**Exhibit 10.3**

** **

**Silicon Valley Bank**

 

**Loanand Security Agreement**

 

**(EximProgram)**

 
| **Borrower:** | **Endocardial  Solutions, Inc.** |
|---------------|----------------------------------|
| **Address:**  | **1350 Energy Lane,  Suite 110** |
|          | **St. Paul, MN  55108**     |
|          |                             |
| **Date:**     | **September 24,  2003**     |

 

**THIS LOAN AND SECURITY AGREEMENT**is entered into on the above date between SILICON VALLEY BANK (“Silicon”),whose address is 3003 Tasman Drive, Santa Clara, California  95054 and the borrower(s) named above(jointly and severally, the “Borrower”), whose chief executive office islocated at the above address (“Borrower’s Address”). The Schedule to thisAgreement (the “Schedule”) shall for all purposes be deemed to be a part ofthis Agreement, and the same is an integral part of this Agreement.  (Definitions of certain terms used in thisAgreement are set forth in Section 8 below.)

 

# ***1.***     LOANS.

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***1.1  Loans.*** Silicon will make loans to Borrower (the“Loans”) up to the amounts (the “Credit Limit”) shown on the Schedule, providedno Default or Event of Default has occurred and is continuing, and subject todeduction of Reserves for accrued interest and such other Reserves as Silicondeems proper from time to time in its good faith business judgment.

 

***1.2  Interest.***  All Loans and all other monetary Obligationsshall bear interest at the rate shown on the Schedule, except where expresslyset forth to the contrary in this Agreement. Interest shall be payable monthly, on the last day of the month.  Interest may, in Silicon’s discretion, becharged as a Loan hereunder to Borrower’s loan account, and the same shall thereafterbear interest at the same rate as the other Loans.  Silicon may alternatively, in its discretion, charge interest toBorrower’s Deposit Accounts maintained with Silicon.  Regardless of the amount of Obligations that may be outstandingfrom time to time, Borrower shall pay Silicon minimum monthly interest duringthe term of this Agreement in the amount set forth on the Schedule (the“Minimum Monthly Interest”).

 

***1.3  Overadvances.*** If at any time or for any reason the total ofall outstanding Loans and all other monetary Obligations exceeds the CreditLimit (an “Overadvance”), Borrower shall immediately pay the amount of theexcess to Silicon, without notice or demand, provided that under ordinarycircumstances, but without any obligation to do so, Silicon will use its bestefforts to contact the Borrower regarding the payment of any suchOveradvance.  Without limitingBorrower’s obligation to repay to Silicon the amount of any Overadvance,Borrower agrees to pay Silicon interest on the outstanding amount of anyOveradvance, on demand, at the Default Rate.

 

***1.4  Fees.***  Borrower shall pay Silicon the fees shown onthe Schedule, which are in addition to all interest and other sums payable toSilicon and are not refundable.

 

***1.5 Loan Requests.*** To obtain a Loan,Borrower shall make a request to Silicon by facsimile or telephone. Loanrequests received after 12:00 Noon will not be considered by Silicon until thenext Business Day. Silicon may rely on any telephone request for a Loan givenby a person whom Silicon believes is an authorized representative of Borrower,and Borrower will indemnify Silicon for any loss Silicon suffers as a result ofthat reliance.

 

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***1.6  Letters ofCredit.***   [Not Applicable.]

 

# ***2.  SECURITY INTEREST.***To secure thepayment and performance of all of the Obligations when due, Borrower herebygrants to Silicon a security interest in all of the following (collectively,the “Collateral”):  all right, title andinterest of Borrower in and to all of the following, whether now owned orhereafter arising or acquired and wherever located: all Accounts; allInventory; all Equipment; all Deposit Accounts; all General Intangibles(including without limitation all Intellectual Property); all InvestmentProperty; all Other Property; and any and all claims, rights and interests inany of the above, and all guaranties and security for any of the above, and allsubstitutions and replacements for, additions, accessions, attachments,accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds andclaims against third parties) of, any and all of the above, and all Borrower’sbooks relating to any and all of the above. Silicon agrees to enter into subordination agreements with respect toequipment financing transactions of the Borrower entered into on or after thedate hereof, with respect to equipment being purchased or acquiredsubstantially concurrently with such financing transactions, provided that (i)the form of said agreement is acceptable to Silicon in its good faith businessjudgment, and (ii) the liens to which Silicon’s security interest is to besubordinated are confined solely to the equipment so financed and the proceedsthereof and otherwise constitute Permitted Liens.

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# ***3.  REPRESENTATIONS, WARRANTIESAND COVENANTS OF BORROWER.***

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In order to induceSilicon to enter into this Agreement and to make Loans, Borrower represents andwarrants to Silicon as follows, and Borrower covenants that the followingrepresentations will continue to be true, and that Borrower will at all timescomply with all of the following covenants, throughout the term of thisAgreement and until all Obligations have been paid and performed in full (otherthan inchoate indemnity obligations of Borrower hereunder that survive anytermination of this Agreement):

 

***3.1  CorporateExistence and Authority.*** Borrower is and will continue to be, duly organized, validly existingand in good standing under the laws of the jurisdiction of itsincorporation.  Borrower is and willcontinue to be qualified and licensed to do business in all jurisdictions inwhich any failure to do so would result in a Material Adverse Change.  The execution, delivery and performance byBorrower of this Agreement, and all other documents contemplated hereby (i)have been duly and validly authorized, (ii) are enforceable against Borrower inaccordance with their terms (except as enforcement may be limited by equitableprinciples and by bankruptcy, insolvency, reorganization, moratorium or similarlaws relating to creditors’ rights generally), and (iii) do not violateBorrower’s articles or certificate of incorporation, or Borrower’s by-laws, orany law or any  material agreement orinstrument which is binding upon Borrower or its property, and (iv) do notconstitute grounds for acceleration of any material indebtedness or obligationunder any agreement or instrument which is binding upon Borrower or itsproperty.

 

***3.2  Name; TradeNames and Styles.*** The name of Borrower set forth in the heading to this Agreement is itscorrect name.  Listed in theRepresentations are all prior names of Borrower and all of Borrower’s presentand prior trade names.  Borrower shallgive Silicon 30 days’ prior written notice before changing its name or doingbusiness under any other name.  Borrowerhas complied, and will in the future comply, in all material respects, with alllaws relating to the conduct of business under a fictitious business name,except where the failure to so comply would not reasonably be expected toresult in a Material Adverse Change.

 

***3.3  Place ofBusiness; Location of Collateral.*** The address set forth in the heading to thisAgreement is Borrower’s chief executive office.  In addition, Borrower has places of business and Collateral islocated only at the locations set forth in the Representations.  Borrower will give Silicon at least 30 daysprior written notice before opening any additional place of business, changingits chief executive office, or moving any of the Collateral to a location otherthan Borrower’s Address or one of the locations set forth in theRepresentations, except that Borrower may maintain sales offices in theordinary course of business at which not more than a total of $10,000 fairmarket value of Equipment is located.

 

***3.4  Title toCollateral; Perfection; Permitted Liens.***

 

(a)   Borrower is now, and will atall times in the future be, the sole owner of all the Collateral, except foritems of Equipment which are leased to Borrower.  The Collateral now is and will remain free and clear of any andall liens, charges, security interests, encumbrances and adverse claims, exceptfor Permitted Liens.  Silicon now has,and will continue to have, a first-priority perfected and enforceable securityinterest in all of the Collateral, subject only to the Permitted Liens, andBorrower will at all times defend Silicon and the Collateral against all claimsof others (other than for rightful claims pertaining to the holders ofPermitted Liens).

 

(b)   Borrower has set forth in theRepresentations all of Borrower’s Deposit Accounts, and Borrower will giveSilicon five Business Days advance written notice before establishing any newDeposit Accounts and will cause the institution where any such new DepositAccount is maintained to execute and deliver to Silicon a control agreement inform sufficient to perfect Silicon’s security interest in the Deposit Accountand otherwise satisfactory to Silicon in its good faith business

 

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judgment.  Nothing herein limits any requirements whichmay be set forth in the Schedule as to where Deposit Accounts will bemaintained.

 

(c)   In the event that Borrowershall at any time after the date hereof have any commercial tort claims againstothers, which it is asserting or intends to assert, and in which the potentialrecovery exceeds $100,000, Borrower shall promptly notify Silicon thereof inwriting and provide Silicon with such information regarding the same as Siliconshall request (unless providing such information would waive the Borrower’sattorney-client privilege).  Suchnotification to Silicon shall constitute a grant of a security interest in thecommercial tort claim and all proceeds thereof to Silicon, and Borrower shallexecute and deliver all such documents and take all such actions as Siliconshall reasonably request in connection therewith.

 

(d)   None of the Collateral now isor will be affixed to any real property in such a manner, or with such intent,as to become a fixture.  Borrower is notand will not become a lessee under any real property lease pursuant to whichthe lessor may obtain any rights in any of the Collateral and no such lease nowprohibits, restrains, impairs or will prohibit, restrain or impair Borrower’sright to remove any Collateral from the leased premises.  Whenever any Collateral is located uponpremises in which any third party has an interest, Borrower shall, wheneverrequested by Silicon, use its best efforts to cause such third party to executeand deliver to Silicon, in form acceptable to Silicon in its good faithbusiness judgment, such waivers and subordinations as Silicon shall specify inits good faith business judgment, except when any such Collateral is in transitor located at any subcontractor’s facility. Borrower will keep in full force and effect, and will comply with allmaterial terms of, any lease of real property where any of the Collateral nowor in the future may be located.

