Exhibit 10.1

 

 

 

 

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POST-PETITION LOAN AND SECURITY AGREEMENT

 

DATED AS OF

 

December 15, 2017

 

By and Between

 

DEXTERA SURGICAL INC.,

 

As Borrower,

 

And

 

AESCULAP, INC., or its designee

 

as Lender

 

 

 

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TABLE OF CONTENTS

 

Page

 

SECTION 1. DEFINITIONS

1

   

1.1 General Provisions

1

1.2 Defined Terms

2

   

SECTION 2. AMOUNT AND TERMS OF LOAN

10

   

2.1 Line of Credit

10

2.2 Line of Credit Note

11

2.3 Loan Account

11

2.4 Computation of Interest

11

2.5 Maximum Legal Rate

11

2.6 Payments

12

2.7 Application of Payments

12

2.8 Voluntary and Mandatory Payments

12

2.9 Additional Security

12

2.10 Administrative Status of Obligations

12

2.11 Grant of Security Interest

12

2.12 Perfection of Security Interests

13

2.13 Additional Collateral; Right of Set-Off

13

2.14 Right to Credit Bid

13

2.15 Facility Fee

13

   

SECTION 3. BORROWER REPRESENTATIONS AND WARRANTIES

13

   

3.1 Organization and Qualification

13

3.2 Power and Authority

13

3.3 Enforceability

14

3.4 Conflict with Other Instruments

14

3.5 Title to Collateral

14

3.6 Use of Proceeds

14

3.7 Regulation G

14

3.8 Location of Collateral

15

3.9 Broker’s Commissions

15

3.10 APA Representations

15

   

SECTION 4. CONDITIONS OF BORROWING

15

   

4.1 Initial Advance

15

4.2 Subsequent Advances

17

4.3 Waiver of Conditions

17

   

SECTION 5. AFFIRMATIVE COVENANTS

17

   

5.1 Financial Statements; Reports

17

5.2 Liabilities

18

5.3 ERISA

18

 

 

 

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5.4 Notices

18

5.5 Environmental Matters; Compliance with Laws

19

5.6 Corporate Existence; Properties

21

5.7 Insurance

21

5.8 Books and Records

22

5.9 Location of Business

22

5.10 Group Health Plans

22

5.11 Location of Collateral

22

5.12 APA Covenants

22

   

SECTION 6. NEGATIVE COVENANTS

22

   

6.1 Debt

22

6.2 Liens

23

6.3 Investments, Loans and Advances

23

6.4 Dividends; Distributions; Acquisition of Capital Stock

23

6.5 Disposition of Assets

23

6.6 Continuance of Business

24

6.7 Removal and Protection of Property

24

6.8 Cash Collateral

24

6.9 Handling of Hazardous Substances

24

6.10 Use of Proceeds

24

6.11 APA Negative Covenants

24

   

SECTION 7. EVENTS OF DEFAULT, REMEDIES

24

   

7.1 Events of Default

24

7.2 Remedies

26

7.3 Right of Setoff

28

7.4 No Marshalling, Etc., Required

28

7.5 Site Assessments

28

7.6 Remedies Cumulative

28

   

SECTION 8. MISCELLANEOUS

28

   

8.1 No Waiver; Cumulative Remedies

28

8.2 Notices

29

8.3 Reimbursement of Lender

29

8.4 Payment of Expenses and Taxes

30

8.5 Survival of Representations and Warranties

30

8.6 Successors

30

8.7 Construction

30

8.8 Severability

30

8.9 Indemnity

30

8.10 Waiver of Trial by Jury; Jurisdiction

31

8.11 Actions Against Lender; Release

31

8.12 Performance by Lender

32

8.13 Counterparts

32

8.14 Further Actions

32

8.15 Section 506(c) Waiver

32

 

 

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8.16 Section 510, 544, 547, 548 and 549 Waiver, Etc.

32

8.17 Entire Agreement

32

8.18 Bankruptcy Court Approval

32

 

Table of Schedules

 

Schedule A – Copyrights, Licenses, Patents and Trademarks Schedule 3.8 –
Location of Collateral Schedule 6.2 –

Certain Permitted Encumbrances

 

Table of Exhibits

 

Exhibit A – Final DIP Order Exhibit B – Interim DIP Order

 

 

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POST-PETITION LOAN AND SECURITY AGREEMENT

 

This POST-PETITION LOAN AND SECURITY AGREEMENT (this “Agreement”) is made and
entered into December 15, 2017, between DEXTERA SURGICAL INC., a Delaware
corporation formerly known as “Cardica, Inc.” (“Borrower”), and AESCULAP, INC.,
a California corporation, or its designee (“Lender”).

 

RECITALS

 

WHEREAS, Borrower is a debtor-in-possession under Chapter 11 of the Bankruptcy
Code in a case (the “Reorganization Case”) pending in the United States
Bankruptcy Court for the District of Delaware (together with any other court
having jurisdiction over the Reorganization Case or any proceedings therein from
time to time, the “Bankruptcy Court”), as Case No. 17-12913-KJC. Borrower has
requested that Lender extend financing to Borrower in connection with the
Reorganization Case in accordance with the provisions of this Agreement.

 

WHEREAS, Lender is willing to make the Post-Petition Loan to Borrower, subject
to the terms and conditions of this Agreement and subject to the terms and
conditions set forth in the orders of the Bankruptcy Court approving the
proposed financing.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, hereby agree as follows:

 

SECTION 1.  DEFINITIONS.

 

1.1  General Provisions. Unless expressly provided otherwise in this Agreement
or in the Loan Documents, or unless the context requires otherwise:

 

(a)  all accounting terms used in this Agreement and in the Loan Documents shall
have the meanings given to them in accordance with GAAP;

 

(b)  all terms used herein and in the Loan Documents that are defined in the
UCC, shall have the meanings set forth therein;

 

(c)  all capitalized terms defined in this Agreement shall have the defined
meanings when used in the Loan Documents and in any other documents made or
delivered pursuant to this Agreement;

 

(d)  the singular shall include the plural, the plural shall include the
singular, and the use of any gender shall include all genders;

 

(e)  all references to any particular party defined herein shall be deemed to
refer to each and every person defined herein as such party individually, and to
all of them, collectively, jointly and severally, as though each were named
wherever the applicable defined term is used;

 

 

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(f)  all references to “Sections” and “Subsections”, unless the context to such
reference clearly indicates otherwise, shall refer to provisions of this
Agreement;

 

(g)  all references to time herein shall mean Eastern Standard Time or Eastern
Daylight Time, as then in effect; and

 

(h)  all references to sections, subsections, paragraphs or other provisions of
statutes or regulations shall be deemed to include successor, amended,
renumbered and replacement provisions.

 

1.2  Defined Terms. As used herein, the following terms shall have the meanings
indicated, unless the context otherwise requires:

 

“Account” has the meaning stated in in the UCC, including all rights to payment
for goods sold or leased, or for services rendered.

 

“Accumulated Funding Deficiency” shall mean any accumulated funding deficiency
as defined in ERISA §302(a).

 

“Affiliate” means, with respect to a specified Person, any other Person which
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person; provided
that such Person shall be deemed an Affiliate for only so long as such control
exists. For purposes of this definition and the definition of Related Person,
the term “control” includes, without limitation, the possession, directly or
indirectly, of the power to direct the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.

 

“Agreement” shall mean this Agreement and any future amendments, restatements,
modifications or supplements hereof or hereto.

 

“APA” means the Asset Purchase Agreement between Borrower and the Lender (or an
Affiliate of the Lender) dated December 11, 2017, together with the Schedules
and Exhibits thereto, and any future amendments, restatements, modifications or
supplements thereof or thereto.

 

“Authorized Officer” means, collectively, the President, Chief Financial
Officer, or any other officer of the Borrower designated as an Authorized
Officer in writing to the Lender by the President of the Borrower.

 

“Bankruptcy Code” means the United States Bankruptcy Code, Title 11 of the
United States Code, as amended, or any successor law thereto, and any rules
promulgated in connection therewith.

 

“Bankruptcy Court” has the meaning stated in the Recitals hereof.

 

“Borrower” has the meaning stated in the preamble hereof.

 

“Borrowing Notice” has the meaning stated in Section 2.1(b) hereof.

 

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“Budget” means a thirteen (13) week cash-flow budget of the Borrower, which
shall include a list of expenses to be incurred by the Borrower during such
thirteen (13) week period and a liquidity forecast, in a form acceptable to the
Lender.

 

“Business Day” means any day other than a Saturday, Sunday or legal holiday
under the laws of the Commonwealth of Pennsylvania.

 

“Chattel Paper” has the meaning stated in in the UCC.

 

“Closing Date” means the date the Interim DIP Order is entered.

 

“Code” means the Internal Revenue Code of 1986, as amended, or any successor law
thereto, and any regulations promulgated thereunder.

 

“Collateral” has the meaning stated in Section 2.11 hereof.

 

“Commercial Tort Claim” has the meaning stated in in the UCC.

 

“Committee” has the meaning stated in Section 7.2(b) hereof.

 

“Contamination” means the presence of any Hazardous Substance which may require
Remedial Actions under applicable law.

 

“Contract Rate” means the fixed annual rate of nine and one quarter percent
(9.25%) per annum.

 

“Controlled Group Member” means:

 

(a)  any corporation included with the Borrower in a controlled group of
corporations within the meaning of Code §414(b);

 

(b)  any trade or business (whether or not incorporated) which is under common
control with a Borrower within the meaning of Code §414(c); and

 

(c)  any member of an affiliated service group of which a Borrower is a member
within the meaning of Code §414(m).

 

“Copyrights” means, collectively, all of the Borrower’s right, title and
interest in and to (i) all copyrights (including, without limitation, all sales
literature, promotional literature, software, databases and firmware), whether
statutory or common law, and whether or not the underlying works of authorship
have been published, (ii) all copyright registrations and copyright applications
(including, without limitation, each of the copyright registrations and
copyright applications set forth on Schedule “A” hereto) and all works of
authorship and other intellectual property rights therein, (iii) all copyrights
of works based on, incorporated in, derived from or relating to works covered by
such copyrights, (iv) all rights to make and exploit all derivative works based
on or adopted from works covered by such copyrights, and (v) any extensions or
renewals thereof, including, but not limited to, (A) the right to print, publish
and distribute any of the foregoing, (B) the right to sue or otherwise recover
for any and all past, present and future infringements, misappropriations and
other violations thereof, (C) all income, royalties, damages, settlements and
other payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered into in
connection therewith, and damages, settlements and payments for past or future
infringements thereof) and (D) all rights corresponding thereto throughout the
world and all other rights of the Company of any kind whatsoever accruing
thereunder or pertaining thereto.

