Document:

exv10w14

 

Exhibit 10.14

Exhibit A-2 to NSO Agreement with Kevin K. Sidow

PLEDGE AND SECURITY AGREEMENT

     THIS PLEDGE AND SECURITY AGREEMENT is made as of March 22, 2005 between Kevin K. Sidow
(“Purchaser”) and St. Francis Medical Technologies, Inc., a Delaware corporation (the “Company”).

     Whereas the Company has loaned to Purchaser the sum of $827,475.00 which Purchaser
has used to purchase 1,275,000 shares of Common Stock of the Company, and Purchaser has executed
and delivered to the Company a Promissory Note evidencing such loan, hereinafter called the “Note”;
and

     Whereas Purchaser has agreed to pledge said stock with the Company as security for
the payment of the Note;

     N o w, T h e r e f o r e, the parties agree as follows:

     1.   Purchaser hereby delivers to the Company certificates for 1,275,000 shares of Common Stock
of the Company, together with two Assignments Separate from Certificate signed by Purchaser.
Purchaser hereby pledges said stock as security for the payment of the Note. In the event of
default in payment of the Note, Purchaser hereby appoints the Company as Purchaser’s true and
lawful attorney to take such action as may be necessary or appropriate to cause said stock to be
transferred into the name of the Company, or to any purchaser thereof.

     2.   The Company agrees to hold said stock as security for the payment of the Note and interest
thereon as therein provided, and the Company shall not at any time dispose of said stock or
encumber same, except as otherwise provided herein.

     3.   At all times while the Company is holding said stock as security hereunder, the Company
shall (i) collect all dividends declared thereon and shall credit the same against principal
and interest of the Note, as part payment thereon, and (ii) collect and hold any other
securities and/or

 

 

other property distributed on account of such stock, all of which shall be
pledged to the Company hereunder.

     4.   While the Company holds said stock as security hereunder, Purchaser shall have the right to
vote the same at all meetings of the stockholders of the Company, so long as Purchaser is not in
default in the performance of any of the terms of this Agreement, or in the payments due under the
Note.

     5.   Upon repayment of the balance of the Note and all interest and other charges due thereon,
the Company shall redeliver to Purchaser the certificates for said stock, and the Assignment forms.

     6.   In the event Purchaser shall fail to perform any of the terms of this Agreement, or fail to
make payments when due under the Note as therein required, the Company shall have all the rights
and remedies of a creditor and secured party at law and in equity, including the rights and
remedies provided under the California Uniform Commercial Code, and without limiting the foregoing,
the Company may, after ten days’ prior written notice to Purchaser by certified mail at Purchaser’s
residence or business address, sell any or all of the stock pledged hereunder in such manner and
for such price as the Company may determine, and out of the proceeds of such sale the Company may
retain an amount sufficient to pay the principal and interest then due on the Note, together with
expenses of the sale and reasonable attorneys’ fees, and the Company shall pay the balance of said
proceeds, if any, to Purchaser. At any bona fide sale which qualifies as a public sale under the
California Uniform Commercial Code, the Company may (if the Company is the highest bidder) purchase
all or any part of said stock at such price as the Company deems proper. Purchaser shall be liable
for any deficiency remaining following exercise by the Company of its rights hereunder.

     7.   Provided Purchaser has not failed to perform on a timely basis any of Purchaser’s
obligations under the Note or this Agreement, the Company will release the shares from pledge
hereunder upon payment in full of the Note plus all accrued but unpaid interest.

     8.   This Agreement shall be governed by the laws of the State of California, without regard to
its choice of laws principles, and shall be construed in accordance therewith.

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     IN WITNESS WHEREOF, the parties have hereunto set their hands as of the day and year
first above written.

	 	 	 	 	 
	PURCHASER	 	 
	 
	 	 	 	 
	 
	 	/s/ Kevin K. Sidow 	 	 
	 	 	 
	Name: Kevin K. Sidow	 	 
	 
	 	 	 	 
	ST. FRANCIS MEDICAL TECHNOLOGIES, INC.	 	 
	 
	 	 	 	 
	By
	 	/s/ Michael A. Bates 	 	 
	 

	 	 

Michael A. Bates
	 	 
	 

	 	Chief Financial Officer and Treasurer	 	 

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Exhibit 10.15

LOAN AND SECURITY AGREEMENT

     THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of the Effective Date between
SILICON VALLEY BANK, a California corporation (“Bank”), and ST. FRANCIS MEDICAL TECHNOLOGIES,
INC., a Delaware corporation (“Borrower”),
provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The
parties agree as follows:

     1. ACCOUNTING AND OTHER TERMS

     Accounting terms not defined in this Agreement shall be construed following GAAP.
Calculations and determinations must be made following GAAP. Capitalized terms not otherwise
defined in this Agreement shall have the meanings set forth in Section 13. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the
Code to the extent such terms are defined therein.