 

***3.5  Maintenance ofCollateral.*** Borrower will not use the Collateral for any unlawful purpose andwill maintain the Collateral in good working condition (ordinary wear and tearexcepted), subject, however, to any dispositions of Collateral that areotherwise specifically permitted and authorized hereunder.  Borrower will immediately advise Silicon inwriting of any material loss or damage in excess of $150,000 to the Collateral.

 

***3.6  Books andRecords.***  Borrowerhas maintained and will maintain at Borrower’s Address complete and accuratebooks and records, comprising an accounting system in accordance with GAAP.

 

***3.7  FinancialCondition, Statements and Reports.***  All financial statements now or in thefuture delivered to Silicon have been, and will be, prepared in conformity withGAAP and now and in the future will fairly present the results of operationsand financial condition of Borrower, in accordance with GAAP, at the times andfor the periods therein stated, provided that, interim financial statements maybe subject to year end adjustments, although the lack of any such adjustmentsin any such interim financial statements shall not, in the reasonable judgmentof the certifying officer at the time, render the interim financial statementsmisleading or reflect anything other than a fair presentation of such resultsof operations and the financial condition of Borrower.  Between the last date covered by any suchstatement provided to Silicon and the date hereof, there has been no MaterialAdverse Change.

 

***3.8  Tax Returns andPayments; Pension Contributions.***  Borrower has timely filed, and will timelyfile, all required tax returns and reports, and Borrower has timely paid, andwill timely pay, all foreign, federal, state and local taxes, assessments,deposits and contributions now or in the future owed by Borrower.  Borrower may, however, defer payment of anycontested taxes, provided that Borrower (i) in good faith contests Borrower’sobligation to pay the taxes by appropriate proceedings promptly and diligentlyinstituted and conducted, (ii) notifies Silicon in writing of the commencementof, and any material development in, any such proceedings involving more than$100,000, and (iii) posts bonds or takes any other steps required to keep thecontested taxes from becoming a lien upon any of the Collateral.  Borrower is unaware of any claims oradjustments proposed for any of Borrower’s prior tax years which could resultin additional taxes becoming due and payable by Borrower.  Borrower has paid, and shall continue to payall amounts necessary to fund all present and future pension, profit sharingand deferred compensation plans in accordance with their terms, and Borrowerhas not and will not withdraw from participation in, permit partial or completetermination of, or permit the occurrence of any other event with respect to,any such plan which could reasonably be expected to result in any liability ofBorrower, including any liability to the Pension Benefit Guaranty Corporationor its successors or any other governmental agency.

 

***3.9  Compliance withLaw.***  Borrowerhas, to the best of its knowledge, complied, and will comply, in all materialrespects, with all provisions of all foreign, federal, state and local laws andregulations applicable to Borrower, including, but not limited to, thoserelating to Borrower’s ownership of real or personal property, the conduct andlicensing of Borrower’s business, and all environmental matters.

 

***3.10  Litigation.***  There is no claim, suit, litigation,proceeding or investigation pending or (to best of Borrower’s knowledge)threatened against or affecting Borrower in any court or before anygovernmental agency (or any basis therefor known to Borrower) which couldreasonably be expected to result, either separately or in the aggregate, in anyMaterial Adverse Change.  Borrower willpromptly inform Silicon in writing of any claim, proceeding, litigation orinvestigation in the future threatened or instituted against Borrower involvingany single claim of $50,000 or more, or involving $100,000 or more in theaggregate.

 

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***3.11  Use ofProceeds.***  Allproceeds of all Loans shall be used solely for lawful business purposes.  Borrower is not purchasing or carrying any“margin stock” (as defined in Regulation U of the Board of Governors of theFederal Reserve System) and no part of the proceeds of any Loan will be used topurchase or carry any “margin stock” or to extend credit to others for thepurpose of purchasing or carrying any “margin stock.”

 

# ***4.  ACCOUNTS.***

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***4.1  RepresentationsRelating to Accounts.* **Borrower represents and warrants to Silicon as follows:  Each Account with respect to which Loans arerequested by Borrower shall, on the date each Loan is requested and made, (i)represent an undisputed bona fide existing unconditional obligation of theAccount Debtor created by the sale, delivery, and per Borrower’s contracts, thedeemed acceptance of goods (which Borrower sends FOB point of shipping) or therendition of services, or the non-exclusive licensing of Intellectual Property,in the ordinary course of Borrower’s business, and (ii) meet the MinimumEligibility Requirements set forth in Section 8 below.

 

***4.2  RepresentationsRelating to Documents and Legal Compliance. ***Borrower represents and warrants to Silicon as follows:  To the best of Borrower’s knowledge, allstatements made and all unpaid balances appearing in all invoices, instrumentsand other documents evidencing the Accounts are and shall be true and correctand all such invoices, instruments and other documents and all of Borrower’sbooks and records are and shall be genuine and in all respects what theypurport to be.  To the best ofBorrower’s knowledge, all sales and other transactions underlying or givingrise to each Account shall comply in all material respects with all applicablelaws and governmental rules and regulations. To the best of Borrower’s knowledge, all signatures and endorsements onall documents, instruments, and agreements relating to all Accounts are andshall be genuine, and all such documents, instruments and agreements are andshall be legally enforceable in accordance with their terms.

 

***4.3  Schedules andDocuments relating to Accounts.* **Borrower shall deliver to Silicon transaction reports andschedules of collections, as provided in the Schedule, on Silicon’s standardforms; provided, however, that Borrower’s failure to execute and deliver thesame shall not affect or limit Silicon’s security interest and other rights inall of Borrower’s Accounts, nor shall Silicon’s failure to advance or lendagainst a specific Account affect or limit Silicon’s security interest andother rights therein. If requested by Silicon, Borrower shall furnish Siliconwith copies (or, at Silicon’s request, originals) of all contracts, orders,invoices, and other similar documents, and all shipping instructions, deliveryreceipts, bills of lading, and other evidence of delivery, for any goods thesale or disposition of which gave rise to such Accounts, and Borrower warrantsthe genuineness of all of the foregoing (to the best of its knowledge).  Borrower shall also furnish to Silicon anaged accounts receivable trial balance as provided in the Schedule.  In addition, Borrower shall deliver toSilicon, on its reasonable request, the originals of all instruments, chattelpaper, security agreements, guarantees and other documents and propertyevidencing or securing any Accounts, in the same form as received, with allnecessary indorsements, and copies of all credit memos.

 

***4.4  Collection ofAccounts.*** Borrower shall have the right to collect all Accounts, unless anduntil a Default or an Event of Default has occurred and is continuing.  Whether or not an Event of Default hasoccurred and is continuing, Borrower shall hold all payments on, and proceedsof, Accounts in trust for Silicon, and Borrower shall immediately (with term“immediately” meaning in this context within One Business Day) deliver all suchpayments and proceeds to Silicon in their original form, duly endorsed, bydepositing the same into the lockbox or “blocked account” referred to below, tobe applied to the Obligations in such order as Silicon shall determine.  Silicon will require that all proceeds ofCollateral be deposited by Borrower into a lockbox account, or such other“blocked account” as Silicon may specify, pursuant to a blocked accountagreement in such form as Silicon may specify in its good faith businessjudgment.

 

***4.5.  Remittance ofProceeds.* **Allproceeds arising from the disposition of any Collateral shall be delivered, inkind, by Borrower to Silicon in the original form in which received by Borrowernot later than the following Business Day after receipt by Borrower, to beapplied to the Obligations in such order as Silicon shall determine; providedthat, if no Default or Event of Default has occurred and is continuing,Borrower shall not be obligated to remit to Silicon the proceeds of the sale ofworn out or obsolete Equipment disposed of by Borrower in good faith in anarm’s length transaction for an aggregate purchase price of $25,000 or less(for all such transactions in any fiscal year).  Borrower agrees that it will not commingle proceeds of Collateralwith any of Borrower’s other funds or property, but will hold such proceedsseparate and apart from such other funds and property and in an express trustfor Silicon.  Nothing in thisSection limits the restrictions on disposition of Collateral set forthelsewhere in this Agreement.

 

***4.6  Disputes.*** Borrower shall notify Silicon promptly of alldisputes or claims in excess of $35,000 relating to Accounts.  Borrower shall not forgive (completely orpartially), compromise or settle any Account for less than payment in full, oragree to do any of the foregoing, except that Borrower may do so, providedthat: (i) Borrower does so in good faith, in a commercially reasonable manner,in the ordinary course of business, and in arm’s length transactions, which arereported to Silicon on the regular reports provided to Silicon; (ii) no Defaultor Event of Default has occurred and is continuing; and (iii) taking intoaccount all such discounts, settlements and forgiveness, the total outstandingLoans will not exceed the Credit Limit.

 

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***4.7  Returns.***  Provided no Event of Default has occurred andis continuing, if any Account Debtor returns any Inventory to Borrower,Borrower shall promptly determine the reason for such return and if such returnis customarily acceptable to Borrower under the circumstances, then Borrowershall promptly issue a credit memorandum to the Account Debtor in theappropriate amount.  In the event anyattempted return occurs after the occurrence and during the continuance of anyEvent of Default, Borrower shall hold the returned Inventory in trust forSilicon, and immediately notify Silicon of the return of the Inventory.

 

***4.8  Verification.***  Silicon may, from time to time, verifydirectly with the respective Account Debtors the validity, amount and othermatters relating to the Accounts, by means of mail, telephone or otherwise,either in the name of Borrower or Silicon or such other name as Silicon maychoose.

 

***4.9  No Liability.* **Silicon shall not be responsible orliable for any shortage or discrepancy in, damage to, or loss or destructionof, any goods, the sale or other disposition of which gives rise to an Account,or for any error, act, omission, or delay of any kind occurring in thesettlement, failure to settle, collection or failure to collect any Account, orfor settling any Account in good faith for less than the full amount thereof,nor shall Silicon be deemed to be responsible for any of Borrower’s obligationsunder any contract or agreement giving rise to an Account.  Nothing herein shall, however, relieveSilicon from liability for its own gross negligence or willful misconduct.

