that are Lenders
on the Effective Date (each an “Original Lender”) have not assigned or
transferred any of their interests in their Term Loans or their Revolving Line
Commitment, Lenders holding one hundred percent (100%) of the aggregate
outstanding principal balance of the Term Loans and the Revolving Line
Commitment, or (ii) at any time from and after any Original Lender has assigned
or transferred any interest in its Term Loans or its Revolving Line Commitment,
Lenders holding at least sixty six percent (66%) of the aggregate outstanding
principal balance of the Term Loans and the Revolving Line Commitment and, in
respect of this clause (ii), (A) each Original Lender that has not assigned or
transferred any portion of its Term Loans or Revolving Line Commitment, (B) each
assignee or transferee of an Original Lender’s interest in the Term Loans or
Revolving Line Commitment, but only to the extent that such assignee or
transferee is an Affiliate or Approved Fund of such Original Lender, and (C) any
Person providing financing to any Person described in clauses (A) and (B) above;
provided, however, that this clause (C) shall only apply upon the occurrence of
a default, event of default or similar occurrence with respect to such
financing.

 

 
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“Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

 

“Reserves” means, as of any date of determination, such amounts as Collateral
Agent may from time to time establish and revise in its good faith business
judgment, reducing the amount of Advances and other financial accommodations
which would otherwise be available to Borrower (a) to reflect events,
conditions, contingencies or risks which, as determined by Collateral Agent 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 business, operations or condition (financial or otherwise) of Borrower or
any Guarantor, or (iii) the security interests and other rights of Collateral
Agent in the Collateral (including the enforceability, perfection and priority
thereof); or (b) to reflect Collateral Agent's reasonable belief that any
collateral report or financial information furnished by or on behalf of Borrower
or any Guarantor to the Lenders is or may have been incomplete, inaccurate or
misleading in any material respect; or (c) in respect of any state of facts
which Collateral Agent determines constitutes an Event of Default or may, with
notice or passage of time or both, constitute an Event of Default.

 

“Responsible Officer” is any of the President, Chief Executive Officer, Chief
Financial Officer, Corporate Controller, General Counsel or Corporate Secretary
of Borrower acting alone.

 

“Revolving Advance” or “Revolving Advances” means an advance (or advances) under
the Revolving Line.

 

“Revolving Line” means a Revolving Advance or Revolving Advances of up to Five
Million Dollars ($5,000,000.00).

 

“Revolving Line Commitment” is, for any Lender, the obligation of such Lender to
make a Revolving Advance, up to the principal amount shown on Schedule 1.1.
“Revolving Line Commitments” means the aggregate amount of such commitments of
all Lenders.

 

“Revolving Line Commitment Percentage” is set forth on Schedule 1.1, as amended
from time to time.

 

“Revolving Line Maturity Date” is the date that is two (2) years after the
Effective Date.

 

“SEC” means the Securities and Exchange Commission.

 

“Second Draw Period” is the period (a) commencing on the later of (i) December
31, 2016 and (ii) the date of the occurrence of the Second Tranche Milestone and
(b) ending on the earlier of (i) June 30, 2017, (ii) the date that is sixty (60)
days after the occurrence of the Second Tranche Milestone and (iii) the
occurrence of an Event of Default; provided, however, that the Second Draw
Period shall not commence if on the date of the occurrence of the Second Tranche
Milestone an Event of Default has occurred and is continuing.

 

“Second Tranche Milestone” is the Lenders receipt, at any time during the period
from December 31, 2016 through June 30, 2017, of evidence satisfactory to the
Lenders that Borrower has achieved trailing six (6) month revenues of at least
Thirteen Million Five Hundred Thousand Dollars ($13,500,000.00) for the six (6)
month period most recently ended.

 

“Secured Promissory Note” is defined in Section 2.5.

 

 
42

--------------------------------------------------------------------------------

 

 

“Secured Promissory Note Record” is a record maintained by each Lender with
respect to the outstanding Obligations owed by Borrower to Lender and credits
made thereto.

 

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

 

“Shares” is one hundred percent (100%) of the issued and outstanding capital
stock, membership units or other securities owned or held of record by Borrower
or Borrower’s Subsidiary, in any Subsidiary; provided that, in the event
Borrower, demonstrates to Collateral Agent’s reasonable satisfaction, that a
pledge of more than sixty five percent (65%) of the Shares of such Subsidiary
which is a Foreign Subsidiary, creates a present and existing adverse tax
consequence to Borrower under the U.S. Internal Revenue Code, “Shares” shall
mean sixty-five percent (65%) of the issued and outstanding capital stock,
membership units or other securities owned or held of record by Borrower or its
Subsidiary in such Foreign Subsidiary.

 

“Solvent” is, with respect to any Person: the fair salable value of such
Person’s consolidated assets (including goodwill minus disposition costs)
exceeds the fair value of such Person’s liabilities; such Person is not left
with unreasonably small capital after the transactions in this Agreement; and
such Person is able to pay its debts (including trade debts) as they mature.

 

“Subordinated Debt” is indebtedness incurred by Borrower or any of its
Subsidiaries subordinated to all Indebtedness of Borrower and/or its
Subsidiaries to the Lenders (pursuant to a subordination, intercreditor, or
other similar agreement in form and substance satisfactory to Collateral Agent
and the Lenders entered into between Collateral Agent, Borrower, and/or any of
its Subsidiaries, and the other creditor), on terms acceptable to Collateral
Agent and the Lenders.

 

“Subsidiary” is, with respect to any Person, any Person of which more than fifty
percent (50%) of the voting stock or other equity interests (in the case of
Persons other than corporations) is owned or controlled, directly or indirectly,
by such Person or through one or more intermediaries.