     2. LOAN AND TERMS OF PAYMENT

     2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the outstanding
principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due
in accordance with this Agreement.

     2.1.1 Revolving Advances.

          (a) Availability. Subject to the terms and conditions of this Agreement, Bank shall
make Advances not exceeding the Availability Amount. Amounts borrowed under the Revolving Line
may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable
terms and conditions precedent herein.

          (b)
Termination; Repayment. The Revolving Line terminates on the Revolving
Line Maturity Date, when the principal amount of all Advances, the unpaid interest thereon, and all
other Obligations relating to the Revolving Line shall be immediately due and payable.

     2.1.2 Letters of Credit Sublimit.

          (a) As part of the Revolving Line, Bank shall issue or have issued Letters of Credit for
Borrower’s account. The face amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve) may not exceed the Availability
Amount. Such aggregate amounts utilized hereunder shall at all times reduce the amount otherwise
available for Advances under the Revolving Line. If, on the Revolving Line Maturity Date, there
are any outstanding Letters of Credit, then on such date Borrower shall provide to Bank cash
collateral in an amount equal to one hundred five percent (105%) of the face amount of all such
Letters of Credit plus all interest, fees, and costs due or to become due in connection
therewith (as estimated by Bank in its good faith business judgment), to secure all of the
Obligations relating to said Letters of Credit. All Letters of Credit shall be in form and
substance acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions

 

 

of Bank’s standard Application and Letter of Credit Agreement (the “Letter of Credit Application”).
Borrower agrees to execute any further documentation in connection with the Letters of Credit as
Bank may reasonably request. Borrower further agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Bank and opened for Borrower’s
account or by Bank’s interpretations of any Letter of Credit issued by Bank for Borrower’s account,
and Borrower understands and agrees that Bank shall not be liable for any error, negligence, or
mistake, whether of omission or commission, in following Borrower’s instructions or those contained
in the Letters of Credit or any modifications, amendments, or supplements thereto.

          (b) The obligation of Borrower to immediately reimburse Bank for drawings made under Letters
of Credit shall be absolute, unconditional, and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, such Letters of Credit, and the Letter of Credit
Application.

          (c) Borrower may request that Bank issue a Letter of Credit payable in a Foreign Currency. If
a demand for payment is made under any such Letter of Credit, Bank shall treat such demand as an
Advance to Borrower of the equivalent of the amount thereof (plus fees and charges in connection
therewith such as wire, cable, SWIFT or similar charges) in Dollars at the then-prevailing rate of
exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.

          (d) To guard against fluctuations in currency exchange rates, upon the issuance of any Letter
of Credit payable in a Foreign Currency, Bank shall create a reserve
(the “Letter of Credit Reserve”) under the Revolving Line in an amount equal to ten percent (10%) of the face amount of
such Letter of Credit. The amount of the Letter of Credit Reserve may be adjusted by Bank from time
to time to account for fluctuations in the exchange rate. The availability of funds under the
Revolving Line shall be reduced by the amount of such Letter of Credit Reserve for as long as such
Letter of Credit remains outstanding.

     2.1.3 Cash Management Services Sublimit. Borrower may use up to the Availability Amount (the
“Cash Management Services Sublimit”) of the Revolving Line for Bank’s cash management services
which may include merchant services, direct deposit of payroll, business credit card, and check
cashing services identified in Bank’s various cash management services agreements (collectively,
the “Cash Management Services”). Any amounts Bank pays on behalf of Borrower or any amounts that
are not paid by Borrower for any Cash Management Services will be treated as Advances under the
Revolving Line and will accrue interest at the interest rate applicable to Advances.

     2.2 FX Guidance Facility.

          (a) FX Guidance Line. Borrower may enter into foreign exchange contracts with Bank
under which Borrower commits to purchase from or sell to Bank a specific amount of Foreign
Currency (each, a “FX Guidance Facility Contract”) on a specified date (the “FX Guidance Facility
Settlement Date”). FX Guidance Facility Contracts shall have a FX Guidance Facility Settlement
Date of at least one (1) FX Business Day after the contract date and shall be subject to a reserve
of ten percent (10%) of each outstanding FX Guidance Facility Contract (the

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“FX
Guidance Facility Reserve”). The aggregate amount of FX Guidance Facility Contracts at any one
time may not exceed ten (10) times the amount of the FX Guidance Facility Reserve.

          (b)
Termination; Repayment. The FX Line terminates on the FX Maturity Date, when the
principal amount of all Guidance Facility Contracts, the unpaid interest thereon, and all other
Obligations relating to the FX Line shall be immediately due and payable.

