Exhibit 10.5

THIS THIRD AMENDED AND RESTATED INTERCREDITOR AGREEMENT AMENDS, RESTATES AND
REPLACES IN ITS ENTIRETY THAT CERTAIN SECOND AMENDED AND RESTATED INTERCREDITOR
AGREEMENT DATED AS OF APRIL 25, 2019 BETWEEN MADRYN HEALTH PARTNERS, LP AND CITY
NATIONAL BANK OF FLORIDA

THIRD AMENDED AND RESTATED INTERCREDITOR AGREEMENT

THIS THIRD AMENDED AND RESTATED INTERCREDITOR AGREEMENT (this “Agreement”) is
entered into as of March 20, 2020, by and between (a) MADRYN HEALTH PARTNERS,
LP, a Delaware limited partnership, having an office at 140 E. 45th Street, 15th
Floor, Suite B, New York, NY 10017, in its capacity as administrative agent
(“Madryn”) for the Madryn Lenders (defined below) under the Madryn Loan
Agreement (defined below), and (b) CITY NATIONAL BANK OF FLORIDA, having an
office at 100 SE 2nd Street, 13th Floor, Miami, Florida 33131 (“CNB”). Madryn
(in its own capacity and as agent for the Madryn Lenders, as applicable), the
Madryn Lenders and CNB are each sometimes referred to herein individually as a
“Lender” and collectively as “Lenders”.

RECITALS

A.    Madryn, the lenders from time to time party thereto (collectively with
Madryn, the “Madryn Lenders”), VENUS CONCEPT CANADA CORP., an Ontario
corporation (“Venus Canada”), VENUS CONCEPT USA INC., a Delaware corporation,
VENUS CONCEPT INC., a Delaware corporation (“VCI”) (“Venus USA” and together
with VCI and Venus Canada, each a “Borrower” and collectively, the “Borrowers”),
VENUS CONCEPT LTD., an Israeli corporation, the Guarantors party thereto (the
“Guarantor”) (collectively with Borrowers, the “Loan Parties”) are parties to
that certain Credit Agreement dated as of October 11, 2016 as amended by that
certain First Amendment to Credit Agreement and Investment Documents dated as of
May 25, 2017, that certain Second Amendment to Credit Agreement and Consent
Agreement dated as of February 15, 2018, that certain Third Amendment to Credit
Agreement and Waiver dated as of August 14, 2018, that certain Fourth Amendment
to Credit Agreement dated as of January 11, 2019, that certain Fifth Amendment
to Credit Agreement dated as of March 15, 2019, that certain Sixth Amendment to
Credit Agreement and Consent dated as of April 25, 2019, that certain Seventh
Amendment to Credit Agreement, Consent and Waiver dated as of June 25, 2019,
that certain Omnibus Amendment and Waiver dated as of July 26, 2019, that
certain Ninth Amendment to Credit Agreement dated as of August 14, 2019, that
certain Tenth Amendment to Credit Agreement, Consent and Joinder Agreement dated
as of November 7, 2019, that certain Eleventh Amendment to Credit Agreement and
Consent Agreement dated as even date herewith (as may be further amended,
modified, restated, replaced, or supplemented from time to time, the “Madryn
Loan Agreement”), whereby Madryn made available to Borrowers certain secured
term loan facilities. The loan facilities provided by the Madryn Loan Agreement
shall be referred to herein as the “Madryn Loan”.

B.    CNB and the Loan Parties are parties to that certain Second Amended and
Restated Loan Agreement dated as of the date hereof (as the same may be further
amended, modified, restated, replaced, or supplemented from time to time, the
“CNB Loan Agreement”), whereby CNB agreed to make available to Borrower a
secured revolving loan credit facility, which is guaranteed by Guarantor. In
addition, CNB may provide Bank Services to Borrower in an aggregate amount
outstanding at any time not to exceed One Million Dollars ($1,000,000.00) (the
“Bank Services Cap”). The facility contemplated by the CNB Loan Agreement, along
with any Bank Services, shall be referred to herein as the “CNB Loan”.

 

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C.    All of the obligations and indebtedness of the Loan Parties to the Madryn
Lenders under the Madryn Loan Documents and all of the obligations and
indebtedness of Borrower to CNB under the CNB Loan Documents and Bank Services
are secured by the Collateral, as defined herein.

D.    Madryn and CNB desire to set forth in this Agreement their respective
rights and obligations with respect to the Collateral.

AGREEMENT

The parties agree as follows:

1.    DEFINITIONS AND CONSTRUCTION

1.1    Definitions. As used in this Agreement, the following terms shall have
the following definitions:

“Accounts” means any “account”, as such term is defined in the UCC, now owned or
hereafter acquired by a Borrower (including, without limitation, under any trade
name, style or division thereof) or in which a Borrower now holds or hereafter
acquires any interest and, in any event, shall include, without limitation, all
accounts receivable, book debts, Payment Intangibles in respect of the
foregoing, whether arising out of goods sold or services rendered (including,
without limitation, the licensing of any property) by a Borrower or from any
other transaction, whether or not the same involves the sale of goods or
services (including, without limitation, licensing) by a Borrower (including,
without limitation, any such obligation that may be characterized as an account
or contract right under the UCC) and all of any Borrower’s accrued rights to
payment under all purchase orders, or receipts now owned or hereafter acquired
by it for goods or services, and all of a Borrower’s rights to any goods
represented by any of the foregoing (including, without limitation, unpaid
seller’s rights of rescission, replevin, reclamation and stoppage in transit and
rights to returned, reclaimed or repossessed goods), and all monies due or to
become due to a Borrower for goods actually delivered or services actually
rendered under all purchase orders and contracts for the sale of goods or the
performance of services or both by a Borrower or in connection with any other
transaction, now in existence or hereafter occurring, but including, all
collateral security and guarantees of any kind given by any person with respect
to any of the foregoing. For the avoidance of doubt, the term “Accounts” only
includes accrued and earned rights to payment (and the actual payments
themselves) for the sale of goods or services in the ordinary course of business
and shall not include the actual purchase orders, contracts or licenses
themselves or any rights to future revenue under such purchase orders, contracts
or licenses after a disposition of the same, all of which shall be part of the
Madryn Priority Collateral.

“Agent” means Madryn, on behalf of Madryn and the other Madryn Lenders.

“Bank Services” are any products, credit services, and/or financial
accommodations previously, now, or hereafter provided to Venus USA or VCI by CNB
or any affiliate of CNB, including, without limitation, any letters of credit,
cash management services (including, without limitation, merchant services,
direct deposit of payroll, overdraft protection arrangements and extensions of
credit, business credit cards, and check cashing services), interest rate swap
arrangements, and foreign exchange services, as any such products or services
may be identified in CNB’s various agreements related thereto, in all cases
whether or not provided pursuant to the CNB Loan Agreement, but in all cases
subject to the Bank Services Cap.

“Bank Services Cap” is defined in Recital B.

 

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“Bankruptcy Code” means the federal bankruptcy law of the United States as from
time to time in effect, currently as Title 11 of the United States Code. Section
references to current sections of the Bankruptcy Code shall refer to comparable
sections of any revised version thereof if section numbering is changed.

“Borrower” and “Borrowers” has the meaning given to such terms in Recital A.

“Cash Collateral” has the meaning given to such term in Section 4.11.