 

“Term Loan” is defined in Section 2.2(a)(iii) hereof.

 

“Term A Loan” is defined in Section 2.2(a)(i) hereof.

 

“Term B Loan” is defined in Section 2.2(a)(ii) hereof.

 

“Term C Loan” is defined in Section 2.2(a)(iii) hereof.

 

“Term Loan Commitment” is, for any Lender, the obligation of such Lender to make
a Term Loan, up to the principal amount shown on Schedule 1.1. “Term Loan
Commitments” means the aggregate amount of such commitments of all Lenders.

 

“Term Loan Commitment Percentage” is set forth in Schedule 1.1, as amended from
time to time.

 

“Third Draw Period” is the period (a) commencing on the later of (i) June 30,
2017 and (ii) the date of the occurrence of the Third Tranche Milestone and (b)
ending on the earlier of (i) December 31, 2017, (ii) the date that is sixty (60)
days after the occurrence of the Third Tranche Milestone and (iii) the
occurrence of an Event of Default; provided, however, that the Third Draw Period
shall not commence if on the date of the occurrence of the Third Tranche
Milestone an Event of Default has occurred and is continuing.

 

“Third Tranche Milestone” is the Lenders receipt, at any time during the period
from June 30, 2017 through December 31, 2017, of evidence satisfactory to the
Lenders that Borrower has achieved trailing six (6) month revenues of at least
Twenty Million Dollars ($20,000,000.00) for the six (6) month period most
recently ended.

 

“Title Company” is Chicago Title Insurance Company.

 

 
43

--------------------------------------------------------------------------------

 

 

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

 

“Transaction Report” is that certain report of transactions and schedule of
collections in the form attached hereto as Exhibit F.

 

“Transfer” is defined in Section 7.1.

 

“Warrants” are those certain Warrants to Purchase Stock dated as of the
Effective Date, or any date thereafter, issued by Nuvectra in favor of each
Lender or such Lender’s Affiliates.

 

 

[Balance of Page Intentionally Left Blank]

 

 
44

--------------------------------------------------------------------------------

 

 

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

 

BORROWER:

     

NUVECTRA CORPORATION

ALGOSTIM, LLC

       

By

/s/ Scott Drees  

By

/s/ Scott Drees   Name: Scott Drees   Name: Scott Drees   Title: CEO & President
  Title: President          

PELVISTIM LLC

NEURONEXUS TECHNOLOGIES, INC.

       

By

/s/ Scott Drees  

By

/s/ Scott Drees   Name: Scott Drees   Name: Scott Drees   Title: President  
Title: President          

COLLATERAL AGENT AND LENDER:

     

OXFORD FINANCE LLC

       

By

/s/ Mark Davis    

Name:

Mark Davis    

Title:

Vice President of Finance, Secretary & Treasurer            

LENDER:

     

SILICON VALLEY BANK

       

By

/s/ R. Michael White    

Name:

R. Michael White    

Title:

Managing Director    

 

 

[Signature Page to Loan and Security Agreement] 

 

--------------------------------------------------------------------------------

 

 

SCHEDULE 1.1

Lenders and Commitments

 

 Term A Loans

Lender

Term A Loan Commitment

Term A Loan Commitment

Percentage

OXFORD FINANCE LLC

$7,500,000.00

50.00%

SILICON VALLEY BANK

$7,500,000.00

50.00%

TOTAL

$15,000,000.00

100.00%

 

 Term B Loans

Lender

Term B Loan Commitment

Term B Loan Commitment

Percentage

OXFORD FINANCE LLC

$6,250,000.00

50.00%

SILICON VALLEY BANK

$6,250,000.00

50.00%

TOTAL

$12,500,000.00

100.00%

 

 Term C Loans

Lender

Term C Loan Commitment

Term C Loan Commitment

Percentage

OXFORD FINANCE LLC

$6,250,000.00

50.00%

SILICON VALLEY BANK

$6,250,000.00

50.00%

TOTAL

$12,500,000.00

100.00%

 

 Aggregate (all Term Loans)

Lender

Term Loan Commitment

Term Loan Commitment

Percentage

OXFORD FINANCE LLC

$20,000,000.00

50.00%

SILICON VALLEY BANK

$20,000,000.00

50.00%

TOTAL

$40,000,000.00

100.00%

 

 Revolving Line

Lender

Revolving Line Commitment

Revolving Line Commitment

Percentage

OXFORD FINANCE LLC

$2,500,000.00

50.00%

SILICON VALLEY BANK

$2,500,000.00

50.00%

TOTAL

$5,000,000.00

100.00%

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT A

Description of Collateral

 

The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles (except as noted below), commercial
tort claims, documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, deposit accounts and other
Collateral Accounts, all certificates of deposit, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

 

All Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding the foregoing, the Collateral does not include any Intellectual
Property; provided, however, the Collateral shall include all Accounts and all
proceeds of Intellectual Property. If a judicial authority (including a U.S.
Bankruptcy Court) would hold that a security interest in the underlying
Intellectual Property is necessary to have a security interest in such Accounts
and such property that are proceeds of Intellectual Property, then the
Collateral shall automatically, and effective as of the Effective Date, include
the Intellectual Property to the extent necessary to permit perfection of
Collateral Agent’s security interest in such Accounts and such other property of
Borrower that are proceeds of the Intellectual Property.

 

Pursuant to the terms of a certain negative pledge arrangement with Collateral
Agent and the Lenders, Borrower has agreed not to encumber any of its
Intellectual Property.