 

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“Debt” means, with respect to any Person at any applicable time (without
duplication), (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (iii) all obligations of such Person under conditional sale or
other title retention agreements relating to property purchased by such Person
to the extent of the value of such property (other than customary reservations
or retentions of title under agreements with suppliers entered into in the
ordinary course of business), (iv) all obligations, other than intercompany
items, of such Person issued or assumed as the deferred purchase price of
property or services purchased by such Person which would appear as liabilities
on a balance sheet of such Person, (v) all Debt of others secured by (or for
which the holder of such Debt has an existing right, contingent or otherwise, to
be secured by) any Lien on, or payable out of the proceeds of production from,
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (vi) all Guaranty Obligations of such Person,
(vii) the principal portion of all capital lease obligations, (viii) all
obligations of such Person in respect of interest rate protection agreements,
foreign currency exchange agreements, or other interest or exchange rate or
commodity price hedging agreements, (ix) the maximum amount of all performance
and standby letters of credit issued or bankers’ acceptances facilities created
for the account of such Person and, without duplication, all drafts drawn
thereunder (to the extent unreimbursed), (x) all preferred stock issued by such
Person and required by the terms thereof to be redeemed, or for which mandatory
sinking fund payments are due, by a fixed date, and (xi) any other item of
indebtedness that would be reflected on the liabilities side of a balance sheet
of such Person in accordance with GAAP. The Debt of any Person shall also
include the Debt of any partnership or unincorporated joint venture in which
such Person is legally obligated or has a reasonable expectation of being liable
with respect thereto.

 

“Default” means any event specified in Section 7.1, whether or not any
requirement for notice or lapse of time or any other condition has been
satisfied.

 

“Default Rate” means the Contract Rate plus five percent (5%) per annum.

 

“Deposit Account” has the meaning stated in in the UCC.

 

“Document” has the meaning stated in in the UCC.

 

“Employee Pension Plan” means any employee pension benefit plan as defined in
ERISA § 3(2) and which is (i) maintained by a Borrower or any Controlled Group
Member, and (ii) qualified under Code §401.

 

“Environmental Law” and “Environmental Laws” means, individually and
collectively, as appropriate, any current or future legal requirement of any
Governmental Body pertaining to (i) the protection of health, safety, and the
environment, (ii) the conservation, management or use of natural resources and
wildlife, (iii) the protection or use of surface water and groundwater or
(iv) the management, manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, release, threatened release,
abatement, removal, remediation or handling of, or exposure to, any hazardous or
toxic substance or material and includes, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42 USC 9601 et seq.,
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976 and Hazardous and Solid Waste Amendment of 1984, 42 USC 6901 et
seq., Federal Water Pollution Control Act, as amended by the Clean Water Act of
1977, 33 USC 1251 et seq., Clean Air Act of 1966, as amended, 42 USC 7401 et
seq., Toxic Substances Control Act of 1976, 15 USC 2601 et seq., Hazardous
Materials Transportation Act, 49 USC App. 1801 et seq., Occupational Safety and
Health Act of 1970, as amended, 29 USC 651 et seq., Oil Pollution Act of 1990,
33 USC 2701 et seq., Emergency Planning and Community Right−to−Know Act of 1986,
42 USC 11001 et seq., National Environmental Policy Act of 1969, 42 USC 4321 et
seq., Safe Drinking Water Act of 1974, as amended, 42 USC 300(f) et seq., and
any analogous implementing or successor law, and any amendment, rule,
regulation, order or directive issued thereunder.

 

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“Equipment” has the meaning stated in in the UCC.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any regulations issued thereunder by the United States Department of Labor
or the PBGC.

 

“Event of Default” means any event specified in Section 7.1, provided that any
requirement for notice or lapse of time or any other condition has been
satisfied.

 

“Facility Fee” has the meaning stated in Section 2.15 hereof.

 

“Final DIP Order” means the order of the Bankruptcy Court entered in the
Reorganization Case granting final approval of this Agreement and the other Loan
Documents and granting the Liens and superpriority claims set forth in
Section 2.11, substantially in the form of Exhibit A or otherwise in form and
substance satisfactory to the Borrower and Lender.

 

“Final Order” means an order, judgment or other decree of any Governmental Body
as to which (a) the operation or effect has not been reversed, stayed, modified
or amended, (b) no appeals, motions for reconsideration, petitions seeking the
grant of certiorari or, if certiorari has been granted, grants of certiorari are
pending, and (c) any and all appeal periods and periods to seek the grant of
certiorari have expired

 

“GAAP” means, at any particular time, generally accepted accounting principles
as in effect at such time, provided, however, that, if employment of more than
one principle shall be permissible at such time in respect of a particular
accounting matter, GAAP shall refer to the principle which is then employed by
the Borrower with the agreement of its independent certified public accountants.

 

“General Intangibles” has the meaning stated in in the UCC.

 

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“Goods” has the meaning stated in in the UCC.

 

“Governmental Body” means any federal, state, local, municipal, foreign or other
governmental or quasi-governmental entity or authority of any nature, including
courts and administrative agencies (including the FDA and its equivalent
authority or body in any foreign jurisdiction).

 

“Hazardous Substances” means all materials of any kind which are flammable,
explosive, toxic, radioactive or otherwise hazardous to animal or plant life or
the environment, including, without limitation, “hazardous wastes,” “hazardous
substances” and “contaminants,” as such terms are defined by Environmental Laws.
The term “Hazardous Substances” shall also include: (a) petroleum, crude oil,
gasoline, natural gas, liquefied natural gas, synthetic fuel, and all other
petroleum, oil, or gas based products; (b) nuclear, radioactive, or atomic
substances, mixtures, wastes, compounds, materials, elements, products or
matters; (c) asbestos, asbestos containing materials, polychlorinated biphenyls,
and (d) any other substance, mixture, waste, compound, material, element,
product or matter that presents an imminent and substantial danger to the public
health or welfare or to the environment upon its Release.

 

“Instrument” has the meaning stated in in the UCC.

 

“Intellectual Property Collateral” means, collectively, (i) Copyrights,
(ii) Patents, (iii) Proprietary Works, (iv) Trademarks, (v) Software, and
(vi) Licenses.

 

“Interim DIP Order” means that certain order of the Bankruptcy Court authorizing
the Borrower to enter into this Agreement subject to certain limitations
applicable until entry of the Final DIP Order, substantially in the form of
Exhibit B or otherwise in form and substance satisfactory to the Borrower and
Lender. .

 

“Investment Property” has the meaning stated in in the UCC.

 

“Law(s)” shall mean any federal, state, local and other law(s) (including common
law), constitution, statute, treaty, regulation, rule, ordinance, opinion,
issued guidance, release, ruling, order, executive order, injunction, writ,
decree, bond judgment authorization or approval, lien or award of or any
settlement arrangement, by agreement, consent or otherwise, with any
Governmental Body, foreign or domestic.

 

“Lender” has the meaning stated in the preamble hereof.

 

“Letter-of-Credit Right” has the meaning stated in in the UCC.

 

“Licenses” means, collectively, all of the Borrower’s right, title and interest
in and to all license agreements with any other Person in connection with any of
the Patents, Proprietary Works, Copyrights, and/or Trademarks, whether the
Borrower is a licensor or a licensee under any such license agreement
(including, without limitation, each license set forth on Schedule “A” hereto),
and any right to prepare for sale, sell and advertise for sale all Inventory now
or hereafter owned by the Borrower and now or hereafter covered by such
licenses, including, but not limited to, (i) the right to sue or otherwise
recover for any and all past, present and future breaches and other violations
thereof, (ii) all income, royalties, damages, settlements and other payments now
and hereafter due and/or payable with respect thereto (including, without
limitation, damages, settlements and payments for past or future breaches and
infringements thereof) and (iii) all rights of the Borrower corresponding
thereto throughout the world and all other rights of the Borrower of any kind
whatsoever accruing thereunder or pertaining thereto

 

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“Lien” means, collectively, any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind, including, without
limitation, any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, and any lease in the nature thereof.

 

“Line of Credit” means the non-revolving line of credit facility described in
Section 2.1.

 

“Line of Credit Commitment” means, as at any applicable time, the Borrower’
maximum credit availability under the Line of Credit, as established in
Section 2.1(a) whether or not then fully extended.

 

“Line of Credit Note” means the promissory note described in Section 2.2 and any
future amendments, restatements, modifications or supplements thereof or
thereto.

 

“Line of Credit Termination Date” means the earliest of (i) May 15, 2018,
(ii) Closing under the APA, (iii) termination of the APA, other than as a result
of the acceptance by the Borrower of a Competing Bid (as defined in the APA),
(iv) sale of any material amount of the Purchased Assets to a buyer other than
the Lender, and (v) the occurrence of an Event of Default.

 

“Loan” means the non-revolving line of credit facility made available to the
Borrower pursuant to this Agreement.

 

“Loan Account” means, collectively, the account or accounts of the Borrower on
the books of Lender in which are recorded the Loan and the payments of principal
interest and other charges made by the Borrower to Lender thereon.

 

“Loan Documents” means this Agreement, the Line of Credit Note and all other
documents executed and delivered to the Lender by or on behalf of the Borrower
in connection therewith and any modifications, amendments, restatements,
substitutions and replacements of or for any of the foregoing.

 

“Obligations” means, collectively, all liabilities, duties and obligations of
the Borrower to the Lender with respect to any covenants, representations or
warranties herein or in the Loan Documents, with respect to the principal of and
interest on the Loan, the Facility Fee and all other present and future fixed
and/or contingent obligations of the Borrower to the Lender hereunder and under
the Loan Documents.

 

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“Patents” means, collectively, all of the Borrower’s right, title and interest
in and to all patents, patent applications and patentable inventions (including,
without limitation, each patent and patent application set forth on Schedule “A”
hereto), including, but not limited to, (i) all inventions and improvements
described and claimed therein, (ii) the right to sue or otherwise recover for
any infringements and other violations thereof, (iii) all income, royalties,
damages, settlements and other payments now and hereafter due and/or payable
with respect thereto (including, without limitation, payments under all licenses
entered into in connection therewith, and damages, settlements and payments for
past and future infringements thereof) and (iv) all rights corresponding thereto
throughout the world and all reissues, divisions, continuations,
continuations-in-part, provisional applications, substitutes, renewals and
extensions thereof, all improvements thereon and all other rights of the
Borrower of any kind whatsoever accruing thereunder or pertaining thereto.

 

“Payment Intangible” has the meaning stated in in the UCC.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Permitted Debt” means any and all Debt permitted under Section 6.1.

 

“Permitted Encumbrances” has the meaning stated in Section 6.2(a) hereof.