 

# ***5.  ADDITIONAL DUTIES OF BORROWER.***

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***5.1  Financial andOther Covenants.*** Borrower shall at all times comply with the financial and othercovenants set forth in the Schedule.

 

***5.2  Insurance.***  Borrower shall, at all times insure all ofthe tangible personal property Collateral and carry such other businessinsurance, with insurers reasonably acceptable to Silicon, in such form andamounts as Silicon may reasonably require and that are customary and inaccordance with standard practices for Borrower’s industry and locations, andBorrower shall provide evidence of such insurance to Silicon.  All such property insurance policies shallname Silicon as an additional loss payee, and shall contain a lenders losspayee endorsement in form reasonably acceptable to Silicon.  Upon receipt of the proceeds of any suchinsurance, Silicon shall promptly apply such proceeds in reduction of theObligations in accordance with Silicon’s standard procedures, except that,provided no Default or Event of Default has occurred and is continuing, Siliconshall release to Borrower insurance proceeds with respect to Equipment totalingless than $100,000, which shall be utilized by Borrower for the replacement ofthe Equipment assets with respect to which the insurance proceeds werepaid.  Silicon may require reasonableassurance that the insurance proceeds so released will be so used.  If Borrower fails to provide or pay for anyinsurance as described in this Section 5.2 or as may be otherwise requiredunder the Loan Documents, Silicon may, but is not obligated to, obtain the sameat Borrower’s expense.  Borrower shallpromptly deliver to Silicon copies of all material reports made to insurancecompanies.  Silicon hereby acknowledgesthat existing insurance policies are acceptable and comport withSection 5.2.

 

***5.3  Reports.***  Borrower, at its expense, shall provideSilicon with the written reports set forth in the Schedule, and such otherwritten reports with respect to Borrower (including budgets, sales projections,operating plans and other financial documentation), as Silicon shall from timeto time specify in its good faith business judgment.

 

***5.4  Access toCollateral, Books and Records.***  At reasonable times, and on one Business Day’s prior notice,Silicon, or its agents, shall have the right to inspect the Collateral, and theright to audit and copy Borrower’s books and records. The parties contemplatethat such audits will be performed no more frequently than quarterly, butnothing herein restricts Silicon’s right to conduct such audits more frequentlyif (i) Silicon believes that it is advisable to do so in Silicon’s good faithbusiness judgment, or (ii) Silicon believes in good faith that an event ofdefault or an event which, with notice or passage of time or both wouldconstitute an event of default, has occurred and is continuing. Silicon shalltake reasonable steps to keep confidential all information obtained in any suchinspection or audit, but Silicon shall have the right to disclose any suchinformation to its auditors, regulatory agencies, and attorneys, and pursuantto any subpoena or other legal process. The foregoing inspections and audits shall be at Borrower’s expense andthe charge therefor shall be $750 per person per day (or such higher amount asshall represent Silicon’s then current standard charge for the same), plusreasonable out-of-pocket expenses. In the event Borrower and Siliconschedule an audit more than 10 days in advance, and Borrower seeks toreschedule the audit with less than five days’ written notice to Silicon,then (without limiting any of Silicon’s rights or remedies), Borrower shall paySilicon a cancellation fee of $1,000 plus any out-of-pocket expenses incurredby Silicon, to compensate Silicon for the anticipated costs and expenses of thecancellation.

 

***5.5  NegativeCovenants.***  Exceptas may be permitted in the Schedule, Borrower shall not, without Silicon’sprior written consent (which shall be a matter of its good faith businessjudgment), do any of the following:  (i)merge or consolidate with another corporation or entity; (ii) acquire anyassets, except in the ordinary course of business; (iii) enter into any othertransaction outside the ordinary course of business; (iv) sell or transfer anyCollateral, except for the sale of finished Inventory in the ordinary course ofBorrower’s business, and except for the sale of obsolete or unneeded Equipmentin the ordinary

 

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course of business andnon-exclusive licenses and similar non-exclusive arrangements for the use ofIntellectual Property; (v) store any Inventory or other Collateral with anywarehouseman or other third party which has not executed and delivered toSilicon a bailee agreement or other similar agreement acceptable to Silicon inits good faith business judgment with respect to finished goods inventory,except when any such Collateral or Inventory is in transit or located at asubcontractor’s facility; (vi) sell any Inventory on a sale-or-return,guaranteed sale, consignment, or other contingent basis other than for suchcustomary and ordinary course return transactions arising from Borrower’sproduct warranties; (vii) make any loans of any money or other assets, otherthan (a) travel advances to Borrower’s employees in the ordinary course ofbusiness consistent with past business practices (including without limitation,for travel entertainment and relocation expenses) and in aggregate amountsconsistent with past ordinary course business practices of Borrower; (b) extensionof trade credit in the ordinary course of business to non-affiliated entities;(c) other loans and advances to employees, officers and directors, in theordinary course of business in an aggregate principal amount not to exceed$25,000, at any time outstanding for all such loans to all employees, officersand directors, provided, no new such loans and advances shall be made while anyDefault or Event of Default is then occurring; (viii) incur any debts, outsidethe ordinary course of business, which results in a Material Adverse Change;(ix) guarantee or otherwise become liable with respect to the obligations ofanother party or entity; (x) pay or declare any dividends on Borrower’s stock(except for dividends payable solely in stock of Borrower); (xi) redeem,retire, purchase or otherwise acquire, directly or indirectly, any ofBorrower’s stock, except that Borrower may repurchase its stock in accordancewith Borrower’s employee stock option plan, provided that the aggregate amountof consideration paid by Borrower for such repurchases shall not exceed$100,000 in the aggregate in any fiscal year, and before and after givingeffect to any such repurchase no Default or Event of Default has occurred andis continuing; (xii) make any change in Borrower’s capital structure whichwould result in a Material Adverse Change; or (xiii) engage, directly orindirectly, in any business other than the businesses currently engaged in byBorrower or reasonably related thereto; or (xiv) dissolve or elect to dissolve.  Transactions permitted by the foregoingprovisions of this Section are only permitted if no Default or Event ofDefault would occur as a result of such transaction.

 

***5.6  LitigationCooperation.*** Should any third-party suit or proceeding be instituted by or againstSilicon with respect to any Collateral or relating to Borrower, Borrower shall,upon reasonable notice, without expense to Silicon, make available Borrower andits officers, employees and agents and Borrower’s books and records, to theextent that Silicon may deem them reasonably necessary in order to prosecute ordefend any such suit or proceeding.

 

***5.7  FurtherAssurances.*** Borrower agrees, at its expense, on request by Silicon, to execute alldocuments and take all actions, as Silicon, may, in its good faith businessjudgment, deem reasonably necessary or useful in order to perfect and maintainSilicon’s perfected first-priority security interest in the Collateral (subjectto Permitted Liens), and in order to fully consummate the transactionscontemplated by this Agreement.

 

# ***6.   TERM.***

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***6.1  Maturity Date.***  This Agreement shall continue in effectuntil the maturity date set forth on the Schedule (the “Maturity Date”),subject to Section 6.3 below.

 

***6.2  EarlyTermination.***  ThisAgreement may be terminated prior to the Maturity Date as follows:  (i) by Borrower, effective three BusinessDays after written notice of termination is given to Silicon; or (ii) bySilicon at any time after the occurrence and during the continuance of an Eventof Default, without notice, effective immediately.  If this Agreement is terminated by Borrower or by Silicon underthis Section 6.2, Borrower shall pay to Silicon a termination fee as setforth in the Non-Exim Agreement (as defined in the Schedule) of approximateeven date herewith, provided that no termination fee shall be charged if thecredit facility hereunder is replaced with a new facility from another divisionof Silicon Valley Bank.  The terminationfee shall be due and payable on the effective date of termination andthereafter shall bear interest at a rate equal to the highest rate applicableto any of the Obligations.

 

***6.3  Payment ofObligations.***  Onthe Maturity Date or on any earlier effective date of termination, Borrowershall pay and perform in full all Obligations (other than for any inchoateindemnity obligations of Borrower hereunder that survive termination of thisAgreement), whether evidenced by installment notes or otherwise, and whether ornot all or any part of such Obligations are otherwise then due andpayable.  Without limiting thegenerality of the foregoing, if on the Maturity Date, or on any earliereffective date of termination, there are any outstanding Letters of Creditissued by Silicon or issued by another institution based upon an application,guarantee, indemnity or similar agreement on the part of Silicon, then on suchdate Borrower shall provide to Silicon cash collateral in an amount equal to105% of the face amount of all such Letters of Credit plus all interest, feesand cost due or to become due in connection therewith (as estimated by Siliconin its good faith business judgment, taking into account the excess of cashcollateral over 100% of the face amount of such Letters of Credit), to secureall of the Obligations relating to said Letters of Credit, pursuant toSilicon’s then standard form cash pledge agreement.  Notwithstanding any termination of this Agreement, all ofSilicon’s security interests in all of the Collateral and all of the terms andprovisions of this Agreement shall continue in full force and effect until allObligations have been paid and performed in full; provided that Silicon may, inits sole discretion, refuse to make any further Loans after termination.  No

 

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termination shall in anyway affect or impair any right or remedy of Silicon, nor shall any suchtermination relieve Borrower of any Obligation to Silicon, until all of theObligations (other than for any inchoate indemnity obligations of Borrower hereunderthat survive termination of this Agreement) have been paid and performed infull.  Upon payment and performance infull of all the Obligations and termination of this Agreement, Silicon shallpromptly terminate its financing statements with respect to the Borrower anddeliver to Borrower such other documents as may be required to fully terminateSilicon’s security interests and Silicon shall further reassign and redeliver(or cause to be reassigned or redelivered) to Borrower, or to such person asBorrower shall designate, against receipt, such of the Borrower’s assetsdelivered to Silicon as shall have not been sold or otherwise applied bySilicon pursuant to the terms of the Loan Documents that are still then held bySilicon.