“Claim” means the Madryn Claims and/or the CNB Claims, as applicable.

“CNB Cap” means (a) $10,000,000, which amount includes the principal amount
outstanding under the CNB Loan Agreement plus (b) all Bank Services up to the
Bank Services Cap, minus (c) the amount of any permanent reductions in the
revolving commitment under the CNB Loan Agreement.

“CNB Claim” and “CNB Claims” means any and all present and future “claims” (used
in its broadest sense, as contemplated by and defined in Section 101(5) of the
Bankruptcy Code, but without regard to whether such claim would be disallowed
under the Bankruptcy Code) of CNB now or hereafter arising or existing under or
relating to the CNB Loan Agreement and related CNB Loan Documents, whether
joint, several, or joint and several, whether fixed or indeterminate, due or not
yet due, contingent or non-contingent, matured or unmatured, liquidated or
unliquidated, or disputed or undisputed, whether under a guaranty or a letter of
credit, and whether arising under contract, in tort, by law, or otherwise, any
interest or fees thereon (including interest or fees that accrue after the
filing of a petition by or against Borrower under the Bankruptcy Code,
irrespective of whether allowable under the Bankruptcy Code), any costs of
Enforcement Actions, including reasonable attorneys’ fees and costs, and any
prepayment or termination premiums.

“CNB Excess Obligations” means the principal amount of the CNB Claim in excess
of (i) the CNB Cap, plus accrued interest on such portion in excess of the CNB
Cap; plus (ii) Bank Services in excess of the Bank Services Cap.

“CNB Loan” has the meaning given to such term in Recital B.

“CNB Loan Agreement” has the meaning given to such term in Recital B.

“CNB Loan Documents” means the CNB Loan Agreement and all of the “Loan
Documents” as defined in the CNB Loan Agreement, but in any event including any
documents in connection with Bank Services, in each case as may be amended,
modified, restated, replaced, or supplemented from time to time.

“CNB Priority Collateral” means all right, title, and interest of Borrowers in
and to any of the following, whether now owned or hereafter acquired and
wherever located: all (a) Accounts, (b) Inventory, (c) cash, cash equivalents,
short and long term investments, all bank and investment accounts including,
without limitation, all operating accounts, depository accounts, savings
accounts, and investment accounts, and all property contained therein, stock,
securities, and Investment Property, to the extent any of the foregoing
represent the Proceeds arising out of any of the collateral described in (a) and
(b), but in each case excluding the Proceeds of Madryn Priority Collateral.

“CNB Priority Obligations” means the CNB Claims other than any CNB Excess
Obligations.

 

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“Collateral” means all of the Loan Parties’ now owned and hereafter acquired
assets and personal property, whether tangible or intangible.

“Enforcement Action” means, with respect to any Lender and with respect to any
Claim of such Lender or any item of Collateral in which such Lender has or
claims a Lien or right of offset, any action, whether judicial or nonjudicial,
to repossess, collect, accelerate, offset, recoup, give notification to third
parties with respect to, sell, dispose of, foreclose upon, give notice of sale,
disposition, or foreclosure with respect to, or obtain equitable or injunctive
relief with respect to, such Claim or Collateral.

“Event of Default” means a default or event of default however so defined under
either (a) under the Madryn Loan Documents or (b) the CNB Loan Documents.

“Insolvency Event” has the meaning given to such term in Section 4.8.

“Insolvency Proceeding” has the meaning given to such term in Section 2.6.

“Investment Property” means any “investment property”, as such term is defined
in the UCC, now owned or hereafter acquired by a Borrower or in which a Borrower
now holds or hereafter acquires any interest.

“Inventory” is all “inventory” as defined in the Code in effect on the date
hereof, with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw material, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of a Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the foregoing.

“Lender” or “Lenders” have the meanings given to such terms in the introductory
paragraph hereof.

“Lien” means a lien or security interest in Collateral to secure a Claim of a
Lender.

“Loan” means, as the context may require, singularly the Madryn Loan, the CNB
Loan, or any other extension of credit pursuant to a Loan Agreement (in the case
of CNB, including, without limitation, Bank Services).

“Loan Agreement” means, as the context may require, singularly the Madryn Loan
Agreement or the CNB Loan Agreement; and “Loan Agreements” means collectively,
the Madryn Loan Agreement and the CNB Loan Agreement.

“Loan Documents” means, as applicable, the Madryn Loan Documents and the CNB
Loan Documents.

“Madryn Claim” and “Madryn Claims” means any and all present and future “claims”
(used in its broadest sense, as contemplated by and defined in Section 101(5) of
the Bankruptcy Code, but without regard to whether such claim would be
disallowed under the Bankruptcy Code) of Madryn now or hereafter arising or
existing under or relating to the Loan Agreement and related Loan Documents,
whether joint, several, or joint and several, whether fixed or indeterminate,
due or not yet due, contingent or non-contingent, matured or unmatured,
liquidated or unliquidated, or disputed or undisputed, whether under a guaranty
or a letter of credit, and whether arising under contract, in tort, by law, or
otherwise, any interest or fees thereon (including interest or fees that accrue
after the filing of a petition by or against a

 

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Loan Party under the Bankruptcy Code, irrespective of whether allowable under
the Bankruptcy Code), any costs of Enforcement Actions, including reasonable
attorneys’ fees and costs, and any prepayment or termination premiums.

“Madryn Lenders” means the Lenders under the Madryn Loan Documents.

“Madryn Loan Agreement” has the meaning given to such term in Recital A.

“Madryn Loan Documents” means the Madryn Loan Agreement and all of the “Loan
Documents” as defined in the Madryn Loan Agreement, except any warrant issued by
a Loan Party, in each case as may be amended, modified, restated, replaced, or
supplemented from time to time.

“Madryn Priority Collateral” means all of the Collateral, other than the CNB
Priority Collateral.

“Non-Priority Agent” means, with respect to the CNB Priority Collateral, Madryn,
and, with respect to the Madryn Priority Collateral, CNB.

“Non-Priority Lenders” means, with respect to the CNB Priority Collateral, the
Madryn Lenders, and, with respect to the Madryn Priority Collateral, CNB.

“Payment Intangible” means any “payment intangible”, as such term is defined in
the UCC, now owned or hereafter acquired by a Loan Party or in which a Loan
Party now holds or hereafter acquires any interest.

“Priority Agent” means, with respect to the CNB Priority Collateral, CNB, and,
with respect to the Madryn Priority Collateral, Madryn.

“Priority Collateral” means, with respect to CNB, the CNB Priority Collateral,
and with respect to Madryn, the Madryn Priority Collateral.

“Priority Lenders” means, as to the CNB Priority Collateral, CNB, and with
respect to the Madryn Priority Collateral, the Madryn Lenders.

“Proceeds” means “proceeds,” as such term is defined in the UCC.

“Proceeds of Collection” means, collectively, the proceeds of all Collateral
received in connection with an Enforcement Action, or any part thereof, and the
proceeds of any remedy with respect to such Collateral under the Loan Documents
after the occurrence and during the continuance of an Event of Default.

“Reimbursement Obligations” has the meaning given to such term in Section 4.7.