 

“Permitted Expense” has the meaning stated in Section 3.6 hereof.

 

“Petition Date” means the date of filing of the Petition for Relief commencing
the Reorganization Case.

 

“Person” means an individual, a corporation, a partnership, a joint venture, a
trust or unincorporated organization, a joint stock company or other similar
organization, a government or any political subdivision thereof, or any other
legal entity.

 

“Post-Petition Obligation” means an obligation of the Borrower which is not a
Pre-Petition Obligation.

 

“Pre-Petition Obligation” means any obligation of the Borrower arising, or
deemed to have arisen pursuant to the Bankruptcy Code, before the Petition Date.

 

“Proceeds” means, collectively, whatever is received when any of the Collateral
is sold, exchanged, leased, collected, or otherwise disposed of, including cash,
insurance proceeds, negotiable instruments and other instruments for the payment
of money, chattel paper, security agreements, other documents, and other noncash
proceeds.

 

“Purchased Assets” means the assets to be sold by the Borrower to the Lender or
an Affiliate of the Lender pursuant to the APA.

 

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, or dumping.

 

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“Remedial Actions” means:

 

(a)  clean-up or removal of Hazardous Substances;

 

(b)  such actions as may be necessary to monitor, assess, or evaluate the
Release or threatened Release of Hazardous Substances;

 

(c)  proper disposal or removal of Hazardous Substances;

 

(d)  the taking of such other actions as may be necessary to prevent, minimize,
or mitigate the damages caused by a Release or threatened Release of Hazardous
Substances to the public health or welfare or to the environment; and

 

(e)  the providing of emergency assistance after a Release.

 

Remedial Actions include, but are not limited to, such actions at the location
of a Release as: storage; confinement; perimeter protection using dikes,
trenches, or ditches; clay cover; neutralization; clean-up of Hazardous
Substances or contaminated materials; recycling or reuse; diversion;
destruction; segregation of reactive wastes; dredging or excavation; repair or
replacement of leaking containers; collection of leachate and runoff; onsite
treatment or incineration; providing alternative water supplies; and any
monitoring reasonably required to assure that such actions protect the public
health and welfare and the environment.

 

“Reorganization” means reorganization as defined in ERISA §4241(a).

 

“Reorganization Case” has the meaning stated in the Recitals hereof.

 

“Reportable Event” means with respect to any Employee Pension Plan, an event
described in ERISA §4043(b).

 

“Security Documents” means, individually and collectively, any instruments now
or hereafter executed and delivered to the Lender to secure, or to assure,
payment or performance, of the Obligations, and any future amendments,
restatements, modifications or supplements thereof or thereto.

 

“Site Assessments” has the meaning stated in Section 7.5 hereof.

 

“Site Reviewers” has the meaning stated in Section 7.5 hereof.

 

“Software” has the meaning stated in in the UCC.

 

“Trademarks” means, collectively, all of the Borrower’s right, title and
interest in and to (i) all trademarks, service marks, trade names, corporate
names, Borrower names, business names, fictitious names, trade dress, service
marks, trade styles, logos and other designs or sources of business identifiers
or other indicia of trade origin, (ii) all trademark and service mark
registrations and applications for trademark or service mark registrations
(including, without limitation, each registration and application set forth on
Schedule “A” hereto) and (iii) any and all extensions and renewals of or with
respect to any of the foregoing, including, but not limited to, (A) the right to
sue or otherwise recover for any and all past, present and future infringements,
misappropriations and other violations thereof, (B) all income, royalties,
damages, settlements and other payments now and hereafter due and/or payable
with respect thereto (including, without limitation, payments under all licenses
entered into in connection therewith, and damages, settlements and payments for
past or future infringements thereof) and (C) all rights of the Borrower
corresponding thereto throughout the world and all other rights of the Borrower
of any kind whatsoever accruing thereunder or pertaining thereto, together in
each case with the goodwill of the business connected with the use of, and
symbolized by, any or all of the foregoing throughout the world, but excluding
any United States intent-to-use trademark application prior to the filing of a
Statement of Use or an amendment to allege use in connection therewith to the
extent that a valid lien and security interest may not be taken in such an
intent-to-use application under applicable law.

 

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“UCC” means the Uniform Commercial Code as in effect in the State of Delaware
or, when the laws of any other jurisdiction govern the perfection or enforcement
of any Lien, the Uniform Commercial Code of such jurisdiction.

 

“Withdrawal Liability” means any withdrawal liability, as defined in ERISA
§4201.

 

SECTION 2.  AMOUNT AND TERMS OF LOAN.

 

2.1  Line of Credit.

 

(a)  Subject to, and in accordance with, the terms and conditions of this
Agreement, the Lender agrees to extend credit to the Borrower by making loans to
it, from time to time during the period commencing on the Closing Date and
ending on the Line of Credit Termination Date, in an aggregate outstanding
amount that shall not exceed, at any one time, the lesser of:

 

(i)  One Million Five Hundred Thousand Dollars ($1,500,000.00) in principal; or

 

(ii)  (A) Prior to entry of the Final DIP Order, the amount authorized by the
Interim DIP Order, and (B) on and after the date of entry of the Final DIP
Order, the Final DIP Order.

 

(b)  The Borrower shall notify the Lender in writing at least one Business Day
in advance of the date of each proposed borrowing under the Line of Credit,
which borrowing date shall also be a Business Day. Each borrowing request
hereunder shall be made pursuant to a borrowing notice, in form and substance
acceptable to the Borrower and Lender (a “Borrowing Notice”). Each such
borrowing shall be in an amount which does not exceed (a) Three Hundred Thousand
Dollars ($300,000.00), minus (b) the Borrower’s projected book balance of cash
and cash equivalents as of the close of business on Friday of the week following
the date of such borrowing notice (without taking into account any such
borrowing).  The Borrower shall be limited to one borrowing per week.  The
Borrower authorize and direct the Lender to disburse the proceeds of each such
borrowing by wire transfer to Borrower’s demand deposit account maintained with
Silicon Valley Bank.

 

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(c)  The Line of Credit Termination Date may be extended or renewed by the
Lender, in its sole discretion, on a day-to-day basis or otherwise, based on a
letter to such effect from the Lender to the Borrower or by a written agreement
between the parties hereto; provided, however, the Lender shall have no duty or
obligation, express or implied, to extend the Line of Credit Termination Date or
consider any request for such an extension and further provided that an
extension of the Line of Credit Termination Date after the occurrence of a
Default or Event of Default shall not constitute a waiver of such Default or
Event of Default.

 

(d)  Notwithstanding anything contained herein to the contrary, the Line of
Credit shall be a non-revolving loan facility and, therefore, each advance under
the Line of Credit shall permanently reduce, dollar for dollar, the Borrower’s
credit availability under the Line of Credit and the Borrower will not have the
ability to re-borrow hereunder.

 

2.2  Line of Credit Note. On the Closing Date, the Borrower shall execute and
deliver to the Lender its promissory note, which shall evidence the Borrower’s
obligation to repay the principal of, interest on, and other amounts due in
connection with the Line of Credit and the Obligations, and which shall:

 

(a)  be dated the Closing Date and be payable to the Lender’s order in the
principal amount of One Million Five Hundred Thousand Dollars ($1,500,000.00).

 

(b)  require the payment of interest on the unpaid principal amount of any funds
advanced and outstanding under the Line of Credit from the dates of such
advances and, prior to the occurrence of an Event of Default, at an annual rate
equal to the Contract Rate and, on and after (i) Line of Credit Termination
Date, or (ii) the date of occurrence of an Event of Default, at an annual rate
equal to the Default Rate, in each case whether prior to or after judgment
against the Borrower;

 

(c)  not require any payment of principal or interest prior to the Line of
Credit Termination Date and be payable in full as to the entire unpaid principal
balance, all accrued interest and other sums due thereunder on the Line of
Credit Termination Date; and

 

(d)  be secured by the Security Documents and the Collateral.

 

2.3  Loan Account. The Lender shall record in one or more Loan Accounts, the
Loans, all advances to and all payments made by Borrower on account of the
Loans, and all other appropriate debits and credits.

 

2.4  Computation of Interest. Interest shall be calculated on the basis of a
365-day year for actual days elapsed. Any change in the interest rate on the
Note resulting from a change from the Contract Rate to the Default Rate shall
become effective as of the opening of business on the day on which such change
shall occur.

 

2.5  Maximum Legal Rate. Borrower shall not be obligated to pay and Lender shall
not collect interest on any Obligation at a rate in excess of the maximum
permitted by law or the maximum that will not subject Lender to any civil or
criminal penalties. If, because of the acceleration of maturity, the payment of
interest in advance or any other reason, the Borrower is required, under the
provisions of any Loan Document or otherwise, to pay interest at a rate in
excess of such maximum rate, the rate of interest under such provisions shall
immediately and automatically be reduced to such maximum rate, and any payment
made in excess of such maximum rate, together with interest thereon at the rate
provided herein from the date of such payment, shall be immediately and
automatically applied to the reduction of the unpaid principal balance of the
Obligations as of the date on which such excess payment was made. If the amount
to be so applied to reduction of the unpaid principal balance exceeds the unpaid
principal balance, the amount of such excess shall be refunded by Lender to
Borrower.

 

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2.6  Payments. All payments by the Borrower hereunder shall be made at the
Lender’s address set forth in Section 8.2, or such other place or places as the
Lender may direct, prior to 5:00 P.M. on the date of payment, in lawful money of
the United States of America, and in immediately available funds.

 

2.7  Application of Payments. All payments shall be applied first to the payment
in full of any expenses incurred by the Lender and permitted to be charged to
the Borrower, including (without limitation) reasonable attorneys’ fees, then to
the payment in full of any late charges, then to the payment in full of accrued,
unpaid interest and finally to the reduction of the unpaid principal balance.
The portion of any payment applied to the reduction of the unpaid principal
balance shall permanently reduce the Line of Credit Commitment by the amount of
such payment and may not be re-borrowed.

 

2.8  Voluntary and Mandatory Payments. The Obligations may pre-paid, in whole or
in part and without penalty, at any time prior to the Line of Credit Termination
Date. If the unpaid principal balance of the Line of Credit Note thereon exceeds
the Line of Credit Commitment at any time, the Borrower shall immediately pay to
the Lender for application to the Line of Credit Note an amount equal to such
excess. All Obligations shall be due and payable in full on the Line of Credit
Termination Date.

 

2.9  Additional Security. In addition to the security provided herein and in the
Security Documents, Borrower also grants Lender, as further security for payment
of the Obligations, a lien upon and security interest in any and all debts or
other obligations Lender or any Affiliate of Lender may owe to Borrower from
time to time.

