Exhibit 10.1

 

FORBEARANCE AGREEMENT AND FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This Forbearance Agreement and First Amendment to Loan and Security Agreement
(this “Agreement”) is entered into as of March 30, 2012, by and between SQUARE 1
BANK, (the “Bank”) and Lucid, Inc. (the “Borrower”), with reference to the
following facts:

 

A.            Borrower has borrowed funds from Bank pursuant to that certain
Loan and Security Agreement by and between Bank and Borrower dated as of
July 20, 2011, as amended (the “Loan Agreement”).

 

B.            As of the date hereof, there is owing under the Loan Agreement a
principal amount of $ 2,333,333.36 (not including, to the extent applicable, any
contingent obligations, e.g. those arising out of any undrawn letters of credit
issued by Bank for Borrower’s benefit), accrued and unpaid interest in the
amount of $ 1,409.72, outstanding legal fees and costs, plus all other
outstanding amounts and costs of enforcement due under the Loan Agreement.  Such
amount, plus accruing interest and costs and accrued and accruing attorneys’
fees and costs are hereinafter referred to herein as the “Existing Debt.”

 

C.            Certain Events of Default have occurred and exist under the Loan
Agreement, including under (i) Section 6.7(a) of the Agreement for the
January 2012, February 2012 and March 2012 measuring periods and
(ii) Section 8.9 due to Jay M. Eastman and William J. Shea failing to meet
certain guarantor reporting requirements (collectively, the “Existing
Default”).  The Existing Default entitles Bank immediately to enforce all the
remedies set forth in the Loan Agreement.  Borrower has asked Bank to forbear
from exercising those remedies as a result of the Existing Default, and Bank has
agreed, provided Borrower enters into this Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the parties agree as
follows:

 

1.             Defined Terms.  Capitalized terms not otherwise defined herein
shall have the same meanings as set forth in the Loan Agreement.

 

2.             Acknowledgement of Liability.  As of the date of this Agreement,
Borrower owes Bank an amount equal to the Existing Debt.  Borrower reaffirms all
of its obligations under the Loan Agreement and hereby forever waives and
relinquishes any and all claims, set-offs or defenses that Borrower may now have
with respect to the payment of sums due to Bank and the performance of other
obligations under the Loan Agreement.  The security interests granted to Bank in
the Loan Agreement in the Collateral remain perfected, first priority liens.

 

3.             Forbearance.  Borrower acknowledges the existence of the Existing
Default under the Loan Agreement.  Borrower further acknowledges and agrees that
Bank is not in any way agreeing to waive such Existing Default as a result of
this Agreement or the performance by the parties of their respective obligations
hereunder or thereunder.  Subject to the conditions contained herein and
performance by Borrower of all of the terms of this Agreement and the Loan
Agreement after the date hereof, Bank shall, through April 30, 2012 or until
such earlier date that there shall occur any further Event of Default (the
“Forbearance Period”), forbear from exercising any remedies that it may have
against Borrower as a result of the occurrence of the Existing Default.  Such
forbearance does not apply to any other Event of Default or other failure by
Borrower to perform in accordance with the Loan Agreement or this Agreement. 
This forbearance shall not be deemed a continuing waiver or forbearance with
respect to any Event of Default of a similar nature that may occur after the
date of this Agreement.

 

4.             Repayment.

 

(a)           Borrower shall continue to make all payments as they become due
under the Loan Agreement.

 

(b)           In consideration of Bank’s execution of this Agreement, Borrower
shall pay Bank a forbearance fee equal to $10,000 (the “Forbearance Fee”), which
fee shall be due and payable upon the execution hereof.

 

5.             Ratification by Borrower of Bank’s First Priority Security
Interest in Collateral.  Borrower hereby confirms and ratifies Bank’s first
priority lien and security interest in and to all Collateral, including all
property described on Exhibit A hereto.

 

1

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

 

Borrower shall execute such security agreements, financing statements and other
documents as Bank may from time to time reasonably request to carry out the
terms of this Agreement and the Loan Agreement.  Borrower authorizes Bank to
file such financing statements and amendments relating to the Collateral.  Such
liens and security interests shall secure all of the obligations of Borrower
under this Agreement and the Loan Agreement.

 

6.             Receipt and Application of Payments.  All payments hereunder and
under the Loan Agreement may, at Bank’s option, first be applied against Bank
Expenses and accrued and unpaid interest, and the balance against the principal
portion of the Existing Debt in reverse order of maturity, all in Bank’s sole
and absolute discretion.  Acceptance by Bank of any payment in an amount less
than the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default pursuant to this Agreement, and at any time thereafter and until the
entire amount then due has been paid, Bank shall be entitled to exercise all
rights conferred upon it herein or in the Loan Agreement upon the occurrence of
an Event of Default.  To the extent that Bank receives any payment or benefit
and such payment or benefit, or any part thereof, is required to be repaid to a
trustee, receiver, or any other party under any bankruptcy act, state or federal
law, common law or equitable cause, then to the extent of such payment or
benefit, the Existing Debt, or any part thereof intended to be satisfied shall
be revived and continued in full force and effect as if such payment or benefit
had not been made, shall accrue interest at the highest rate applicable to any
portion thereof, shall be secured by the Collateral and payable on demand.

