exv10w4



 





Exhibit 10.4




Loan and Security Agreement




     This LOAN AND SECURITY AGREEMENT dated the Effective Date between SILICON VALLEY BANK
(“Bank”), whose address is 3003 Tasman Drive, Santa Clara, California 95054 and VOLCANO
THERAPEUTICS, INC., a Delaware corporation (“Borrower”), whose address is 26061 Merit Circle,
Suite 103, Laguna Hills, California 92653, provides the terms on which Bank will lend to Borrower
and Borrower will repay Bank. The parties agree as follows:



1. ACCOUNTING AND OTHER TERMS.




     Accounting terms not defined in this Agreement will be construed following GAAP.
Calculations and determinations must be made following GAAP. The term “financial statements”
includes the notes and schedules. The terms “including” and “includes” always mean “including (or
includes) without limitation,” in this or any Loan Document.



2. LOAN AND TERMS OF PAYMENT.




2.1. Promise to Pay.




     Borrower promises to pay Bank the unpaid principal amount of all Credit Extensions and
interest on the unpaid principal amount of the Credit Extensions.



2.1.1. Revolving Advances.




     (a) Bank will make Advances not exceeding the Credit Limit shown on Schedule 1. Amounts
borrowed under this Section may be repaid and reborrowed during the term of this Agreement.



     (b) To obtain an Advance, Borrower must notify Bank by facsimile or telephone by 12:00
p.m. Pacific time on the Business Day the Advance is to be made. Borrower must promptly confirm the
notification by delivering to Bank the Payment/Advance Form attached as Exhibit B. Bank will credit
Advances to Borrower’s deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without instructions if the
Advances are necessary to meet Obligations which have become due. Bank may rely on any telephone
notice given by a person whom Bank believes is a Responsible Officer or designee. Borrower will
indemnify Bank for any loss Bank suffers due to such reliance.



     (c) The Committed Revolving Line terminates on the Revolving Maturity Date, when all Advances
are immediately payable.



2.1.2. Letters of Credit Sublimit.




     Bank will issue or have issued letters of credit (the “Letters of Credit”) for Borrower’s
account not exceeding the amount shown on Schedule 2. Borrower shall secure all of Borrower’s
reimbursement obligations relating to all outstanding Letters of Credit by unencumbered cash on
terms acceptable to Bank on or before the Revolving Maturity Date if the term of this Agreement
is not extended by Bank. Borrower agrees to execute any further documentation in connection with
the Letters of Credit as Bank may reasonably request.



2.1.3. Foreign Exchange Sublimit.




     If there is availability under the Committed Revolving Line and the Borrowing Base for the
making of an Advance in the amount of the applicable FX Reserve relating to the proposed FX Forward
Contract, then Borrower may enter into foreign exchange forward contracts with the Bank under which
Borrower commits to purchase from or sell to Bank a set amount of foreign currency more than one
business day



 









 







after the contract date (the “FX Forward Contract”). Bank will subtract 10% of each outstanding FX
Forward Contract from the foreign exchange sublimit which is set forth in Schedule 2 (the “FX
Reserve”). The total FX Forward Contracts at any one time may not exceed 10 times the amount of the
FX Reserve. Bank may terminate the FX Forward Contracts if an Event of Default occurs.



2.1.4 Cash Management Services Sublimit.




     Borrower may use up to the amount shown on Schedule 2 (the “Cash Management Services
Sublimit”) for Bank’s cash management services, which may include merchant services,
direct deposit of payroll, business credit card, and check cashing services identified in
various cash management services agreements related to such services (the “Cash Management
Services”). The aggregate amounts utilized under the Cash Management Services Sublimit
will at all times reduce the amount otherwise available to be borrowed under the Committed
Revolving Line and new Cash Management Services may be extended only if the amount of such
proposed new extension of such services would otherwise be available for the making of an
Advance in such amount. Any amounts Bank pays on behalf of Borrower or any amounts that
are not paid by Borrower for any Cash Management Services will be treated as Advances
under the Committed Revolving Line and will accrue interest at the rate for Advances.



2.2. Overadvances.




     If Borrower’s Obligations under Section 2.1.1, 2.1.2, 2.1.3 or 2.1.4 exceed the applicable
lending limitations set forth above whether with respect to any specific sublimit provisions or
otherwise in the aggregate, Borrower must immediately pay Bank any such excess.



2.3. Interest Rate, Payments.




     (a) Interest Rate. Advances accrue interest on the outstanding principal balance at
the interest rate set forth on Schedule 2. After an Event of Default, Obligations accrue
interest at 5 percent above the rate effective immediately before the Event of Default. The
interest rate increases or decreases when the Prime Rate changes. Interest is computed on a
360 day year for the actual number of days elapsed.



     (b) Payments. Interest due on the Committed Revolving Line is payable on the first day
of each month. Bank may debit any of Borrower’s deposit accounts maintained with Bank,
including the Accounts shown on Schedule 1 for principal and interest payments owing or any
amounts Borrower owes Bank. Bank will promptly notify Borrower when it debits Borrower’s
accounts. These debits are not a set-off. Payments received after 12:00 noon Pacific time
are considered received at the opening of business on the next Business Day. When a payment
is due on a day that is not a Business Day, the payment is due the next Business Day and
additional fees or interest accrue.



2.4. Fees.




     Borrower will pay:



     (a) Facility Fee. A fully earned, non refundable Facility Fee in the amount shown on
Schedule 2, which shall be due on the Closing Date; and



     (b) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and
reasonable expenses) incurred through and after the date of this Agreement, are payable when
due.



3. CONDITIONS OF LOANS.




3.1. Conditions Precedent to Initial Credit Extension.



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     Bank’s obligation to make the initial Credit Extension is subject to the condition precedent
that it receive the agreements, documents and fees it re quires in order to effectuate the
purposes of this Agreement and related transactions and such other items as the Bank may
reasonably determine are necessary or advisable in connection herewith.



3.2. Conditions Precedent to all Credit Extensions.




     Bank’s obligations to make each Credit Extension, including the initial Credit Extension, is
subject to the following:



     (a) Timely receipt of any Payment/Advance Form; and



     (b) The representations and warranties in Section 5 must be true (subject to the materiality
provisions in Section 5) on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default may have occurred and be continuing, or result from the
Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that date that
the representations and warranties of Section 5 remain true.



4. CREATION OF SECURITY INTEREST.




4.1. Grant of Security Interest.




     Borrower grants Bank a continuing security interest in all presently existing and later
acquired Collateral to secure all Obligations and performance of each of Borrower’s duties under
the Loan Documents, Except for Permitted Liens, the Bank will, at all times, have a first-priority
security interest in all of the Collateral. Bank’s lien and security interest in the Collateral
will continue until Borrower fully satisfies its Obligations, and all obligations of the Bank to
make Advances or otherwise extend credit accommodations have terminated.



4.2. Authorization to File Financing Statements.




     Borrower authorizes Bank to file financing statements without notice to Borrower, with all
appropriate jurisdictions, as Bank deems appropriate, in order to perfect or protect Bank’s
interest in the Collateral.



5. REPRESENTATIONS AND WARRANTIES.




     Borrower represents and warrants that the following statements are true and correct on
the date hereof and Borrower covenants that the following statements will continue to be true and
correct throughout the term of this Agreement and so long as any Obligations are outstanding:



5.1. Due Organization and Authorization.




     Borrower and each of its Subsidiaries is duly existing and in good standing in its state of
formation and qualified and licensed to do business in, and in good standing in, any state in
which the conduct of its business or its ownership of property requires that it be qualified,
except where the failure to do so could not reasonably be expected to cause a Material Adverse
Change. Borrower has not changed its state of formation or its organizational structure or type or
any organizational number (if any) assigned by its jurisdiction of formation.



     The execution, delivery and performance of the Loan Documents have been duly authorized, and
do not conflict with Borrower’s formation documents, nor constitute an event of default under any
material agreement by which Borrower is bound. Borrower is not in default under any agreement to
which it is a



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party or by which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.