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT B-1

Form of Disbursement Letter

 

[see attached]

 

 
 

--------------------------------------------------------------------------------

 

 

DISBURSEMENT LETTER

March __, 2016

 

The undersigned, being the duly elected and acting                 of NUVECTRA
CORPORATION, a Delaware corporation (“Nuvectra”), on behalf of Nuvectra and each
of ALGOSTIM, LLC, a Delaware limited liability company, PelviStim LLC, a
Delaware limited liability company, and NeuroNexus Technologies, Inc., a
Michigan corporation, each with offices located at 5830 Granite Parkway, Suite
1100, Plano, Texas 75024 (individually and collectively, jointly and severally,
“Borrower”), does hereby certify to OXFORD FINANCE LLC (“Oxford” and “Lender”),
as collateral agent (the “Collateral Agent”) in connection with that certain
Loan and Security Agreement dated as of March __, 2016, by and among Borrower,
Collateral Agent and the Lenders from time to time party thereto (the “Loan
Agreement”; with other capitalized terms used below having the meanings ascribed
thereto in the Loan Agreement) that:

 

1.     The representations and warranties made by Borrower in Section 5 of the
Loan Agreement and in the other Loan Documents are true and correct in all
material respects as of the date hereof.

 

2.     No event or condition has occurred that would constitute an Event of
Default under the Loan Agreement or any other Loan Document.

 

3.     Borrower is in compliance with the covenants and requirements contained
in Sections 4, 6 and 7 of the Loan Agreement.

 

4.     All conditions referred to in Section 3 of the Loan Agreement to the
making of a Term Loan to be made on or about the date hereof have been satisfied
or waived by Collateral Agent.

 

5.     No Material Adverse Change has occurred.

 

6.     The undersigned is a Responsible Officer.

 

[7.     With respect to the Term [B][C] Loans, the [Second][Third] Tranche
Milestone Event occurred on or prior to the date hereof (but not more than sixty
(60) days prior to the date hereof).]

 

 

[Balance of Page Intentionally Left Blank]

 

 
 

--------------------------------------------------------------------------------

 

 

[7][8].     The proceeds of the Term [A][B][C] Loan shall be disbursed as
follows:

 

 

Disbursement from Oxford:

   

Loan Amount

$_______________

 

Plus:

   

[--Deposit Received

$60,000.00]

       

Less:

   

[--Facility Fee

($_________)]

 

[--Interim Interest

($_________)]

 

--Lender’s Legal Fees

($_________)*--1

       

Net Proceeds due from Oxford:

$_______________

       

Disbursement from SVB:

   

Loan Amount

$_______________

       

Less:

   

[--Facility Fee

($_________)]

 

[--Interim Interest

($_________)]

       

Net Proceeds due from SVB:

$_______________

       

TOTAL TERM [A][B][C] LOAN NET PROCEEDS FROM

LENDERS

$_______________

 

[8][9].     The Term [A][B][C] Loans shall amortize in accordance with the
Amortization Table attached hereto [as Exhibits A-1 and A-2, as applicable].

 

[9][10].     The aggregate net proceeds of the Term [A][B][C] Loans shall be
transferred to the Designated Deposit Account as follows:

 

Account Name:

NUVECTRA CORPORATION

Bank Name:

Silicon Valley Bank

Bank Address:

3003 Tasman Drive
Santa Clara, California 95054

Account Number:

____________________________________

ABA Number:

121140399

 

 

[Balance of Page Intentionally Left Blank]

 

 

--------------------------------------------------------------------------------

* Legal fees and costs are through the Effective Date. Post-closing legal fees
and costs, payable after the Effective Date, to be invoiced and paid
post-closing.

 

 
 

--------------------------------------------------------------------------------

 

 

Dated as of the date first set forth above.

 

BORROWER:

         

NUVECTRA CORPORATION, on behalf of itself and all other Borrowers

               

By 
                                                                                       

   

Name:                                                                                   

   

Title:                                                                                     

               

COLLATERAL AGENT AND LENDER:

         

OXFORD FINANCE LLC

               

By:                                                                                        

   

Name:                                                                                   

   

Title:                                                                                     

         

LENDER:

   

SILICON VALLEY BANK

               

By:
                                                                                       

   

Name:                                                                                   

   

Title:                                                                                     

         

 

 

 

[Signature Page to Disbursement Letter] 

 

 
 

--------------------------------------------------------------------------------

 

 

AMORTIZATION TABLE
(Term [A][B][C] Loan)

 

[see attached]

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT B-2

Loan Payment/Advance Request Form

 

Deadline for same day processing is Noon Pacific Time*

Fax To: (858) 622-1424

 Date: _____________________

 

Loan Payment:

NUVECTRA CORPORATION, ALGOSTIM, LLC, PELVISTIM LLC and NEURONEXUS TECHNOLOGIES,
INC.

 

From Account #________________________________           To Account
#__________________________________________________

       (Deposit Account
#)                                                                                                                   
(Loan Account #)

Principal $____________________________________             and/or Interest
$________________________________________________

 

Authorized
Signature:                                                                                             Phone
Number:                                                                                                 

Print
Name/Title:                                                                      
   

 

 

Loan Advance:

 

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

 

From Account #________________________________            To Account
#__________________________________________________

          (Loan Account
#)                                                                         
 (Deposit Account #)

 

Amount of Advance $___________________________

 

All Borrower’s representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
request for an advance; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such date:

 

Authorized
Signature:                                                                                             Phone
Number:                                                                                                 

Print
Name/Title:                                                                          

 

Outgoing Wire Request:

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

Deadline for same day processing is noon, Pacific Time

 

Beneficiary Name: _____________________________                         Amount
of Wire: $                                                           
             

Beneficiary Bank: ______________________________                        Account
Number:                                                           
              

City and State:                                 
                                               

 