     2.3 Overadvances. If, at any time, the Credit Extensions under Section 2.1 exceed the
lesser of either (a) the Revolving Line or (b) the Borrowing Base, Borrower shall immediately pay
to Bank in cash such excess.

     2.4 Payment of Interest on the Credit Extensions.

          (a) Interest Rate on Advances. Subject to Section 2.4(b), the principal amount
outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to
two percentage points (2.00%) above the Prime Rate unless a Quick Ratio Threshold Period is not in
effect, in which case a floating per annum rate equal to three quarters of one percentage point
(0.75%) above the Prime Rate, which interest shall be payable monthly in accordance with Section
2.4(f) below.

          (b) Default Rate. Immediately upon the occurrence and during the
continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is
five percentage points (5.00%) above the rate effective immediately before the Event of Default
(the “Default Rate”). Payment or acceptance of the increased interest rate provided in this
Section 2.4(b) is not a permitted alternative to timely payment and shall not constitute a waiver
of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.

          (c) Adjustment to Interest Rate. Changes to the interest rate of any Credit
Extension based on changes to the Prime Rate shall be effective on the effective date of any change
to the Prime Rate and to the extent of any such change. Changes to the interest rate based on the
commencement or termination of a Quick Ratio Threshold Period shall be effective on the first
(1st) day of the month following the reporting date of the financial statements that
show the change in the Quick Ratio.

          (d) 360-Day Year. Interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed.

          (e) Debit of Accounts. Bank may debit any of Borrower’s deposit accounts, including
the Designated Deposit Account, for principal and interest payments or any other amounts Borrower
owes Bank when due. These debits shall not constitute a set-off.

          (f) Payments. Unless otherwise provided, interest is payable monthly on the first
(1st) calendar day of each month. Payments of principal and/or interest received after
12:00 p.m. Pacific time are considered received at the opening of business on the next Business
Day. When a payment is due on a day that is not a Business Day, the payment is due the next
Business Day and additional fees or interest, as applicable, shall continue to accrue.

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     2.5 Fees. Borrower shall pay to Bank:

          (a) Good Faith Deposit. A good faith deposit by Borrower in the amount of Fifteen
Thousand Dollars ($15,000) to be used by Bank to complete its due diligence process, including, but
not limited to, Bank’s legal and out of pocket expenses. Any amount not used by Bank shall be
applied to the Loan Fee;

          (b) Loan Fee. A fully earned, non-refundable fee, equal to an amount of Ten Thousand
Dollars ($10,000) per annum;

          (c) Collateral Handling Fee. At all times during a Quick Ratio Threshold Period,
Borrower will pay to Bank a collateral handling fee of Seven Hundred Fifty Dollars ($750) per month
or portion of a month (the “Collateral Handling Fee”);

          (d) Letter of Credit Fee. Bank’s customary fees and expenses for the issuance or
renewal of Letters of Credit, upon the issuance, each anniversary of the issuance, and the renewal
of such Letter of Credit; and

          (e) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and
expenses, plus expenses, for documentation and negotiation of this Agreement) incurred through and
after the Effective Date, when due.

     2.6 Lockbox; Account Collection Services. At all times during a Quick Ratio
Threshold Period, Borrower shall direct each Account Debtor (and each depository institution
where proceeds of Accounts are on deposit) to remit payments with respect to the Accounts to a
lockbox account established with Bank or to wire transfer payments to a cash collateral account
that Bank controls (collectively, the “Lockbox”). It will be considered an immediate Event of
Default if the Lockbox is not set-up and operational during a Quick Ratio Threshold Period.
Provided no Event of Default exists or an event that with notice or lapse of time will be an
Event of Default, within three (3) days of receipt of such amounts by Bank in the case of
proceeds of Accounts in any form other than by wire transfer and on the same day they are
received in the case of proceeds of Accounts in the form of a wire transfer, Bank will turn over
to Borrower the proceeds of the Accounts in excess of the outstanding Advances and accrued and
unpaid interest owed in connection with the Advances. This Section does not impose any
affirmative duty on Bank to perform any act other than as specifically set forth herein. All
Accounts and the proceeds thereof are Collateral and, if an Event of Default occurs, Bank may
apply the proceeds of such Accounts to the Obligations. Regardless of whether an Event of Default
exists, during each Quick Ratio Threshold Period the Bank shall apply the proceeds of the
Accounts to the outstanding Advances, and shall deposit the proceeds of the Accounts in excess of
the outstanding Advances directly into Borrower’s Designated Deposit Account.