5.2. Collateral.




     Borrower has good title to the Collateral and the Intellectual Property, free of Liens
except Permitted Liens and the pledge of specific patents of the Borrower (having registered
patent numbers in the United States Patent and Trademark Office of 5,871,449; 5,924,997;
6,245,026; and 6,536,949) in connection with the Guaranty dated July 3, 2003 by Borrower given to
Philips Electronics N.V. relating to indebtedness of Pacific Rim Medical Ventures Corp. owing to
Philips Electronics N.V. (such Lien being referred to herein as the “Philips Lien” and
such guaranty being the “Philips Guaranty”) Borrower has no other deposit account, other than the
deposit accounts described on Schedule 1. Each Account with respect to which Advances are
requested by Borrower shall, on the date each Advance is requested and made, represent an
undisputed bona fide existing unconditional obligation of the account debtor created by the sale,
delivery, and acceptance of goods or the rendition of services in the ordinary course of
Borrower’s business. The Collateral is not in the possession of any third party bailee (such as
at a warehouse). In the event that Borrower, after the date hereof, intends to store or otherwise
deliver the Collateral to such a bailee, then Borrower will receive the prior written consent of
Bank and such bailee must acknowledge in writing that the bailee is holding such Collateral for
the benefit of Bank. Borrower has no notice of any actual or imminent Insolvency Proceeding of
any account debtor whose accounts are an Eligible Account in any Borrowing Base Certificate. All
Inventory is in all material respects of good and marketable quality, free from material defects.
Borrower is the sole owner of the Intellectual Property, except for non-exclusive licenses
granted to its customers in the ordinary course of business. Each Patent is, to the best of
Borrower’s knowledge, valid and enforceable and no part of the Intellectual Property has been
judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property violates the rights of any third party, except to the extent such claim
could not reasonably be expected to cause a Material Adverse Change.



5.3. Litigation.




     Except as shown in Schedule 1 hereto, there are no actions or proceedings pending or, to the
knowledge of Borrower’s Responsible Officers and legal counsel, threatened by or against Borrower
or any Subsidiary, which could result in damages or costs to Borrower or any Subsidiary of
$100,000 or more, or in which an adverse decision could reasonably be expected to cause a Material
Adverse Change.



5.4. No Material Adverse Change in Financial Statements.




     All consolidated financial statements for Borrower, and any Subsidiary, delivered to Bank
fairly present in all material respects Borrower’s consolidated financial condition and
Borrower’s consolidated results of operations. There has not been any material deterioration in
Borrower’s consolidated financial condition since the date of the most recent financial
statements submitted to Bank.



5.5. Regulatory Compliance.




     Borrower is not an “investment company” or a company “controlled” by an “investment company”
under the Investment Company Act. Borrower is not engaged as one of its important activities in
extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of
Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards
Act. Borrower has not violated any laws, ordinances or rules, the violation of which could
reasonably be expected to cause a Material Adverse Change. None of Borrower’s or any Subsidiary’s
properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s
knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any
hazardous substance other than legally. Borrower and each Subsidiary has timely filed all
required tax returns and paid, or made



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adequate provision to pay, all material taxes, except those being contested in good faith
with adequate reserves under GAAP and which do not result in any tax lien on any of the Collateral
or the Intellectual Property. Borrower and each Subsidiary have obtained all consents, approvals
and authorizations of, made all declarations or filings with, and given all notices to, all
government authorities that are necessary to continue its business as currently conducted, except
where the failure to do so could not reasonably be expected to cause a Material Adverse Change.




5.6. Subsidiaries.




     Borrower does not own any stock, partnership interest or other equity securities except for
Permitted Investments.



5.7. Representations; Full Disclosure.




     The information in the Representations previously submitted to Bank continues to be true and
correct as of the date hereof. No written representation, warranty or other statement of Borrower
in any certificate or written statement given to Bank (taken together with all such written
certificates and written statements to Bank) contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained in the certificates or
statements not misleading.



6. AFFIRMATIVE COVENANTS.




     Borrower will do all of the following for so long as Bank has an obligation to lend, or
there are outstanding Obligations:



6.1. Government Compliance.




     Borrower will maintain its and all Subsidiaries’ legal existence and good standing in its
jurisdiction of formation and maintain qualification in each jurisdiction in which the failure to
so qualify would reasonably be expected to cause a material adverse effect on Borrower’s business
or operations. Borrower will comply, and have each Subsidiary comply, with all laws, ordinances
and regulations to which it is subject, noncompliance with which could have a material adverse
effect on Borrower’s business or operations or would reasonably be expected to cause a Material
Adverse Change.



6.2. Financial Statements, Reports, Certificates.




     (a) Borrower will deliver to Bank: (i) as soon as available, but no later than 30 days after
the last day of each month, a company prepared consolidated balance sheet and income statement
covering Borrower’s consolidated operations during the period certified by a Responsible Officer
and in a form acceptable to Bank; (ii) as soon as available, but no later than 30 days after the
last day of each quarter, a company prepared consolidating balance sheet covering Borrower’s
operations during such period and certified by a Responsible Officer and otherwise in a form
acceptable to Bank; (iii) as soon as available, but no later than 120 days after the last day of
Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP,
consistently applied, together with an unqualified opinion on the financial statements from an
independent certified public accounting firm reasonably acceptable to Bank; (iii) a prompt report
of any legal actions pending or threatened against Borrower or any Subsidiary that could result in
damages or costs to Borrower or any Subsidiary of $100,000 or more, or in which an adverse
decision could reasonably be expected to cause a Material Adverse Change; (iv) budgets, sales
projections, operating plans or other financial information Bank reasonably requests; and (v)
prompt notice of any material change in the composition of the Intellectual Property, including
any subsequent ownership right of Borrower in or to any copyright, patent or trademark not shown
in any intellectual property security agreement between Borrower and Bank or knowledge of an event
that materially adversely affects the value of the Intellectual Property.



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     (b) Within 20 days after the last day of each month when any Credit Extensions are outstanding or
at the time of request for a Credit Extension when no other Credit Extensions are then outstanding,
Borrower will deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in the
form of Exhibit C, with aged listings (by invoice date) of accounts receivable and accounts
payable.



     (c) Within 30 days after the last day of each month, Borrower will deliver to Bank with the
monthly financial statements a Compliance Certificate signed by a Responsible Officer in the form
of Exhibit D.



     (d) Allow Bank to audit Borrower’s Collateral at Borrower’s expense. Such audits will be
conducted no more often than every 6 months, unless an Event of Default or an event which, with
notice or passage of time or both would constitute an Event of Default, has occurred and is
continuing.



6.3. Inventory; Returns.




     Borrower will keep all Inventory in good and marketable condition, free from material defects.
Returns and allowances between Borrower and its account debtors will follow Borrower’s customary
practices as they exist at execution of this Agreement. Borrower must promptly notify Bank of all
returns, recoveries, disputes and claims, that involve more than $50,000.



6.4. Taxes.




     Borrower will make, and cause each Subsidiary to make, timely payment of all material
federal, state, and local taxes or assessments (except for taxes or assessments being contested in
good faith with adequate reserves under GAAP and which do not result in any tax lien on any of the
Collateral) and will deliver to Bank, on demand, appropriate certificates attesting to the
payment.



6.5. Insurance.




     Borrower will keep its business, the Collateral and the Intellectual Property insured for
risks, and in amounts, as Bank may reasonably request. Insurance policies will be in a form, with
companies, and in amounts that are satisfactory to Bank in Bank’s reasonable discretion and is
customary for the industry in which Borrower operates where commercial lenders have extended
secured credit facilities. All property policies will have a lender’s loss payable endorsement
showing Bank as an additional loss payee, to the extent of its insurable interest therein, and all
liability policies will show the Bank as an additional insured and provide that the insurer must
give Bank at least 20 days notice before canceling its policy. At Bank’s request, Borrower will
deliver certified copies of policies and evidence of all premium payments. Proceeds payable under
any policy will, at Bank’s option and to the extent of Bank’s insurable interest, be payable to
Bank on account of the Obligations.



6.6. Primary Accounts.




     Borrower will maintain its primary depository and investment accounts with Bank, which
relationship shall include Borrower maintaining account balances in any accounts at or through
Bank representing at least 70% of all account balances of Borrower at any financial institution.
Within 60 days of the date hereof, Borrower will cause the institutions where any Deposit Accounts
outside of the Bank are maintained to execute and deliver to Bank control agreements in form
sufficient to perfect Silicon’s security interest in the Deposit Accounts and which are otherwise
satisfactory to Bank in its good faith business judgment. Further, Borrower will give Bank five
Business Days advance written notice before establishing any new Deposit Account and will cause
the institution where any such new Deposit Account is maintained to execute and deliver to Bank a
control agreement in form sufficient to perfect Bank’s security interest therein and which is
otherwise satisfactory to Silicon in its good faith business judgment.




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6.7. Financial Covenants.







     Borrower will comply with the financial covenants set forth on Schedule 2.