Beneficiary Bank Transit (ABA) #:                                           
                     Beneficiary Bank Code (Swift, Sort, Chip, etc.):
                       

                                                                                                                                        
    (For International Wire Only)

Intermediary
Bank:                                                                                           
Transit (ABA) #:
                                                                           

For Further Credit
to:                                                                                                                                                                           
              

 

Special Instruction:

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

 

Authorized Signature: ___________________________          2nd Signature (if
required): _______________________________________

Print Name/Title: ______________________________            Print Name/Title:
______________________________________________

Telephone
#:                                                                                      
  Telephone #:                                                        

 

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT C

Compliance Certificate

 

TO:

OXFORD FINANCE LLC, as Collateral Agent and Lender
SILICON VALLEY BANK, as Lender

   

FROM:

NUVECTRA CORPORATION, ALGOSTIM, LLC, PELVISTIM LLC and NEURONEXUS TECHNOLGIES,
INC.

 

The undersigned authorized officer (“Officer”) of NUVECTRA CORPORATION,
ALGOSTIM, LLC, PELVISTIM LLC and NEURONEXUS TECHNOLGIES, INC. (individually and
collectively, jointly and severally, “Borrower”), hereby certifies that in
accordance with the terms and conditions of the Loan and Security Agreement by
and among Borrower, Collateral Agent, and the Lenders from time to time party
thereto (the “Loan Agreement;” capitalized terms used but not otherwise defined
herein shall have the meanings given them in the Loan Agreement),

 

(a)     Borrower is in complete compliance for the period ending _______________
with all required covenants except as noted below;

 

(b)     There are no Events of Default, except as noted below;

 

(c)     Except as noted below, all representations and warranties of Borrower
stated in the Loan Documents are true and correct in all material respects on
this date and for the period described in (a), above; provided, however, that
such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date.

 

(d)     Borrower, and each of Borrower’s Subsidiaries, has timely filed all
required tax returns and reports, Borrower, and each of Borrower’s Subsidiaries,
has timely paid all foreign, federal, state, and local taxes, assessments,
deposits and contributions owed by Borrower, or Subsidiary, except as otherwise
permitted pursuant to the terms of Section 5.8 of the Loan Agreement;

 

(e)     No Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Collateral Agent and the
Lenders.

 

Attached are the required documents, if any, supporting our certification(s).
The Officer, on behalf of Borrower, further certifies that the attached
financial statements are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes and except, in
the case of unaudited financial statements, for the absence of footnotes and
subject to year-end audit adjustments as to the interim financial statements.

 

Please indicate compliance status since the last Compliance Certificate by
circling Yes, No, or N/A under “Complies” column.

 

 

Reporting Covenant

 

Requirement

Actual

Complies

           

1)

Financial statements

 

Quarterly within 5 days of filing with SEC

 

Yes

No

N/A

               

2)

Annual (CPA Audited) statements

 

Within earlier of 180 days after FYE or 5 days of filing with SEC

 

Yes

No

N/A

               

3)

Annual Financial Projections/Budget (prepared on a monthly basis)

 

Annually (within earlier of 90 days of FYE or 7 Business Days of approval by
Board), and when revised

 

Yes

No

N/A

 

 
 

--------------------------------------------------------------------------------

 

 

4)

A/R & A/P agings, Inventory report, deferred revenue report, Borrowing Base
Certificate, Transaction Report

 

Monthly within 30 days when Revolving Advances are outstanding, and (unless such
documents were delivered during the most recently ended month) with each request
for a Revolving Advance

 

Yes

No

N/A

               

5)

8-K, 10-K and 10-Q Filings

 

If applicable, within 5 days of filing

 

Yes

No

N/A

               

6)

Compliance Certificate

 

Within 5 days of filing quarterly/annual financial statements with SEC

 

Yes

No

N/A

               

7)

IP Report

 

When required

 

Yes

No

N/A

               

8)

Total amount of Borrower’s cash and cash equivalents at the last day of the
measurement period

   

$________

Yes

No

N/A

               

9)

Total amount of Borrower’s Subsidiaries’ cash and cash equivalents at the last
day of the measurement period

   

$________

Yes

No

N/A

 

 

Deposit and Securities Accounts

(Please list all accounts; attach separate sheet if additional space needed)

 

 

Institution Name

Account Number

New Account?

Account Control Agreement in place?

         

1)

   

Yes

No

Yes

No

             

2)

   

Yes

No

Yes

No

             

3)

   

Yes

No

Yes

No

             

4)

   

Yes

No

Yes

No

 

Financial Covenants

 

 

Covenant

Requirement

Actual

Compliance

1)

Minimum Revenues

(quarterly)*

At least 75% of projections

            _____%

Yes

No

   

$_________

      $_________

               

*only required upon advance of the Term B Loans (or Term C Loans if no Term B
Loans were previously advanced).

 

Other Matters

 

1)

Have there been any changes in management since the last Compliance Certificate?

Yes

No

       

2)

Have there been any transfers/sales/disposals/retirement of Collateral or IP
prohibited by the Loan Agreement?

Yes

No

       

 

 
 

--------------------------------------------------------------------------------

 

 

3)

Have there been any new or pending claims or causes of action against Borrower
that involve more than Two Hundred Fifty Thousand Dollars ($250,000.00)?

Yes

No

       

4)

Have there been any amendments of or other changes to the capitalization table
of any Subsidiary and to the Operating Documents of Borrower or any of its
Subsidiaries? If yes, provide copies of any such amendments or changes with this
Compliance Certificate.

Yes

No

 

 

Exceptions

 

Please explain any exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions.” Attach separate sheet if additional
space needed.)

 

 

 

NUVECTRA CORPORATION

ALGOSTIM, LLC

PELVISTIM LLC

NEURONEXUS TECHNOLOGIES, INC.