 

# ***7.  EVENTS OF DEFAULT ANDREMEDIES.***

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***7.1  Events ofDefault.***  Theoccurrence of any of the following events shall constitute an “Event ofDefault” under this Agreement, and Borrower shall give Silicon immediatewritten notice thereof: (a) Any warranty, representation, statement, report orcertificate made or delivered to Silicon by Borrower or any of Borrower’sofficers, employees or agents, now or in the future, shall be untrue ormisleading in a material respect when made or deemed to be made; or (b)Borrower shall fail to pay when due any Loan or any interest thereon or anyother monetary Obligation; or (c) the total Loans and other Obligationsoutstanding at any time shall exceed the Credit Limit provided, however, if anOveradvance results directly from a change by Silicon of either the amount ofReserves or of the “Minimum Eligibility Requirements”, then if Borrower failsto pay such Overadvance within three Business Days of the occurrence of theOveradvance; or (d) Borrower shall fail to comply with any of the financial covenantsset forth in the Schedule, or shall fail to perform any other non-monetaryObligation which by its nature cannot be cured, or shall fail to permit Siliconto conduct an inspection or audit as specified in Section 5.4 hereof; or(e) Borrower shall fail to perform any other non-monetary Obligation, whichfailure is not cured within five Business Days after the date due; or (f) anylevy, assessment, attachment, seizure, lien or encumbrance (other than aPermitted Lien) is made on all or any part of the Collateral which is not curedwithin 10 days after the occurrence of the same; or (g) any default or event ofdefault occurs under any obligation in excess of $100,000, secured by aPermitted Lien, which is not cured within any applicable cure period or waivedin writing by the holder of the Permitted Lien; or (h) Borrower breaches anymaterial contract or obligation, which has resulted or may reasonably beexpected to result in a Material Adverse Change; or (i) Dissolution,termination of existence, insolvency or business failure of Borrower; orappointment of a receiver, trustee or custodian, for all or any part of theproperty of, assignment for the benefit of creditors by, or the commencement ofany proceeding by Borrower under any reorganization, bankruptcy, insolvency,arrangement, readjustment of debt, dissolution or liquidation law or statute ofany jurisdiction, now or in the future in effect, which is not dismissed within45 days after the date commenced; or (j) the commencement of any proceedingagainst Borrower or any guarantor of any of the Obligations under anyreorganization, bankruptcy, insolvency, arrangement, readjustment of debt,dissolution or liquidation law or statute of any jurisdiction, now or in thefuture in effect, which is not cured by the dismissal thereof within 45 daysafter the date commenced; or (k) revocation or termination of, or limitation ordenial of liability upon, any guaranty of the Obligations or any attempt to doany of the foregoing, or commencement of proceedings by any guarantor of any ofthe Obligations under any bankruptcy or insolvency law; or (l) revocation ortermination of, or limitation or denial of liability upon, any pledge of anycertificate of deposit, securities or other property or asset of any kind pledgedby any third party to secure any or all of the Obligations, or any attempt todo any of the foregoing, or commencement of proceedings by or against any suchthird party under any bankruptcy or insolvency law; or (m) Borrower makes anypayment on account of any indebtedness or obligation which has beensubordinated to the Obligations other than as permitted in the applicablesubordination agreement, or if any Person who has subordinated suchindebtedness or obligations terminates or in any way limits his subordinationagreement; or (n) if a Person or group of affiliated Persons shall acquire,beneficially or of record, more than 30% of the outstanding shares of stock ofBorrower, in one or more transactions, and such Person or group of affiliatedPersons has “control” of the Borrower (which shall mean the effective abilityto elect a majority of the Board of Directors of Borrower) (such acquisitionand control referred to herein as a “Change in Control”), then Borrower shallnotify Silicon of the Change in Control within five Business Days afterBorrower has actual knowledge of the Change in Control, and if Silicon shallgive written notice to Borrower that, in the exercise of its good faithbusiness judgment it does not consent to the Change in Control then the sameshall constitute an Event of Default; or (o) Borrower shall generally not payits debts as they become due, or Borrower shall conceal, remove or transfer anypart of its property, with intent to hinder, delay or defraud its creditors, ormake or suffer any transfer of any of its property which may be fraudulentunder any bankruptcy, fraudulent conveyance or similar law; or (p) a MaterialAdverse Change shall occur.  Silicon maycease making any Loans hereunder during any of the above cure periods, andthereafter if an Event of Default has occurred and is continuing.

 

***7.2  Remedies.***  Upon the occurrence and during thecontinuance of any Event of Default, and at any time thereafter, Silicon, atits option, and without notice or demand of any kind (all of which are herebyexpressly waived by Borrower, to the extent permitted by law), may do any oneor more of the following: (a) Cease making Loans or otherwise extending creditto Borrower under this Agreement or any other Loan Document; (b) Accelerate anddeclare all or any part of the Obligations to be immediately due, payable, andperformable, notwithstanding any deferred or installment payments allowed byany instrument evidencing or relating to any Obligation; (c) Take possession ofany or all of the Collateral wherever it may be

 

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found, and for thatpurpose Borrower hereby authorizes Silicon without judicial process (subject tothe rights of any landlord regarding any of Borrower’s leased premises) toenter onto any of Borrower’s premises without interference to search for, takepossession of, keep, store, or remove any of the Collateral, and remain on thepremises or cause a custodian to remain on the premises in exclusive controlthereof, without charge for so long as Silicon deems it necessary, in its goodfaith business judgment, in order to complete the enforcement of its rightsunder this Agreement or any other agreement; provided, however, that shouldSilicon seek to take possession of any of the Collateral by court process,Borrower hereby irrevocably waives: (i) any bond and any surety or securityrelating thereto required by any statute, court rule or otherwise as anincident to such possession; (ii) any demand for possession prior to thecommencement of any suit or action to recover possession thereof; and (iii) anyrequirement that Silicon retain possession of, and not dispose of, any suchCollateral until after trial or final judgment; (d) Require Borrower toassemble any or all of the Collateral and make it available to Silicon atplaces designated by Silicon which are reasonably convenient to Silicon andBorrower, and to remove the Collateral to such locations as Silicon may deemadvisable; (e) Complete the processing, manufacturing or repair of anyCollateral prior to a disposition thereof and, for such purpose and for thepurpose of removal, Silicon shall have the right to use Borrower’s premises,vehicles, hoists, lifts, cranes, and other Equipment and all other propertywithout charge; (f) Sell, lease or otherwise dispose of any of the Collateral,in its condition at the time Silicon obtains possession of it or after furthermanufacturing, processing or repair, at one or more public and/or privatesales, in lots or in bulk, for cash, exchange or other property, or on credit,and to adjourn any such sale from time to time without notice other than oralannouncement at the time scheduled for sale. Silicon shall have the right to conduct such disposition on Borrower’spremises (subject to the rights of any landlord regarding any of Borrower’sleased premises) without charge, for such time or times as Silicon deemsreasonable, or on Silicon’s premises, or elsewhere and the Collateral need notbe located at the place of disposition. Silicon may directly or through any affiliated company purchase or leaseany Collateral at any such public disposition, and if permissible underapplicable law, at any private disposition. Any sale or other disposition of Collateral shall not relieve Borrower ofany liability Borrower may have if any Collateral is defective as to title orphysical condition or otherwise at the time of sale; (g) Demand payment of, andcollect any Accounts and General Intangibles comprising Collateral and, inconnection therewith, Borrower irrevocably authorizes Silicon to endorse orsign Borrower’s name on all collections, receipts, instruments and otherdocuments, to take possession of and open mail addressed to Borrower and removetherefrom payments made with respect to any item of the Collateral or proceedsthereof, and, in Silicon’s good faith business judgment, to grant extensions oftime to pay, compromise claims and settle Accounts and the like for less thanface value; (h) Offset against any sums in any of Borrower’s general, specialor other Deposit Accounts with Silicon against any or all of the Obligations;and (i) Demand and receive possession of any of Borrower’s federal and stateincome tax returns and the books and records utilized in the preparationthereof or referring thereto.  Allreasonable attorneys’ fees, expenses, costs, liabilities and obligationsincurred by Silicon with respect to the foregoing shall be added to and becomepart of the Obligations, shall be due on demand, and shall bear interest at arate equal to the highest interest rate applicable to any of theObligations.  Without limiting any ofSilicon’s rights and remedies, from and after the occurrence and during thecontinuance of any Event of Default, the interest rate applicable to theObligations shall be increased by an additional four percent per annum (the“Default Rate”).

 

***7.3  Standards forDetermining Commercial Reasonableness.***  Borrower and Silicon agree that a sale orother disposition (collectively, “sale”) of any Collateral which complies withthe following standards will conclusively be deemed to be commerciallyreasonable:  (i) Notice of the sale isgiven to Borrower at least ten days prior to the sale, and, in the case of apublic sale, notice of the sale is published at least five days before the salein a newspaper of general circulation in the county where the sale is to beconducted; (ii) Notice of the sale describes the collateral in general,non-specific terms; (iii) The sale is conducted at a place designated bySilicon, with or without the Collateral being present; (iv) The sale commencesat any time between 8:00 a.m. and 6:00 p.m. (in the time zone where collateralis located);  (v) Payment of thepurchase price in cash or by cashier’s check or wire transfer is required; (vi)With respect to any sale of any of the Collateral, Silicon may (but is notobligated to) direct any prospective purchaser to ascertain directly fromBorrower any and all information concerning the same.  Silicon shall be free to employ other methods of noticing andselling the Collateral, in its discretion, if they are commercially reasonable.