     3. CONDITIONS OF LOANS

     3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make the initial
Credit Extension is subject to the condition precedent that Bank shall have received, in form and
substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate, including, without limitation:

          (a) Borrower shall have delivered duly executed original signatures to the Loan
Documents to which it is a party;

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          (b) Borrower shall have delivered duly executed original signatures to the Control Agreement;

          (c) Borrower shall have delivered its Operating Documents and a good standing certificate of
Borrower certified by the Secretary of State of the State of Delaware and the Secretary of State
of the State of California as of a date no earlier than thirty (30) days prior to the Effective
Date;

          (d) Borrower shall have delivered duly executed original signatures to the completed
Borrowing Resolutions for Borrower;

          (e) Bank shall have received certified copies, dated as of a recent date, of financing
statement searches, as Bank shall request, accompanied by written evidence (including any UCC
termination statements) that the Liens indicated in any such financing statements either
constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will
be terminated or released;

          (f) Borrower shall have delivered the Perfection Certificate executed by Borrower;

          (g) Borrower shall have delivered the insurance policies and/or endorsements required
pursuant to Section 6.6 evidence satisfactory to Bank that the insurance policies required by
Section 6.6 are in full force and effect, together with appropriate evidence showing loss payable
and/or additional insured clauses or endorsements in favor of Bank; and

          (h) Borrower shall have paid the fees and Bank Expenses then due as specified in
Section 2.5.

     3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make each
Credit Extension, including the initial Credit Extension, is subject to the following:

          (a) except as otherwise provided in Section 3.4(a), timely receipt of an executed
Payment/Advance Form;

          (b) the representations and warranties in Section 5 shall be true in all material respects on
the date of the Payment/Advance Form and on the Funding Date of each Credit Extension; provided,
however, that such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text thereof; and provided,
further that those representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no Default or Event of
Default shall have occurred and be continuing or result from the Credit Extension. Each Credit
Extension is Borrower’s representation and warranty on that date that the representations and
warranties in Section 5 remain true in all material respects; provided, however, that such
materiality qualifier shall not be applicable to any representations and warranties that already
are qualified or modified by materiality in the text thereof; and
provided, further that those
representations and warranties expressly referring to a specific date shall be true, accurate and
complete in all material respects as of such date; and

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          (c) in Bank’s sole but reasonable discretion, there has not been a Material Adverse Change.

     3.3 Covenant to Deliver.

     Borrower agrees to deliver to Bank each item required to be delivered to Bank under this
Agreement as a condition to any Credit Extension. Borrower expressly agrees that the extension of
a Credit Extension prior to the receipt by Bank of any such item shall not constitute a waiver by
Bank of Borrower’s obligation to deliver such item, and any such extension in the absence of a
required item shall be in Bank’s sole but reasonable discretion.

     3.4 Procedures for Borrowing.

          (a) Advances and Guidance Facility Contracts. Subject to the prior satisfaction of
all other applicable conditions to the making of an Advance or a Guidance Facility Contract set
forth in this Agreement, to obtain an Advance or a Guidance Facility Contract, Borrower shall
notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by
12:00 p.m. Pacific time on the Funding Date of the Advance or Guidance Facility Contract, as
applicable. Together with any such electronic or facsimile notification, Borrower shall deliver to
Bank by electronic mail or facsimile a completed Payment/Advance Form executed by a Responsible
Officer or his or her designee. Bank may rely on any telephone notice given by a person whom Bank
believes is a Responsible Officer or designee. Bank shall credit Advances and Guidance Facility
Contracts to the Designated Deposit Account. Bank may make Advances and Guidance Facility
Contracts under this Agreement based on instructions from a Responsible Officer or his or her
designee or without instructions if the Advances or Guidance Facility Contracts, as applicable,
are necessary to meet Obligations which have become due.

     4. CREATION OF SECURITY INTEREST

     4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and
performance in full of all of the Obligations, a continuing security interest in and right of
set-off as security for, and pledges to Bank, the Collateral, wherever located, whether now owned
or hereafter acquired or arising, and all proceeds and products thereof. Borrower represents,
warrants, and covenants that the security interest granted herein is and shall at all times
continue to be a first priority perfected security interest in the Collateral (subject only to
Permitted Liens that may have superior priority to Bank’s Lien under this Agreement). If Borrower
shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by
Borrower of the general details thereof and grant to Bank in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance reasonably satisfactory to Bank.

     If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the
Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment
in full in cash of the Obligations and at such time as Bank’s obligation to make Credit
Extensions has terminated, Bank shall, at Borrower’s sole cost and expense, release its Liens in
the Collateral and all rights therein shall revert to Borrower.

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     4.2 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file
financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or
protect Bank’s interest or rights hereunder, including a notice that any disposition of the
Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Bank
under the Code.