6.8. Registration of Intellectual Property Rights/Proceeds Resulting In Collateral.




     Borrower has no present maskworks, software, computer programs and other works of authorship
registered with the United States Copyright Office, and Borrower shall not hereafter register any
maskworks, software, computer programs or other works of authorship subject to United States
copyright protection with the United States Copyright Office that result in Collateral, either
directly or as proceeds thereof, without first complying with the following: (i) providing Bank
with at least 15 days prior written notice thereof, (ii) providing Bank with a copy of the
application for any such registration and (iii) executing and filing such other instruments, and
taking such further actions as Bank may reasonably request from time to time to perfect or continue
the perfection of Bank’s interest in the Collateral, including without limitation the filing with
the United States Copyright Office of a security agreement with respect to proceeds of Intellectual
Property, simultaneously with the filing by Borrower of the application for any such registration,
of a copy of this Agreement or a Supplement hereto in form acceptable to Bank identifying the
maskworks, software, computer programs or other works of authorship being registered and confirming
the grant of a security interest therein in favor of Bank.



     Further, Borrower shall inform Bank promptly of any registration of its Intellectual Property
assets in the United States Patent and Trademark Office and take such actions and execute such
documentation as Bank may deem necessary or advisable relating thereto in order for Bank to
protect its interest the Collateral that may arise as proceeds of any such Intellectual Property
items.



     Borrower will (i) protect, defend and maintain the validity and enforceability of the
Intellectual Property and promptly advise Bank in writing of material infringements and (ii) not
allow any Intellectual Property to be abandoned, forfeited or dedicated to the public without
Bank’s written consent.



6.9. Further Assurances.




     Borrower will execute any further instruments and take further action as Bank reasonably
requests to perfect or continue Bank’s security interest in the Collateral or to effect the
purposes of this Agreement.



7. NEGATIVE COVENANTS.




     Borrower will not do any of the following without Bank’s prior written consent, which
will not be unreasonably withheld, for so long as Bank has an obligation to lend and there are any
outstanding Obligations:



7.1. Dispositions.




     Convey, sell, lease, transfer or otherwise dispose of (collectively “Transfer”), or permit
any of its Subsidiaries to Transfer, all or any part of its business or property or any
Collateral, except for Transfers (i) of Inventory in the ordinary course of business; (ii) of
non-exclusive licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business; or (iii) of worn out or obsolete Equipment.



7.2. Changes in Business, Non-Ordinary Course Transactions, Ownership, Management or Locations of
Collateral.




     Engage in or permit any of its Subsidiaries to engage in any business other than the
businesses currently engaged in by Borrower or reasonably related thereto, or enter into any
transaction outside the ordinary course of business, or permit there to be a change in the
record or beneficial ownership of an aggregate of more than 30% of the outstanding shares of stock
of Borrower, in one or more transactions,



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compared to the ownership of outstanding shares of stock of Borrower in effect on the date
hereof (other than by the sale of Borrower’s equity securities in a public offering or to venture
capital investors so long as Borrower identifies to the Bank, in writing, the venture capital
investors prior to the closing of the investment). Borrower will not, without at least 30 days
prior written notice to the Bank, relocate its chief executive office, change its state of
formation (including reincorporation), change its organizational number or name or add any new
offices or business locations (including warehouses) in which Borrower maintains or stores over
$5,000 in Collateral.



7.3. Mergers or Acquisitions.




     Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any
other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of
the capital stock or property of another Person, except a Subsidiary may merge or consolidate into
another Subsidiary or into Borrower if no Default or Event of Default has occurred and is
continuing or would result from such action.



7.4. Indebtedness.




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



7.5. Encumbrance.




     Create, incur, or allow any Lien on any of its property, or assign or convey any right to
receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so,
except for Permitted Liens, or permit any Collateral not to be subject to the first priority
security interest granted here, subject to Permitted Liens.



7.6. Distributions; Investments.




     Directly or indirectly acquire or own any Person, or make any Investment in any Person, other
than Permitted Investments, or permit any of its Subsidiaries to do so. Pay any dividends (other
than dividends payable solely in stock of the Borrower) or make any distribution or payment or
redeem, retire or purchase any capital stock, except for the repurchase of stock from employees,
consultants and like Persons pursuant to company-approved repurchase agreements provided that the
aggregate amount allowed to be repurchased in any fiscal year shall not exceed $75,000 and no such
repurchase shall be permitted to be effected in any event while any Default or Event of Default is
then outstanding.



7.7. Transactions with Affiliates.




     Directly or indirectly enter into or permit to exist any material transaction with any
Affiliate of Borrower except for transactions that are in the ordinary course of Borrower’s
business, upon fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a nonaffiliated Person.



7.8. Subordinated Debt.




     Make or permit any payment on any Subordinated Debt, except under the terms of the
Subordinated Debt, or amend any provision in any document relating to the Subordinated Debt
without Bank’s prior written consent.



7.9 No Further Negative Pledge Agreements. Without limitation of any other term or condition set
forth herein or in any other Loan Document, Borrower shall not enter into any agreements or
transactions



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in which, or otherwise with respect to which, Borrower agrees not to encumber or create a Lien
regarding its Intellectual Property assets.



7.10 Compliance.




     Become an “investment company” or a company controlled by an “investment company,” under the
Investment Company Act of 1940 or undertake as one of its important activities extending credit to
purchase or carry margin stock, or use the proceeds of any Credit Extension for that purpose; fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards
Act or violate any other law or regulation, if the violation could reasonably be expected to have a
material adverse effect on Borrower’s business or operations or would reasonably be expected to
cause a Material Adverse Change, or permit any of its Subsidiaries to do so.



8. EVENTS OF DEFAULT.




     Any one of the following is an Event of Default:



8.1. Payment Default.




     If Borrower fails to pay any of the Obligations within 3 days after their due date.



8.2. Certain Defaults.




     If Borrower (i) fails to provide the financial statements called for by Section 6.2 hereof or
by any other provisions of this Agreement, within the time therein provided; or (ii) Borrower
breaches any of the financial covenants set forth in Section 6.7
of this Agreement; or (iii) fails
to perform or comply with any other term, condition or covenant in any other agreement between
Borrower and Bank which is not cured within any cure period provided in such agreement.



8.3. Other Defaults.




     If Borrower fails to perform or comply with any other term, condition or covenant in this
Agreement (other than as set forth in Section 8.1 or 8.2 above), and such failure is not cured
within 30 days after the date it occurs



8.4. Material Adverse Change.




     A Material Adverse Change occurs.



8.5. Attachment.




     If any of Borrower’s assets having a value in the aggregate of more than $50,000 is attached,
seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure
or levy is not removed in 10 days, or if Borrower is enjoined, restrained, or prevented by court
order from conducting a material part of its business or if a judgment or other claim becomes a
Lien on a material portion of Borrower’s assets, or if a notice of lien, levy, or assessment is
filed against any of Borrower’s assets by any government agency and not paid within 10 days after
Borrower receives notice. These are not Events of Default if stayed or if a bond is posted pending
contest by Borrower;




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8.6.
Insolvency



     If Borrower fails to pay its debts generally as they mature, or if Borrower begins an
Insolvency Proceeding, or if an Insolvency Proceeding is begun against Borrower and not dismissed
or stayed within 30 days;



8.7. Other Agreements.




     If there is a default in any agreement between Borrower and a third party that gives the
third party the right to accelerate any Indebtedness exceeding $100,000 or that could cause a
Material Adverse Change;



8.8 Judgments.




     If a money judgment(s) in the aggregate of at least $50,000 is rendered against Borrower and
is unsatisfied and unstayed for 10 days;



8.9. Misrepresentations.




     If Borrower or any Person acting for Borrower makes any material misrepresentation or material
misstatement now or later in any warranty or representation in this Agreement or in any writing
delivered to Bank or to induce Bank to enter this Agreement or any Loan Document; or



8.10. Guaranty.




     Any guaranty of any Obligations ceases for any reason to be in full force or any Guarantor
does not perform any obligation under any guaranty of any of the Obligations, or any material
misrepresentation or material misstatement exists now or later in any
warranty or representation in any guaranty of the Obligations or in any certificate delivered to Bank in connection with the
guaranty, or any circumstance described in Sections 8.5, 6 or 8 occurs to any Guarantor.



     No Credit Extensions will be made during any of the cure periods set forth in Sections
8.1-8.10 above.