“UCC” means the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of New York; provided, that in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to any Lender’s Lien on any Collateral is
governed by the Uniform Commercial Code as enacted and in effect in a
jurisdiction other than the State of New York, the term “UCC” shall mean the
Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such
provisions. Unless otherwise defined herein, terms that are defined in the UCC
and used herein shall have the

 

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meanings given to them in the UCC.

1.2    Other Interpretive Provisions. References in this Agreement to
“Recitals,” “Sections,” and “Exhibits” are to recitals, sections, and exhibits
herein and hereto unless otherwise indicated. References in this Agreement to
any document, instrument or agreement shall include (a) all exhibits, schedules,
annexes and other attachments thereto, (b) all documents, instruments or
agreements issued or executed in replacement thereof, and (c) such document,
instrument or agreement, or replacement or predecessor thereto, as amended,
modified and supplemented from time to time and in effect at any given time. The
words “include” and “including” and words or similar import when used in this
Agreement shall not be construed to be limiting or exclusive. The Recitals
constitute a part of the agreement among the parties hereto.

2.    INTERCREDITOR ARRANGEMENTS

2.1    Priority of Security Interests. (a) Notwithstanding any contrary priority
established by (i) the filing dates of their respective financing statements,
(ii) the recording dates of any other security perfection documents, (iii) which
Lender has possession of, or control over, any of the Collateral (but expressly
subject to Section 4.5) or (iv) any statute or rule of law to the contrary, the
Lenders agree that, except as otherwise provided under Section 4:

(i)    the Lien of CNB in CNB’s Priority Collateral shall at all times be senior
in rank, priority and enforcement to the Lien and enforcement rights of Madryn
in and against CNB’s Priority Collateral, to the extent of the CNB Priority
Obligations;

(ii)    the Lien of Madryn in CNB’s Priority Collateral shall be junior and
subordinate in rank, priority and enforcement to the Lien and enforcement rights
of CNB in and against CNB’s Priority Collateral, to the extent of the CNB
Priority Obligations;

(iii)    the Lien of Madryn in Madryn Priority Collateral shall at all times be
senior in rank, priority and enforcement to the Lien and enforcement rights of
CNB in and against such Madryn Priority Collateral;

(iv)    the Lien of CNB in Madryn Priority Collateral shall be junior and
subordinate in rank, priority and enforcement to the Lien and enforcement rights
of Madryn in and against Madryn’s Priority Collateral;

(v)     the Proceeds of Collection of the Madryn Priority Collateral and the
Proceeds of Collection of CNB Priority Collateral shall be distributed as
provided in Section 4 below;

(vi)    the relative priority of the Liens specified in this Agreement applies
only to Liens held by the Lenders (and by their respective agents) to secure
Loans made under their respective Loan Agreements (and in the case of CNB Liens
for Bank Services);

(vii)    each of Madryn and CNB consents to the grant of liens set forth in the
CNB Loan Documents and the Madryn Loan Documents, in effect as of the date
hereof.

(b)    The relative priorities set forth in subsection (a) are subject to the
following:

(i)    No Lender shall challenge or contravene the perfection of the Lien of any
other Lender.

 

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(ii)    A Lender’s relative priority in the proceeds (within the meaning of the
Code, but not including proceeds of liquidation) of an asset of a Loan Party
shall be determined based upon that Lender’s relative priority in the asset from
which such proceeds arose.

(iii)    The proceeds of the liquidation of any assets of a Loan Party conducted
by any Lender and the proceeds of any insurance on assets of such Loan Party
shall be distributed to the Lenders, to the extent available, in order of their
respective priorities in the assets of the Loan Party giving rise to such
proceeds, as provided in subsection (a) above.

(iv)    Any Lender which conducts a liquidation shall provide each other Lender
with copies of all demands, communications, correspondence, and pleadings which
relate to such Lender’s conduct of such liquidation. The proceeds of any
liquidation shall be distributed accordance with subsection (a) above. Any
Lender which conducts a liquidation shall provide the other Lender with a
written statement of the results of such liquidation and the distribution of the
proceeds thereof.

(v)    Each of the Lenders shall provide the other Lender with a copy of any
notice of demand, or similar communication as and when given to any Loan Party.
Each of the Lenders shall make reasonable efforts to provide all others as and
when received, given, or executed, copy of any amendment, modification, waiver,
replacement or supplement of their respective Loan Documents with the Loan
Party. No Lender shall have any liability to the other Lender for failure to
comply with this subsection.

2.2    Limitation on Further Loans. After the date hereof, except pursuant to
the Loan Agreements and as permitted pursuant to Section 2.5, no CNB Lender may
make loans to or otherwise extend credit to Borrower in excess of the CNB
Priority Obligations, without notice to and the consent of Madryn; provided,
however, that CNB may, in the ordinary course of its commercial banking
relationship with Borrower, extend credit to Borrower in the form of
(i) overdrafts under deposit accounts maintained with either Lender, extensions
of credit in connection with unsecured cash management services and similar
unsecured extensions of credit; provided, however that to the extent any such
overdrafts are secured, the amount secured shall be included as principal and
shall be subject to the CNB Cap, and (ii) secured extensions of credit in
connection with Bank Services as permitted under Section 4.11 below.

2.3    Transfer of Interest in Loans.

(a)    Consent. Madryn agrees that it will not transfer any of its interest in
the Madryn Loan Documents without obtaining the acknowledgment of the proposed
transferee or assignee that the transfer or assignment is subject to all of the
terms of this Agreement. CNB agrees that it will not transfer any of its
interest in the CNB Loan Documents or its Loans without obtaining the
acknowledgment of the proposed transferee or assignee that the transfer or
assignment is subject to all of the terms of this Agreement; provided, however,
CNB may sell to any other financial entity participation interests in such CNB’s
rights under this Agreement and the Loan Documents, provided that
notwithstanding the sale of participations, CNB shall remain solely responsible
for the performance of its obligations under this Agreement and the Loan
Documents, and Madryn or its transferee shall continue to deal solely and
directly with CNB in connection with this Agreement and the Loan Documents. For
the avoidance of doubt this Agreement shall have no effect to restrict or
prohibit any transfers of the rights of any Madryn Lender under the Madryn Loan
Agreement in accordance with the terms of the Madryn Loan Documents.

(b)    Assumption of Obligations. The transferee shall assume all obligations of
the transferring Lender with respect to the portion of the transferor’s interest
under this Agreement and the applicable Loan Documents; provided, that to the
extent the transferor shall not transfer the entirety

 

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and shall retain any portion of its interest in its Loan Agreement and the other
applicable Loan Documents, the transferor shall retain its obligations under
this Agreement, its Loan Agreement and the other applicable Loan Documents with
respect to that portion of its interest.

2.4    Agent for Perfection. Each Lender hereby appoints the other Lender as
agent for the purposes of perfecting its Liens in and on any of the Collateral
in the possession or under the control of such other Lender; provided, that, a
Lender in the possession or having control of any Collateral shall not have any
duty or liability to protect or preserve any rights pertaining to any of the
Collateral and, except for gross negligence or willful misconduct as determined
pursuant to a final non-appealable order of a court of competent jurisdiction,
the non-possessing and/or non-controlling Lender hereby waives and releases the
other Lender from, all claims and liabilities arising pursuant to the possessing
Lender’s role as bailee with respect to the Collateral, so long as the
possessing and/or controlling Lender shall use the same degree of care with
respect thereto as the possessing and/or controlling Lender uses for similar
property pledged to the possessing and/or controlling Lender as collateral for
indebtedness of others to the possessing and/or controlling Lender. For the
avoidance of doubt, so long as the CNB Loan Documents remain in place this
Agreement shall constitute a Qualifying Control Agreement for each deposit
account of either Borrower maintained at CNB and after payment in full of the
CNB Loan, then CNB agrees to enter into a deposit account control agreement
covering any deposit accounts at CNB within thirty (30) days of the request of
Madryn.