 

2.10  Administrative Status of Obligations. In addition to being secured by the
Collateral, the Obligations shall be allowed administrative expenses in the
Reorganization Case, pursuant to Section 503(b)(1) of the Bankruptcy Code, with
priority over all other administrative expenses, pursuant to Section 364(c)(1)
of the Bankruptcy Code.

 

2.11  Grant of Security Interest. To secure the payment to the Lender and the
prompt performance of the Obligations, the Borrower hereby grants to Lender
(i) a first priority security interest in all of the Borrower’s assets not
subject to Permitted Encumbrances, including all such presently owned or
hereafter acquired Accounts, Chattel Paper, Commercial Tort Claims, Deposit
Accounts, Documents, Equipment, Fixtures, General Intangibles, all Intellectual
Property Collateral, Goods, Inventory, Instruments, Investment Property, Letter
of Credit Rights, Payment Intangible, Supporting Obligations, insurance
policies, all books and records (including customer lists, files,
correspondence, tapes, computer programs, print-outs and computer records)
pertaining to the foregoing, and all Products and Proceeds (including cash
collateral, as defined in Section 363 of the Bankruptcy Code and all accessions
to, substitutions for, and all replacements, products, and cash and non-cash
proceeds of the foregoing, including proceeds of and unearned premiums with
respect to insurance policies, and claims against any Person for loss, damage or
destruction of any Collateral) but excluding all causes of action under
Sections 544, 545, 547, 548, 549 or 550 of the Bankruptcy Code and the proceeds
thereof, and (ii) a security interest in all assets of the Borrower subject to
Permitted Encumbrances, junior only to such Permitted Encumbrances
(collectively, items (i) and (ii) above are referred to as the “Collateral”).
The Borrower agrees that the aforesaid grant of security interests is intended
as a contemporaneous exchange for value given to the Borrower.

 

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2.12  Perfection of Security Interests. The Interim DIP Order and the Final DIP
Order shall, without the necessity of any further action or filings by the
Lender, the Debtor or any other Person, perfect the Lender’s security interests
in the Collateral. Notwithstanding the foregoing, the Borrower shall, at its
cost and expense, execute and deliver to Lender, concurrently with the execution
of this Agreement, and at any time or times hereafter at the request of the
Lender, all financing statements and all other agreements, instruments and
documents that the Lender may reasonably request, in form and substance
satisfactory to the Lender, and shall take any and all other steps reasonably
requested by the Lender, in order to perfect and maintain the security interest
and liens granted herein by the Borrower to the Lender and in order to fully
consummate all of the transactions contemplated herein and under any other Loan
Documents.

 

2.13  Additional Collateral; Right of Set-Off. Collateral of any nature and the
cash and noncash Proceeds thereof owned by the Borrower or in which the Borrower
has an interest, which now or hereafter are in the possession or control of the
Lender, shall at all times constitute additional security and Collateral for the
Obligations and may be set off against the Obligations upon the occurrence of an
Event of Default.

 

2.14  Right to Credit Bid. In connection with any sale of Collateral, the Lender
shall have the right to credit bid the Obligations.

 

2.15  Facility Fee. On the Line of Credit Termination Date, the Borrower shall
pay to the Lender an amount equal to one percent (1%) of the amount of the Line
of Credit Commitment. The amount payable by the Borrower pursuant to this
Section 2.15 is referred to herein as the “Facility Fee”).

 

SECTION 3.  BORROWER REPRESENTATIONS AND WARRANTIES. To induce Lender to enter
into this Agreement and to make the Loans, the Borrower represents and warrants
to Lender that:

 

3.1  Organization and Qualification. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified as a foreign corporation
and in good standing under the laws of each jurisdiction in which the conduct of
its business or the ownership of its assets requires such qualification.

 

3.2  Power and Authority. Subject to the Bankruptcy Court approval of this
Agreement, the Borrower has the corporate power to execute, deliver and perform
under, the Loan Documents, to borrow under this Agreement and to create the
collateral security interests for which the Security Documents provide, and has
taken all necessary corporate action to authorize the borrowings hereunder on
the terms and conditions of this Agreement and the execution and delivery of,
and performance under, the Loan Documents. Other than Bankruptcy Court approval
of this Agreement, no consent of any other party (including members of the
Borrower) and no consent, license, approval or authorization of, or registration
or declaration with, any governmental authority, bureau or agency is required in
connection with the execution, delivery, performance, validity or enforceability
of the Loan Documents.

 

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3.3  Enforceability. Subject to the Bankruptcy Court approval of this Agreement,
the Loan Documents, when executed and delivered to Lender pursuant to the
provisions of this Agreement, will constitute valid obligations of the Borrower
legally binding upon it and enforceable in accordance with their respective
terms, except as enforceability of the foregoing may be limited by bankruptcy,
insolvency or other laws of general application relating to or affecting the
enforcement of creditors’ rights.

 

3.4  Conflict with Other Instruments. Subject to the Bankruptcy Court approval
of this Agreement, the execution and delivery of, and performance under, the
Loan Documents will not violate or contravene any provision of any existing law
or regulation or decree of any court, governmental authority, bureau or agency
having jurisdiction in the premises or of the Articles or Certificate of
Incorporation, Charter or By-Laws of the Borrower.

 

3.5  Title to Collateral. The Borrower has good and marketable title in fee to
the Collateral, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances except Permitted Encumbrances.

 

3.6  Use of Proceeds. From and after the Closing Date, the Borrower agree that
amounts drawn on the Line of Credit may be used only to pay expenses provided
for in the Budget (with a twenty percent (20%) cumulative variance on a line
item basis (a “Permitted Variance”). In no circumstance shall amounts drawn on
the Line of Credit or any cash Collateral for the Obligations be used for
expenses incurred to investigate or to contest in any adversary proceeding or
any other action (a) the validity, extent, attachment, perfection or priority of
the Liens created by this Agreement or the Loan Documents, (b) the validity,
binding effect or enforceability of this Agreement or the Loan Documents or the
Line of Credit Note, or (c) any other rights or interests of the Lender under
the Loan Documents (those expenses set forth in clauses (i) through (iv) above
and not excluded pursuant to the foregoing proviso are hereinafter collectively
referred to as the “Permitted Expenses”). Nothing herein shall in any way
prejudice or prevent the Lender from objecting, for any reason, to any
applications made for interim or final allowances of compensation for services
rendered or reimbursement of expenses incurred under section 330 or 331 of the
Bankruptcy Code.

 

3.7  No Notices; No Violations. Neither the Borrower nor any Subsidiary has
received any notice from any Governmental Body or any insurance or inspection
body to the effect that any of its properties, facilities, equipment or business
procedures or practices fail to comply with any applicable Law, including any
ordinance, regulation, building or zoning Law, judicial or administrative
determination, or any other requirements of any such Governmental Body, and the
Borrower and all Subsidiaries, and all such properties, facilities, equipment,
procedures and practices, comply in all material respects with all such Laws,
including ERISA and any Environmental Laws.

 

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3.8  Margin Regulation; Investment Company Act.

 

(a)  The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying “margin stock” within the meaning of Regulation U. No part of the
proceeds of the Loan will be used, directly, or indirectly, for the purpose of
purchasing or carrying any “margin stock” within the meaning of Regulation U.
None of the transactions contemplated by this Agreement (including the direct or
indirect use of the proceeds of the Loan) will violate or result in a violation
of Regulation T, U or X.

 

(b)  The Borrower is not an “investment company” registered or required to be
registered under the Investment Company Act of 1940, as amended or
(ii) controlled by such a company.

 

3.9  Location of Collateral. The Collateral and all of the Borrower’ business
records are situated at the locations set forth in Schedule 3.8 attached hereto
and made a part hereof, and the Borrower’ places of business are all listed
thereon.

 

3.10  Broker’s Commissions. No brokerage commission or similar compensation is
due or will become due to any Person by reason of the making of the Loan.

 

3.11  APA Representations. All of the representations made by the Borrower to
the Lender in the APA are true and correct.

 

SECTION 4.  CONDITIONS OF BORROWING.

 

4.1  Initial Advance. As a condition precedent to the Lender’s obligation to
make the initial advance under the Line of Credit, the following conditions
shall all be satisfied:

 

(a)  Loan Documents. The Borrower shall have delivered or caused to be delivered
to the Lender duly executed copies of each of the Loan Documents.

 

(b)  Financing Statements. A financing statement describing the Collateral shall
have been filed in each such jurisdiction and in each such office as shall have
been required by the Lender.

 

(c)  Borrower’ Authorizations.

 

(i)  The Borrower shall have delivered to Lender:

 

(A)  a copy, certified by the Secretary of the Borrower, of the resolutions of
the Board of Directors of the Borrower authorizing and approving the execution
and delivery of and performance under this Agreement and the other Loan
Documents, the borrowings provided for hereunder and the creation of the
collateral security interests for which the Security Documents provide;

 

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(B)  a copy of the Borrower’s articles or certificate of incorporation,
certified by the Secretary of State of the state of the Borrower’s incorporation
as of a recent date;

 

(C)  a good standing or subsistence certificate with respect to the Borrower
certified by the Secretary of State of the state of the Borrower’s incorporation
as of a recent date;

 

(D)  a copy of the Borrower’s By-Laws, as currently in effect, certified by such
Borrower’s Secretary or Assistant Secretary;

 

(ii)  The Secretary of the Borrower shall have duly executed and delivered to
the Lender a certificate of incumbency, in form and substance satisfactory to
the Lender.

 

(d)  Representations. The representations and warranties contained in Section 3
hereof shall be true and correct on and as of the date of the making of the
Loans and the date of any advance under the Line of Credit with the same effect
as if made on and as of such date, and no Event of Default or Default shall be
in existence on the date of the making of Loans or such advance or shall occur
as a result thereof.

 

(e)  No Litigation. No suit, action, investigation, inquiry or other proceeding
by or before any arbitrator or any governmental authority shall be pending and
no preliminary or permanent injunction or order by a state or federal court
shall have been entered (i) in connection with this Agreement, the other Loan
Documents, the APA or any of the transactions contemplated hereby or thereby, or
(ii) which, in the reasonable judgment of the Lender, could reasonably be
expected to have a material adverse effect upon the Borrower.

 

(f)  Lien Searches. The Lender shall have received such secured transaction,
judgment and docket searches as it deems appropriate.

 

(g)  Insurance. The Lender shall have received certificates or policies
evidencing the insurance required under Section 5.7.

 

(h)  No Violation. Subject to Bankruptcy Court approval of this Agreement, the
completion of the transactions contemplated hereby and by the Loan Documents
shall not contravene, violate or conflict with, nor involve the Lender in
violation of, any law, rule, or regulation applicable to any of them.