9. BANK’S RIGHTS AND REMEDIES.




9.1. Rights and Remedies.




     When an Event of Default occurs and continues Bank may, without notice or demand, do any or
all of the following:



     (a) Declare all Obligations immediately due and payable (but if an Event of Default described
in Section 8.6 occurs all Obligations are immediately due and payable without any action by Bank);



     (b) Stop advancing money or extending credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and Bank and terminate the Committed Revolving Line;



     (c) Settle or adjust disputes and claims directly with account debtors for amounts, on terms
and in any order that Bank considers advisable;



     (d) Make any payments and do any acts it considers necessary or reasonable to protect its
security interest in the Collateral. Borrower will assemble the Collateral if Bank requires and
make it available as Bank designates. Bank may enter premises where the Collateral is located,
take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or
compromise any Lien which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower



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grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of
Bank’s rights or remedies;



     (e) Apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any
amount held by Bank owing to or for the credit or the account of Borrower;



     (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for
sale, and sell the Collateral. Bank is granted a non-exclusive, royalty-free license or other right
to use, without charge, Borrower’s labels, Intellectual Property, and advertising matter, and any
similar property as it pertains to the Collateral, in completing production of, advertising for
sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this
Section, Borrower’s rights under all licenses and all franchise agreements inure to Bank’s benefit;
and



     (g) Dispose of the Collateral according to the Code.



9.2. Power of Attorney.




     Effective only when an Event of Default occurs and continues, Borrower irrevocably appoints
Bank as its lawful attorney to: (i) endorse Borrower’s name on any checks or other forms of
payment or security; (ii) sign Borrower’s name on any invoice or bill of lading for any Account
or drafts against account debtors, (iii) make, settle, and adjust all claims under Borrower’s
insurance policies; (iv) settle and adjust disputes and claims about the Accounts directly with
account debtors, for amounts and on terms Bank determines reasonable; and (v) transfer the
Collateral into the name of Bank or a third party as the Code permits. Bank may exercise the
power of attorney to sign Borrower’s name on any documents necessary to perfect or continue the
perfection of any security interest regardless of whether an Event of Default has occurred.
Bank’s appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers, are
coupled with an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank’s obligation to provide Credit Extensions terminates.



9.3. Accounts Collection.




     When an Event of Default occurs and continues, Bank may notify any Person owing Borrower
money of Bank’s security interest in the funds and demand payment of, and collect any Accounts,
general intangibles and other Collateral, and, in connection therewith, Borrower irrevocably
authorizes Bank to endorse or sign Borrower’s name on all collections, receipts, instruments and
other documents, and, in Bank’s good faith business judgment, to grant extensions of time to pay,
compromise claims and settle Accounts and general intangibles for less than face value. When an
Event of Default occurs and continues, Borrower shall collect all payments in trust for Bank and,
if requested by Bank, immediately deliver the payments to Bank in the form received from the
account debtor, with proper endorsements for deposit.



9.4. Bank Expenses.




     If Borrower fails to obtain the insurance called for by Section 6.5 or fails to pay any
premium thereon or fails to pay any other amount, which Borrower is obligated to pay under this
Agreement or any other Loan Document, Bank may obtain such insurance or make such payment, and
all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest
at the then applicable rate and secured by the Collateral. No payments by Bank shall be deemed an
agreement to make similar payments in the future or Bank’s waiver of any Event of Default.



9.5. Bank’s Liability for Collateral.




     If Bank complies with reasonable banking practices and Section 9207 of the Code, it is not
liable for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c)
any diminution in



11









 







the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other person. Borrower bears all risk of loss, damage or destruction of the Collateral.



9.6. Remedies Cumulative.




     Bank’s rights and remedies under this Agreement, the Loan Documents, and all other agreements
are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity.
Bank’s exercise of one right or remedy is not an election, and Bank’s waiver of any Event of
Default is not a continuing waiver. Bank’s delay is not a waiver; election, or acquiescence. No
waiver is effective unless signed by Bank and then is only effective for the specific instance and
purpose for which it was given.



9.7. Demand Waiver.




     Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which
Borrower is liable.



9.8. Asset Based Terms.




     Without limiting Bank’s other rights and remedies, if an Event of Default under Section
8.2(ii) occurs, the provisions of Exhibit E hereto (the “Asset Based Terms”) shall be effective
upon written notice by Bank to the Borrower.



10. NOTICES.




     All notices or demands by any party about this Agreement or any other related agreement must
be in writing and be personally delivered or sent by an overnight delivery service, by certified
mail, postage prepaid, return receipt requested, or by fax to the addresses set forth at the
beginning of this Agreement and, in the case of notices by fax, to the latest fax number a party
has for the other party. A party may change its notice address by giving the other party written
notice.



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




     California law governs the Loan Documents without regard to principles of conflicts of law.
Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in
Orange County, California.



     BORROWER AND BANK EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN BANK AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF
BANK OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER
PERSONS AFFILIATED WITH BANK OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO
THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.



12. GENERAL PROVISIONS




12.1. Successors and Assigns.




12









 








     This Agreement binds and is for the benefit of the successors and permitted assigns of
each party. Borrower may not assign this Agreement or any rights under it without Bank’s prior
written consent which may be granted or withheld in Bank’s discretion. Bank has the right, without
the consent of or notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank’s obligations, rights and benefits under this Agreement.



12.2. Indemnification.




     Borrower will indemnify, defend and hold harmless Bank and its officers, employees, and agents
against: (a) all obligations, demands, claims, and liabilities asserted by any other Person in
connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank
Expenses incurred, or paid by Bank from, following, or consequential to transactions between Bank
and Borrower (including reasonable attorneys fees and expenses), except for losses caused by Bank’s
gross negligence or willful misconduct.



12.3. Time of Essence.




     Time is of the essence for the performance of all obligations in this Agreement.



12.4. Severability of Provision.




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



12.5. Amendments in Writing, Integration.




     All amendments to this Agreement must be in writing and signed by Borrower and Bank. This
Agreement represents the entire agreement about this subject matter, and supersedes prior
negotiations or agreements. All prior agreements, understandings, representations, warranties, and
negotiations between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents.



12.6. Counterparts.




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



12.7. Survival.




     All covenants, representations and warranties made in this Agreement continue in full force
while any Obligations remain outstanding. The obligations of Borrower in Section 12.2 to indemnify
Bank will survive until all statutes of limitations for actions that may be brought against Bank
have run.



12.8. Confidentiality.




     In handling any confidential information, Bank will exercise the same degree of care that it
exercises for its own proprietary information, but disclosure of information may be made (i) to
Bank’s subsidiaries or affiliates in connection with their business with Borrower, (ii) to
prospective transferees or purchasers of any interest in the loans (provided, however, Bank shall
use commercially reasonable efforts in obtaining such prospective transferee or purchasers
agreement of the terms of this provision), (iii) as required by law, regulation, subpoena, or
other order, (iv) as required in connection with Bank’s examination or audit and (v) as Bank
considers appropriate exercising remedies under this Agreement. Confidential information does not
include information that either: (a) is in the public domain in Bank’s



13









 




possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank;
or (b) is disclosed to Bank by a third party, if Bank does not know that the third party is
prohibited from disclosing the information.




12.9. Attorneys’ Fees, Costs and Expenses.




     In any action or proceeding between Borrower and Bank arising out of the Loan Documents, the
prevailing party will be entitled to recover its reasonable attorneys’ fees and other reasonable
costs and expenses incurred, in addition to any other relief to which it may be entitled.



12.9. Conflict With Other Agreements.




     In the event of a conflict between any provision of this Agreement and any provision of the
any of the Existing Loan Agreements or any other document, instrument or agreement between
Borrower, on the one hand, and Bank or any other division or affiliate of Bank on the other hand,
Bank shall determine in its sole discretion which provision shall apply.



13. DEFINITIONS.




13.1. Definitions.




     In this Agreement:



     “Accounts” is defined on Exhibit A hereto.



     “Advance” or “Advances” is a loan advance (or advances) under the Committed Revolving Line.



     “Affiliate” means (I) any of Borrower’s officers or directors, and if Borrower is a limited
liability company, Borrower’s managers and members, and if Borrower is a partnership, Borrower’s
general and limited partners; (ii) a Person that, directly or indirectly, owns or controls, is
controlled by or is under common control with Borrower, and any of such person’s officers or
directors, and if such person is a limited liability company, such person’s managers and members,
and if such person is a partnership, such person’s general and limited partners.



     “Bank Expenses” are all audit fees and expenses and reasonable costs and expenses (including
reasonable attorneys’ fees and expenses) for preparing, negotiating, administering, defending and
enforcing the Loan Documents (including appeals or Insolvency Proceedings), or otherwise relating
to Borrower or the Loan Documents, including, but not limited to, any reasonable attorneys’ fees
and costs Bank incurs in order to do the following: obtain legal advice in connection with this
Agreement or Borrower; enforce, or seek to enforce, any of Bank’s rights; prosecute actions
against, or defend actions by, account debtors; commence, intervene in, or defend any action or
proceeding; initiate any complaint to be relieved of the automatic stay in bankruptcy; file or
prosecute any bankruptcy claim, third-party claim, or other claim; protect, obtain possession of,
lease, dispose of, or otherwise enforce Bank’s security interest in, the Collateral; and otherwise
represent Bank in any litigation relating to Borrower.