2.5    Limitations on Amendments to CNB Loan Documents. CNB shall obtain
Madryn’s written consent prior to (i) entering into any amendment to the CNB
Loan Documents that increases the maximum principal amount that may be
outstanding thereunder above the CNB Cap (except for Bank Services which may or
may not be provided under the CNB Loan Agreement, but subject to the Bank
Services Cap), or (ii) entering into any Bank Services in excess of the Bank
Services Cap, (iii) making any loans other than revolving loans subject to the
borrowing base formula established under the CNB Loan Documents in effect as of
the date hereof or otherwise relaxing the eligibility requirements for Accounts
or Inventory in any applicable borrowing base or increasing the advance rates
contained in any applicable borrowing base, in a manner which would cause the
Loan Parties to obtain credit in excess of the borrowing base formulas
established in the CNB Loan Documents in effect as of the date hereof, other
than the making of protective advances necessary to protect or preserve the CNB
Priority Collateral in an amount not to exceed $500,000, or (iv) adding any Loan
Parties as borrowers or guarantors under the CNB Loan Documents except to the
extent such Loan Parties are borrowers or guarantors under the CNB Loan
Documents on the date of this Agreement.

2.6     Insolvency Proceeding. In any bankruptcy, assignment for the benefit of
creditors, arrangement, or reorganization of a Loan Party (“Insolvency
Proceeding”), the Collateral of each Lender shall include Collateral acquired by
the applicable Loan Party, or arising, after the commencement of the Insolvency
Proceeding, and this Agreement shall continue to apply during any such
Insolvency Proceeding.

3.    ALLOCATION OF PAYMENTS AMONG LENDERS. Notwithstanding anything to the
contrary, nothing set forth herein shall restrict the Borrowers from making
payments of principal, interest, fees and costs to Madryn in accordance with the
Madryn Loan Agreement. Without limiting the foregoing, Borrowers may (i) make
and continue to make to Madryn payments of principal, interest, fees and costs
in accordance with the terms of its Loan Agreement or (ii) prepay a Loan in
accordance with the terms of the applicable Loan Agreement, even though in each
of the foregoing cases (i) and (ii) such payments may be the proceeds of CNB’s
Priority Collateral.

4.    REMEDIES UPON AN EVENT OF DEFAULT

 

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4.1    Exercise of Remedies by Madryn. Madryn shall be free at all times to
exercise or to refrain from exercising any and all rights and remedies it may
have with respect to the Collateral under the Madryn Loan Documents or under
applicable law (and continue to receive regularly scheduled payments); provided
that, in no event shall Madryn take any Enforcement Action against any of the
CNB Priority Collateral without the prior written consent of CNB until the date
that is 120 days after CNB has received written notice from Madryn stating
(a) that an Event of Default has occurred under the Madryn Loan Documents and
(b) with specific reference to this Section 4.1, that Madryn intends to take an
Enforcement Action with respect to the CNB Priority Collateral (and containing
specific details of the actions to be taken); provided further, that said
120-day period shall be tolled during (i) any period that CNB or its agent(s),
as applicable, is taking Enforcement Action against such CNB Priority Collateral
and (ii) the continuation of any case or proceeding by or against Borrower under
the Bankruptcy Code or any other insolvency law.

4.2    Exercise of Remedies by CNB. CNB shall be free at all times to exercise
or to refrain from exercising any and all rights and remedies it may have with
respect to the CNB Priority Collateral under the CNB Loan Documents or under
applicable law; provided that, in no event shall CNB take any Enforcement Action
against any of the Madryn Priority Collateral without the prior written consent
of Madryn until CNB has received written notice from Madryn stating that the
Madryn Claim has been paid in full and all commitments to lend thereunder have
been terminated. During the term of this Agreement, the “Default Rate” CNB may
charge pursuant to the CNB Loan Documents shall be limited to the greater of :
(a) default interest rate set forth in the Madryn Loan Documents, or
(b) fourteen percent (14%).

4.3    Application of Proceeds of Collection of CNB Priority Collateral after an
Event of Default. Notwithstanding anything to the contrary in the Loan
Documents, as among the Lenders, the Proceeds of Collection of all of the CNB
Priority Collateral shall upon receipt by any Lender, after an Event of Default,
be paid to and applied as follows:

(a)    First, to the payment of then outstanding reasonable out-of-pocket costs
and expenses of the Lenders expended to preserve the value of the CNB Priority
Collateral, of foreclosure or suit with respect to CNB Priority Collateral, if
any, and of such sale with respect to the CNB Priority Collateral (in proportion
to such costs and expenses theretofore incurred by each);

(b)    Second, to CNB in an amount up to CNB’s Claims until all CNB Priority
Obligations are satisfied in full and the CNB Loan Documents evidencing
Borrowers’ obligations to CNB (other than in respect of any CNB Excess
Obligations) are terminated;

(c)    Third, to Madryn in an amount up to the Madryn Claim until the Madryn
Claim is satisfied in full and the Loan Documents evidencing the Loan Parties’
obligations to the Madryn Lenders are terminated;

(d)    Fourth, to CNB in respect of any CNB Excess Obligations; and

(e)    Fifth, to Borrower, its successors and assigns, or to whomsoever may be
lawfully entitled to receive the same.

4.4    Application of Proceeds of Collection of Madryn Priority Collateral after
an Event of Default. Notwithstanding anything to the contrary in the Loan
Documents, as among the Lenders, the Proceeds of Collection of all of the Madryn
Priority Collateral shall upon receipt by either Lender, after an Event of
Default, be paid to and applied as follows:

 

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(a)    First, to the payment of then outstanding reasonable out-of-pocket costs
and expenses of Madryn or the other Madryn Lenders expended to preserve the
value of the Madryn Priority Collateral, of foreclosure or suit with respect to
Madryn Priority Collateral, if any, and of such sale and the exercise of any
other rights or remedies with respect to the Madryn Priority Collateral (in
proportion to such costs and expenses theretofore incurred by each);

(b)    Second, to Madryn for application to the Madryn Claim until satisfied in
full and the Loan Documents evidencing the Loan Parties’ obligations to the
Madryn Lenders are terminated;

(c)    Third, to CNB in an amount up to CNB’s Claims until all CNB Claims are
satisfied in full and the CNB Loan Documents evidencing Borrowers’ obligations
to CNB (other than in respect of any CNB Excess Obligations) are terminated; and

(f)    Fourth, to the applicable Loan Party, its successors and assigns, or to
whomsoever may be lawfully entitled to receive the same.