     5. REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants as follows:

     5.1 Due Organization and Authorization. Borrower and each of its Subsidiaries are duly
existing and in good standing as Registered Organizations only in the State of Delaware and are
qualified and licensed to do business and are in good standing in any jurisdiction in which the
conduct of their business or their ownership of property requires that they be qualified except
where the failure to do so would not reasonably be expected to have a material adverse effect on
Borrower’s business. In connection with this Agreement, Borrower has delivered to Bank a completed
certificate substantially in the form attached hereto as Exhibit F signed by Borrower
entitled “Perfection Certificate.” Borrower represents and warrants to Bank that (a) Borrower’s
exact legal name is that indicated on the Perfection Certificate and on the signature page hereof;
(b) Borrower is an organization of the type and is organized in the jurisdiction set forth in the
Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s
organizational identification number or accurately states that Borrower has none; (d) the
Perfection Certificate accurately sets forth Borrower’s place of business, or, if more than one,
its chief executive office as well as Borrower’s mailing address (if different than its chief
executive office); (e) Borrower (and each of its predecessors) has not, in the past five (5)
years, changed its state of formation, organizational structure or type, or any organizational
number assigned by its jurisdiction; and (f) all other information set forth on the Perfection
Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete. If
Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly
notify Bank of such occurrence and provide Bank with Borrower’s organizational identification
number.

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

     5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer each
item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and
all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts
with Bank, the deposit accounts, if any, described in the Perfection Certificate delivered to Bank
in connection herewith, or of which Borrower has given Bank notice and taken such actions as are
necessary to give Bank a perfected security interest therein. The Accounts are bona fide, existing
obligations of the Account Debtors.

     The Collateral is not in the possession of any third party bailee (such as a warehouse)
except as otherwise provided in the Perfection Certificate. Other than Collateral which by its

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very nature is intended to be used at places other than the Borrower’s place of business (such as
laptop computers, marketing materials, cell phones and the like), none of the Collateral shall be
maintained at locations other than as provided in the Perfection Certificate or as Borrower has
given Bank notice pursuant to Section 7.2. In the event that Borrower, after the date hereof,
intends to store or otherwise deliver any portion of the Collateral to a bailee, then Borrower will
first receive the written consent of Bank and such bailee must execute and deliver a bailee
agreement in form and substance satisfactory to Bank in its sole discretion.

     5.3 Accounts Receivable. For any Eligible Account and Eligible Foreign Account in any
Borrowing Base Certificate, all statements made and all unpaid balances appearing in all invoices,
instruments and other documents evidencing such Eligible Accounts and Eligible Foreign Accounts are
and shall be true and correct and all such invoices, instruments and other documents, and all of
Borrower’s Books are genuine and in all respects what they purport to be. All sales and other
transactions underlying or giving rise to each Eligible Account and Eligible Foreign Account shall
comply in all material respects with all applicable laws and governmental rules and regulations.
Borrower has no knowledge of any actual or imminent Insolvency Proceeding of any Account Debtor
whose accounts are an Eligible Account and Eligible Foreign Account in any Borrowing Base
Certificate. To the best of Borrower’s knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Eligible Accounts and Eligible Foreign Accounts are
genuine, and all such documents, instruments and agreements are legally enforceable in accordance
with their terms.

     5.4 Litigation. There are no actions or proceedings pending or, to the knowledge of the
Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries
involving more than the Threshold Amount.

     5.5 No Material Deviation in Financial Statements. All consolidated financial statements for
Borrower and any of its Subsidiaries delivered to Bank fairly present in all material respects
Borrower’s consolidated financial condition and Borrower’s consolidated results of operations.
There has not been any material deterioration in Borrower’s consolidated financial condition since
the date of the most recent financial statements submitted to Bank.

     5.6 Solvency. The fair salable value of Borrower’s assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; Borrower is not left with
unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay
its debts (including trade debts) as they mature.

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     5.7 Regulatory Compliance. Borrower is not an “investment company” or a company
“controlled” by an “investment company” under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under Regulations T and U
of the Federal Reserve Board of Governors). Borrower has complied in all material respects with
the Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the
violation of which would reasonably be expected to have a material adverse effect on its business.
None of Borrower’s or any of its Subsidiaries’ properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance other than legally. Borrower
and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all government authorities that are
necessary to continue its business as currently conducted.

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

     5.9 Tax Returns and Payments; Pension Contributions. Borrower has timely filed all required
tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower. Borrower may defer payment of any
contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Bank in
writing of the commencement of, and any material development in, the proceedings, (c) posts bonds
or takes any other steps required to prevent the governmental authority levying such contested
taxes from obtaining a Lien upon any of the Collateral that is other than a Permitted Lien.
Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years
which could result in additional taxes becoming due and payable by Borrower. Borrower has paid all
amounts necessary to fund all present pension, profit sharing and deferred compensation plans in
accordance with their terms, and Borrower has not withdrawn from participation in, and has not
permitted partial or complete termination of, or permitted the occurrence of any other event with
respect to, any such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or
any other governmental agency.