 

(i)  Legal Matters. All legal matters incident to the transactions contemplated
by this Agreement shall be satisfactory to counsel for the Lender.

 

(j)  Interim DIP Order. The Bankruptcy Court shall have entered the Interim DIP
Order in form and substance satisfactory to the Lender and its counsel and such
shall be in full force and effect and shall not have been vacated, reversed,
modified, amended or stayed.

 

(k)  Execution of APA.   The Borrower and the Lender shall have executed the APA
and the APA shall not have been terminated.

 

(l)  Cash Management System. The Borrower shall have implemented a cash
management system satisfactory, in form and substance, to the Lender.

 

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(m)  Closing Date Budget. The Borrower shall have delivered to the Lender a
Budget setting forth: (a) projected weekly operating cash receipts for each
week, (b) projected weekly disbursements (including, specifically, from advances
under the Line of Credit) for each week, and (c) a liquidity forecast of the
Borrower, for each week commencing with the week ending as of December 15, 2017
(collectively, the “Projected Information”).    

 

(n)  Borrowing Notice. The Borrower shall have executed and delivered to the
Lender a Borrowing Notice.

 

(o)  No Default. No Default or Event of Default shall exist as on the date of
such initial advance or shall occur as a result of making such initial advance.

 

4.2  Subsequent Advances. As a condition precedent to the Lenders’ obligation to
make any advance after the initial advance, the following conditions shall all
be satisfied on the date of such Advance:

 

(a)  No Default. No Default or Event of Default shall exist on the date of such
advance or shall occur as the result of making such advance.

 

(b)  Representations. Without limiting the generality of Section 4.2(a), the
representations and warranties contained in Section 3 shall be true and correct
on and as of the date of the making of such advance with the same effect as if
made on and as of such date.

 

(c)  No Litigation. No litigation, investigation, or proceeding before or by any
arbitrator or governmental authority shall be pending and no preliminary or
permanent injunction or order by a state or federal court shall have been
entered (i) in connection with this Agreement, the other Loan Documents, the APA
or any of the transactions contemplated hereby or thereby, or (ii) which, in the
reasonable judgment of the Lender, could reasonably be expected to have a
material adverse effect on the Borrower.

 

(d)  Borrowing Notice. The Borrower shall have executed and delivered to the
Lender a Borrowing Notice.

 

(e)  Non-Termination of APA. The APA shall not have been terminated.

 

(f)  Additional Matters. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall be reasonably
satisfactory, in form and substance, to the Lender.

 

4.3  Waiver of Conditions. The Lender may waive any condition in whole or in
part.

 

SECTION 5.  AFFIRMATIVE COVENANTS. The Borrower covenants and agrees that from
and after the Closing Date and so long as any of the Obligations remain
outstanding and unpaid, in whole or in part, the Borrower will observe the
following covenants, unless the Lender shall otherwise consent in writing:

 

5.1  Financial Statements; Reports. The Borrower will furnish to Lender:

 

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(a)  on or prior to Tuesday of each week following the Closing Date, an updated
Budget, in form and substance satisfactory to Lender, prepared on a cumulative,
weekly roll forward basis, together with a report that sets forth for the
immediately preceding four (4) week period a comparison of the actual cash
receipts and cash disbursements to the Projected Information for such four (4)
week period set forth in the Budget on a cumulative, weekly roll-forward basis,
together with a certification from an authorized officer of Borrower that no
material budget deviation has occurred or if a material budget deviation has
occurred, a detailed explanation of such occurrence; and

 

(b)   from time to time, such financial and other information as Lender may
reasonably request.

 

5.2  Liabilities. The Borrower and any Subsidiaries will pay and discharge, at
or before their maturity, all their respective Post-Petition Obligations
(including, without limitation, tax liabilities and all employee wages as
provided in the Fair Labor Standards Act, 29 U.S.C. §§206-207 and any successor
statute), except those which may be contested in good faith. .

 

5.3  ERISA.

 

(a)  The Borrower will furnish to Lender (i) within five (5) days after it has
reason to know that any Reportable Event has occurred with respect to any
Employee Pension Plan or that the PBGC has instituted or will institute
proceedings under Title IV of ERISA to terminate any Employee Pension Plan or to
appoint a trustee to administer any Employee Pension Plan, a statement setting
forth the details as to such Reportable Event, termination or appointment
proceedings and the action which it (or Employee Pension Plan sponsor other than
the Borrower) proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event given to PBGC if a copy of such notice is
available to the Borrower or any of its Controlled Group Members; and
(ii) promptly after receipt thereof, a copy of any notice the Borrower or any of
its Controlled Group Members or the sponsor of any Employee Pension Plan
received from PBGC or the Internal Revenue Service which sets forth or proposes
any action or determination with respect to such Employee Pension Plan.

 

(b)  The Borrower will notify Lender of (i) any excise taxes which have been
assessed or which the Borrower or any of its Controlled Group Members have
reason to believe may be assessed against the Borrower or any of its Controlled
Group Members by the Internal Revenue Service with respect to any Employee
Pension Plan or (ii) any revocation of qualification under Code §401 or §403(b)
which has occurred or which the Borrower or any of its Controlled Group Members
have reason to believe may occur with respect to any Employee Pension Plan.

 

5.4  Notices. The Borrower will promptly give notice in writing to Lender of the
occurrence of any of the following:

 

(a)  any Event of Default or Default under this Agreement, or any event of
default or similar occurrence under any instrument or other agreement of the
Borrower entitling any Person to accelerate the maturity of any obligation of
the Borrower or to exercise any other remedy against the Borrower;

 

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(b)  any strike, lock-out, boycott or any other labor trouble;

 

(c)  the commencement of any material litigation, proceeding or dispute
affecting the Borrower or any material dispute between the Borrower and any
Person;

 

(d)  any material and adverse change in the financial position, operations or
business of the Borrower; or

 

any changes in the personnel holding the following positions with the Borrower
at the time of closing: President, Chief Financial Officer and Chairman of the
Board of Directors.

 

5.5  Environmental Matters; Compliance with Laws.

 

(a)  Borrower, and its Subsidiaries, shall comply, and cause all properties,
assets, and operations owned or used by such Borrower and its Subsidiaries to
comply, with (i) all Laws, including, without limitation, all Environmental Laws
and all other applicable zoning, occupational safety, health, employment,
discrimination, labor and other Laws and regulations, (ii) the provisions and
requirements of all franchises, licenses, permits and certificates of compliance
and approvals issued by Governmental Bodies and with other like grants of
authority held by the Borrower or its Subsidiaries in connection with its
business, and (iii)  all applicable material decrees, orders and judgments.

 

(b)  Borrower shall promptly notify the Lenders in reasonable detail once it is
aware of any failure by the Borrower or its Subsidiaries to comply with or
perform or any breach or violation by the Borrower or its Subsidiaries in
respect of any of the matters compliance with which is required under
Section 5.5(a).

 

(c)  The Borrower shall:

 

(i)  immediately notify the Lender (and any other person that the Borrower is
required to notify pursuant to any applicable laws) once it is aware of a
Release or threatened Release of Hazardous Substances on, from, or near any of
the properties owned or used by the Borrower which might cause Contamination;

 

(ii)  immediately notify the Lender once an environmental investigation or
clean-up proceeding is instituted by any Person in connection with such
properties;

 

(iii)  immediately notify the Lender of any citation, notification, complaint,
or violation which the Borrower receives from any Person which relates to or
pertains to the making, storing, handling, treating, disposing, generating,
transporting or Release of any Hazardous Substances;

 

(iv)  promptly upon the written request of the Lender, permit the Lender, its
agents, contractors and other representatives, to enter into any property owned
or used by the Borrower in order to make such report or assessment, and at such
other times and as often as the Lender may reasonably request, the Borrower will
make available at their offices to the Lender or its representatives such
historical and operational information (including the results of all samples
sent for analysis), correspondence with official bodies, and environmental
reviews conducted prior to and after the Closing Date regarding its properties
as are within the possession, custody or control of the Borrower or which are
reasonably available to it, and

 

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(v)  make appropriate personnel employed by the Borrower having knowledge of
such matters available for meetings with the Lender or its representatives; and

 

(vi)  comply, and cause all properties, assets, and operations owned or used by
the Borrower to comply, with all applicable federal, state, local and other
environmental, zoning, occupational safety, health, employment, discrimination,
labor and other laws and regulations.

 

(d)  If the Borrower shall fail to fully execute and complete any requisite
Remedial Action, the Lender may, but is not obligated to, make advances or
payments toward performance or satisfaction of such Remedial Actions.

 

(e)  If the Lender acquires equitable or legal title to any of the Borrower’s
property as a result of enforcement of remedies hereunder or under any other
Loan Document, the Lender does not accept and shall not bear (nor shall any
assignee or transferee of the Lender accept or bear) any responsibility for any
Hazardous Substances in or about such property or for the actual or threatened
Release thereof from such property. No provisions of the Loan Documents shall be
interpreted to absolve or release the Borrower from any liability or
responsibility which they may have to any Person, under any local, state or
federal statute or regulation, for Remedial Actions with respect to any such
Hazardous Substances or for the actual or threatened Release of any such
Hazardous Substances.

 

(f)  The Borrower shall defend, indemnify the Lender and hold the Lender
harmless from and against all loss, liability, damage, cost, and expense,
including without limitation, reasonable attorneys fees, fines, or other civil
and criminal penalties or payments, for failure of the Collateral or any other
operations, assets or property owned or used by the Borrower to comply in all
respects with all environmental and other laws, caused, in whole or in part,
regardless of fault, by the Borrower or by any past or present owner, occupier,
tenant, subtenant, licensee, guest or other person provided, the Borrower shall
not be liable for any loss, liability, damage, cost or expense under this
Section 5.5(f) caused by the gross negligence or willful misconduct of the
Lender. The provisions of this Section 5.5(f) shall survive payoff, release,
foreclosure, or other disposition of this Agreement, the Collateral, or such
other properties hereunder or otherwise. The Borrower shall remain liable
hereunder regardless of any other provisions hereof which may limit the
Borrower’ liability.

 

(g)  All sums advanced or paid by the Lender under this Section 5.5, including
sums so advanced or paid in connection with any judicial or administrative
investigation or proceeding relating thereto, and including, without limitation,
reasonable attorneys’ fees, fines, or other penalties or payments, and all of
the Borrower’ obligations to defend, indemnify and hold harmless the Lender,
shall be deemed to be advances under the Line of Credit and shall be at once
repayable. The Borrower’ obligations with respect thereto shall be evidenced by,
and shall bear interest at the highest rate provided in the Line of Credit Note
and shall be secured and guaranteed, as the case may be, by the Security
Documents.