4.5    CNB Accounts. Notwithstanding anything in this Agreement to the contrary,
the above priorities shall not apply to or restrict any and/or all of CNB’s
present and future rights (whether described as rights of setoff, banker’s
liens, chargeback or otherwise, and whether available to CNB under the law or
under any other agreement between CNB and Borrower concerning any account
maintained by the Borrower with CNB or any of its affiliates (“CNB Account”))
with respect to: (a) the face amount of a check, draft, money order, instrument,
wire transfer of funds, automated clearing house entry, credit from a merchant
card transaction, other electronic transfer of funds or other item (i) deposited
in or credited to any CNB Account and returned unpaid or otherwise uncollected
or subject to an adjustment entry, whether for insufficient funds or for any
other reason and without regard to the timeliness of the return or adjustment or
the occurrence or timeliness of any other person’s notice of nonpayment or
adjustment, (ii) subject to a claim against the CNB for breach of transfer,
presentment, encoding, retention or other warranty under Federal Reserve
Regulations or Operating Circulars, clearing house rules, the UCC or other
applicable law, or (iii) for a merchant card transaction, against which a
contractual demand for chargeback has been made; (b) service charges, fees or
expenses payable or reimbursable to the CNB in connection with any CNB Account
or any related services; and (c) any adjustments or corrections of any posting
or encoding errors, so long as such payments are made from the CNB’s Priority
Collateral, CNB shall be senior to the Madryn with respect to such payments.

4.6    Insurance. In the event of any loss affecting any Collateral, the Lender
having a senior Lien in the affected Collateral under this Agreement shall,
subject to the Loan Parties’ rights under the applicable Loan Documents, have
the sole and exclusive right (but not the obligation) to adjust settlement of
any insurance policy applicable to such Collateral. All proceeds of insurance
applicable to the affected Collateral shall (subject to the Loan Parties’ rights
under the applicable Loan Documents) be applied in the same manner set forth in
Sections 4.3 and 4.4 with respect to such Collateral itself and other Proceeds
thereof.

4.7    Releases of Collateral.

(a)    Within three (3) business days of the request by CNB, Madryn shall
execute and deliver such termination statements and releases as CNB shall
reasonably request to release the Lien or security interest of Madryn in the
subject CNB Priority Collateral in connection with a disposition of such
Collateral (and shall be deemed to have consented to such disposition) provided
that:

(i)    CNB also is releasing (or foreclosing) its Liens on the subject CNB
Priority Collateral;

 

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(ii)    the sale or disposition is made to a third party on an arm’s length
basis;

(iii)    such sale or disposition (X) is permitted by the terms of the Loan
Agreements, (Y) occurs pursuant to an Enforcement Action by CNB, or (Z) occurs
after an Event of Default with the consent of CNB; and

(iv)    the net proceeds of such disposition are applied to permanently repay
the CNB Claim and to reduce the commitments thereunder in an amount equal to
such prepayment.

(b)    Within three (3) business days of the request by Madryn, CNB shall
execute and deliver such termination statements and releases as Madryn shall
reasonably request to release the Lien or security interest of CNB in the
subject Madryn Priority Collateral in connection with a disposition of such
Collateral (and shall be deemed to have consented to such disposition) provided
that:

(i)    Madryn also is releasing (or foreclosing) its Liens on the subject Madryn
Priority Collateral;

(ii)    such sale or disposition (X) is permitted by the terms of the Loan
Agreements, (Y) occurs pursuant to an Enforcement Action by Madryn, or
(Z) occurs after an Event of Default with the consent of Madryn; and

(iii)    the net proceeds of such disposition are applied to permanently repay
the Madryn Claim and to reduce the commitments thereunder in an amount equal to
such prepayment.

4.8    Insolvency Events. (a) Subject to Section 4.11, in the event of any
distribution, division, or application, partial or complete, voluntary or
involuntary, by operation of law or otherwise, of all or any part of the
property of a Loan Party or the proceeds thereof to the creditors of a Loan
Party, or the readjustment of any of the Claims, whether by reason of
liquidation, bankruptcy, arrangement, receivership, assignment for the benefit
of creditors or any other action or proceeding involving the readjustment of all
or any part of any of the Claims, or the application of the property of a Loan
Party to the payment or liquidation thereof, or upon the dissolution or other
winding up of a Loan Party’s business, or upon the sale of all or any
substantial part of a Loan Party’s property (any of the foregoing being
hereinafter referred to as an “Insolvency Event”), then, and in any such event,
and subject to any subordination arrangements to which the Lenders may be
subject, (a) all payments and distributions of any kind or character, whether in
cash or property or securities in respect of the Lenders’ Claims shall be
distributed pursuant to the provisions of Sections 2.1, 4.3 and 4.4 hereof;
(b) each Lender shall promptly file a claim or claims, on the form required in
such proceeding, for the full outstanding amount of such Lender’s Claim, and
shall use its best efforts to cause said claim or claims to be approved; and
(c) in the event that, notwithstanding the foregoing, but subject to the
provisions of Sections 2.1, 4.3, and 4.4, any payment or distribution of any
kind or character, whether in cash, properties or securities, shall be received
by a Lender in excess of the amounts contemplated by such Sections, then the
portion of such payment or distribution in excess of such amount shall be
received by such Lender in trust for and shall be promptly paid over to the
other Lender for application to the payments of amounts due on the other
Lender’s Claims.

For avoidance of doubt, nothing set forth in this Agreement, including without
limitation the allocation of payments contemplated under Section 4.3 and 4.4, is
intended to constitute subordination in right of payment of any Lender’s Claim
to any other Claim, but is intended strictly to constitute the Lenders’
agreement as to the subordination of their respective liens in one another’s
Priority Collateral to the extent and in the manner provided herein.

 

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(b)    If any Loan Party shall be subject to any Insolvency Event and the
Priority Agent shall desire to permit the use of cash collateral which
constitutes such Priority Agent’s Priority Collateral or to permit any Loan
Party to obtain financing secured by such Priority Collateral (and not by any
Collateral which does not constitute such Priority Agent’s Priority Collateral),
from one or more of the Lenders for whom such Priority Agent acts as Agent,
under Section 363 or Section 364 of the Bankruptcy Code or any similar
Bankruptcy Law (such financing, a “DIP Financing”), then each Agent, (A) agrees
that it will raise no objection to such use of cash collateral or DIP Financing
nor support any other Person objecting to, such sale, use, or lease of cash
collateral or DIP Financing and will not request any form of adequate protection
or any other relief in connection therewith (except as agreed by the Priority
Agent or to the extent expressly permitted by Section 4.8(e)) and, to the extent
the Liens securing the Priority Obligations are subordinated to or pari passu
with the Liens securing such DIP Financing, the Non-Priority Agent will
subordinate its Liens in the Priority Agent’s Priority Collateral to (x) the
Liens securing such DIP Financing (and all Claims relating thereto), (y) any
adequate protection Liens provided to the Priority Lenders and (z) any
“carve-out” for professional or United States Trustee fees agreed to by the
Priority Agent; and (B) agrees that notice received five (5) calendar days prior
to the entry of an order approving such usage of cash collateral or approving
such DIP Financing shall be adequate notice; provided that the foregoing shall
not prohibit the Non-Priority Agent or the Non-Priority Lenders from objecting
solely to any provisions in any agreement regarding the use of cash collateral
or any DIP Financing relating to, describing or requiring any provision or
content of a plan of reorganization other than any provisions requiring that the
DIP Financing be paid in full in cash; provided further, the maximum amount of
indebtedness that may be outstanding from time to time in connection with any
DIP Financing to be provided by or with the consent of CNB in respect of its
Priority Collateral, together with the principal amount of the CNB Claim
outstanding at such time (after giving effect to the application of the proceeds
of any DIP Financing to refinance all or any portion of the CNB Claim) shall not
exceed an amount equal to the CNB Cap at such time.