 

7.             Representations and Warranties.

 

(a)           Borrower hereby represents and warrants that no Event of Default
or failure of condition has occurred or exists, or would exist with notice or
lapse of time or both under any of the Loan Agreement, other than the Existing
Default.

 

(b)           The forbearance period granted pursuant to the terms of this
Agreement is reasonable and is based upon the projections of Borrower.

 

(c)           All representations and warranties of Borrower in this Agreement
and the Loan Agreement are true and correct in all material respects as of the
date hereof, and shall survive the execution of this Agreement.

 

(d)           Bank has not at anytime directed or participated in any aspect of
the management of Borrower or the conduct of Borrower’s business.  Borrower has
made all business decisions independently of Bank, and Bank has limited its
actions to those solely of a lender of money.

 

(e)           Bank is not required to grant any additional credit to Borrower or
to renew or forbear to enforce any obligations of Borrower other than the
limited forbearance set forth in Section 3 of this Agreement.

 

8.             Amendments. The Loan Agreement is hereby amended as follows:

 

(a)           The following defined term in Exhibit A of the Loan Agreement is
hereby amended and restated in its entirety as follows:

 

“Term Loan Maturity Date” is April 30, 2012.

 

(b)           Section 2.1(b)(ii) of the Loan Agreement hereby is amended and
restated in its entirety to read as follows:

 

“(ii)         Interest shall continue to accrue from the date of each Term Loan
at the rate specified in Section 2.3(a). On the Term Loan Maturity Date, all
amounts due in connection with the Term Loans and any other amounts due under
this Agreement shall be immediately due and payable. Term Loans, once repaid,
may not be reborrowed.”

 

(c)           Section 6.7 of the Loan Agreement is hereby amended and restated
in its entirety to read as follows:

 

“6.7        Minimum Cash.  Borrower shall maintain a balance of unrestricted
cash at Bank not less than $1.500,000 at all times.”

 

2

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

 

9.             Default.  In addition to all other Event(s) of Default under the
Loan Agreement, the following shall constitute an Event of Default under this
Agreement:

 

(a)           Borrower’s failure to pay any amount when due under this Agreement
or to perform any covenant or other agreement contained in this Agreement or any
other document entered into pursuant hereto;

 

10.          Rights and Remedies.

 

(a)           Upon the occurrence and during the continuance of an Event of
Default, Bank may, at its election, without notice of its election and without
demand, do any one or more of the following, all of which are authorized by
Borrower:

 

(i)            Without notice to Borrower, set off and apply to the amounts due
and owing under the Loan Agreement and this Agreement:

 

(A)          any and all cash or certificates of deposit held by Bank for
whatever purpose; and

 

(B)          indebtedness at any time owing to or for the credit or the account
of Borrower held by Bank.

 

(ii)           Take action against Borrower for payment under the Loan Agreement
and this Agreement;

 

(iii)          Demand that Borrower (i) deposit cash with Bank in an amount
equal to the amount of any Letters of Credit remaining undrawn, as collateral
security for the repayment of any future drawings under such Letters of Credit,
and (ii) pay in advance all Letter of Credit fees scheduled to be paid or
payable over the remaining term of the Letters of Credit, and Borrower shall
promptly deposit and pay such amounts; and/or

 

(iv)          Exercise any right and remedy authorized by the Loan Agreement
and/or this Agreement and/or applicable law.

 

(b)           Bank’s rights and remedies under this Agreement, the Loan
Agreement and all other agreements shall be cumulative.  Bank shall have all
other rights and remedies not inconsistent herewith as provided under the Code,
by law, or in equity.  No exercise by Bank of one right or remedy shall be
deemed an election, and no waiver by Bank of any Event of Default on the part of
Borrower shall be deemed a continuing waiver.  No delay by Bank shall constitute
a waiver, election, or acquiescence by it.  Bank shall have the right to take
any action it deems necessary against Borrower in order to enforce or perfect,
or to realize on its security interest in the Collateral.

 

11.          Conditions Precedent.  The effectiveness of this Agreement is
subject to Bank’s receipt of all of the following:

 

(a)           this Agreement and such other agreements and instruments
reasonably requested by Bank pursuant hereto (including such documents as are
necessary to create and perfect Bank’s interest in the Collateral), each duly
executed by Borrower;

 

(b)           a certificate of the secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement, in form acceptable to Bank;

 

(c)           payment of all Bank Expenses incurred through the date of this
Agreement;

 

(d)           payment of the Forbearance Fee; and

 

(e)           such other documents and completion of such other matters as Bank
may reasonably deem necessary or appropriate.