     “Borrower’s Books” are all Borrower’s books and records including ledgers, records regarding
Borrower’s assets or liabilities, the Collateral, business operations or financial condition and
all computer programs or discs or any equipment containing the information.



     “Borrowing Base” is as set forth in Schedule 2.



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



14









 





     “Cash Management Services Sublimit” shall have the meaning set forth in Section 2.1.4
hereof.



     “Cash Management Services” shall have the meaning set forth in Section 2.1.4 hereof.



     “Closing Date” is the date of this Agreement.



     “Code” is the California Uniform Commercial Code, in effect from time to time.



     “Collateral” is the property described on Exhibit A.



     “Committed Revolving Line” is defined in Schedule 2.



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



     “Credit Extension” is each Advance, Letter of Credit, FX Forward Contracts, Cash Management
Services utilization and each any other extension of credit by Bank for Borrower’s benefit under
and relating to this Agreement.



     “Current Liabilities” are the aggregate amount of Borrower’s Total Liabilities which mature
within one (1) year.



     “Effective Date” is the date that Bank executes this Agreement.



     “Eligible Accounts” are Accounts in the ordinary course of Borrower’s business that meet all
Borrower’s representations and warranties in Section 5; but Bank may change eligibility standards
by giving Borrower notice. Unless Bank agrees otherwise in writing, Eligible Accounts will not
include:



     (a) Accounts that the account debtor has not paid within 90 days of invoice date;



     (b) Accounts for an account debtor, 50% or more of whose Accounts have not been paid within 90
days of invoice date;



     (c) Credit balances over 90 days from invoice date;



     (d) Accounts for an account debtor, including Affiliates, whose total obligations to Borrower
exceed 25% of all Accounts, for the amounts that exceed that percentage;



     (e) Accounts for which the account debtor does not have its principal place of business in the
United States, other than for the account debtors of Fukuda Intervention Systems and Goodman
Company Ltd.



15









 





     (f) Accounts for which the account debtor is a federal, state or local government entity or any
department, agency, or instrumentality (unless there has been compliance, to Silicon’s
satisfaction, with the United States Assignment of Claims Act),;



     (g) Accounts for which Borrower owes the account debtor, but only up to the amount owed
(sometimes called “contra” accounts, accounts payable, customer deposits or credit accounts);



     (h) Accounts for demonstration or promotional equipment, or in which goods are consigned,
sales guaranteed, sale or return, sale on approval, bill and hold, or other terms if account
debtor’s payment may be conditional;



     (i) Accounts for which the account debtor is Borrower’s Affiliate, officer,
employee, or agent;



     (j) Accounts in which the account debtor disputes liability or makes any claim or Bank
believes there may be a basis for dispute (but only up to the disputed or claimed amount), or if
the Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of
business;



     (k) Accounts for which Bank reasonably determines collection to be doubtful.



     “Eligible Inventory” shall mean inventory consisting of finished goods and raw materials
which are deemed acceptable to Bank, for Advance purposes, in Bank’s sole discretion.



     “Equipment” is defined on Exhibit A hereto.



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



     “Existing Loan Agreements” shall mean that certain Loan and Security Agreement entered into by
and between Bank and Borrower dated August 27, 2001, as amended from time to time, with respect to
an equipment financing facility, as amended or otherwise modified from time to time.



     “FX Forward Contract” is defined in Section 2.1.3.



     “FX Reserve” is defined in Section 2.1.3.



     “GAAP” is generally accepted accounting principles.



     “Guarantor” is any present or future guarantor of any of the Obligations.



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



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



     “Intellectual Property” is defined on Exhibit A hereto



     “Inventory” is defined on Exhibit A hereto.



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



16









 





     “Letter of Credit” is defined in Section 2.1.2.



     “Lien” is a mortgage, lien, deed of trust, charge, pledge, security interest or other
encumbrance.



     “Loan Documents” are, collectively, this Agreement, any note, or notes or guaranties executed
by Borrower or Guarantor, and any other present or future agreement between Borrower and/or for
the benefit of Bank in connection with this Agreement, all as amended, extended or restated.



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



     “Obligations” are debts, principal, interest, Bank Expenses and other amounts Borrower owes
Bank now or later, including cash management services, letters of credit and foreign exchange
contracts, if any and including interest accruing after Insolvency Proceedings begin and debts,
liabilities, or obligations of Borrower assigned to Bank.



     “Patents” are patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions and continuations in part of the same.



     “Permitted Indebtedness” is:



     (a) Borrower’s indebtedness to Bank under this Agreement, any other Loan Document or under the
Existing Loan Agreements;



     (b) Indebtedness existing on the Closing Date and shown on Schedule 1;



     (c) Subordinated Debt;



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



     (e) Indebtedness secured by Permitted Liens;



     (f) Indebtedness incurred by Subsidiaries of Borrower organized and doing business in Europe
in an aggregate amount not to exceed $500,000 in the aggregate or an equivalent amount in the
applicable local monetary unit;



     (g) A guaranty by the Borrower of the Indebtedness described in clause (f) above and limited,
in any event, to an aggregate amount of no more than $500,000 or an equivalent amount in the
applicable local monetary unit where the underlying Indebtedness is incurred;



     (h) The indebtedness represented by the Philips Guaranty.



     “Permitted Investments” are:



     (a) Investments shown on Schedule 1 and existing on the Closing Date; and



     (b) (i) marketable direct obligations issued or unconditionally guaranteed by the United
States or its agency or any State maturing within 1 year from its acquisition, (ii) commercial
paper maturing no more than 1 year after its creation and having the highest rating from either
Standard & Poor’s Corporation or Moody’s Investors Service, Inc., and (iii) Bank’s certificates of
deposit issued maturing no more than 1 year after issue.



17









 





     “Permitted Liens” are:



     (a) Liens existing on the Closing Date and shown on Schedule 1 or arising under this Agreement
or other Loan Documents;



     (b) Liens for taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Borrower maintains adequate reserves on
its Books, if they have no priority over any of Bank’s security interests;



     (c) Purchase money Liens (i) on Equipment acquired or held by Borrower or its Subsidiaries
incurred for financing the acquisition of the Equipment, or (ii) existing on equipment when
acquired, if the Lien is confined to the property and improvements and the proceeds of the
equipment;



     (d) Nonexclusive licenses and non-exclusive sublicenses granted by Borrower in the ordinary
course of its business including in connection with joint venture enterprises of Borrower;



     (e) Leases or subleases granted in the ordinary course of Borrower’s business, including in
connection with Borrower’s leased premises or leased property;



     (f) Liens given by Subsidiaries of Borrower organized and doing business in Europe with
respect to the permitted amount of indebtedness as set forth in clause (f) of the category of
Permitted Indebtedness above;



     (g) The Philips Lien; and



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



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



     “Philips Guaranty” shall have the meaning ascribed to such term in Section 5.2 hereof.



     “Prime Rate” is Bank’s most recently announced “prime rate,” even if it is not Bank’s
lowest rate.



     “Quick Assets” is, on any date, the Borrower’s consolidated, unrestricted cash, cash
equivalents, net billed accounts receivable and investments with maturities of fewer than 12
months determined according to GAAP.



     “Representations” are the written Representations and Warranties of Borrower delivered via
email to the Bank on July 15, 2003.



     “Responsible Officer” is each of the Chief Executive Officer, the President, the Chief
Financial Officer and the Controller of Borrower.



     “Revolving Maturity Date” is set forth on Schedule 2.



     “Schedule 1” is Schedule 1 to this Agreement.



     “Schedule 2” is Schedule 2 to this Agreement.



18









 





     “Subordinated Debt” is debt incurred by
Borrower subordinated to Borrower’s indebtedness
owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank
and approved by Bank in writing.



     “Subsidiary” is for any Person, or any other business entity of which more than 50% of the
voting stock or other equity interests is owned or controlled, directly or indirectly, by the
Person or one or more Affiliates of the Person.



     “Tangible Net Worth” is, on any date, the consolidated total assets of Borrower and its
Subsidiaries minus, (i) any amounts attributable to (a) goodwill, (b) intangible items such as
unamortized debt discount and expense, Patents, trade and service marks and names, copyrights and
research and development expenses except prepaid expenses, and (c) reserves not already deducted
from assets, and (ii) Total Liabilities.



     “Total Liabilities” is on any day, obligations that should, under GAAP, be classified as
liabilities on Borrower’s consolidated balance sheet, including all Indebtedness, and current
portion Subordinated Debt allowed to be paid, but excluding all other Subordinated Debt.