(c)    Each Agent, on behalf of itself and the Lenders for whom it acts as
Agent, agrees that it will raise no objection to or oppose a sale or other
disposition of any Collateral which does not constitute its Priority Collateral
free and clear of its Liens or other claims under Section 363 of the Bankruptcy
Code if the Priority Agent has consented to such sale or disposition of such
assets so long as the interests of the such Agent and the Lenders for whom it
acts as Agent in such Collateral attach to the proceeds thereof, subject to the
terms of this Agreement. If requested by the Priority Agent in connection
therewith, the Non-Priority Agent shall affirmatively consent to such a sale or
disposition.

(d) Each Agent, on behalf of itself and the Lenders for whom it acts as Agent,
agrees that none of them shall (i) seek relief from the automatic stay or any
other stay in any Insolvency or Liquidation Proceeding in respect of any
Collateral which does not constitute its Priority Collateral, without the prior
written consent of the Priority Agent, or (ii) oppose any request by the
Priority Agent or any Priority Lender to seek relief from the automatic stay or
any other stay in any Insolvency or Liquidation Proceeding in respect of their
respective Priority Collateral.

(e)    Each Agent, on behalf of itself and the Lenders for whom it acts as
Agent:

(i)    may seek adequate protection of its interest in its respective Priority
Collateral and the other Agent, on behalf of itself and the Lenders for whom it
acts as Agent, agrees that none of them shall contest (or support any other
person contesting) (i) any such request for adequate protection by the Priority
Agent or (ii) any objection by the Priority Agent or the Priority Lenders to any
motion, relief, action or proceeding based on the Priority Agent or the Priority
Lenders claiming a lack of adequate protection of their interests in their
respective Priority Collateral;

 

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(ii)    acknowledges and agrees that any superpriority administrative expense
claim granted to such Agent or arising under 11 U.S.C. § 507(b) as adequate
protection of its interest in its respective Priority Collateral shall be pari
passu with any superpriority administrative expense claim granted to the other
Agent as adequate protection of its interest in its respective Priority
Collateral;

(iii)    may seek adequate protection of its junior interest in Collateral,
subject to the provisions of this Agreement, only if (A) the Priority Agent is
granted adequate protection in the form of a replacement Lien on post-petition
collateral of the same type as the Priority Collateral, and (B) such additional
adequate protection requested by such Agent is in the form of a replacement Lien
on such post-petition collateral of the same type as the Priority Collateral,
which Lien, if granted, will be subordinated to the adequate protection Liens
granted in favor of the Priority Agent on such post-petition collateral and the
Liens securing any DIP Financing (and all Obligations relating thereto) secured
by such Priority Collateral on the same basis as the Liens of the Non-Priority
Agent on such Priority Collateral are subordinated to the Liens of the Priority
Agent on such Priority Collateral under this Agreement;

(iv)     agrees that, in the event an Agent, on behalf of itself or any of the
Lenders for whom it acts as Agent, seeks or requests (or is otherwise granted)
adequate protection of its junior interest in Collateral in the form of a
replacement Lien on additional collateral in any form, then such Agent, on
behalf of itself and the Lenders for whom it acts as Agent, the Priority Agent
shall also be granted a replacement Lien on such additional collateral as
adequate protection of its senior interest in Collateral and that such Agent’s
replacement Lien shall be subordinated to the replacement Lien of the Priority
Agent;

(v)    agrees that, if any Agent or Lender receives as adequate protection a
Lien on post-petition assets of the same type as its pre-petition Priority
Collateral, then such post-petition assets shall also constitute Priority
Collateral of such Person to the extent of any allowed claim secured by such
adequate protection Lien;

(vi)    may seek and receive additional adequate protection of its junior
interest in Collateral, subject to the provisions of this Agreement, in the form
of a superpriority administrative expense claim, including a claim arising under
11 U.S.C. § 507(b), which superpriority administrative expense claim shall be
junior in all respects to any superpriority administrative expense claim granted
to the Priority Lenders with respect to such Collateral; and

(vii)    agrees that, in the event an Agent, on behalf of itself and the Lenders
for whom it acts as Agent, seeks or receives protection of its junior interest
in Collateral and is granted a superpriority administrative expense claim,
including a claim arising under 11 U.S.C. § 507(b), that the Priority Lenders
shall receive a superpriority administrative expense claim which shall be senior
in all respects to the superpriority administrative expense claim granted to
such Agent with respect to such Collateral.

(f)    Neither Agent, nor any of the Lenders for which they act as Agent, shall
oppose or seek to challenge (a) any claim by the Priority Agent or any Priority
Lender for allowance in any Insolvency or Liquidation Proceeding of Obligations
consisting of post-petition interest, fees, costs, charges or expenses to the
extent of the value of the Lien of the Priority Agent in such Priority Agent’s
Priority Collateral, without regard to the existence of the Lien of the other
Agent in such Collateral, or (b) any claim by the Non-Priority Agent or any
Non-Priority Lender for allowance in any Insolvency or Liquidation Proceeding of
Obligations consisting of post-petition interest, fees, costs, charges or
expenses to the extent of the value of the lien of the Non-Priority Agent in
such Collateral.

 

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4.9    Return of Payments. To the extent any payment for the account of a Loan
Party is required to be returned as a voidable transfer or otherwise, the
Lenders shall contribute to one another as is necessary to ensure that such
return of payment is in accordance with the provisions of Sections 2.2, 4.3, and
4.4.

4.10    Foreclosure.

(a)    Credit Bid By Madryn. Nothing set forth herein shall preclude Madryn
Lenders from making a credit bid in connection with (i) any foreclosure or sale
in an Insolvency Event of any Madryn Priority Collateral, or (ii) any
foreclosure or sale in an Insolvency Event of any Collateral, provided that such
Madryn Lenders also make a cash bid with respect to any CNB Priority Collateral
subject to such foreclosure or sale sufficient to satisfy the CNB Priority
Obligations.

(b)    Credit Bid by CNB. Nothing set forth herein shall preclude CNB from
making a credit bid in connection with (i) any foreclosure or sale in an
Insolvency Event of any CNB Priority Collateral, or (ii) any foreclosure or sale
in an Insolvency Event of any Collateral, provided that CNB also makes a cash
bid with respect to any Madryn Priority Collateral subject to such foreclosure
or sale sufficient to satisfy the Madryn Claim.

(c)    License of Intellectual Property. Madryn (i) acknowledges and consents to
the grant to CNB by the Loan Parties on the date hereof of a limited,
non-exclusive royalty-free license (the “Closing Date License”) of the
Intellectual Property solely as needed to dispose of Inventory in connection
with an exercise of remedies and (ii) agrees that its Liens in the Madryn
Priority Collateral shall be subject to the Closing Date License.