 

12.          Waiver of Notice and Cure.  Borrower acknowledges that Events of
Default have occurred under the Loan Agreement that, but for this Agreement,
would have entitled Bank to exercise all the remedies available to Bank under
the Loan Agreement and applicable law.  Borrower waives all notices of default
and rights to cure that are otherwise provided in the Loan Agreement or
applicable law.  Borrower further waives any claim that a sale or other
disposition by Bank of the Collateral is not

 

3

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

 

commercially reasonable because Bank disclaims any warranties with respect to
such sale or other disposition, including, without limitation, disclaimers of
warranties relating to title, possession, quiet enjoyment, or the like.

 

13.          Release.

 

(a)           Borrower acknowledges that Bank would not enter into this
Agreement without Borrower’s assurance hereunder.  Except for the obligations
arising hereafter under this Agreement, Borrower hereby absolutely discharges
and releases Bank, any person or entity that has obtained any interest from Bank
under the Loan Agreement and each of Bank’s and such entity’s former and present
partners, stockholders, officers, directors, employees, successors, assignees,
agents and attorneys from any known or unknown claims which Borrower now has
against Bank of any nature, including any claims that Borrower, its successors,
counsel, and advisors may in the future discover they would have now had if they
had known facts not now known to them, whether founded in contract, in tort or
pursuant to any other theory of liability, including but not limited to any
claims arising out of or related to the Loan Agreement or the transactions
contemplated thereby.

 

(b)           The provisions, waivers and releases set forth in this section are
binding upon Borrower and Borrower’s shareholders, agents, employees, assigns
and successors in interest, and each and every party claiming rights by or
through Borrower.  The provisions, waivers and releases of this section shall
inure to the benefit of Bank and its agents, employees, officers, directors,
assigns and successors in interest.

 

(c)           Borrower warrants and represents that Borrower is the sole and
lawful owner of all right, title and interest in and to all of the claims
released hereby and Borrower has not heretofore voluntarily, by operation of law
or otherwise, assigned or transferred or purported to assign or transfer to any
person any such claim or any portion thereof.  Borrower shall indemnify and hold
harmless Bank from and against any claim, demand, damage, debt, liability
(including payment of attorneys’ fees and costs actually incurred whether or not
litigation is commenced) based on or arising out of any assignment or transfer.

 

(d)           The provisions of this section shall survive payment in full of
the Obligations, full performance of all the terms of this Agreement and the
Loan Agreement, and/or Bank’s actions to exercise any remedy available under the
Loan Agreement or otherwise.

 

14.          Further Assurances.  Borrower will take such other actions as Bank
may reasonably request from time to time to perfect or continue Bank’s security
interests in Borrower’s property, and to accomplish the objectives of this
Agreement.

 

15.          Consultation of Counsel.  Borrower acknowledges that Borrower has
had the opportunity to be represented by legal counsel of its own choice
throughout all of the negotiations that preceded the execution of this
Agreement.  Borrower has executed this Agreement after reviewing and
understanding each provision of this Agreement and without reliance upon any
promise or representation of any person or persons acting for or on behalf of
Bank.  Borrower further acknowledges that Borrower and its counsel have had
adequate opportunity to make whatever investigation or inquiry they may deem
necessary or desirable in connection with the subject matter of this Agreement
prior to the execution hereof and the delivery and acceptance of the
consideration described herein.

 

16.          Miscellaneous.

 

(a)           Successors and Assigns.  This Agreement shall be binding upon and
shall inure to the benefit of Borrower and Bank and their respective successors
and assigns; provided, however, that the foregoing shall not authorize any
assignment by Borrower of its rights or duties hereunder.

 

(b)           Integration.  This Agreement and any documents executed in
connection herewith or pursuant hereto contain the entire agreement between the
parties with respect to the subject matter hereof and supersede all prior
agreements, understandings, offers and negotiations, oral or written, with
respect thereto and no extrinsic evidence whatsoever may be introduced in any
judicial or arbitration proceeding, if any, involving this Agreement; except
that any financing statements or other agreements or instruments filed by Bank
with respect to Borrower shall remain in full force and effect.

 

(c)           Entire Agreement.  This Agreement and the Loan Agreement contain
the entire agreement of the parties hereto and supersede any other oral or
written agreements or understandings with respect to the subject matter hereof
and thereof.