 

***7.4  Power ofAttorney.***  Uponthe occurrence and during the continuance of any Event of Default, withoutlimiting Silicon’s other rights and remedies, Borrower grants to Silicon anirrevocable power of attorney coupled with an interest, authorizing andpermitting Silicon (acting through any of its employees, attorneys or agents)at any time, at its option, but without obligation, with or without notice toBorrower, and at Borrower’s expense, to do any or all of the following, inBorrower’s name or otherwise, but Silicon agrees that if it exercises any righthereunder, it will do so in good faith and in a commercially reasonablemanner:  (a) Execute on behalf ofBorrower any documents that Silicon may, in its good faith business judgment,deem advisable in order to perfect and maintain Silicon’s security interest inthe Collateral, or in order to exercise a right of Borrower or Silicon, or inorder to fully consummate all the transactions contemplated under thisAgreement, and all other Loan Documents; (b) Execute on behalf of Borrower, anyinvoices relating to any Account, any draft against any Account Debtor and anynotice to any Account Debtor, any proof of claim in bankruptcy, any Notice ofLien, claim of mechanic’s, materialman’s or other lien, or assignment orsatisfaction of mechanic’s, materialman’s or other lien; (c)

 

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Take control in anymanner of any cash or non-cash items of payment or proceeds of Collateral;endorse the name of Borrower upon any instruments, or documents, evidence ofpayment or Collateral that may come into Silicon’s possession; (d) Endorse allchecks and other forms of remittances received by Silicon; (e) Pay, contest orsettle any lien, charge, encumbrance, security interest and adverse claim in orto any of the Collateral, or any judgment based thereon, or otherwise take anyaction to terminate or discharge the same; (f) Grant extensions of time to pay,compromise claims and settle Accounts and General Intangibles for less thanface value and execute all releases and other documents in connectiontherewith; (g) Pay any sums required on account of Borrower’s taxes or tosecure the release of any liens therefor, or both; (h) Settle and adjust, andgive releases of, any insurance claim that relates to any of the Collateral andobtain payment therefor; (i) Instruct any third party having custody or controlof any books or records belonging to, or relating to, Borrower to give Siliconthe same rights of access and other rights with respect thereto as Silicon hasunder this Agreement; and (j) Take any action or pay any sum required ofBorrower pursuant to this Agreement and any other Loan Documents.  Any and all reasonable sums paid and any andall reasonable costs, expenses, liabilities, obligations and attorneys’ feesincurred by Silicon with respect to the foregoing shall be added to and becomepart of the Obligations, shall be payable on demand, and shall bear interest ata rate equal to the highest interest rate applicable to any of theObligations.  In no event shallSilicon’s rights under the foregoing power of attorney or any of Silicon’sother rights under this Agreement be deemed to indicate that Silicon is incontrol of the business, management or properties of Borrower.  The foregoing power of attorney shall expireupon payment in full of the Obligations (other than for inchoate indemnityobligations which survive the termination of this Agreement) and thetermination of this Agreement.

 

***7.5  Application ofProceeds.***  Allproceeds realized as the result of any sale of the Collateral shall be appliedby Silicon first to the reasonable costs, expenses, liabilities, obligationsand attorneys’ fees incurred by Silicon in the exercise of its rights underthis Agreement, second to the interest due upon any of the Obligations, andthird to the principal of the Obligations, in such order as Silicon shalldetermine in its sole discretion.  Anysurplus shall be paid to Borrower or other persons legally entitled thereto;Borrower shall remain liable to Silicon for any deficiency.  If, Silicon, in its good faith businessjudgment, directly or indirectly enters into a deferred payment or other credittransaction with any purchaser at any sale of Collateral, Silicon shall havethe option, exercisable at any time, in its good faith business judgment, ofeither reducing the Obligations by the principal amount of purchase price ordeferring the reduction of the Obligations until the actual receipt by Siliconof the cash therefor.

 

***7.6  RemediesCumulative.***  Inaddition to the rights and remedies set forth in this Agreement, Silicon shallhave all the other rights and remedies accorded a secured party under the CaliforniaUniform Commercial Code and under all other applicable laws, and under anyother instrument or agreement now or in the future entered into between Siliconand Borrower, and all of such rights and remedies are cumulative and none isexclusive.  Exercise or partial exerciseby Silicon of one or more of its rights or remedies shall not be deemed anelection, nor bar Silicon from subsequent exercise or partial exercise of anyother rights or remedies.  The failure ordelay of Silicon to exercise any rights or remedies shall not operate as awaiver thereof, but all rights and remedies shall continue in full force andeffect until all of the Obligations have been fully paid and performed.

 

# ***8.***     DEFINITIONS. As used in this Agreement, the following terms have the followingmeanings:

# *** ***

“Account Debtor”means the obligor on an Account.

 

“Accounts” meansall present and future “accounts” as defined in the California UniformCommercial Code in effect on the date hereof with such additions to such termas may hereafter be made, and includes without limitation all accountsreceivable and other sums owing to Borrower.

 

 “Affiliate” means, with respect to anyPerson, a relative, partner, shareholder, director, officer, or employee ofsuch Person, or any parent or subsidiary of such Person, or any Personcontrolling, controlled by or under common control with such Person.

 

“Business Day”means a day on which Silicon is open for business.

 

“Code” means theUniform Commercial Code as adopted and in effect in the State of California  from time to time.

 

“Collateral” hasthe meaning set forth in Section 2 above.

 

“continuing” and “duringthe continuance of” when used with reference to a Default or Event ofDefault means that the Default or Event of Default has occurred and has notbeen either waived in writing by Silicon or cured within any applicable cureperiod.

 

“Default” meansany event which with notice or passage of time or both, would constitute anEvent of Default.

 

“Default Rate” hasthe meaning set forth in Section 7.2 above.

 

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“Deposit Accounts”means all present and future “deposit accounts” as defined in the CaliforniaUniform Commercial Code in effect on the date hereof with such additions tosuch term as may hereafter be made, and includes without limitation all generaland special bank accounts, demand accounts, checking accounts, savings accountsand certificates of deposit.

 

“Eligible Accounts”means Accounts and General Intangibles arising in the ordinary course ofBorrower’s business from the sale of goods or the rendition of services, or thenon-exclusive licensing of Intellectual Property, which Silicon, in its goodfaith business judgment, shall deem eligible for borrowing and whichconstitutes “Eligible Export-Related Accounts Receivable” (as defined in theExim Borrower Agreement referred to in the Schedule).  Without limiting the fact that the determination of whichAccounts are eligible for borrowing is a matter of Silicon’s good faithbusiness judgment, the following (the “Minimum Eligibility Requirements”)are the minimum requirements for a Account to be an Eligible Account:  (i) the Account must not be on terms of morethan net 90 days from its invoice date and must not be outstanding for morethan 60 days past its due date as set forth in the applicable invoice (the “EligibilityPeriod”), (ii) the Account must not represent progress billings, or be dueunder a fulfillment or requirements contract with the Account Debtor, (iii) theAccount must not be subject to any contingencies (including Accounts arisingfrom sales on consignment, guaranteed sale or other terms pursuant to whichpayment by the Account Debtor may be conditional) other than for potentialcustomary and ordinary course returns arising from Borrower’s productwarranties, (iv) the Account must not be owing from an Account Debtor with whomBorrower has any dispute (whether or not relating to the particular Account),(v) the Account must not be owing from an Affiliate of Borrower, (vi) the Accountmust not be owing from an Account Debtor which is subject to any insolvency orbankruptcy proceeding, or whose financial condition is not acceptable toSilicon, or which, fails or goes out of a material portion of its business,(vii) the Account must not be owing from the United States or any department,agency or instrumentality thereof (unless there has been compliance, toSilicon’s satisfaction, with the United States Assignment of Claims Act),(viii) [intentionally omitted],  (ix)the Account must not be owing from an Account Debtor to whom Borrower is or maybe liable for goods purchased from such Account Debtor or otherwise (but, insuch case, the Account will be deemed not eligible only to the extent of anyamounts owed by Borrower to such Account Debtor). Accounts owing from oneAccount Debtor will not be deemed Eligible Accounts to the extent they exceed25% of the total Accounts outstanding (except that, in the case of NihonKohden, said percentage shall be 75%). In addition, if more than 50% of the Accounts owing from an AccountDebtor are outstanding for a period longer than their Eligibility Period(without regard to unapplied credits) or are otherwise not eligible Accounts,then all Accounts owing from that Account Debtor will be deemed ineligible forborrowing.  Silicon may, from time totime, in its good faith business judgment, revise the Minimum EligibilityRequirements, upon written notice to Borrower.

 

“Equipment” meansall present and future “equipment” as defined in the California UniformCommercial Code in effect on the date hereof with such additions to such termas may hereafter be made, and includes without limitation all machinery,fixtures, goods, vehicles (including motor vehicles and trailers), and anyinterest in any of the foregoing.

 

“Event of Default”means any of the events set forth in Section 7.1 of this Agreement.

 

“GAAP” meansgenerally accepted accounting principles consistently applied.

 

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

 

“good faith businessjudgment” means honesty in fact and good faith (as defined inSection 1201 of the Code) in the exercise of Silicon’s business judgment.

 

“including” meansincluding (but not limited to).

 

 “Intellectual Property” means allpresent and future (a) copyrights, copyright rights, copyright applications,copyright registrations and like protections in each work of authorship andderivative work thereof, whether published or unpublished, (b) trade secretrights, including all rights to unpatented inventions and know-how, and confidentialinformation; (c) mask work or similar rights available for the protection ofsemiconductor chips; (d) patents, patent applications and like protectionsincluding 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 theforegoing are registered, and all applications to register and registrations ofthe same and like protections, and the entire goodwill of the business ofBorrower connected with and symbolized by any such trademarks; (f) computersoftware and computer software products; (g) designs and design rights; (h)technology; (i) all claims for damages by way of past, present and future infringementof any of the rights included above; (j) all licenses or other rights to useany property or rights of a type described above.