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



	 	 	 	 	 	 	 
	 	 	BORROWER:	 	 
	 
	 	 	 	 	 	 
	 	 	VOLCANO THERAPEUTICS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Scott Huennekens
 

	 	 
	 	 	Name Scott Huennekens	 	 
	 	 	Title   Pres. & CEO	 	 
	 
	 	 	 	 	 	 
	 	 	BANK:	 	 
	 
	 	 	 	 	 	 
	 	 	SILICON VALLEY BANK	 	 
	 
	 

	 	By
	 	/s/ Richard Shuttleworth	 	 
	 

	 	 	 	 	 	 
	 	 	Title Senior Vice President	 	 






Effective Date: July 18, 2003




Version:
—1 dated 7/23/02




19









 






EXHIBIT A 




Collateral




     “Collateral” means of all of Borrower’s right, title and interest in and to the
following whether owned now or hereafter acquired or arising, and wherever located: all
Accounts; all Inventory; all Equipment; all Deposit Accounts; all General Intangibles; all
Investment Property; all Other Property; and any and all claims, rights and interests in any
of the foregoing, and all guaranties and security for any of the foregoing, and all
substitutions and replacements for, additions, accessions, attachments, accessories, and
improvements to, and proceeds (including proceeds of any insurance policies, proceeds of
proceeds and claims against third parties) of, all of the foregoing, and all Borrower’s books
relating to any of the foregoing; provided, however, the Collateral shall not include
Intellectual Property, provided, further, notwithstanding the exclusion of the
Intellectual Property from the scope of the definition of Collateral hereunder, any and all
proceeds of the Intellectual Property (regardless of form but not including proceeds in the
direct form of Intellectual Property itself) shall be specifically included in the definition
of Collateral hereunder, provided, further, that if a judicial authority (including a
U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property
is necessary to have a security interest in such items that are proceeds of the Intellectual
Property including, without limitation, proceeds consisting of payment intangibles, accounts,
license revenues, or general intangibles relating to rights to payment arising therefrom or
relating thereto, then in such circumstance, the Collateral shall automatically, and effective
as of the date hereof, include the Intellectual Property only to the extent necessary to
permit perfection of Bank’s security interest in such proceeds, including, without limitation,
in proceeds consisting of payment intangibles, accounts, license revenues, or general
intangibles relating to rights to payment.



As used in this Agreement and in this Exhibit, the following terms have the following meanings:




“Accounts” means all present and future “accounts” 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 accounts receivable and other sums owing to Borrower.




“Deposit Accounts” means all present and future “deposit accounts” 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 general and special bank accounts, demand
accounts, checking accounts, savings accounts and certificates of deposit, whether
maintained with Bank or other institutions




“Equipment” means all present and future “equipment” 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 machinery, fixtures, goods, vehicles (including motor
vehicles and trailers), and any interest in any of the foregoing.




“General Intangibles” means all present and future “general intangibles” as defined in
the Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer lists,
route lists, telephone numbers, domain names, claims, income tax refunds, security and
other deposits, options to purchase or sell real or personal property, rights in all
litigation presently or hereafter pending (whether in contract, tort or otherwise),
insurance policies (including without limitation key man, property damage, and
business interruption insurance), payments of insurance and rights to payment of any
kind.




“Inventory” means all present and future “inventory” as defined in the Code in effect on
the date hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and shipping
materials, work in process



 









 







and finished products, including without limitation such inventory as is out of Borrower’s
custody or possession or in transit and including any returned goods and any documents of title
representing any of the above.




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




“Investment Property” means all present and future investment property, securities, stocks, bonds,
debentures, debt securities, partnership interests, limited liability company interests, options,
security entitlements, securities accounts, commodity contracts, commodity accounts, and all
financial assets held in any securities account or otherwise, wherever located, and all other
securities of every kind, whether certificated or uncertificated,




“Other Property” means (i) the following as defined in the Code in effect on the date hereof with
such additions to such term as may hereafter be made, and all rights relating thereto: all present
and future “commercial tort claims”, “documents”, “instruments”, “promissory notes”, “chattel
paper”, “letters of credit”, “letter-of-credit rights”, “fixtures”, “farm products” and “money”;
and (ii) all other goods and personal property of every kind, tangible and intangible, whether or
not governed by the Code.




21









 






EXHIBIT B




LOAN PAYMENT/ADVANCE REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.




Fax To:                             
                                

                     
                   
Date:   
                     
                      
               




o LOAN PAYMENT:
                                                                      
                    
           Client Name (Borrower)




From Account #           
                                                                       To Account #                                        

                      
        (Deposit Account #)            
                      
                      
                (Loan Account #)




Principal $           
          
and/or Interest $          
                      
         



All Borrower’s representation and warranties in the Loan and Security Agreement are true,
correct and complete in all material respects to on the date of the telephone transfer request
for and advance, but those representations and warranties expressly referring to another date
shall be true, correct and complete in all material respects as of the date:



Authorized Signature:          
                     
                  
   Phone Number:                  
                     
  



o LOAN ADVANCE:

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



From Account #           
                      
                       
                       
   To Account #                 
                      
  

                       
       (Loan Account
#)                 
                       
                       
               (Deposit Account #)



Amount of
Advance $          
                     
          



All Borrower’s representation and warranties in the Loan and Security Agreement are true,
correct and complete in all material respects to on the date of the telephone transfer request
for and advance, but those representations and warranties expressly referring to another date
shall be true, correct and complete in all material respects as of the date:



Authorized
Signature:                                         
          
Phone Number:         
                                



OUTGOING WIRE REQUEST

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



Deadline for same day processing is 12:00 p.m., P.S.T.



Beneficiary
Name:       
                      
                        
       Amount of Wire: $              
                     
      

Beneficiary Bank:                 
                    
                   
    Account Number:                  
                            

City and Sate:                                              

Beneficiary Bank Transit (ABA) #:                  
                      
 




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

(For International Wire Only)



Intermediary
Bank:           
                      
                       
      Transit (ABA) #:               
                      
    

For Further Credit to:                    
                                      
                      
                      
                      
             

Special Instruction:                    
                                          
                      
                      
                                   




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




	 	 	 	 	 	 	 	 	 
	Authorized Signature:

	 	 	 	 	 	2nd Signature (If Required):	 	 
	 Print
Name/Title:

	 	 

	 	 	 	Print Name/Title:
	 	 
 
	 Telephone
#

	 	 

	 	 	 	Telephone #
	 	 
 
	 

	 	 

	 	 	 	 	 	 
 






 









 








Schedule 1 to Loan and Security Agreement



The exact correct corporate name of Borrower is (attach a copy of the formation documents, e.g.,
articles, partnership agreement): See Representations



Borrower’s State of formation: See Representations



Borrower has operated under only the following other names (if none, so
state): See Representations



All other address at which the Borrower does business are as follows (attach additional sheets if
necessary and include all warehouse addresses):


See Representations



Borrower has deposit accounts and/or investment accounts located only at the following
institutions:

See Representations

List Acct. Numbers: See Representations



Liens existing on the Closing Date and disclosed to and accepted by Bank in
writing:

Permitted Liens are set forth in the Loan Agreement


Subordinated
Debt:



Indebtedness on the Closing Date and disclosed to and consented to by Bank in writing:

Indebtedness outstanding in favor of DP V Associates LP and Domain Partners V LP in the
approximate
aggregate amount of $2,000.000



The following is a list of the Borrower’s copyrights (including copyrights of software) which are
registered with the United States Copyright Office. (Please include name of the copyright and
registration number and attach a copy of the registration:

See Representations



The following is list of all software which the Borrower sells, distributes or licenses to others,
which is not registered with the United States Copyright Office. (Please include versions
which are not registered:

See Representations



The following is a list of all of the Borrower’s patents which are registered with the United
States Patent
Office. (Please include name of the patent and registration number and attach a copy of the
registration.):

See Representations



The following is a list of all of the Borrower’s patents which are pending with the United States
Patent Office. (Please include name of the patent and a copy of the application):
 See
Representations



The following is a list of all of the Borrower’s registered trademarks. (Please include name of
the trademark and a copy of the registration.):

See Representations



Borrower is not subject to litigation which would have a material adverse effect on the Borrower’s
financial
condition, except the following (attach additional comments, if needed):



None



Tax ID Number: 33-0928885



Organizational
Number, if any:                     




 










 







EXHIBIT C

BORROWING BASE CERTIFICATE




	 	 	 
	Borrower: VOLCANO THERAPEUTICS, INC.

	 	Bank: Silicon Valley Bank
	 

	 	3003 Tasman Drive
	 

	 	Santa Clara, CA 95054






Commitment Amount: $6,000,000




	 	 	 	 	 	 	 
	ACCOUNTS RECEIVABLE	 	 	 	 
	1.