 

By:                                                       

Name:                                                  

Title:                                                    

 

Date:

 

  LENDER USE ONLY          

Received
by:                                                                          

Date:                 

       

Verified
by:                                                                            

Date:                  

        Compliance Status:           Yes                    No  

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT D

Form of Secured Promissory Note

 

[see attached]

 

 
 

--------------------------------------------------------------------------------

 

 

SECURED PROMISSORY NOTE
(Term [A][B][C] Loan)

 

$____________________  

 Dated: [DATE]

 

FOR VALUE RECEIVED, each of the undersigned, NUVECTRA CORPORATION a Delaware
corporation, ALGOSTIM, LLC, a Delaware limited liability company, PELVISTIM LLC,
a Delaware limited liability company, and NEURONEXUS TECHNOLOGIES, INC., a
Michigan corporation, each with offices located at 5830 Granite Parkway, Suite
1100, Plano, Texas 75024 (individually and collectively, jointly and severally,
“Borrower”) HEREBY PROMISES TO PAY to the order of [OXFORD FINANCE LLC][SILICON
VALLEY BANK] (“Lender”) the principal amount of [___________] MILLION DOLLARS
($______________) or such lesser amount as shall equal the outstanding principal
balance of the [Revolving Advances made under the Revolving Line][Term [A][B][C]
Loan] made to Borrower by Lender, plus interest on the aggregate unpaid
principal amount of such [Revolving Advances][Term [A][B][C] Loan], at the rates
and in accordance with the terms of the Loan and Security Agreement dated March
__, 2016 by and among Borrower, Lender, Oxford Finance LLC, as Collateral Agent,
and the other Lenders from time to time party thereto (as amended, restated,
supplemented or otherwise modified from time to time, the “Loan Agreement”). If
not sooner paid, the entire principal amount and all accrued and unpaid interest
hereunder shall be due and payable on the Maturity Date as set forth in the Loan
Agreement. Any capitalized term not otherwise defined herein shall have the
meaning attributed to such term in the Loan Agreement.

 

Principal, interest and all other amounts due with respect to the [Revolving
Advances under the Revolving Line][Term [A][B][C] Loan], are payable in lawful
money of the United States of America to Lender as set forth in the Loan
Agreement and this Secured Promissory Note (this “Note”). The principal amount
of this Note and the interest rate applicable thereto, and all payments made
with respect thereto, shall be recorded by Lender and, prior to any transfer
hereof, endorsed on the grid attached hereto which is part of this Note.

 

The Loan Agreement, among other things, (a) provides for the making of a secured
[Revolving Advances under the Revolving Line][Term [A][B][C] Loan] by Lender to
Borrower, and (b) contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events.

 

This Note may not be prepaid except as set forth in [Section
2.3(a)][Section 2.2(c) and Section 2.2(d)] of the Loan Agreement.

 

This Note and the obligation of Borrower to repay the unpaid principal amount of
the [Revolving Advances under the Revolving Line][Term [A][B][C] Loan], interest
on [such Revolving Advances][the Term [A][B][C] Loan] and all other amounts due
Lender under the Loan Agreement is secured under the Loan Agreement.

 

Presentment for payment, demand, notice of protest and all other demands and
notices of any kind in connection with the execution, delivery, performance and
enforcement of this Note are hereby waived.

 

Borrower shall pay all reasonable fees and expenses, including, without
limitation, reasonable attorneys’ fees and costs, incurred by Lender in the
enforcement or attempt to enforce any of Borrower’s obligations hereunder not
performed when due.

 

This Note shall be governed by, and construed and interpreted in accordance
with, the internal laws of the State of California.

 

The ownership of an interest in this Note shall be registered on a record of
ownership maintained by Lender or its agent. Notwithstanding anything else in
this Note to the contrary, the right to the principal of, and stated interest
on, this Note may be transferred only if the transfer is registered on such
record of ownership and the transferee is identified as the owner of an interest
in the obligation. Borrower shall be entitled to treat the registered holder of
this Note (as recorded on such record of ownership) as the owner in fact thereof
for all purposes and shall not be bound to recognize any equitable or other
claim to or interest in this Note on the part of any other person or entity.

 

[Balance of Page Intentionally Left Blank]

 

 
 

--------------------------------------------------------------------------------

 

 

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of
its officers thereunto duly authorized on the date hereof.

 

   

BORROWER:

         

NUVECTRA CORPORATION

               

By                                                                                        

   

Name:                                                                                   

   

Title:                                                                                     

         

ALGOSTIM, LLC

               

By                                                                                        

   

Name:                                                                    
              

   

Title:                                                                                     

         

PELVISTIM LLC

               

By                                                                                        

   

Name:                                                                                   

   

Title:                                                                                     

         

NEURONEXUS TECHNOLOGIES, INC.

               

By                                                                                        

   

Name:                                                                                   

   

Title:                                                                                     

 

 

[Oxford Finance LLC][Silicon Valley Bank]

[Revolving Line][Term [A][B][C] Loan] Secured Promissory Note

 

 
 

--------------------------------------------------------------------------------

 

 

 

LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL

 

Date

 

Principal

Amount

 

Interest Rate

 

Scheduled

Payment Amount

 

Notation By

                 

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT E

BORROWING BASE CERTIFICATE

 

Borrower: 

Nuvectra Corporation, Algostim, LLC, PelviStim LLC and NeuroNexus Technologies,
Inc

Collateral Agent: Oxford Finance LLC      Commitment Amount: $5,000,000.00

     

 

ACCOUNTS RECEIVABLE

 

1.  Accounts Receivable (invoiced) Book Value as of                             
$   2. Additions (please explain on next page) $   3. Less: Intercompany /
Employee / Non-Trade Accounts  $   4. NET TRADE ACCOUNTS RECEIVABLE  $  

 

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

 

5.