 

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“Inventory” meansall present and future “inventory” as defined in the California UniformCommercial Code in effect on the date hereof with such additions to such termas may hereafter be made, and includes without limitation all merchandise, rawmaterials, parts, supplies, packing and shipping materials, work in process andfinished products, including without limitation such inventory as istemporarily out of Borrower’s custody or possession or in transit and includingany returned goods and any documents of title representing any of the above.

 

“Investment Property”means all present and future investment property, securities, stocks, bonds,debentures, debt securities, partnership interests, limited liability companyinterests, options, security entitlements, securities accounts, commoditycontracts, commodity accounts, and all financial assets held in any securitiesaccount or otherwise, and all options and warrants to purchase any of theforegoing, wherever located, and all other securities of every kind, whethercertificated or uncertificated.

 

“Loan Documents” means,collectively, this Agreement, the Representations, and all other present andfuture documents, instruments and agreements between Silicon and Borrower,including, but not limited to those relating to this Agreement, and allamendments and modifications thereto and replacements therefor.

 

“Material AdverseChange” means any of the following: (i) a material adverse change in thebusiness, operations, or financial or other condition of the Borrower, or (ii)a material impairment of the prospect of repayment of any portion of theObligations; or (iii) a material impairment of the value or priority ofSilicon’s security interests in the Collateral.

 

“Obligations”means all present and future Loans, advances, debts, liabilities, obligations,guaranties, covenants, duties and indebtedness at any time owing by Borrower toSilicon, whether evidenced by this Agreement or any note or other instrument ordocument, or otherwise, whether arising from an extension of credit, opening ofa letter of credit, banker’s acceptance, loan, guaranty, indemnification orotherwise, whether direct or indirect (including, without limitation, thoseacquired by assignment and any participation by Silicon in Borrower’s debtsowing to others), absolute or contingent, due or to become due, including,without limitation, all interest, charges, expenses, fees, attorney’s fees,expert witness fees, audit fees, letter of credit fees, collateral monitoringfees, closing fees, facility fees, termination fees, minimum interest chargesand any other sums chargeable to Borrower under this Agreement or under anyother Loan Documents.

 

“Other Property”means the following as defined in the California Uniform Commercial Code ineffect on the date hereof with such additions to such term as may hereafter bemade, and all rights relating thereto: all present and future “commercial tortclaims” (including without limitation any commercial tort claims identified inthe Representations), “documents”, “instruments”, “promissory notes”, “chattelpaper”, “letters of credit”, “letter-of-credit rights”, “fixtures”, “farmproducts” and “money”; and all other goods and personal property of every kind,tangible and intangible, whether or not governed by the California UniformCommercial Code.

 

 “Permitted Liens” means thefollowing:  (i) purchase money securityinterests in specific items of Equipment; (ii) leases of specific items ofEquipment; (iii) liens for taxes not yet payable; (iv) additional securityinterests and liens consented to in writing by Silicon, which consent may bewithheld in its good faith business judgment; (v) security interests beingterminated substantially concurrently with this Agreement; (vi) liens ofmaterialmen, mechanics, warehousemen, carriers, or other similar liens arisingin the ordinary course of business and securing obligations which are notdelinquent; (vii) liens incurred in connection with the extension, renewalor refinancing of the indebtedness secured by liens of the type described abovein clauses (i) or (ii) above, provided that any extension, renewal orreplacement lien is limited to the property encumbered by the existing lien andthe principal amount of the indebtedness being extended, renewed or refinanceddoes not increase; (viii) Liens in favor of customs and revenue authoritieswhich secure payment of customs duties in connection with the importation ofgoods.  Silicon will have the right torequire, as a condition to its consent under subparagraph (iv) above, that theholder of the additional security interest or lien sign an intercreditoragreement on Silicon’s then standard form, acknowledge that the securityinterest is subordinate to the security interest in favor of Silicon, and agreenot to take any action to enforce its subordinate security interest so long asany Obligations remain outstanding, and that Borrower agree that any uncureddefault in any obligation secured by the subordinate security interest shallalso constitute an Event of Default under this Agreement.

 

“Person” means anyindividual, sole proprietorship, partnership, joint venture, trust,unincorporated organization, association, corporation, government, or anyagency or political division thereof, or any other entity.

 

“Representations”means the written Representations and Warranties provided by Borrower toSilicon referred to in the Schedule.

 

“Reserves” means,as of any date of determination, such amounts as Silicon may from time to timeestablish and revise in its good faith business judgment, reducing the amountof Loans, Letters of Credit and other financial accommodations which wouldotherwise be available to Borrower under the lending formula(s) provided in theSchedule:  (a) to reflect events,conditions, contingencies or risks which, as determined by Silicon in its goodfaith business judgment, do or may adversely affect (i) the Collateral or anyother property which is security for the Obligations or its value (includingwithout limitation any increase in delinquencies of Accounts), (ii) the assets,business or prospects of Borrower or any Guarantor, or (iii) the

 

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security interests andother rights of Silicon in the Collateral (including the enforceability,perfection and priority thereof); or (b) to reflect Silicon’s good faith beliefthat any collateral report or financial information furnished by or on behalfof Borrower or any Guarantor to Silicon is or may have been incomplete,inaccurate or misleading in any material respect; or (c) in respect of anystate of facts which Silicon determines in good faith constitutes an Event ofDefault or may, with notice or passage of time or both, constitute an Event ofDefault.

 

Other Terms.  All accounting terms used in this Agreement,unless otherwise indicated, shall have the meanings given to such terms inaccordance with GAAP, consistently applied. All other terms contained in this Agreement, unless otherwise indicated,shall have the meanings provided by the Code, to the extent such terms aredefined therein.

 

# ***9.***     GENERAL PROVISIONS.

# *** ***

***9.1  InterestComputation. ***Incomputing interest on the Obligations, all checks, wire transfers and otheritems of payment received by Silicon (including proceeds of Accounts andpayment of the Obligations in full) shall be deemed applied by Silicon onaccount of the Obligations two Business Days after receipt by Silicon ofimmediately available funds, and, for purposes of the foregoing, any such fundsreceived after 12:00 Noon on any day shall be deemed received on the nextBusiness Day.  Silicon shall not, however,be required to credit Borrower’s account for the amount of any item of paymentwhich is unsatisfactory to Silicon in its good faith business judgment, andSilicon may charge Borrower’s loan account for the amount of any item ofpayment which is returned to Silicon unpaid.

 

***9.2  Application ofPayments. ***Allpayments with respect to the Obligations shall be promptly applied inaccordance with this Agreement and Silicon’s standard procedures may beapplied, and in Silicon’s good faith business judgment may be reversed andre-applied, to the Obligations, in such order and manner as Silicon shalldetermine in its good faith business judgment.

 

***9.3  Charges toAccounts. ***Siliconmay, in its discretion, require that Borrower pay monetary Obligations in cashto Silicon, or charge them to Borrower’s Loan account, in which event they willbear interest at the same rate applicable to the Loans.  Silicon may also, in its discretion, chargeany monetary Obligations to Borrower’s Deposit Accounts maintained with Silicon.

 

***9.4  MonthlyAccountings.*** Silicon shall provide Borrower monthly with an account of advances,charges, expenses and payments made pursuant to this Agreement.  Such account shall be deemed correct, accurateand binding on Borrower and an account stated (except for reverses andreapplications of payments made and corrections of errors discovered bySilicon), unless Borrower notifies Silicon in writing to the contrary within 90days after such account is rendered, describing the nature of any alleged errorsor omissions.

 

***9.5  Notices.***  All notices to be given under this Agreementshall be in writing and shall be given either personally or by reputableprivate delivery service or by regular first-class mail, or certified mailreturn receipt requested, addressed to Silicon or Borrower at the addressesshown in the heading to this Agreement, or at any other address designated inwriting by one party to the other party. Notices to Silicon shall be directed to the Commercial Finance Division,to the attention of the Division Manager or the Division Credit Manager.  All notices shall be deemed to have beengiven upon delivery in the case of notices personally delivered, or at theexpiration of one Business Day following delivery to the private deliveryservice, or two Business Days following the deposit thereof in the UnitedStates mail, with postage prepaid.

 

***9.6  Severability.***  Should any provision of this Agreement beheld by any court of competent jurisdiction to be void or unenforceable, suchdefect shall not affect the remainder of this Agreement, which shall continuein full force and effect.

 

***9.7  Integration.***  This Agreement and such other writtenagreements, documents and instruments as may be executed in connection herewithare the final, entire and complete agreement between Borrower and Silicon andsupersede all prior and contemporaneous negotiations and oral representationsand agreements, all of which are merged and integrated in this Agreement.  There are no oral understandings,representations or agreements between the parties which are not set forth inthis Agreement or in other written agreements signed by the parties inconnection herewith.