	 	Accounts Receivable Book Value as of
	 	 	 	$          
	 

	 	 	 	 	 	 
	2.

	 	Additions (please explain on reverse)
	 	 	 	$          
	 

	 	 	 	 	 	 
	3.

	 	TOTAL ACCOUNTS RECEIVABLE
	 	 	 	$          
	 

	 	 	 	 	 	 
	 
	ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)	 	 	 	 
	4.

	 	Amounts over 90 days from invoice date
	 	$          
	 	 
	 

	 	 	 	 	 	 
	5.

	 	Balance of 50% over 90 day accounts
	 	$          	 	 
	 

	 	 	 	 	 	 
	6.

	 	Credit balances over 90 days
	 	$          	 	 
	 

	 	 	 	 	 	 
	7.

	 	Concentration Limits*
	 	$          	 	 
	 

	 	 	 	 	 	 
	8.

	 	Foreign Accounts
	 	$          	 	 
	 

	 	 	 	 	 	 
	9.

	 	Governmental Accounts
	 	$          	 	 
	 

	 	 	 	 	 	 
	10.

	 	Contra Accounts
	 	$          	 	 
	 

	 	 	 	 	 	 
	11.

	 	Promotion or Demo Accounts
	 	$          	 	 
	 

	 	 	 	 	 	 
	12.

	 	Intercompany/Employee Accounts
	 	$          	 	 
	 

	 	 	 	 	 	 
	13.

	 	Other (please explain on reverse)
	 	$          	 	 
	 

	 	 	 	 	 	 
	14.

	 	TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
	 	 	 	$          
	 

	 	 	 	 	 	 
	15.

	 	Eligible Accounts (#3 minus #14)
	 	 	 	$          
	 

	 	 	 	 	 	 
	16.

	 	LOAN VALUE OF ACCOUNTS (80% of #15)
	 	 	 	$          
	 

	 	 	 	 	 	 
	16a.

	 	Eligible Inventory
	 	 	 	$          
	 

	 	 	 	 	 	 
	16b.

	 	LOAN VALUE OF ELIGIBLE INVENTORY
(lesser of 20% of 16a)
or ($1,250,000)
	 	 	 	$          
	 

	 	 	 	 	 	 
	16c.

	 	Allowed Overadvance Facility Amount
	 	 	 	$          
	 

	 	 	 	 	 	 
	 
	BALANCES	 	 	 	 
	17.

	 	Maximum Loan Amount
	 	 	 	$          
	 

	 	 	 	 	 	 
	18.

	 	Total Funds Available [Lesser of #17 or (#16 plus #16b plus 16c)]
	 	 	 	$          
	 

	 	 	 	 	 	 
	19.

	 	Present balance owing on Line of Credit
	 	 	 	$          
	 

	 	 	 	 	 	 
	20.

	 	Outstanding under Sublimits (LC, FX and Cash Mgmt)
	 	 	 	$          
	 

	 	 	 	 	 	 
	21.

	 	RESERVE POSITION (#18 minus #19 and #20)
	 	 	 	$          
	 

	 	 	 	 	 	 




The undersigned represents and warrants that this is true, complete and correct, and that the
information in this Borrowing Base Certificate complies with the representations and warranties in
the Loan and Security Agreement between the undersigned and Silicon Valley Bank.




	 	 	 	 	 	 	 
	COMMENTS:	 	BANK USE ONLY
	 

	 	 	 	Rec’d By:	 	 
	 

	 	 	 	 	 	 
	VOLCANO THERAPEUTICS, INC.

	 	 	 	Auth. Signer 
	 

	 	 	 	Date:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Verified:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Auth. Signer
	 

	 	 	 	Date:	 	 
	 

	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Authorized Signer	 	 	 	 






 









 







EXHIBIT D 




COMPLIANCE CERTIFICATE





			
	TO:	 	SILICON VALLEY BANK

 3003 Tasman Drive

Santa Clara, CA 95054






FROM:
VOLCANO THERAPEUTICS, INC.




     The undersigned authorized officer of VOLCANO THERAPEUTICS, INC. (“Borrower”)
certifies that under the terms and conditions of the Loan and Security Agreement between Borrower
and Bank
(the “Agreement”), (i) Borrower is in complete
compliance for the period ending _____ with
        all
required covenants except as noted below and (ii) all representations and warranties in the
Agreement are true and correct in all material respects on this date. Attached are the required
documents supporting the certification. The Officer certifies that these are prepared in accordance
with Generally Accepted Accounting Principles (GAAP) consistently applied from one period to the
next except as explained in an accompanying letter or footnotes. The Officer acknowledges that no
borrowings may be requested at any time or date of determination that Borrower is not in compliance
with any of the terms of the Agreement, and that compliance is determined not just at the date this
certificate is delivered.



     Please
indicate compliance status by circling Yes/No under
“Complies” column.



	 	 	 	 	 	 	 
	Reporting
Covenant	 	Required	 	Complies
	Monthly financial
statements + CC

	 	Monthly within 30 days
	 	Yes
	 	No
	Quarterly Consolidating
financial statements

	 	Qrterly within 30 days
	 	Yes
	 	No
	Annual (Audited)

	 	FYE within 120 days
	 	Yes
	 	No
	A/R & A/P Agings

	 	Monthly within 20 days,

when borrowing
	 	Yes
	 	No
	 
	A/R Audit

	 	Initial and Semi-Annual
	 	Yes
	 	No
	Borrowing Base
Certificate

	 	Monthly within 20 days,
when borrowing
	 	Yes
	 	No






	 	 	 	 	 	 	 	 	 
	Financial
Covenant	 	Required	 	Actual	 	Complies
	Maintain on a Monthly

Basis:
	 	 	 	 	 	 	 	 
	Minimum Quick Ratio

	 	0.90:1.00
	 	___:1.00
	 	Yes
	 	No
	Max Net Loss (qtrly)

	 	($6MM) for 6.30.03
	 	 
	 	Yes
	 	No
	 

	 	($5.5MM) for 9.30.03	 	 	 	 	 	 
	 

	 	($4.6MM) thereafter	 	 	 	 	 	 





Have there been updates to Borrower’s intellectual property that affect the Collateral per the
loan agreement provision? Yes /No



Borrower
only has deposit accounts located at the following institutions: __________.



Comments Regarding Exceptions: See Attached.



	 	 	 	 	 
	Sincerely,

	 	BANK USE ONLY
	 
	 	 	 	 
	VOLCANO THERAPEUTICS, INC.

	 	Rec’d By:	 	 
	 
	 	 

	 

	 	 	 	Auth.
Signer          
	 
	 	Date:	 	 
	 
	 	 

	Signature

	 	Verified:	 	 
	 

	 	 

	 
	 	 	 	Auth. Signer          
	Title

	 	Date:	 	 
	 
	 
	 	 

	Date: 
	 	Compliance Status:                     Yes          No






 









 







EXHIBIT E




ASSET BASED TERMS



The following are the “Asset Based Terms”:




     (1) Schedules
and Documents relating to Accounts.  Borrower shall deliver to Bank transaction
reports, Advance requests, schedules of Accounts, and schedules of collections, all on
Bank’s standard forms; provided, however, that Borrower’s failure to execute and deliver the same
shall not affect or limit Bank’s security interest and other rights in all of Borrower’s Accounts.
If requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s request, originals) of
all contracts, orders, invoices, and other similar documents, and all shipping instructions,
delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or
disposition of which gave rise to such Accounts, and Borrower warrants the genuineness of all of the
foregoing. Borrower shall also furnish to Bank an aged accounts receivable trial balance in such
form and at such intervals as Bank shall request. In addition, Borrower shall deliver to Bank the
originals of all instruments, chattel paper, security agreements, guarantees and other documents and
property evidencing or securing any Accounts, immediately upon receipt thereof and in the same form
as received, with all necessary endorsements, all of which shall be with recourse. Borrower shall
also provide Bank with copies of all credit memos from time to time
on request by Bank.



     (2) Collection
of Accounts.  Borrower shall hold all payments on, and proceeds of, Accounts
and all other Collateral in trust for Bank, and Borrower shall immediately deliver all
such payments and proceeds to Bank in their original form, duly endorsed, to be applied to the
Obligations in such order as Bank shall determine. Borrower agrees that it will not commingle such
payments and proceeds with any of Borrower’s other funds or property, but will hold such payments
and proceeds separate and apart from such other funds and property and in an express trust for Bank.
Bank may, in its discretion, require that all proceeds of Collateral be deposited by Borrower into a
lockbox account, or such other “blocked account” as Bank may specify, pursuant to a blocked account
agreement in such form as Bank may specify. Bank or its designee may, at any time, notify Account
Debtors that the Accounts have been assigned to Bank. Nothing in this Exhibit limits the
restrictions on Transfers of Collateral set forth elsewhere in this Agreement.