120 Days Past Invoice Date 

$  

6.

Credit Balances over 120 Days

$  

7.

Balance of 50% over 120 Day Accounts (Cross-Age or Current Affected)

$  

8.

Foreign Account Debtor Accounts

$  

9.

Foreign Invoiced and/or Collected Accounts

$  

10.

Contra/Customer Deposit Accounts

$  

11.

U.S. Governmental Accounts (w/o AOC)

$  

12.

Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts

$  

13.

Accounts with Memo or Pre-Billings

$  

14.

Contract Accounts; Accounts with Progress / Milestone Billings

$  

15.

Accounts for Retainage Billings

$  

16.

Trust / Bonded Accounts

$  

17.

Bill and Hold Accounts

$  

18.

Unbilled Accounts

$  

19.

Non-Trade Accounts (if not already deducted above)

$  

20.

Accounts with Extended Term Invoices (Net 90+)

$  

21.

Chargeback Accounts / Debit Memos

$  

22.

Product Returns/Exchanges

$  

23.

Disputed Accounts; Insolvent Account Debtor Accounts

$  

24.

Deferred Revenue, if applicable/Other (please explain on next page)

$  

25.

Concentration Limits

$  

26.

Individual Account Debtor Accounts

$  

27.

TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

$   28. Eligible Accounts (#4 minus #27) $   29. ELIGIBLE AMOUNT OF ACCOUNTS
(80% of #28) $  

 

BALANCES

 

30. Maximum Loan Amount $ 5,000,000

.00 31. Total Funds Available [Lesser of #29 or #30] $   32.
Present balance owing on Line of Credit $   33. RESERVE POSITION (#31 minus #32)
$  

 

[Continued on following page.]

 

 
 

--------------------------------------------------------------------------------

 

 

Explanatory comments:

 

 

 

 

 

The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned, the lenders from time to time party thereto and Oxford Finance LLC,
as Collateral Agent.

 

COMMENTS:

 

 

By: ___________________________

Authorized Signer

Date: _________________________

LENDERS USE ONLY

 Received by: _____________________

 authorized signer

 Date: __________________________

 Verified: ________________________

 authorized signer

 Date: ___________________________

 Compliance Status:                Yes          No

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT F

TRANSACTION REPORT

 

[EXCEL spreadsheet to be provided separately from lending officer.]

 

 
 

--------------------------------------------------------------------------------

 

 

CORPORATE BORROWING CERTIFICATE

 

Borrower:

NUVECTRA CORPORATION

Date: March __, 2016

Lenders:

OXFORD FINANCE LLC, as Collateral Agent and Lender

   

SILICON VALLEY BANK, as Lender

 

 

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

 

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

 

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

 

3.     Attached hereto as Exhibit A and Exhibit B, respectively, are true,
correct and complete copies of (i) Borrower’s Certificate of Incorporation
(including amendments), as filed with the Secretary of State of the state in
which Borrower is incorporated as set forth in paragraph 2 above; and
(ii) Borrower’s Bylaws. Neither such Certificate of Incorporation nor such
Bylaws have been amended, annulled, rescinded, revoked or supplemented, and such
Certificate of Incorporation and such Bylaws remain in full force and effect as
of the date hereof.

 

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

 

[Balance of Page Intentionally Left Blank]

 

 
 

--------------------------------------------------------------------------------

 

 

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

 

Name

 

Title

 

Signature

Authorized to

Add or Remove

Signatories

         

□

         

□

         

□

         

□

 

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

 

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

 

Borrow Money. Borrow money from the Lenders.

Execute Loan Documents. Execute any loan documents any Lender requires.

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

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

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

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

Issue Warrants. Issue warrants for Borrower’s capital stock.

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

 

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

 

[Balance of Page Intentionally Left Blank]

 

 
 

--------------------------------------------------------------------------------

 

 

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

 

   

By                                                                                        

         

Name:                                                                                  

         

Title:                                                                                    

 

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

 

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

          [print title]

 

   

By                                                                                        

         

Name:                                                                                  

         

Title:                                                                                    

 

 

[Signature Page to Corporate Borrowing Certificate]

 

 
 

--------------------------------------------------------------------------------

 

 

 

EXHIBIT A

Certificate of Incorporation (including amendments)

 

[see attached]

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT B

Bylaws

 

[see attached]

 

 
 

--------------------------------------------------------------------------------

 

 

LIMITED LIABILITY COMPANY BORROWING CERTIFICATE

 

Borrower:

ALGOSTIM, LLC

Date: March __, 2016

Lenders:

OXFORD FINANCE LLC, as Collateral Agent and Lender

   

SILICON VALLEY BANK, as Lender

 

 

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

 

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

 

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

 

3.     Attached hereto as Exhibit A and Exhibit B, respectively, are true,
correct and complete copies of (i) Borrower’s Certificate of Formation
(including amendments), as filed with the Secretary of State of the state in
which Borrower is organized as set forth in paragraph 2 above; and
(ii) Borrower’s operating agreement. Neither such Certificate of Formation nor
such operating agreement have been amended, annulled, rescinded, revoked or
supplemented, and such Certificate of Formation and such operating agreement
remain in full force and effect as of the date hereof.

 

4.     The following resolutions were duly and validly adopted by Borrower’s
[sole member][Board of Managers]. Such resolutions are in full force and effect
as of the date hereof and have not been in any way modified, repealed,
rescinded, amended or revoked, and the Lenders may rely on them until each
Lender receives written notice of revocation from Borrower.