 

***9.8  Waivers;Indemnity.***  Thefailure of Silicon at any time or times to require Borrower to strictly complywith any of the provisions of this Agreement or any other Loan Document shallnot waive or diminish any right of Silicon later to demand and receive strictcompliance therewith.  Any waiver of anydefault shall not waive or affect any other default, whether prior orsubsequent, and whether or not similar. None of the provisions of this Agreement or any other Loan Documentshall be deemed to have been waived by any act or knowledge of Silicon or itsagents or employees, but only by a specific written waiver signed by anauthorized officer of Silicon and delivered to Borrower.  Borrower waives the benefit of all statutesof limitations relating to any of the Obligations or this Agreement or anyother Loan Document, and Borrower waives demand, protest, notice of protest andnotice of default or dishonor, notice of payment and nonpayment, release,compromise, settlement, extension or renewal of any commercial paper,instrument, account, General Intangible, document or guaranty at any time heldby Silicon on which Borrower is or may in any way be liable, and notice of anyaction taken by Silicon, unless

 

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expressly required bythis Agreement. Borrower hereby agrees to indemnify Silicon and its affiliates,subsidiaries, parent, directors, officers, employees, agents, and attorneys,and to hold them harmless from and against any and all claims, debts,liabilities, demands, obligations, actions, causes of action, penalties, costsand expenses (including reasonable attorneys’ fees), of every kind, which theymay sustain or incur based upon or arising out of any of the Obligations, orany relationship or agreement between Silicon and Borrower, or any othermatter, relating to Borrower or the Obligations; provided that this indemnityshall  not extend to damages proximatelycaused by the indemnitee’s own gross negligence or willful misconduct.  A Person seeking to be indemnified underthis Section 9.8 shall make commercially reasonable efforts to notifyBorrower of any event requiring indemnification within a reasonable timefollowing such Person’s receipt of notice of commencement of any action orproceeding giving rise to a claim for indemnification hereunder, provided that(i) there shall be no obligation to so notify Borrower if an Event of Defaulthas occurred and is continuing, (ii) neither Silicon nor any such Person shallhave any liability or obligation for any inadvertent failure to provide suchnotice, (iii) no failure to provide such notice shall affect Borrower’sobligation to provide indemnity hereunder and (iv) in any event, nothing hereinshall impose on Silicon any duty or obligation to impair the confidentiality orsanctity of its attorney client relationship. In such proceeding, such Person shall use commercially reasonableefforts to keep Borrower reasonably informed of its defense and any settlementof any such action or proceeding and negotiations to settle or otherwiseresolve any claim, provided that (i) such Person shall have the exclusive rightto decide to accept or reject any settlement offer, (ii) there shall be noobligation to keep Borrower so informed if an Event of Default has occurred andis continuing, (iii) neither Silicon nor any such Person shall have anyliability or obligation for any inadvertent failure to keep Borrower soinformed, (iv) no failure to keep Borrower so informed shall affect Borrower’sobligation to provide indemnity hereunder and (v) in any event, nothing hereinshall impose on Silicon any duty or obligation to impair the confidentiality orsanctity of its attorney client relationship. Notwithstanding any provision in this Agreement to the contrary, theindemnity agreement set forth in this Section shall survive any terminationof this Agreement and shall for all purposes continue in full force and effect.

 

***9.9  No Liability forOrdinary Negligence.*** Neither Silicon, nor any of its directors, officers, employees, agents,attorneys or any other Person affiliated with or representing Silicon shall beliable for any claims, demands, losses or damages, of any kind whatsoever,made, claimed, incurred or suffered by Borrower or any other party through theordinary negligence of Silicon, or any of its directors, officers, employees,agents, attorneys or any other Person affiliated with or representing Silicon,but nothing herein shall relieve Silicon from liability for its own grossnegligence or willful misconduct.

 

***9.10  Amendment.***  The terms and provisions of this Agreementmay not be waived or amended, except in a writing executed by Borrower and aduly authorized officer of Silicon.

 

***9.11  Time ofEssence.***  Time isof the essence in the performance by Borrower of each and every obligationunder this Agreement.

 

***9.12  Attorneys Feesand Costs.*** Borrower shall reimburse Silicon for all reasonable attorneys’ fees andall filing, recording, search, title insurance, appraisal, audit, and otherreasonable costs incurred by Silicon, pursuant to, or in connection with, orrelating to this Agreement (whether or not a lawsuit is filed), including, butnot limited to, any reasonable attorneys’ fees and costs Silicon incurs inorder to do the following: prepare and negotiate this Agreement and all presentand future documents relating to this Agreement; obtain legal advice inconnection with this Agreement or Borrower; enforce, or seek to enforce, any ofits rights; prosecute actions against, or defend actions by, Account Debtors;commence, intervene in, or defend any action or proceeding; initiate anycomplaint to be relieved of the automatic stay in bankruptcy; file or prosecuteany probate claim, bankruptcy claim, third-party claim, or other claim;examine, audit, copy, and inspect any of the Collateral or any of Borrower’sbooks and records; protect, obtain possession of, lease, dispose of, orotherwise enforce Silicon’s security interest in, the Collateral; and otherwiserepresent Silicon in any litigation relating to Borrower.  In satisfying Borrower’s obligationhereunder to reimburse Silicon for attorneys fees, Borrower may, for convenience,issue checks directly to Silicon’s attorneys, Levy, Small & Lallas, butBorrower acknowledges and agrees that Levy, Small & Lallas is representingonly Silicon and not Borrower in connection with this Agreement.  If either Silicon or Borrower files anylawsuit against the other predicated on a breach of this Agreement, theprevailing party in such action shall be entitled to recover its reasonablecosts and attorneys’ fees, including (but not limited to) reasonable attorneys’fees and costs incurred in the enforcement of, execution upon or defense of anyorder, decree, award or judgment.  Allattorneys’ fees and costs to which Silicon may be entitled pursuant to thisParagraph shall immediately become part of Borrower’s Obligations, shall be dueon demand, and shall bear interest at a rate equal to the highest interest rateapplicable to any of the Obligations.

 

***9.13  Benefit ofAgreement.***  Theprovisions of this Agreement shall be binding upon and inure to the benefit ofthe respective successors, assigns, heirs, beneficiaries and representatives ofBorrower and Silicon; provided, however, that Borrower may not assign ortransfer any of its rights under this Agreement without the prior writtenconsent of Silicon, and any prohibited assignment shall be void.  No consent by Silicon to any assignmentshall release Borrower from its liability for the Obligations.

 

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***9.14  Joint andSeveral Liability.*** If Borrower consists of more than one Person, their liability shall bejoint and several, and the compromise of any claim with, or the release of, anyBorrower shall not constitute a compromise with, or a release of, any otherBorrower.

 

***9.15  Limitation ofActions.**** *Anyclaim or cause of action by Borrower against Silicon, its directors, officers,employees, agents, accountants or attorneys, based upon, arising from, orrelating to this Loan Agreement, or any other Loan Document, or any othertransaction contemplated hereby or thereby or relating hereto or thereto, orany other matter, cause or thing whatsoever, occurred, done, omitted orsuffered to be done by Silicon, its directors, officers, employees, agents,accountants or attorneys, shall be barred unless asserted by Borrower by thecommencement of an action or proceeding in a court of competent jurisdiction bythe filing of a complaint within one year after the first act, occurrence oromission upon which such claim or cause of action, or any part thereof, isbased, and the service of a summons and complaint on an officer of Silicon, oron any other person authorized to accept service on behalf of Silicon, withinthirty (30) days thereafter.  Borroweragrees that such one-year period is a reasonable and sufficient time for

 Borrower to investigate and act upon any suchclaim or cause of action.  The one-yearperiod provided herein shall not be waived, tolled, or extended except by thewritten consent of Silicon in its sole discretion.  This provision shall survive any termination of this LoanAgreement or any other Loan Document.

 

***9.16  ParagraphHeadings; Construction.*** Paragraph headings are only used in this Agreement for convenience.  Borrower and Silicon acknowledge that theheadings may not describe completely the subject matter of the applicable paragraph,and the headings shall not be used in any manner to construe, limit, define orinterpret any term or provision of this Agreement. This Agreement has beenfully reviewed and negotiated between the parties and no uncertainty orambiguity in any term or provision of this Agreement shall be construedstrictly against Silicon or Borrower under any rule of construction orotherwise.

 

***9.17  Governing Law;Jurisdiction; Venue.*** This Agreement and all acts and transactions hereunder and all rightsand obligations of Silicon and Borrower shall be governed by the laws of theState of California.  As a material partof the consideration to Silicon to enter into this Agreement, Borrower (i)agrees that all actions and proceedings relating directly or indirectly to thisAgreement shall, at Silicon’s option, be litigated in courts located withinCalifornia, and that the exclusive venue therefor shall be Santa Clara County;(ii) consents to the jurisdiction and venue of any such court and consents toservice of process in any such action or proceeding by personal delivery or anyother method permitted by law; and (iii) waives any and all rights Borrower mayhave to object to the jurisdiction of any such court, or to transfer or changethe venue of any such action or proceeding.

 

***9.18  Mutual Waiverof Jury Trial.* BORROWER AND SILICON EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANYACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO,THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEENSILICON AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF SILICON OR BORROWEROR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHERPERSONS AFFILIATED WITH SILICON OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHERSOUNDING IN CONTRACT OR TORT OR OTHERWISE.**

 
| **Borrower:**            | **Silicon:**                    |
|--------------------------|---------------------------------|
|                     |                            |
|                     | **ENDOCARDIAL SOLUTIONS, INC.** | **SILICON VALLEY BANK** |
|                     |                            |
|                     | **By**                          | **  /s/ J. Robert  Paulson, Jr.** |   | **By** | ** /s/ J. Anthony Clarkson** |   |
| **Vice President, CFO**  | **Title**                       | **Vice  President Market Manager** |   |
|                     |                            |
|                     |                            |
|                     | **By**                          | **  /s/ J. Robert  Paulson, Jr.** |   |   |
| **Ass’t Secretary** |                            |
|                          |                                 |  |  |  |  |  |  |

 

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**Silicon Valley Bank**

 

**Schedule to**

 

**Loanand Security Agreement**

**(EximProgram)**

 
| **Borrower:** | **Endocardial  Solutions, Inc.** |
|---------------|----------------------------------|
| **Address:**  | **1350 Energy Lane,  Suite 110** |
|          | **St. Paul, MN  55108**     |
|          |                             |
| **Date:**     | **September 24,  2003**     |

 

This Schedule forms an integral part of the Loan and SecurityAgreement between Silicon Valley Bank and the above-borrower of even date.