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



     (4) Loan
Requests.  Without limiting the right of Bank to cease making Advances on an Event of
Default, requests for Advances shall be in writing and shall be
accompanied by a current Transaction
Report on Bank’s standard form.



     (5) Reserves.  Without limiting the right of Bank to cease making Advances on an Event
of Default, Bank shall have the right, from time to time, to establish and deduct the following
reserves from the amount of Advances, Letters of Credit and other financial accommodations under the
lending formula(s) provided in Schedule 2: (a) reserves to reflect events, conditions contingencies
or risks which, as determined by Bank in good faith, do or may affect
adversely (1) the Collateral or
any other property which is security for the Obligations or its Value (including without limitation
any increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower, or
(iii) the security interests and other rights of Bank in the
(Collateral (including the
enforceability, perfection and priority thereof); and(b)



 









 







reserves to reflect Bank’s good faith belief that any collateral report or financial information
furnished by or on behalf of Borrower to Bank is or may have been incomplete, inaccurate or
misleading in any material respect.



     (6) Cure Periods. The cure periods set forth in the Loan Agreement shall be modified as
follows: the cure period in Section 8.3 of the Loan Agreement shall be five Business Days rather
than 30 days and there shall be no cure period in Section 8.1 of the Loan Agreement.



27









 





Schedule 2 to




Loan and Security Agreement





			
	Borrower:	 	Volcano Therapeutics, Inc.






			
	Date:	 	July 18, 2003




This Schedule forms an integral part of the Loan and Security Agreement (the “Loan
Agreement”) between Silicon Valley Bank (“Bank”) and the above-borrowers (jointly and severally
“Borrower”) of even date herewith. (Capitalized terms used herein, which are not defined, shall
have the meanings set forth in the Loan Agreement.)



 




1. CREDIT LIMIT




    (Section 2.1.1):





An amount not to exceed the lesser of (A) or (B), minus (C):




(A) $6,000,000 at any one time outstanding (the
“Committed Revolving Line”); or




(B) The sum of (1), (2) and (3) (the “Borrowing Base”):




    (1) Up to 80% of the amount of Borrower’s Eligible
Accounts; plus




    (2) Up to the lesser of (x) 20% of the value of the
Eligible Inventory based on the lower of cost or market value;
or (y) $1,250,000; plus




    (3) Up to $1,750,000, provided that Borrower has on
deposit with Bank an amount at least equal to the Advance
proposed to made and all Advances already extended under this
clause (3) and Borrower maintains such aggregate amount in Bank
deposits while any such Advances remain outstanding,
provided, further, that all Advances made under this
clause (3) shall be repaid in their entirety on the earlier to
occur of October 31, 2003 or the satisfaction of the covenant set
forth in Section 7.3 of this Schedule and no further Advances
under this clause (3) shall be made on and after such date;




MINUS




(C) (1) the amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of credit); (2) the FX
Reserve; and (3) the aggregate amount of Cash Management Services
utilizations.



    Letter of Credit Sublimit

    (Section 2.1.2):                       $1,000,000




 









 









Bank will issue or have issued Letters of Credit for
Borrower’s account not exceeding (i) the lesser of the Committed
Revolving Line or the Borrowing Base, minus (ii) the outstanding
principal balance of the Advances, minus (iii) the applicable FX
Reserve and minus (iv) the aggregate amount of Cash Management
Services utilizations; provided, however, the face amount of
outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit) may not exceed the Letter of Credit Sublimit set
forth above.




			
	Foreign Exchange Sublimit
	(Section 2.1.3):	$1,000,000, subject to the provisions set forth in Section 2.1.3 of
the Loan Agreement







 



			
	Cash Management Services Sublimit
	(Section 2.1.4):	$500,000, subject to the provisions set forth in Section 2.1.4 of
the Loan Agreement






			
	2. INTEREST
	 
	    Interest Rate	 	 
	    (Section 2.3(a)):	A rate equal to the “Prime Rate” in effect from time to time, plus 0.75% per annum,
provided that in no event shall the interest rate be less than 4.75% per annum.







			
	3. FEES (Section 2.4(a)):
	 
	    Facility Fee:	$30,000, payable concurrently herewith, and Bank acknowledges that
$ 10,000 of such fee has been received.
	 
	    Termination:	Borrower shall have the right to terminate the Committed Revolving
Line prior to the Revolving Maturity Date, effective three
Business Days after written notice of termination is given to
Bank, in which event Borrower shall pay in full all Obligations on
the effective date of termination.





2









 







4. REVOLVING MATURITY DATE




	 	 	 
	     (Section 13.1):	 	July     , 2004, subject to the required repayment of certain Advances
as set forth in the clause (B)(3) of the Credit Limit
section above.







5.
FINANCIAL COVENANTS





	 	 	 
	     (Section 6.7):	 	Borrower shall comply with each of the following
covenants. Compliance shall be determined on a consolidated
basis as of the end of each month, except as specifically
otherwise provided below:
	 
	Quick Ratio:  	Borrower shall maintain a ratio of
	 
	 	 	(i) the total of unrestricted cash, cash equivalents and
net trade accounts receivable,





TO






	 	 	 
	 	 	(ii) the total of current
liabilities, 



of not less than 0.90 to 1.00.
	 
	Profitability: 	 Borrower shall not incur a net loss (after taxes) in
excess of
(A) $6,000,000 for the fiscal quarter ending June 30,
2003;

(B) $5,500,000 for the fiscal quarter ending September 30, 2003;
and
(C) $4,600,000 for each fiscal quarter thereafter. Further, it
is understood and agreed that cumulative extraordinary non-cash
charges less than or equal to $4,000,000 are to be allowed to be
incurred for the quarter end periods of September 30, 2003 and
December 31, 2003 in the aggregate and the permitted net loss
amounts for such quarters shall be deemed to exclude such
cumulative extraordinary non-cash charges (but only to the extent
of $4,000,000 in the aggregate for both such quarters);
extraordinary non-cash charges in excess of such permitted
aggregate amount for such permitted quarter periods and
any extraordinary non-cash charges in any other quarter end period
shall not be excluded for purposes of determining compliance with
the foregoing maximum loss covenants for such applicable periods.

	Definitions. 
	For purposes of this Agreement, the following term shall have the
following meaning:



“Current assets”, “current liabilities” and “liabilities” shall
have the meaning ascribed thereto by GAAP.






6.
ASSET BASED TERMS




3









 









	 	(iii)	 	“Asset Based Terms”. As used herein, “Asset Based
Terms” means the terms set forth on Exhibit E to the Loan
Agreement. Terms of this Agreement without the Asset Based
Terms are referred to as the “Non-Asset Based Terms”.
	 
	 	(iv)	 	Financial Covenant
Breach. Without limiting any of the other terms or
provisions hereof, if there is breach of the financial
covenant set forth in Section 5 above, the Asset Based Terms
shall be deemed effective upon written notice from the Bank
to the Borrower.








7. ADDITIONAL PROVISIONS.





	 	7.1	 	Warrant to Purchase
Stock. Borrower shall execute and deliver to Bank the
Warrant to Purchase Stock to purchase 40,000 shares
of Borrower’s Series B Preferred Stock on such terms
as are acceptable to Bank.
	 
	 	7.2	 	Close of Initial Series
B Round. Prior to the making of any Advances hereunder,
Borrower shall supply evidence to Bank, in form satisfactory
to Bank, that it has received at least $19,000,000 in net cash
proceeds from its current equity financing
transaction relating to Series B Preferred stock of the
Borrower.
	 
	 	7.3	 	Additional Series B
Proceeds. On or prior to October 31, 2003, Borrower
shall have received additional net cash proceeds from
its Series B Preferred stock offering, apart from the sum
referred to in section 7.2 above, in the minimum amount of
$11,000,000, and Borrower shall supply evidence satisfactory
to Bank thereof. Failure to satisfy the covenant in this
Section 7.3 shall constitute and Event of Default hereunder.







     IN WITNESS WHEREOF, the parties hereto have executed this Schedule as of the date first
written above.



	 	 	 	 	 	 	 	 	 	 	 
	Borrower:	 	 	 	Bank:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	VOLCANO	 	THERAPEUTICS, INC.	 	 	 	SILICON VALLEY BANK	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Scott Huennekens
	 	 	 	By
	 	/s/ Richard Shuttleworth	 	 
	 

	 	 

President or Vice President
	 	 	 	Title
	 	 

Senior Vice President
	 	 
	 

	 	 	 	 	 	 	 	 	 	 





4