 

[Balance of Page Intentionally Left Blank]

 

 
 

--------------------------------------------------------------------------------

 

 

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

 

Name

 

Title

 

Signature

Authorized to

Add or Remove

Signatories

         

□

         

□

         

□

         

□

 

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

 

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

 

Borrow Money. Borrow money from the Lenders.

Execute Loan Documents. Execute any loan documents any Lender requires.

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

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

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

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

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

 

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

 

[Balance of Page Intentionally Left Blank]

 

 
 

--------------------------------------------------------------------------------

 

 

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

 

 

By                                                                                        

 

Name:                                                                                  

 

Title:                                                                                    

 

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

 

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

          [print title]

 

 

By                                                                                        

 

Name:                                                                                  

 

Title:                                                                                    

 

 

[Signature Page to Limited Liability Company Borrowing Certificate]

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT A

Certificate of Formation (including amendments)

 

[see attached]

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT B

Operating Agreement

 

[see attached]

 

 
 

--------------------------------------------------------------------------------

 

 

LIMITED LIABILITY COMPANY BORROWING CERTIFICATE

 

Borrower:

PELVISTIM LLC

Date: March __, 2016

Lenders:

OXFORD FINANCE LLC, as Collateral Agent and Lender

   

SILICON VALLEY BANK, as Lender

 

 

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

 

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

 

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

 

3.     Attached hereto as Exhibit A and Exhibit B, respectively, are true,
correct and complete copies of (i) Borrower’s Certificate of Formation
(including amendments), as filed with the Secretary of State of the state in
which Borrower is organized as set forth in paragraph 2 above; and
(ii) Borrower’s operating agreement. Neither such Certificate of Formation nor
such operating agreement have been amended, annulled, rescinded, revoked or
supplemented, and such Certificate of Formation and such operating agreement
remain in full force and effect as of the date hereof.

 

4.     The following resolutions were duly and validly adopted by Borrower’s
[sole member][Board of Managers]. Such resolutions are in full force and effect
as of the date hereof and have not been in any way modified, repealed,
rescinded, amended or revoked, and the Lenders may rely on them until each
Lender receives written notice of revocation from Borrower.

 

[Balance of Page Intentionally Left Blank]

 

 
 

--------------------------------------------------------------------------------

 

 

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

 

Name

 

Title

 

Signature

Authorized to

Add or Remove

Signatories

         

□

         

□

         

□

         

□

 

 

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

 

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

 

Borrow Money. Borrow money from the Lenders.

Execute Loan Documents. Execute any loan documents any Lender requires.

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

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

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

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

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

 

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

 

[Balance of Page Intentionally Left Blank]

 

 
 

--------------------------------------------------------------------------------

 

 

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

 

 

By:                                                                                        

     

Name:                                                                                    

     

Title:                                                                                      

 

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

 

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

                 [print title]

 

 

By:                                                                                        

     

Name:                                                                                    

     

Title:                                                                                      

 

 

[Signature Page to Limited Liability Company Borrowing Certificate]

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT A

Certificate of Formation (including amendments)

 

[see attached]

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT B

Operating Agreement

 

[see attached]

 

 
 

--------------------------------------------------------------------------------

 

 

CORPORATE BORROWING CERTIFICATE

 

Borrower:

NEURONEXUS TECHNOLOGIES, INC.

Date: March __, 2016

Lenders:

OXFORD FINANCE LLC, as Collateral Agent and Lender

   

SILICON VALLEY BANK, as Lender

 

 

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

 

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

 

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

 

3.     Attached hereto as Exhibit A and Exhibit B, respectively, are true,
correct and complete copies of (i) Borrower’s Certificate of Incorporation
(including amendments), as filed with the Secretary of State of the state in
which Borrower is incorporated as set forth in paragraph 2 above; and
(ii) Borrower’s Bylaws. Neither such Certificate of Incorporation nor such
Bylaws have been amended, annulled, rescinded, revoked or supplemented, and such
Certificate of Incorporation and such Bylaws remain in full force and effect as
of the date hereof.

 

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

 

[Balance of Page Intentionally Left Blank]

 

 
 

--------------------------------------------------------------------------------

 

 

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

 

Name

 

Title

 

Signature

Authorized to

Add or Remove

Signatories

         

□

         

□

         

□

         

□

 

 

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

 

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

 

Borrow Money. Borrow money from the Lenders.

Execute Loan Documents. Execute any loan documents any Lender requires.

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

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

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

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

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

 

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

 

[Balance of Page Intentionally Left Blank]

 

 
 

--------------------------------------------------------------------------------

 

 

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

 

 

By:                                                                                        

     

Name:                                                                                    

     

Title:                                                                                      

 

 

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

 

I, the __________________________ of Borrower, hereby certify as to paragraphs 1
through 5 above, as

          [print title]

of the date set forth above.

 

 

By:                                                                                        

     

Name:                                                                                    

     

Title:                                                                                      

 

 

[Signature Page to Corporate Borrowing Certificate]

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT A

Certificate of Incorporation (including amendments)

 

[see attached]

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT B

Bylaws

 

[see attached]

 

 
 

--------------------------------------------------------------------------------

 

 

DEBTOR:                      NUVECTRA CORPORATION
SECURED PARTY:     OXFORD FINANCE LLC, as Collateral Agent

 

EXHIBIT A TO UCC FINANCING STATEMENT

Description of Collateral

 

The Collateral consists of all of Debtor’s right, title and interest in and to
the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles (except as noted below), commercial
tort claims, documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, deposit accounts and other
Collateral Accounts, all certificates of deposit, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

 

All Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding the foregoing, the Collateral does not include any Intellectual
Property; provided, however, the Collateral shall include all Accounts and all
proceeds of Intellectual Property. If a judicial authority (including a U.S.
Bankruptcy Court) would hold that a security interest in the underlying
Intellectual Property is necessary to have a security interest in such Accounts
and such property that are proceeds of Intellectual Property, then the
Collateral shall automatically, and effective as of the Effective Date, include
the Intellectual Property to the extent necessary to permit perfection of
Secured Party’s security interest in such Accounts and such other property of
Debtor that are proceeds of the Intellectual Property.