 

4

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

 

(d)           Course of Dealing; Waivers.  No course of dealing on the part of
Bank or its officers, nor any failure or delay in the exercise of any right by
Bank, shall operate as a waiver thereof, and any single or partial exercise of
any such right shall not preclude any later exercise of any such right.  Bank’s
failure at any time to require strict performance by Borrower of any provision
shall not affect any right of Bank thereafter to demand strict compliance and
performance.  Any suspension or waiver of a right must be in writing signed by
an officer of Bank.

 

(e)           Time is of the Essence.  Time is of the essence as to each and
every term and provision of this Agreement and the other Loan Agreement.

 

(f)            Counterparts.  This Agreement may be signed in counterparts and
all of such counterparts when properly executed by the appropriate parties
thereto together shall serve as a fully executed document, binding upon the
parties.

 

(g)           Legal Effect.  Except as explicitly set forth herein, the Loan
Agreement remains unmodified and in full force and effect.  If any provision of
this Agreement conflicts with applicable law, such provision shall be deemed
severed from this Agreement, and the balance of this Agreement shall remain in
full force and effect.

 

(h)           Choice of Law and Venue; Jury Trial Waiver.  This Agreement shall
be governed by, and construed in accordance with, the internal laws of the State
of North Carolina, without regard to principles of conflicts of law. 
Jurisdiction shall lie in the State of North Carolina.  All disputes,
controversies, claims, actions and similar proceedings arising with respect to
your account or any related agreement or transaction shall be brought in the
General Court of Justice of North Carolina sitting in Durham County, North
Carolina or the United States District Court for the Middle District of North
Carolina, except as provided below with respect to arbitration of such matters. 
BANK AND BORROWER EACH ACKNOWLEDGES THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED.  EACH OF THEM, AFTER CONSULTING
OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF THEIR CHOICE,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT
OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM.  THESE PROVISIONS SHALL NOT
BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR
BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.  If the jury
waiver set forth in this Section 16(h) is not enforceable, then any dispute,
controversy, claim, action or similar proceeding arising out of or relating to
this Agreement, the Loan Documents or any of the transactions contemplated
therein shall be settled by final and binding arbitration held in Durham County,
North Carolina in accordance with the then current Commercial Arbitration
Rules of the American Arbitration Association by one arbitrator appointed in
accordance with those rules.  The arbitrator shall apply North Carolina law to
the resolution of any dispute, without reference to rules of conflicts of law or
rules of statutory arbitration. Judgment upon any award resulting from
arbitration may be entered into and enforced by any state or federal court
having jurisdiction thereof.  Notwithstanding the foregoing, the parties may
apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this Section.  The
costs and expenses of the arbitration, including without limitation, the
arbitrator’s fees and expert witness fees, and reasonable attorneys’ fees,
incurred by the parties to the arbitration may be awarded to the prevailing
party, in the discretion of the arbitrator, or may be apportioned between the
parties in any manner deemed appropriate by the arbitrator.  Unless and until
the arbitrator decides that one party is to pay for all (or a share) of such
costs and expenses, both parties shall share equally in the payment of the
arbitrator’s fees as and when billed by the arbitrator.

 

(i)            Assignment and Indemnity.  Borrower consents to Bank’s assignment
of all or any part of Bank’s rights under this Agreement and the Loan
Agreement.  Borrower shall indemnify and defend and hold Bank and any assignee
of Bank’s interests harmless from any actions, costs, losses or expenses
(including attorneys’ fees) arising out of such assignment, this Agreement and
the Loan Agreement.

 

5

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

 

IN WITNESS WHEREOF the undersigned have executed this Agreement as of the first
date above written.

 

 

 

SQUARE 1 BANK

 

 

 

 

By:

/s/ BASIL KUSHNIR

 

 

 

 

Title:

AVP — Venture Banking

 

 

 

 

 

 

 

LUCID, INC.

 

 

 

 

By:

/s/ MARTIN J. JOYCE

 

 

 

 

Title:

Chief Financial Officer

 

6

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

 

EXHIBIT A

 

All personal property of Borrower (herein referred to as “Borrower” or “Debtor”)
whether presently existing or hereafter created or acquired, and wherever
located, including, but not limited to:

 

(a)           all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), financial assets, general intangibles
(including patents, trademarks, copyrights, goodwill, payment intangibles and
software), goods (including fixtures), instruments (including promissory notes),
inventory (including all goods held for sale or lease or to be furnished under a
contract of service, and including returns and repossessions), investment
property (including securities and securities entitlements), letter of credit
rights, money, and all of Debtor’s books and records with respect to any of the
foregoing, and the computers and equipment containing said books and records;

 

(b)           any and all cash proceeds and/or noncash proceeds of any of the
foregoing, including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment.  All terms
above have the meanings given to them in the North Carolina Uniform Commercial
Code, as amended or supplemented from time to time, including revised Division 9
of the Uniform Commercial Code-Secured Transactions.

 

Exhibit A - 1

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