 

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5.6  Corporate Existence; Properties. The Borrower will not change its name and
the Borrower will maintain:

 

(a)  its corporate existence and its qualification to do business and good
standing in each jurisdiction in which qualification is necessary for the proper
conduct of its businesses;

 

(b)  all licenses, permits and other authorizations necessary for the ownership
and operation of its properties and businesses; and

 

(c)  its assets and properties (including all of the Collateral) in
substantially the state of repair, order and condition as on the date hereof,
reasonable wear and tear or loss by casualty excepted.

 

5.7  Insurance.

 

(a)  The Borrower shall carry at all times insurance covering risks, in amounts
at least equal to and subject to terms no less favorable than the insurance
maintained by the Borrower as of the Petition Date, and pay all premiums on the
policies for such insurance when and as they become due and do all other things
necessary to maintain such policies in full force and effect. The Borrower shall
from time to time, upon request by the Lender, promptly furnish or cause to be
furnished to the Lender evidence, in form and substance satisfactory to the
Lender, of the maintenance of all insurance required to be maintained by this
Section 5.7 including, but not limited to, such originals or copies, as the
Lender may request, of policies, certificates of insurance, riders and
endorsements relating to such insurance and proof of premium payments.

 

(b)  The Borrower shall cause all hazard insurance policies to provide, and the
insurers issuing such policies to certify to the Lender, that:

 

(i)  the interest of the Lender shall be insured regardless of any breach or
violation by Borrower or the holder or owner of the policies of any warranties,
declarations or conditions contained in such policies and the Lender shall have
the right, in its own name or the name of the Borrower, to file claims, receive
and give acquittance for any payments and execute any and all endorsements or
other documents necessary to effect the collection, compromise or settlement of
any claims;

 

(ii)  if such insurance be proposed to be canceled or materially changed for any
reason whatsoever, such insurer will promptly notify the Lender and such
cancellation or change shall not be effective, as to the Lender, for thirty (30)
days after receipt by Lender of such notice, unless the effect of such change is
to extend or increase coverage under the policy;

 

(iii)  the Lender will have the right, at its election, to remedy any default in
the payment of premiums within thirty (30) days of notice from the insurer of
such default; and

 

(iv)  loss payments in each instance will be payable to the Lender as lender
loss payee, or otherwise.

 

(c)  If the Borrower shall fail at any time or times hereafter to obtain and
maintain any of the policies of insurance required hereby, or fail to pay any
premium in whole or in part relating to any such policies, then Lender may, but
it shall have no obligation to do so, obtain and cause to be maintained any or
all of such policies, and pay any part or all of the premiums due thereunder,
without thereby waiving any default by Borrower, and any sums so disbursed by
Lender shall become a part of the Obligations secured by the Collateral, payable
on demand and, until paid, shall bear interest at the Default Rate.

 

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5.8  Books and Records. The Borrower will maintain accurate and complete records
and books of account with respect to all its operations in accordance with GAAP,
and will permit officers or representatives of the Lender to examine and make
excerpts from such books and records and to visit and inspect its properties,
both real and personal, at all reasonable times provided such examination will
not interfere with Borrower’ operations.

 

5.9  Location of Business. The Borrower will not change the location of any
place of business of Borrower, whether the establishment of a new place of
business or the discontinuance of a present place of business.

 

5.10  Group Health Plans. The Borrower will comply in all material respects with
the group health plan COBRA Continuation Coverage requirements of Code
§4980B(f), with all provisions of §1862(b)(1) of the Social Security Act and the
provisions of the Health Insurance Portability and Accountability Act of 1996.
The Borrower will furnish to Lender, as soon as possible and in any event within
thirty (30) days after the Borrower knows or has reason to know, notice that the
Borrower is not in compliance with any provision of Code §4980B(f) or
§1862(b)(1) of the Social Security Act.

 

5.11  Location of Collateral. All Collateral and all of the Borrower’ business
records will at all times be situated at the locations set forth in
Schedule 3.8, and the Borrower will provide the Lender with at least sixty (60)
days’ advance written notice of any change in such locations.

 

5.12  APA Covenants. The Borrower will comply with all covenants in the APA
applicable to the Borrower.

 

SECTION 6.  NEGATIVE COVENANTS.

 

The Borrower covenants and agrees that, from and after the Closing Date and so
long as any of the Obligations remain outstanding and unpaid, in whole or in
part, the Borrower will observe the following covenants unless the Lender shall
otherwise consent in writing:

 

6.1  Debt. The Borrower will not create, incur, assume or suffer or permit to
exist any Debt, including indebtedness for borrowed money or any indebtedness
constituting the deferred portion of the purchase price of any property, except
(collectively, the “Permitted Debt”):

 

(a)  any Obligations, whether evidenced by the Line of Credit Note or any other
instruments;

 

(b)  Debt related to Permitted Expenses;

 

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(c)  Pre-Petition Obligations; and

 

(d)  any other Debt permitted under the Loan Documents.

 

6.2  Liens.

 

(a)  The Borrower will not create, assume, or suffer to exist, any Lien of any
kind upon the Collateral or any of its other assets, whether now owned or
hereafter except the following (collectively, the “Permitted Encumbrances”);

 

(i)  Liens identified on Schedule 6.2 hereof;

 

(ii)  any adequate protection or replacement liens that may be granted to
Century Medical, Inc. with respect to diminution in value, if any, of its
interests in the Borrower’s property resulting from the use, sale or lease of
the Borrower’s property (including the use of the cash and securities in the
cash collateral accounts) or the automatic stay

 

(iii)  Liens for taxes not yet payable;

 

(iv)  mechanics’, materialmen’s, warehousemen’s, carriers’ or other like Liens
arising in the ordinary course of business arising with respect to obligations
which are not overdue for a period longer than thirty (30) days;

 

(v)  other encumbrances consisting of zoning restrictions, easements,
restrictions on the use of real property or minor irregularities in the title
thereto, which do not arise in connection with the borrowing of, or any
obligation for the payment of, money and which, in the aggregate, do not
materially detract from the value of the business, properties or assets of the
Borrower; and

 

(vi)  the Liens granted to the Lender.

 

6.3  Investments, Loans and Advances. The Borrower will not make or suffer to
exist any Investment (by way of transfer of property, contribution to capital,
purchase of stock, securities, partnership or other ownership interests or
evidence of indebtedness, acquisition of the business or assets or otherwise)
in, or make or suffer to exist any advances or loans to, any Person, except
that:

 

(a)  the Borrower may extend trade credit under usual and customary arm’s length
terms in the ordinary course of business; and

 

(b)  the Borrower may invest money consistent with the provisions of Section 345
of the Bankruptcy Court or as may be permitted by order of the Bankruptcy Court.

 

6.4  Dividends; Distributions; Acquisition of Capital Stock. The Borrower will
not declare or pay any dividends or make any other distribution (whether in cash
or in property) on any shares of its capital stock or any other securities (or
rights, options or warrants to purchase such shares), and the Borrower will not
purchase, redeem, retire or otherwise acquire for value any shares of the
capital stock or any other securities (or rights, options or warrants to
purchase such shares) of the Borrower.

 

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6.5  Disposition of Assets. The Borrower will not convey, sell, lease, or
otherwise transfer or dispose of all or any part of its properties, assets or
business except that (a) the Borrower may sell used equipment no longer used or
useful in connection with their respective businesses, (b) the Borrower may sell
inventory in the ordinary course of its business, and (c) the Borrower may sell
the Purchased Assets pursuant to the APA or pursuant to an order of the
Bankruptcy Court permitting sale of the Purchased Assets to a buyer other than
the Lender provided, in all cases, all Obligations hereunder are paid in full at
closing on such sale.

 

6.6  Continuance of Business. The Borrower will not engage in any line of
business other than those in which the Borrower is actively engaged on the
effective date of this Agreement.

 

6.7  Removal and Protection of Property. The Borrower will not remove (other
than in the ordinary course of business) any equipment, inventory, or general
intangibles from the place of business where presently located, nor permit the
value of any property to be impaired or any equipment to become a fixture or an
accession to other goods.

 

6.8  Cash Collateral. The Borrower shall not request the entry of an order of
the Bankruptcy Court authorizing the use of cash collateral pursuant to
Section 363 of the Bankruptcy Code while any Obligations are outstanding unless
the terms of such order are reasonably acceptable to the Lender.

 

6.9  Handling of Hazardous Substances. The Borrower will not permit use in their
businesses or operations, or produce as a result or as a by-product of their
businesses or operations, or store or hold at any site or location at which it
conducts their businesses or operations, or at any other property, Hazardous
Substance unless the Borrower strictly and fully comply with all requirements of
any applicable law, regulation, decision or edict relating to the special
handling, collection, storage, treatment, disposal, or transportation of such
Hazardous Substance. The Borrower will not permit the Release or threatened
Release of any Hazardous Substance on, from, or near their respective properties
which might cause Contamination.

 

6.10  Use of Proceeds. The Borrower agrees that it will not, nor will it permit
any Subsidiary to, directly or indirectly, apply any part of the proceeds of the
Advances to the purchasing or carrying of any “margin stock” within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System, or any
regulations, interpretations or rulings thereunder

 

6.11  APA Negative Covenants. The Borrower will comply with all covenants in the
APA applicable to the Borrower.

 

SECTION 7.  EVENTS OF DEFAULT, REMEDIES.