     5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely to fund
its general business requirements and not for personal, family, household or agricultural purposes.

     5.11 Full Disclosure. No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank, as of the date such representations,
warranties, or other statements were made, taken together with all such written certificates and
written statements given to Bank, contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained in the certificates or statements
not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and that actual results
during the period or periods covered by such projections and forecasts may differ from the
projected or forecasted results).

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     6. AFFIRMATIVE COVENANTS

     Borrower shall do all of the following:

     6.1 Government Compliance. Maintain its and all its Subsidiaries’ legal existence and good
standing in their respective jurisdictions of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to have a material
adverse effect on Borrower’s business or operations. Borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is subject,
noncompliance with which could have a material adverse effect on Borrower’s business.

     6.2 Financial Statements, Reports, Certificates.

          (a) Deliver to Bank: (i) as soon as available, but no later than thirty (30) days after the
last day of each month, a company prepared consolidated balance sheet and income statement covering
Borrower’s and each of its Subsidiary’s operations during the period certified by a Responsible
Officer and in a form acceptable to Bank; (ii) as soon as available, but no later than one hundred
eighty (180) days after the last day of Borrower’s fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm acceptable to Bank in its
reasonable discretion; (iii) within five (5) days of delivery, copies of all statements, reports
and notices made available to Borrower’s security holders or to any holders of Subordinated Debt;
(iv) a prompt report of any legal actions pending or threatened in writing against Borrower or any
of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of
Fifty Thousand Dollars ($50,000) or more; (v) as soon as available, but no later than thirty (30)
days after approval by Borrower’s board of directors, copies of all annual financial projections,
commensurate in form, substance and timing with those provided by Borrower to its venture capital
and other investors and; and (vi) budgets, sales projections, operating plans and other financial
information reasonably requested by Bank.

          (b) Within fifteen (15) days after the last day of each month, deliver to Bank a duly
completed Borrowing Base Certificate signed by a Responsible Officer, with aged listings of
accounts receivable and accounts payable (by invoice date).

          (c) Within fifteen (15) days after the last day of each month, deliver to Bank with the
monthly financial statements, a duly completed Compliance Certificate signed by a Responsible
Officer setting forth calculations showing compliance with the financial covenants set forth in
this Agreement.

          (d) During any Quick Ratio Threshold Period, Borrower shall provide Bank with the following
additional reports:

                (i) Transaction reports, accounts receivable agings, accounts payable agings and schedules
of collections, sales, credit memos and other adjustments, each week and at the time of each
Payment/Advance Form, on Bank’s standard form.

                (ii) If there are no Advances outstanding, the transaction reports under clause (i) may be
made monthly, within thirty (30) days after the end of each month; provided,

10

 

however, that Borrower shall give Bank thirty (30) days prior written notice before requesting any
Advance.

     6.3 Inventory; Returns. Keep all Inventory in good and marketable condition, free from
material defects. Returns and allowances between Borrower and its Account Debtors shall follow
Borrower’s customary practices as they exist at the Effective Date. Borrower must promptly notify
Bank of all returns, recoveries, disputes and claims that involve more than the Threshold Amount.

     6.4 Taxes; Pensions. Make, and cause each of its Subsidiaries to make, timely payment of all
foreign, federal, state, and local taxes or assessments (other than taxes and assessments which
Borrower is contesting pursuant to the terms of Section 5.9) and shall deliver to Bank, on demand,
appropriate certificates attesting to such payments, and pay all amounts necessary to fund all
present pension, profit sharing and deferred compensation plans in accordance with their terms.

     6.5 Access to Collateral; Books and Records. At reasonable times, on five (5) Business Days’
notice (provided no notice is required if an Event of Default has occurred and is continuing),
Bank, or its agents, shall have the right to inspect the Collateral and the right to audit and copy
Borrower’s Books. The foregoing inspections and audits shall be at Borrower’s expense, and the
charge therefore shall be Seven Hundred Fifty Dollars ($750) per person per day (or such higher
amount as shall represent Bank’s then-current standard charge for the same), plus
reasonable out-of-pocket expenses. During any calendar year, if no Event of Default has occurred
and no Quick Ratio Threshold Period has been triggered, such fees payable by Borrower shall not
exceed Five Thousand Dollars ($5,000) for such year. Bank shall conduct an initial audit within
sixty (60) days of the Effective Date, and thereafter such audits will be conducted as follows: (i)
if during any twelve (12) month period the Quick Ratio Threshold Period has not been triggered,
Bank shall not conduct more than two (2) audits per year and (ii) during any twelve (12) month
period in which a Quick Ratio Threshold Period has been triggered Bank shall not conduct more than
three (3) audits per year, unless an Event of Default has occurred and is continuing; provided,
however, that additional audits, at Borrower’s expense, may be conducted by Bank if, at Bank’s
discretion, there has been a deterioration in the Collateral or in Borrower’s financial
performance.