4.11    Exception for Bank Services. In addition to the provision of Bank
Services by CNB, which may be provided on a non-cash secured basis, the parties
acknowledge that Borrower may in the future desire to pledge cash and/or
securities in connection with the provision by CNB to Borrower of Bank Services.
The parties agree that notwithstanding anything to the contrary contained in
this Agreement, Borrower may pledge cash and/or securities in the aggregate
principal amount of up to One Million Dollars ($1,000,000) to CNB as collateral
to secure its obligations to CNB relating to Bank Services (such cash and/or
securities and the proceeds thereof (but expressly excluding any other
Collateral) being hereinafter referred to as the “Cash Collateral”). The parties
further agree that (a) notwithstanding anything to the contrary contained in
this Agreement, CNB’s lien on the Cash Collateral shall be senior in priority to
the Liens of Madryn under the Madryn Loan Documents to the extent of Borrower’s
reimbursement obligations in respect of Bank Services in the aggregate principal
amount of up to One Million Dollars ($1,000,000) (collectively, the
“Reimbursement Obligations”), and (b) CNB may extend credit to Borrower in
connection with the provision of Bank Services and take such action as CNB deems
necessary to enforce its rights and remedies to satisfy the Reimbursement
Obligations in respect to Bank Services, all without prior notice to or the
consent of Madryn. Madryn may not foreclose upon, or force CNB to take any
actions with respect to, the Cash Collateral notwithstanding anything in this
Agreement to the contrary. CNB consents to Borrower’s grant to Madryn of liens
and security interests against the Cash Collateral, and the parties agree that
the Cash Collateral and proceeds thereof shall be distributed among the Lenders,
after termination and satisfaction of the Reimbursement Obligations to CNB, in
the manner and order set forth in Sections 2.1, 4.3 and 4.4, as applicable. This
Section 4.11 shall not in any way limit CNB’s rights under Sections 4.2 and 4.3.
For the avoidance of doubt, the parties acknowledge and agree that
notwithstanding anything stated in this Section 4.11 to the contrary, to the
extent the Cash Collateral is ever comprised of CNB Priority Collateral it may
also be used to secure any other amounts owed by Borrower to CNB and is not
limited to One Million Dollars.

 

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4.12    Other Actions. Notwithstanding anything to the contrary set forth in
this Agreement, any Lender may:

(a)    file a claim or statement of interest with respect to its Loan or Claims
in an Insolvency Event;

(b)    take any action (not adverse to the priority status of the Liens securing
the other Lender’s Priority Collateral or such other Lender’s rights to exercise
its rights with respect to such Liens) in order to create, perfect, preserve or
protect its Lien on any of its respective Collateral;

(c)    file any necessary responsive or defensive pleadings in opposition to any
motion, claim, adversary proceeding or other pleading made by any Person
objecting to or otherwise seeking the disallowance of its Loans or Claims,
including any claims secured by the Collateral, if any, in each case not
prohibited by the terms of this Agreement;

(d)    file any pleadings, objections, motions or agreements which assert rights
or interests available to unsecured creditors of any Loan Party arising under
either an Insolvency Event or applicable non-bankruptcy law, in each case not
prohibited by the terms of this Agreement;

(e)    take any action to the extent necessary to prevent the running of any
applicable statute of limitation or similar restriction on claims, or to assert
a compulsory cross-claim or counterclaim against a Loan Party;

(f)    vote on any plan of reorganization;

(g)    file any proof of claim, make other filings and make any arguments and
motions with respect to its Loans or Claims that are, in each case,

(h)    furnish a notice under the Loan Documents to preserve or enforce its
rights with respect thereto, including notices to any Loan Party of the
existence of any event of default under the applicable Loan Agreement;

(i)    engage consultants, valuation firms, investment bankers, and perform or
engage third parties to perform audits, examinations and appraisals of the
Collateral for the sole purpose of valuing the Collateral and not for the
purpose of marketing or conducting a disposition of the Collateral; or

(j)    exercise any rights and remedies with respect to its Priority Collateral.

5.    EXCULPATION OF AND DELEGATION BY LENDERS

5.1    Exculpation. In connection with any exercise of Enforcement Actions
hereunder, no Lender or any of its partners, or any of their respective
directors, officers, employees, attorneys, accountants, or agents shall be
liable as such for any action taken or omitted by it or them, except for its or
their own gross negligence or willful misconduct with respect to its duties
under this Agreement.

5.2    Delegation of Duties. Each Lender may execute any of its powers and
perform any duties hereunder either directly or by or through agents or
attorneys-in-fact. Each Lender shall be entitled to advice of counsel concerning
all matters pertaining to such powers and duties. No Lender shall be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
it, if the selection of such agents or attorneys-in-fact was done without gross
negligence or willful misconduct.

 

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6.    RIGHTS IN THE WARRANTS

Notwithstanding anything to the contrary herein, no warrants issued to any
Lender (or any affiliate thereof) by a Loan Party, the stock issuable
thereunder, any equity securities purchased by any Lender (or any affiliate
thereof), any amounts paid thereunder, any dividends, or any other rights in
connection therewith shall be subject to the terms and conditions of this
Agreement. Nothing herein shall affect any Lender’s rights (or the rights of any
affiliate thereof as assignee) under any such warrants or stock to administer,
manage, transfer, assign, or exercise such warrants or stock for its own
account.

7.    NO RESPONSIBILITY FOR INVESTIGATION

Each of the Lenders represents that it has made, and agrees that it will
continue to make its own independent investigation of the financial condition
and affairs of Loan Parties in connection with the making, administration and
enforcement of its Loans, and that it has made and shall continue to make its
own appraisal of the creditworthiness of the Loan Parties. No Lender shall have
any duty or responsibility either initially or on a continuing basis to make any
such investigation or any such appraisal on behalf of any other party, or to
provide any other party with any credit or other information with respect
thereto, whether coming into its possession before the date hereof or any time
or times thereafter, and shall further have no responsibility with respect to
the accuracy of or the completeness of the information provided to the Lenders
by Loan Parties.

8.    REPRESENTATIONS AND WARRANTIES

8.1    Due Organization and Qualification. Each Lender represents and warrants
to the other parties that it is a corporation or other entity duly existing and
in good standing under the laws of its state of organization and it is qualified
and licensed to do business in, and is in good standing in, any state in which
the conduct of its business or its ownership of property requires that it be so
qualified, except for such states as to which any failure so to qualify would
not have a material adverse effect on such Lender.

8.2    Authority. Each Lender represents and warrants that it has all necessary
power and authority to execute, deliver and perform this Agreement in accordance
with the terms hereof and that it has all requisite power and authority to own
and operate its properties and to carry on its business as now conducted.

8.3    Authorization; Enforceability. Each Lender represents and warrants that
(a) the execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have each been duly authorized by all necessary
action on its part, and (b) this Agreement has been duly executed and delivered
and constitutes a legal, valid and binding obligation of such person,
enforceable against it in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other similar
laws of general application relating to or affecting the enforcement of
creditors’ rights or by general principles of equity.