 

7.1  Events of Default. The following shall constitute Events of Default:

 

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(a)  Non-Payment. (i) Failure by the Borrower to pay the principal of or accrued
interest on the Line of Credit Note or any other instrument evidencing any
Obligation when due, or (ii) five (5) days following written notice of the
failure of the Borrower to pay any other amount payable to Lender, whether under
this Agreement or otherwise, when due;

 

(b)  Falsity of Representations and Warranties. Any representation or warranty
made by the Borrower in this Agreement or in any other Loan Document or in any
certificate, financial or other statement furnished at any time under or in
connection with this Agreement or any other Loan Document shall be false or
misleading in any material respect as of the date made or deemed to have been
made;

 

(c)  Failure to Perform Certain Covenants. Five (5) days following written
notice of failure by the Borrower to observe or perform any other covenants,
conditions or provisions contained in this Agreement or in any other Loan
Document unless, within such five (5) day period, such failure is cured;
provided, however, that, the five (5) day notice provision shall not apply to
any Event of Default described in Sections 7.1(a)(i) or 7.1(b) hereof or any
other covenant, condition or provision which is not curable;

 

(d)  Material Adverse Effect. The occurrence of a Material Adverse Effect, as
defined in the APA;

 

(e)  Default Under Other Loan Documents or the APA. An Event of Default by the
Borrower or similar event shall have occurred and be continuing under any Loan
Document or under the APA;

 

(f)  Unenforceability. (i) Any material provision of any of the Loan Documents
shall at any time for any reason cease to be a valid and binding obligation of
the Borrower, or shall be declared to be null and void or (ii) the validity or
enforceability thereof shall be contested by the Borrower or any other Person,
or the Borrower shall deny that it has any further liability or obligation under
any Loan Document;

 

(g)  Lender’s Liens. The Liens granted by the Borrower to the Lender shall at
any time fail to be first priority perfected Liens, subject only to Permitted
Encumbrances, or the Borrower shall so allege in any writing;

 

(h)  Judgments. One or more judgments are entered against the Borrower which
have a material adverse affect upon the Collateral;

 

(i)  Appointment of Trustee. The Bankruptcy Court shall enter an order
appointing a trustee under Section 1104(a) of the Bankruptcy Code in the
Reorganization Case of the Borrower;

 

(j)  Final DIP Order. The Bankruptcy Court shall not have entered the Final DIP
Order on or before the thirtieth (30th) day following the Petition Date or the
Final DIP Order shall not have become a Final Order on or before the sixtieth
(60th) day following the Petition Date;

 

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(k)  Appointment of Examiner. The Bankruptcy Court shall enter an order
appointing an examiner for the Borrower with powers beyond those stated in
Sections 1106(a)(3 and (4) of the Bankruptcy Code;

 

(l)  Modification of Orders. The Interim DIP Order or the Final DIP Order, as
applicable, shall be amended, supplemented, vacated, stayed or otherwise
modified without the written consent of the Lender;

 

(m)  Dismissal, Conversion, Priority Administrative Expenses. The Reorganization
Case of the Borrower shall be dismissed or converted to a case under Chapter 7
of the Bankruptcy Code; or an application shall be filed by the Borrower for the
approval of, or there shall arise, any claim which is, an administrative expense
claim having priority over the administrative expense claim granted to the
Lender, other than with respect to any administrative expense claim granted to
Century Medical, Inc. pursuant to a cash collateral order entered by the
Bankruptcy Court that is limited in amount to the lesser of (i) diminution in
value of Century Medical Inc.’s collateral as of the Petition Date, and (ii) the
amounts owed to Century Medical Inc. pursuant to that certain Secured Note
Purchase Agreement dated September 2, 2011 in the maximum aggregate amount of
Four Million Dollars ($4,000,000);

 

(n)  Relief from Automatic Stay. The Bankruptcy Court shall enter an order
granting relief from the automatic stay applicable under Section 362 of the
Bankruptcy Code to the holder of any security interest in any material Purchased
Asset;

 

(o)  Noncompliance with Interim DIP Order or Final DIP Order. The Borrower shall
fail to comply with the terms of the Interim DIP Order or, upon its entry, the
Final DIP Order;

 

(p)  Noncompliance with Cash Collateral Order. The Borrower shall fail to comply
with the terms of any order of the Bankruptcy Court allowing for the use of cash
collateral.

 

(q)  Payment of Pre-Petition Obligations. The Borrower shall make any payment on
account of a Pre-Petition Obligation, other than as approved by the Bankruptcy
Court provided the Lender shall not be deemed to have waived its rights to
object to any motion to approve such payments; or

 

(r)  Claims Against Lender. Commencement by the Borrower, or its estate or any
other Person of any litigation, arbitration or other proceeding relating to any
claim or action against the Lender arising or alleged to arise out of any
conduct in connection with Loan Documents or the APA;

 

7.2  Remedies.

 

(a)  Upon the occurrence of an Event of Default, the Lender may, by written
notice to Borrower, terminate immediately and irrevocably the Line of Credit,
the Line of Credit Commitment, and any other obligation of the Lender to make
any advances to or for the account of the Borrower, and declare the Line of
Credit Termination Date to have occurred and the Line of Credit Note, and all
other instruments evidencing the Obligations to be due and payable, whereupon
the principal amount of the Line of Credit Note and all outstanding Obligations,
together with accrued interest thereon and all other amounts payable thereunder,
shall become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the documents evidencing the same to the contrary
notwithstanding;

 

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(b)  Upon the occurrence of an Event of Default and following five (5) days
written notice to the Borrower and counsel to the Creditors Committee in the
Reorganization Case, if one has been appointed, (the “Committee”) the automatic
stay of Section 362 of the Bankruptcy Code shall be deemed automatically vacated
and the Lender shall be immediately permitted to, among other things, pursue any
and all of its remedies against the Borrower and the Collateral unless, prior to
the expiration of such five (5) day period, the Bankruptcy Court, upon motion of
the Debtor or the Committee and hearing with an opportunity for the Lender to be
heard, orders otherwise, provided, however, the automatic stay shall be deemed
vacated immediately upon entry of the Interim DIP Order to the extent necessary
to allow the Lender to enforce its entitlement to payment in full of all
Obligations from the proceeds of sale of any Purchased Assets;

 

(c)  Upon the occurrence of an Event of Default the Lender shall have all rights
and, subject to obtaining any necessary relief from the automatic stay, all
remedies contained in this Agreement or in any other Loan Document, and all the
rights and remedies of a secured party under the UCC. In addition to all such
rights and remedies, subject to obtaining any necessary relief from the
automatic stay, the Lender may sell, lease or otherwise dispose of the
Collateral, or any part thereof, at public or private sale, for cash, credit or
any combination thereof. The Lender shall have the right to bid and purchase at
such sale or sales. The Proceeds of any sale or other disposition of all or any
part of the Collateral upon which Lender has a security interest, after payment
of all costs and expenses of sale, including retaking, holding, preparing for
sale, selling and the like and also including reasonable attorneys’ fees and
legal expenses incurred by the Lender, shall be applied by the Lender to the
then outstanding balance of the Obligations and any surplus shall be paid by the
Lender to the Borrower. The Borrower shall be liable to the Lender for any
deficiency;

 

(d)  Upon the occurrence of an Event of Default and subject to obtaining any
necessary relief from the automatic stay, the Lender shall have the right to
enter and remain upon the various premises of the Borrower without cost or
charge to Lender, and to use the same, together with materials, supplies, books
and records of the Borrower, for the purpose of preparing for and conducting the
sale of Collateral, whether by foreclosure, auction or otherwise. In addition,
the Lender may remove from such premises the Collateral and copies of any
records with respect thereto, to the premises of the Lender or any designated
agent of the Lender for such time as the Lender may desire, in order to
effectively collect or liquidate the Collateral;

 

(e)  Upon the occurrence of an Event of Default, the Borrower irrevocably waives
the right to direct the application of any and all payments (including Proceeds
of Collateral) at any time or times thereafter which may be received by the
Lender by or for the benefit of the Borrower.

 

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7.3  Right of Setoff. Upon the occurrence of a Default or an Event of Default,
the Lender shall have the right, in addition to all other rights and remedies
available to it, to set off against the unpaid balance of the Obligations, any
debt owing to the Borrower by the Lender.

 

7.4  No Marshalling, Etc., Required. If an Event of Default shall have occurred
and be continuing, the Lender shall not be required to marshal any present or
future security for, or guarantees of, the Obligations or to resort to any such
security or guarantee in any particular order and the Borrower waives, to the
fullest extent that it lawfully can, (a) any right it might have to require the
Lender to pursue any particular remedy before proceeding against it, and (b) any
right to the benefit of, or to direct the application of the proceeds of any
Collateral until the Obligations have been paid in full.

 

7.5  Site Assessments. In connection with the Lender’s consideration of
enforcement or preservation of rights under any Loan Document, if an Event of
Default shall occur, the Borrower shall permit such persons (“Site Reviewers”)
as the Lender may select to visit all properties owned or used by the Borrower
and perform such environmental and other site investigations and assessments
thereof (“Site Assessments”) for the purpose of determining whether such
properties are subject to any Contamination or other condition which could
result in any liability, cost or expense to the owner or occupier thereof
relating to Hazardous Substances or otherwise. Such Site Assessments may include
above- and below-the-ground sampling and/or testing for Contamination and such
other tests as may be necessary in the opinion of the Site Reviewers. The
Borrower shall supply to the Site Reviewers such historical and operational
information, including the results of all samples sent for analysis,
correspondence with official bodies and previous environmental audits or
environmental reviews regarding its properties as are within its possession,
custody or control or which are reasonably available to it, and will make
available for meetings with the Site Reviewers appropriate personnel employed by
the Borrower having knowledge of such matters. The cost of performing all Site
Assessments shall be paid by the Borrower within five days after demand by the
Lender, together with interest thereon at the Default Rate from and after such
fifth day until paid. The provisions of this Section 7.5 are in addition to all
rights of the Lender under this Agreement and the other Loan Documents.

 

7.6  Remedies Cumulative. Lender may exercise any of its rights and remedies set
forth in this Loan Agreement and the other Loan Documents. The remedies of
Lender shall be cumulative and concurrent, and may be pursued singly,
successively, or together, at its sole discretion, and may be exercised as often
as the occasion therefore shall occur; and the failure to exercise any such
right or remedy shall in no event be construed as a waiver or release thereof.

 

SECTION 8.  MISCELLANEOUS.

 

8.1  No Waiver; Cumulative Remedies. No failure or delay on the part of the
Lender in exercising any right, power or privilege hereunder or under the other
Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder or thereunder
preclude or require any other or further exercise thereof or the exercise of any
other right, power or privilege. The Lender shall not be deemed, by any act of
omission or commission, to have waived any of its rights or remedies hereunder
unless such waiver is in writing and signed by the Lender, and then only to the
extent specifically set forth in writing. A waiver with respect to one event
shall not be construed as continuing or as a bar to or a waiver of any right or
remedy with respect to a subsequent event. The rights and remedies herein
provided are cumulative and not exclusive of any rights or remedies provided by
law.

 

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8.2  Notices. All notices and other communications shall have been duly given
and shall be effective (i) when delivered, (ii) when transmitted via telecopy
(or other facsimile device) to the numbers set forth below, (iii) the Business
Day following the day on which the same has been delivered prepaid to a
reputable national overnight air courier service, or (iv) the third Business Day
following the day on which the same is sent by certified or registered mail,
post prepaid, in each case to the respective parties at the address or telecopy
number set forth below, or at such other address or telecopy number as such
party may hereafter specify by written notice to the other party hereof:

 

Borrower:

Dextera Surgical, Inc.

 

900 Saginaw Drive

 

Redwood City, CA 94063

 

Attn: Julian Nikolchev

 

Email: jnikolchev@dexterasurgical.com

 

 

with a copy to:

Cooley LLP

 

101 California Street

 

5th Floor

 

San Francisco, CA 94111-5800

 

Attention: Robert L. Eisenbach III, Esq.