     6.6 Insurance. Keep its business and the Collateral insured for risks and in amounts standard
for companies in Borrower’s industry and location and as Bank may reasonably request in its good
faith business judgment. Insurance policies shall be in a form, with companies, and in amounts that
are satisfactory to Bank. All property policies shall have a lender’s loss payable endorsement
showing Bank as the sole lender loss payee and waive subrogation against Bank, and all liability
policies shall show, or have endorsements showing, Bank as an additional insured. All policies (or
the loss payable and additional insured endorsements) shall provide that the insurer must give Bank
at least twenty (20) days notice before canceling, amending, or declining to renew its policy. At
Bank’s request, Borrower shall deliver certified copies of policies and evidence of all premium
payments. Proceeds payable under any policy shall, at Bank’s option, be payable to Bank on
account of the Obligations. If Borrower fails to obtain insurance as required under this Section
or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may
make all or part of such payment or obtain such

11

 

insurance policies required in this Section, and take any action under the policies Bank deems
prudent.

     6.7 Operating Accounts.

          (a) Maintain its primary operating accounts with Bank.

          (b) Provide Bank five (5) days prior written notice before establishing any Collateral Account
at or with any bank or financial institution other than Bank or its Affiliates. In addition, for
each Collateral Account that Borrower at any time maintains, Borrower shall cause the applicable
bank or financial institution (other than Bank) at or with which any Collateral Account is
maintained to execute and deliver a Control Agreement or other appropriate instrument with respect
to such Collateral Account to perfect Bank’s Lien in such Collateral Account in accordance with the
terms hereunder; provided, however, that no Control Agreement shall be required with respect to
Collateral Accounts in which Borrower maintains less than Twenty Five Thousand Dollars ($25,000) in
the aggregate at any time so long as such Collateral Accounts are not subject to any Lien other
than Bank’s Lien. The provisions of the previous sentence shall not apply to deposit accounts
exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for
the benefit of Borrower’s employees and identified to Bank by Borrower as such.

     6.8 Financial Covenants. Borrower shall maintain, to be tested as of the last day of each
month, a Tangible Net Worth of not less than the sum of (a) Three Million Two Hundred Fifty
Thousand Dollars ($3,250,000), plus (b) equity received by Borrower after the Effective
Date, plus (c) any Subordinated Debt received by Borrower after the Effective Date.

     6.9 Protection of Intellectual Property Rights. Except as shall be consistent with sound
commercial practices, Borrower shall:

          (a) protect, defend and maintain the validity and enforceability of its intellectual
property;

          (b) promptly advise Bank in writing of material infringements of its intellectual property;
and

          (c) not allow any intellectual property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public.

     6.10 Litigation Cooperation. From the date hereof and continuing through the termination of
this Agreement, make available to Bank, without expense to Bank, Borrower and its officers,
employees and agents and Borrower’s books and records, to the extent that Bank may deem them
reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or
against Bank with respect to any Collateral or relating to Borrower.

     6.11 Further Assurances. Borrower shall execute any further instruments and take further
action as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral or to
effect the purposes of this Agreement.

12

 

     7. NEGATIVE COVENANTS

     Borrower shall not do any of the following without Bank’s prior written consent:

     7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively,
“Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or
property, except for Permitted Asset Dispositions.

     7.2 Changes in Business, Ownership or Business Locations. Engage in or permit any of its
Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower
and such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or dissolve; or
(c) enter into any transaction or series of related transactions in which the stockholders of
Borrower who were not stockholders immediately prior to the first such transaction own more than
forty-nine percent (49%) of the voting stock of Borrower immediately after giving effect to such
transaction or related series of such transactions (other than by the sale of Borrower’s equity
securities in a public offering or to venture capital investors so long as Borrower identifies to
Bank the venture capital investors prior to the closing of the transaction). Borrower shall not,
without at least thirty (30) days prior written notice to Bank: (1) add any new offices or business
locations, including warehouses (unless such new offices or business locations contain less than
the Threshold Amount in Borrower’s assets or property), (2) change its jurisdiction of
organization, (3) change its organizational structure or type, (4) change its legal name, or (5)
change any organizational number (if any) assigned by its jurisdiction of organization.