9.    NOTICES

Unless otherwise provided in this Agreement, all notices or demands by any party
relating to this Agreement or any other agreement entered into in connection
herewith shall be in writing and (except informal documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
certified mail, postage prepaid, return receipt requested, or by facsimile to
the parties, at their respective addresses or fax numbers set forth below:

 

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If to Madryn:

  

Madryn Asset Management, LP

Attention: John Ricciardi

140 E. 45th Street, 15th Floor, Suite B

New York, NY 10017

Electronic Mail: jricciardi@madrynlp.com

Telephone: (646) 560-5493

with a copy to:

  

Moore & Van Allen PLLC

Attention: Tripp Monroe

100 North Tryon Street, Suite 4700

Charlotte, NC 28202

Fax: (704) 378-1942

Email: trippmonroe@mvalaw.com

If to CNB:

  

City National Bank

100 S.E. 2nd Street, 13th Floor

Miami, Florida 33131

Attention: Legal Department

Fax: (305) 533-0144

Email: LegalDepartment@citynational.com

with a copy to:

  

Greenspoon Marder LLP

Attention: Thomas F. Coyle, Jr.

200 East Broward Boulevard, Suite 1800

Fort Lauderdale, FL 33301

Fax: 954-343-6948

Email: Thomas.Coyle@gmlaw.com

The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other. In
addition, each Lender agrees (a) to use its best efforts to notify the other
Lender promptly upon receipt of any material written notice from a Loan Party
and (b) at the other Lender’s request, to send a copy of any such notice to the
other Lender, but neither Lender shall have any liability to the other Lender
for any inadvertent failure to give such notice under clause (a) or (b) above.

10.    NO BENEFIT TO THIRD PARTIES

The terms and provisions of this Agreement shall be for the sole benefit of
Lenders, and their respective successors and assigns, and no other person or
entity (including any Loan Party) shall have any right, benefit, priority, or
interest under, or because of this Agreement.

11.    GENERAL PROVISIONS

12.1    Lender’s Rights. Madryn, on the one hand (for itself and for each Madryn
Lender), and CNB on the other hand (individually, a “Lender Group” and
collectively, the “Lender Groups”), agrees that each Lender Group may at any
time, and from time to time, without the consent of the other Lender Groups and
without notice to the other Lender: (i) renew or extend any Loan Party’s
indebtedness and obligations owing to such Lender Group or that of any other
person at any time directly or indirectly liable for the payment of thereof;
(ii) accept partial payments of its Claims; (iii) settle, release (by operation
of law or otherwise), compromise, collect or liquidate any of its Claims;
(iv) release, exchange, fail to perfect, delay the perfection of, fail to resort
to, or realize upon its Collateral; (v) change, alter or vary the interest
charge on, or any other terms or provisions of its Claims or any present or
future

 

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instrument, document or agreement with any Loan Party; and (vi) take any other
action or omit to take any other action with respect to its Claims as it deems
necessary or advisable in its sole discretion; subject, however, in all cases,
to the specific provisions of this Agreement. Each Lender Group waives any right
to require another Lender Group to proceed first against some Collateral before
proceeding against other Collateral, or to exercise certain remedies before
exercising other remedies, whether under the equitable doctrine of marshalling
or otherwise, but subject, in all cases, to the provisions of this Agreement.

11.2    Non-Avoidability. The subordinations and priorities specified in this
Agreement are expressly conditioned upon the non-avoidability and perfection of
the security interest to which another security interest is subordinated, and if
the security interest to which another security interest is subordinated is not
perfected or is avoidable, for any reason, then the subordinations and relative
priority provided for in this Agreement shall not be effective as to the
particular Collateral that is the subject of the unperfected or avoidable
security interest.

11.3    Successors and Assigns. This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned, transferred or participated by any of the parties hereto
without being in compliance with Section 2.3.

11.4    Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

11.5    Entire Agreement; Construction; Amendments and Waivers.

(a)    This Agreement constitutes and contains the entire agreement among the
Lenders, and supersedes any and all prior agreements, negotiations,
correspondence, understandings and communications between the parties, whether
written or oral, respecting the subject matter hereof.

(b)    This Agreement is the result of negotiations between and has been
reviewed by each of the Lenders executing this Agreement as of the date hereof
and their respective counsel; accordingly, this Agreement shall be deemed to be
the product of the parties hereto, and no ambiguity shall be construed in favor
of or against any party. Lenders agree that they intend the literal words of
this Agreement and that no parole evidence shall be necessary or appropriate to
establish any of their actual intentions.

(c)    Any and all amendments, modifications, discharges or waivers of, or
consents to any departures from any provision of this Agreement shall not be
effective without the written consent of each Lender against which enforcement
of the same is sought. Any waiver or consent with respect to any provision of
this Agreement shall be effective only in the specific instance and for the
specific purpose for which it was given. Any amendment, modification, waiver or
consent effected in accordance with this Section 11.5(c) shall be binding upon
each Lender.

11.6    Counterparts. This Agreement may be executed in any number of
counterparts, including counterparts transmitted by facsimile or other means of
electronic transmission, and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.

11.7    Termination. This Agreement shall terminate upon the later of
(a) irrevocable payment in full to each Lender of all amounts owing to it under
the Loan Documents, (b) the termination

 

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of all obligations to lend thereunder and (c) termination of the Loan Documents.
Notwithstanding the prior termination of this Agreement, the respective
obligations of each Lender to indemnify each other shall survive until all
applicable statute of limitations periods with respect to actions that may be
brought against Lenders have run.

11.8    Reinstatement. Notwithstanding any provision of this Agreement to the
contrary, the rights and obligations of the parties hereunder shall be
reinstated and revived if and to the extent that for any reason any payment by
or on behalf of a Loan Party is rescinded, or must be otherwise restored by
Lenders, whether as a result of any proceedings in bankruptcy or reorganization
or otherwise, all as though such amount had not been paid. To the extent any
payment is rescinded or restored, the obligations shall be revived in full force
and effect without reduction or discharge for that payment.

11.9    Survival. All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any obligations
remain outstanding hereunder.

12.    RELATIONSHIP OF LENDERS

Lenders shall not under any circumstances be construed to be partners or joint
venturers of one another; nor shall the Lenders under any circumstances be
deemed to be in a relationship of confidence or trust or a fiduciary
relationship with one another, or to owe any fiduciary duty to one another.
Lenders do not undertake or assume any responsibility or duty to one another to
select, review, inspect, supervise, pass judgment upon or otherwise inform each
other of any matter in connection with the Loan Parties’ property, any
Collateral held by any Lender or the operations of the Loan Parties. Each Lender
shall rely entirely on its own judgment with respect to such matters, and any
review, inspection, supervision, exercise of judgment or supply of information
undertaken or assumed by any Lender in connection with such matters is solely
for the protection of such Lender.

13.    CHOICE OF LAW AND VENUE; AND JURY TRIAL WAIVER

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW, AND EACH OF THE LENDERS HEREBY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK.
TO THE EXTENT NOT PROHIBITED BY APPLICABLE STATE LAW, LENDERS HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.

 

MADRYN HEALTH PARTNERS, LP,

a Delaware limited partnership

By:   MADRYN HEALTH ADVISORS, LP, its General Partner   By:   MADRYN HEALTH
ADVISORS GP, LLC, its General Partner   By:   /s/ Avinash Amin   Name:  

Avinash Amin

  Title:  

Member

CITY NATIONAL BANK OF FLORIDA By:  

/s/ Greg Mangram

Name:  

Greg Mangram

Title:  

SVP

The undersigned acknowledges and agrees with the terms of this Agreement.

 

VENUS CONCEPT INC., a Delaware corporation, for itself and on behalf of each
other Loan Party By:   /s/ Domenic Serafino Name:   Dominic Serafino Title:  
Chief Executive Officer