 

**1.  CREDIT LIMIT**

(Section 1.1):                                                 Anamount not to exceed the lesser of (i) **$1,500,000** at any one time outstanding (the“Maximum Credit Limit”), or (ii) **80%** of the amount of Borrower’s EligibleReceivables (as defined in Section 8 above).

 

**2.  INTEREST.**

** **

**InterestRate** (Section 1.2):

 

A rate equal to the “Prime Rate” in effect from time to time, plus **1.50%**per annum, provided that the interest rate in effect on any day shall not beless than **5.75%**per annum.  Interest shall be calculatedon the basis of a 360-day year for the actual number of days elapsed.  As used in this Agreement, “Prime Rate”means the interest rate announced from time to time by Silicon as its “primerate” (which is a base rate upon which other rates charged by Silicon arebased, and it is not necessarily the best rate available at Silicon).  The interest rate applicable to theObligations shall change on each date there is a change in the Prime Rate.

 

**MinimumMonthly**

**Interest**(Section 1.2):                          $5,000per month in the aggregate as between this Agreement and the Non-EximAgreement.

 

 

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**3.  FEES**(Section 1.4):

 

Loan Fee:                                               SeeNon-Exim Agreement (as defined below) of approximate even date herewith.

 

Collateral Monitoring

Fee:                                                         $1,250,per month in the aggregate as between this Agreement and the Non-Exim Agreement,payable in arrears (prorated for any partial month at the beginning and attermination of this Agreement).

 

**4.  MATURITY DATE**

(Section 6.1):                                                 Thefirst anniversary of the date of this Agreement.

 

**5.  FINANCIAL COVENANTS**

(Section 5.1):                                                 Borrowershall comply with each of the financial covenants set forth in the Non-EximAgreement (defined below).

 

**6.  REPORTING.**

(Section 5.3):

 

Borrower shall provide Silicon with the following:

 

1.     Transaction reports and schedules of collections,each week and at the time of each Loan request, on Silicon’s standard form

 

2.     Monthly accounts receivable agings, aged byinvoice date, within twenty days after the end of each month.

 

3.     Monthly accounts payable agings, aged by invoicedate, and outstanding or held check registers, if any, within twenty days afterthe end of each month.

 

4.     Monthly reconciliations of accounts receivableagings (aged by invoice date), transaction reports, and general ledger, withintwenty days after the end of each month.

 

5.     A copy of the Board of Director’s Report each timea Board of Director’s meeting is held and, in any event, within thirty days ofthe date of such meeting.

 

6.     Monthly unaudited financial statements, as soon asavailable, and in any event within thirty days after the end of each month.

 

7.     Monthly Compliance Certificates, within thirtydays after the end of each month, in such form as Silicon shall reasonablyspecify, signed by the Chief Financial Officer of Borrower, certifying that asof the end of such month Borrower was in full compliance with 

 

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all of the terms and conditions of this Agreement, and setting forthcalculations showing compliance with the financial covenants set forth in thisAgreement and such other information as Silicon shall reasonably request,including, without limitation, a statement that at the end of such month therewere no held checks.

 

8.     Quarterly unaudited financial statements, as soonas available, and in any event within forty-five days after the end of eachfiscal quarter of Borrower.

 

9.     Annual operating budgets (including incomestatements, balance sheets and cash flow statements, by month) for the upcomingfiscal year of Borrower within thirty days prior to the end of each fiscal yearof Borrower.

 

10.   Annual financial statements, as soon as available,and in any event within 120 days following the end of Borrower’s fiscal year,certified by, and with an unqualified opinion of, independent certified publicaccountants acceptable to Silicon.

 

 

**7.  BORROWER INFORMATION:**

 

Borrower represents and warrants that the information set forth in theRepresentations and Warranties of the Borrower dated July 27, 2003,previously submitted to Silicon (the “Representations”) is true and correct asof the date hereof.

 

**8.  ADDITIONAL PROVISIONS**

 

 

**(1)****   BankingRelationship. **Borrower shall at alltimes maintain its primary banking relationship, including without limitationits primary operating account, with Silicon. Without limiting the generality of the foregoing, Borrower shall, at alltimes, maintain not less than 100% of its total cash and investments on depositwith Silicon.

 

**(2)**   **Subordination of Inside Debt**.  All present and future indebtedness ofBorrower to its officers, directors and shareholders (“Inside Debt”) shall, atall times, be subordinated to the Obligations pursuant to a subordinationagreement on Silicon’s standard form. Borrower represents and warrants that there is no Inside Debt presentlyoutstanding, except for the following: None. Prior to incurring any Inside Debt in the future, Borrower shall causethe person to whom such Inside Debt will be owed to execute and deliver toSilicon a subordination agreement on Silicon’s standard form.

 

 

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**9.EXIM PROVISIONS:**

 

**(1)****   EximGuaranty. **Prior to the firstdisbursement of any Loans hereunder, Borrower shall cause the Export ImportBank of the United States (the “Exim Bank”) to guarantee the Loans made underthis Agreement, pursuant to a Master Guarantee Agreement, Loan AuthorizationAgreement and (to the extent applicable) Delegated Authority Letter Agreement(collectively, the “Exim Guaranty”), and Borrower shall cause the Exim Guarantyto be in full force and effect throughout the term of this Agreement and solong as any Loans hereunder are outstanding. If, for any reason, the Exim Guaranty shall cease to be in full forceand effect, or if the Exim Bank declares the Exim Guaranty void or revokes anyobligations thereunder or denies liability thereunder, any such event shallconstitute an Event of Default under this Agreement.  Nothing in any confidentiality agreement in this Agreement or inany other agreement shall restrict Silicon’s right to make disclosures andprovide information to the Exim Bank in connection with the Exim Guaranty.

 

**(2)****   EximBorrower Agreement; Costs.**  Borrowershall, concurrently execute and deliver a Borrower Agreement, in the formspecified by the Exim Bank, in favor of Silicon and the Exim Bank  (the “Exim Borrower Agreement”). ThisAgreement is subject to all of the terms and conditions of the Exim BorrowerAgreement, all of which are hereby incorporated herein by this reference.  Borrower expressly agrees to perform all ofthe obligations and comply with all of the affirmative and negative covenantsand all other terms and conditions set forth in the Exim Borrower Agreement asthough the same were expressly set forth herein.  In the event of any conflict between the terms of the EximBorrower Agreement and the other terms of this Agreement, whichever terms aremore restrictive shall apply.  Borroweracknowledges and agrees that it has received a copy of the Loan AuthorizationAgreement which is referred to in the Exim Borrower Agreement.  Borrower agrees to be bound by the terms ofthe Loan Authorization Agreement, including, without limitation, by anyadditions or revisions made prior to its execution on behalf of Exim Bank.  Upon the execution of the Loan AuthorizationAgreement by Exim Bank and Silicon, it shall become an attachment to the EximBorrower Agreement. ** **Borrowershall reimburse Silicon for all fees and all out of pocket costs and expensesincurred by Silicon with respect to the Exim Guaranty and the Exim BorrowerAgreement, including without limitation all facility fees and usage fees, andSilicon is

 

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authorized to debit Borrower’s account with Silicon for such fees,costs and expenses when paid by Silicon.

 

**(3)****   Non-EximAgreement; Cross-Collateralization; Cross-Default**. Silicon and the Borrowerare parties to that certain Loan and Security Agreement of approximate evendate herewith (as amended from time to time, the “Non-Exim Agreement”).  Both this Agreement and the Non-Exim Agreementshall continue in full force and effect, and all rights and remedies under thisAgreement and the Non-Exim Agreement are cumulative.  The term “Obligations” as used in this Agreement and in theNon-Exim Agreement shall include without limitation the obligation to pay whendue all Loans made pursuant to this Agreement (the “Exim Loans”) and allinterest thereon and the obligation to pay when due all Loans made pursuant tothe Non-Exim Agreement (the “Non-Exim Loans”) and all interest thereon.  Without limiting the generality of theforegoing, all “Collateral” as defined in this Agreement and as defined in theNon-Exim Agreement shall secure all Exim Loans and all Non-Exim Loans and allinterest thereon, and all other Obligations. Any Event of Default under this Agreement shall also constitute an Eventof Default under the Non-Exim Agreement, and any Event of Default under theNon-Exim Agreement shall also constitute an Event of Default under thisAgreement.  In the event Silicon assignsits rights under this Agreement and/or under any Note evidencing Exim Loansand/or its rights under the Non-Exim Agreement and/or under any Note evidencingNon-Exim Loans, to any third party, including without limitation the Exim Bank,whether before or after the occurrence of any Event of Default, Silicon shallhave the right (but not any obligation), in its sole discretion, to allocateand apportion Collateral to the Agreement and/or Note assigned and to specifythe priorities of the respective security interests in such Collateral betweenitself and the assignee, all without notice to or consent of the Borrower.

 
| Borrower:                   | Silicon:                         |
|-----------------------------|----------------------------------|
|                        |                             |
| ENDOCARDIAL SOLUTIONS, INC. | SILICON VALLEY BANK              |
|                        |                             |
|                        |                             |
| By                          |  /s/ J. Robert Paulson, Jr. |   | By |   /s/ J.  Anthony Clarkson |   |
| Vice President, CFO         | Title                            | Vice President Market  Manager |   |
|                        |                             |
|                        |                             |
| By                          |  /s/ J. Robert Paulson, Jr. |   |   |
| Ass’t Secretary        |                             |
|                             |                                  |  |  |  |  |  |

 

 

 

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