 

Email: reisenbach@cooley.com

 

Facsimile: (415) 693-2222

 

 

Lender:

Aesculap, Inc.

 

3773 Corporate Parkway

 

Center Valley, PA 18034

 

Attn: Michael F. Barra

 

Email: mike.barra@aesculap.com

 

 

with a copy to:

Stevens & Lee, P.C.

 

620 Freedom Business Center

 

Suite 200

 

King of Prussia, PA., 19406

 

Attention: Robert Lapowsky, Esq.

 

Email: rl@stevenslee.com

 

Facsimile: (610) 371-7958

 

8.3  Reimbursement of Lender. The Borrower hereby agrees to reimburse the Lender
for out-of-pocket expenses, including reasonable counsel fees, incurred by the
Lender in connection with (a) the development, preparation, execution and
approval of this Agreement and all the Loan Documents, and (b) until all
Obligations are paid in full, enforcement by the Lender and its rights and
remedies hereunder and participation by the Lender in, and monitoring of, the
Reorganization Case, but solely in its capacity as Lender and not in its
capacity as Buyer under the APA. Expenses described in this Section 8.3 shall be
paid in accordance with the procedures set forth in the Interim DIP Order and
the Final DIP Order.

 

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8.4  Payment of Expenses and Taxes. In addition to payment of the expenses
provided for in Section 8.3, the Borrower agrees to pay, and to save the Lender
harmless from any delay in paying, stamp and other similar taxes, if any,
including, without limitation, all levies, impositions, duties, charges or
withholdings, together with any penalties, fines or interest thereon or other
additions thereto, which may be payable or determined to be payable in
connection with the execution and delivery of this Agreement and the Loan
Documents or any modification of any thereof or any waiver or consent under or
in respect of any thereof.

 

8.5  Survival of Representations and Warranties. All representations,
warranties, covenants and agreements made in this Agreement and all other Loan
Documents shall survive the execution and delivery of the Loan Documents and the
making of the Loans hereunder. All such representations and warranties shall be
deemed to be made again at the date of each request for a borrowing under the
Line of Credit. The provisions of Sections 5.5, 7.5, 8.3, 8.4, 8.9, 8.10 and
8.11 hereof shall survive payment of the Obligations.

 

8.6  Successors. This Agreement shall be binding upon and inure to the benefit
of the Borrower and the Lender and their respective successors and assigns,
except that the Borrower may not assign or transfer its rights hereunder without
the prior written consent of the Lender.

 

8.7  Construction. This Agreement, all Loan Documents, and the rights and
obligations of the parties hereunder and thereunder, shall be governed by and
construed and interpreted in accordance with, the domestic internal laws of
State of Delaware without regard to its rules pertaining to conflict of laws.
The Section headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
At all times prior to termination of the APA, to the extent of any direct
conflict between the representations and covenants of the Borrower hereunder and
the representations and covenants of the Seller under the APA, the
representations and covenants of the Seller under the APA shall control. At all
times after termination of the APA, the representations and covenants of the
Borrower hereunder shall be fully enforceable notwithstanding any direct
conflict with the representations and covenants of the Seller under the APA.

 

8.8  Severability. Any provision contained in this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

8.9  Indemnity. The Borrower hereby agrees to pay, assume liability for, and
indemnify, protect, defend, save and keep harmless the Lender from and against,
any and all liabilities, obligations, losses, damages, settlements, claims,
actions, suits, penalties, costs and expenses (including, but not limited to,
legal and investigative fees and expenses) of whatsoever kind and nature,
including, but not limited to claims based upon negligence, strict or absolute
liability, liability in tort, latent and other defects (whether or not
discoverable), and any claim for patent, trademark or copyright infringement
which may from time to time be imposed on, incurred by or asserted against the
Lender (whether or not any such claim is also indemnified or insured against by
any other person) relating to or resulting from this Agreement, any Loan
Document, or any of the transactions contemplated herein or therein (but
excluding the APA, the Ancillary Documents, as defined in the APA, or any of the
transactions contemplated therein) except to the extent arising out of Lender’s
gross negligence or willful misconduct. The provisions of this Section 8.9 shall
survive the payoff, release, foreclosure or other disposition, as applicable, of
this Agreement, the Obligations or the Collateral.

 

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8.10  Waiver of Trial by Jury; Jurisdiction.

 

(a)  To the extent permitted by law, each party to this Agreement agrees that
any suit, action, or proceeding, whether claim or counterclaim, brought or
instituted by either party hereto or any successor or assign of any party on or
with respect to this Agreement or any other Loan Document or which in any way
relates, directly or indirectly, to the Loans or any event, transaction, or
occurrence arising out of or in any way connection with the Loans, or the
dealings of the parties with respect thereto, shall be tried only by a court and
not by a jury. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY SUCH SUIT, ACTION, OR PROCEEDING. THE BORROWER ACKNOWLEDGES AND AGREES
THAT THIS SECTION 8.10 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT
BETWEEN THE PARTIES AND THAT THE LENDER WOULD NOT EXTEND THE LOANS TO THE
BORROWER IF THIS WAIVER OF JURY TRIAL SECTION WERE NOT A PART OF THIS AGREEMENT.

 

(b)  To the extent permitted by law, for the purpose of any suit, action or
proceeding arising out of or relating to this Agreement, the Line of Credit Note
or the Loan, the Borrower hereby irrevocably consents and submits to the
jurisdiction and venue of the Courts of the State of Delaware, the Federal
District Court for the District of Delaware and the United States Bankruptcy
Court for the District of Delaware, and agrees to accept and acknowledge all
service of process in connection with any such matter by certified or registered
mail or by any other legally permissible means. The Borrower irrevocably waives
any objection which it may now or hereinafter have to the laying of the venue of
any suit, action or proceeding brought in such court and any claim that such
suit, action or proceeding brought in such a court has been brought in an
inconvenient forum and agrees that service of process in accordance with the
foregoing sentence shall be deemed in every respect effective and valid personal
service of process upon the Borrower. The provisions of this Section 8.10(b)
shall not limit or otherwise affect the right of the Lender to institute and
conduct action in any other appropriate manner, jurisdiction or court.

 

8.11  Actions Against Lender; Release.

 

(a)  Any action brought by the Borrower against the Lender which is based,
directly or indirectly, or on this Agreement or any other Loan Document or any
matter in or related to this Agreement or any other Loan Document, including but
not limited to the making of the Loans or the administration or collection
thereof, shall be brought only in the Courts of the State of Delaware or the
Federal District Court or Bankruptcy Court for the District of Delaware.

 

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(b)  Upon full payment and satisfaction of the Loans and the interest thereon,
as provided in Section 2 hereof, the parties shall thereupon automatically each
be fully, finally, and forever released and discharged from any further claim,
liability or obligation in connection with the Loans except as expressly set
forth herein, except to the extent an payment received by the Lender is
determined to be a preference or similar voidable transfer, in which case the
claims of the Lender shall not be released.

 

8.12  Performance by Lender. If the Borrower shall fail to observe or perform
any of the terms, agreements or covenants contained in this Agreement, or in any
other Loan Document, the Lender may, in its discretion, but without any
obligation or duty to do so, and without waiving any Default, or Event of
Default, perform any of such terms, agreements or covenants, in part or in
whole, and any money advanced or expended by the Lender in or toward the
fulfillment of such terms, agreements or covenants, shall be due on demand and
become a part of and be added to the indebtedness due under the Line of Credit
Note and secured as herein provided with interest thereon at the rate specified
in such Note from the date of the respective advance or expenditure. Lender’s
rights contained in this Section 8.12 shall be in addition to all of Lender’s
rights under Section 5.5(b) and otherwise, and Lender may, at its sole election,
exercise any one or more, or all, of such rights alternatively or concurrently.

 

8.13  Counterparts. This Agreement may be executed by facsimile or electronic
PDF signature and in any number of counterparts with then same effect as if the
signatures thereto and hereto were upon the same instrument, but all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.

 

8.14  Further Actions. The Borrower shall execute and deliver such documents and
instruments, and take such other actions, as the Lender deems necessary to
consummate the transactions described in this Agreement.

 

8.15  Section 506(c) Waiver. In consideration of the agreements of the Lender
stated in the Loan Documents, each Borrower hereby agrees not to assert and
affirmatively waives any claim it otherwise might have under Section 506(c) of
the Bankruptcy Code and agrees that the Collateral securing the Obligations may
not be charged with costs or expenses or administration including Permitted
Expenses and other expenses which are permitted uses of the proceeds of the Line
of Credit.

 

8.16  Section 510, 544, 547, 548 and 549 Waiver, Etc. In consideration of the
agreements of the Lender stated in the Loan Documents, the Borrower hereby
agrees not to assert and hereby affirmatively waives any claim it may have under
Sections 510, 544, 547, 548, or 549 of the Bankruptcy Code against the Lender,
in any form or manner whatsoever, any right it may have to challenge the extent
and validity of the Liens granted to the Lender as security under the Loan
Documents.

 

8.17  Entire Agreement. This Agreement and the Loan Documents represent the
entire agreement between the Lender and the Borrower with respect to the
financing transactions to which they relate, and cannot be changed or amended
except by an agreement in writing signed by the party against whom enforcement
of the change or amendment is sought.

 

8.18  Bankruptcy Court Approval. Neither this Agreement, nor the Loan Documents,
shall be binding upon any party prior to entry of the Interim Final DIP Order.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered by their proper and duly authorized officers as of the day and
year first above written.

 

 

BORROWER:

 

DEXTERA SURGICAL INC.

As Debtor-In-Possession

 

 

 

 

 

 

 

 

 

 

By:

/s/ Julian Nikolchev

 

 

 

Name: Julian Nikolchev

 

 

 

Title: President and CEO

 

 

 

 

LENDER:

 

AESCULAP, INC., or its designee

 

 

 

 

 

 

 

 

 

 

By:

/s/ Keith Moser

 

 

 

Name: Keith Moser

 

 

 

Title: VP of Corporate Finance and IT Services

 

 

 

 

and

 

 

 

 

 

 

 

 

 

 

By:

/s/ Charles A. DiNardo

 

 

 

Name: Charles A. DiNardo

 

 

 

Title: President

 

 

 

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The following exhibits and schedules to this Agreement have been omitted
pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish
supplementally copies of these omitted exhibits and schedules to the Securities
and Exchange Commission upon request.

 

Schedule A

Copyrights, Licenses, Patents and Trademarks

 

Schedule 3.8

Location of Collateral

 

Schedule 6.2

Certain Permitted Encumbrances

 

Exhibit A

Final DIP Order

 

Exhibit B

Interim DIP Order