 

Pursuant to the terms of a certain negative pledge arrangement with Secured
Party and the Lenders, Debtor has agreed not to encumber any of its Intellectual
Property.

 

Capitalized terms used but not defined herein have the meanings ascribed in the
Uniform Commercial Code in effect in the State of California as in effect from
time to time (the “Code”) or, if not defined in the Code, then in the Loan and
Security Agreement by and between Debtor, Secured Party and the other Lenders
party thereto (as modified, amended and/or restated from time to time).

 

 
 

--------------------------------------------------------------------------------

 

  

DEBTOR:                      ALGOSTIM, LLC
SECURED PARTY:     OXFORD FINANCE LLC, as Collateral Agent

 

EXHIBIT A TO UCC FINANCING STATEMENT

Description of Collateral

 

The Collateral consists of all of Debtor’s right, title and interest in and to
the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles (except as noted below), commercial
tort claims, documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, deposit accounts and other
Collateral Accounts, all certificates of deposit, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

 

All Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding the foregoing, the Collateral does not include any Intellectual
Property; provided, however, the Collateral shall include all Accounts and all
proceeds of Intellectual Property. If a judicial authority (including a U.S.
Bankruptcy Court) would hold that a security interest in the underlying
Intellectual Property is necessary to have a security interest in such Accounts
and such property that are proceeds of Intellectual Property, then the
Collateral shall automatically, and effective as of the Effective Date, include
the Intellectual Property to the extent necessary to permit perfection of
Secured Party’s security interest in such Accounts and such other property of
Debtor that are proceeds of the Intellectual Property.

 

Pursuant to the terms of a certain negative pledge arrangement with Secured
Party and the Lenders, Debtor has agreed not to encumber any of its Intellectual
Property.

 

Capitalized terms used but not defined herein have the meanings ascribed in the
Uniform Commercial Code in effect in the State of California as in effect from
time to time (the “Code”) or, if not defined in the Code, then in the Loan and
Security Agreement by and between Debtor, Secured Party and the other Lenders
party thereto (as modified, amended and/or restated from time to time).

 

 
 

--------------------------------------------------------------------------------

 

  

DEBTOR:                      PELVISTIM LLC
SECURED PARTY:     OXFORD FINANCE LLC, as Collateral Agent

 

EXHIBIT A TO UCC FINANCING STATEMENT

Description of Collateral

 

The Collateral consists of all of Debtor’s right, title and interest in and to
the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles (except as noted below), commercial
tort claims, documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, deposit accounts and other
Collateral Accounts, all certificates of deposit, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

 

All Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding the foregoing, the Collateral does not include any Intellectual
Property; provided, however, the Collateral shall include all Accounts and all
proceeds of Intellectual Property. If a judicial authority (including a U.S.
Bankruptcy Court) would hold that a security interest in the underlying
Intellectual Property is necessary to have a security interest in such Accounts
and such property that are proceeds of Intellectual Property, then the
Collateral shall automatically, and effective as of the Effective Date, include
the Intellectual Property to the extent necessary to permit perfection of
Secured Party’s security interest in such Accounts and such other property of
Debtor that are proceeds of the Intellectual Property.

 

Pursuant to the terms of a certain negative pledge arrangement with Secured
Party and the Lenders, Debtor has agreed not to encumber any of its Intellectual
Property.

 

Capitalized terms used but not defined herein have the meanings ascribed in the
Uniform Commercial Code in effect in the State of California as in effect from
time to time (the “Code”) or, if not defined in the Code, then in the Loan and
Security Agreement by and between Debtor, Secured Party and the other Lenders
party thereto (as modified, amended and/or restated from time to time).

 

 
 

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DEBTOR:                      NEURONEXUS TECHNOLOGIES, INC.
SECURED PARTY:     OXFORD FINANCE LLC, as Collateral Agent

 

EXHIBIT A TO UCC FINANCING STATEMENT

Description of Collateral

 

The Collateral consists of all of Debtor’s right, title and interest in and to
the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles (except as noted below), commercial
tort claims, documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, deposit accounts and other
Collateral Accounts, all certificates of deposit, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

 

All Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding the foregoing, the Collateral does not include any Intellectual
Property; provided, however, the Collateral shall include all Accounts and all
proceeds of Intellectual Property. If a judicial authority (including a U.S.
Bankruptcy Court) would hold that a security interest in the underlying
Intellectual Property is necessary to have a security interest in such Accounts
and such property that are proceeds of Intellectual Property, then the
Collateral shall automatically, and effective as of the Effective Date, include
the Intellectual Property to the extent necessary to permit perfection of
Secured Party’s security interest in such Accounts and such other property of
Debtor that are proceeds of the Intellectual Property.

 

Pursuant to the terms of a certain negative pledge arrangement with Secured
Party and the Lenders, Debtor has agreed not to encumber any of its Intellectual
Property.

 

Capitalized terms used but not defined herein have the meanings ascribed in the
Uniform Commercial Code in effect in the State of California as in effect from
time to time (the “Code”) or, if not defined in the Code, then in the Loan and
Security Agreement by and between Debtor, Secured Party and the other Lenders
party thereto (as modified, amended and/or restated from time to time).