     7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge
or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person, except where (A) (1)
cash consideration for such transactions does not exceed, in the aggregate, Two Hundred Fifty
Thousand Dollars ($250,000) (other than by the sale of Borrower’s equity securities in a public
offering or to venture capital investors so long as Borrower identifies to Bank the venture capital
investors prior to the closing of the transaction) in any fiscal year of Borrower; (2) no Event of
Default has occurred and is continuing or would exist after giving effect to the transactions; and
(3) Borrower is the surviving legal entity, or (B) (1) Borrower promptly notifies Bank of
Borrower’s approval of, and Bank consents to (such consent not to be unreasonably withheld), any
transaction or series of related transactions (a) which constitute a sale of all or substantially
all of Borrower’s assets; or (b) in which the stockholders of Borrower who were not stockholders
immediately prior to the first such transaction own more than forty-nine percent (49%) of the
voting stock of Borrower immediately after giving effect to such transaction or related series of
such transactions; and (2) Borrower pays Bank an amount equal to all then unpaid Obligations. In
the case of clause (B), no further Credit Extensions will be permitted under the Loan Documents. A
Subsidiary may merge or consolidate into another Subsidiary or into Borrower.

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

13

 

     7.5 Encumbrance. Create, incur, or allow any Lien on any of its property, or assign or convey
any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries
to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority
security interest granted herein, or enter into any agreement, document, instrument or other
arrangement (except with or in favor of Bank) with any Person which directly or indirectly
prohibits or has the effect of prohibiting Borrower from assigning, mortgaging, pledging, granting
a security interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s intellectual
property, except as is otherwise permitted in Section 7.1 and the definition of “Permitted Lien”
herein.

     7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to
the terms of Section 6.7(b).

     7.7 Investments; Distributions.

          (a) Directly or indirectly make any Investment other than Permitted Investments, or permit
any of its Subsidiaries to do so; or (b) pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock provided that (i) Borrower may convert any of its
convertible securities into other securities pursuant to the terms of such convertible securities
or otherwise in exchange thereof, (ii) Borrower may pay dividends solely in common stock, and
(iii) Borrower may repurchase the stock of former officers, directors, employees or consultants
pursuant to stock repurchase agreements so long as an Event of Default does not exist at the time
of such repurchase and would not exist after giving effect to such repurchase, provided such
repurchase does not exceed in the aggregate the Threshold Amount in any calendar year.

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

     7.9 Subordinated Debt.

          (a) Make or permit any payment on any Subordinated Debt, except under the terms of the
subordination, intercreditor, or other similar agreement to which such Subordinated Debt is
subject, or (b) amend any provision in any document relating to the Subordinated Debt which would
increase the amount thereof or adversely affect the subordination thereof to Obligations owed to
Bank.

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

14

 

of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation
in, permit partial or complete termination of, or permit the occurrence of any other event with
respect to, any present pension, profit sharing and deferred compensation plan which could
reasonably be expected to result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

     8. EVENTS OF DEFAULT

     Any
one of the following shall constitute an event of default (an “Event of Default”) under
this Agreement:

     8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on
any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business
Days after such Obligations are due and payable. During the cure period, the failure to cure the
payment default is not an Event of Default (but no Credit Extension will be made during the cure
period);

     8.2 Covenant Default.

          (a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4, 6.5, 6.7 or
6.8, or violates any covenant in Section 7; or

          (b) Borrower fails or neglects to perform, keep, or observe any other term, provision,
condition, covenant or agreement contained in this Agreement, any Loan Document, and as to any
default (other than those specified in Section 8.8 below) under such other term, provision,
condition, covenant or agreement that can be cured, has failed to cure the default within ten (10)
days after the occurrence thereof; provided, however, that if the default cannot by its nature be
cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within
such ten (10) day period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure to cure the
default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such
cure period). Grace periods provided under this section shall not apply, among other things, to
financial covenants or any other covenants set forth in subsection (a) above;

     8.3 Material Adverse Change. A Material Adverse Change occurs;

     8.4 Attachment.

          (a) Any material portion of Borrower’s assets is attached, seized, levied on, or comes into
possession of a trustee or receiver and the attachment, seizure or levy is not removed in ten (10)
days; (b) the service of process upon Bank seeking to attach, by trustee or similar process, any
funds of Borrower, or of any entity under control of Borrower (including a Subsidiary) on deposit
with Bank; (c) Borrower is enjoined, restrained, or prevented by court order from conducting a
material part of its business; (d) a judgment or other claim in excess of Fifty Thousand Dollars
($50,000) becomes a Lien on any of Borrower’s assets; or (e) a notice of lien, levy, or assessment
is filed against any of Borrower’s assets by any government agency and not paid within ten (10)
days after Borrower receives notice. These are not Events of Default if

15

 

stayed or if a bond is posted pending contest by Borrower (but no Credit Extensions shall be made
during the cure period);

     8.5 Insolvency. (a) Borrower is unable to pay its debts (including trade debts) as they
become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an
Insolvency Proceeding is begun against Borrower and not dismissed or stayed within thirty (30)
days (but no Credit Extensions shall be made while of any of the conditions described in clause
(a) exist and/or until any Insolvency Proceeding is dismissed);

     8.6 Other Agreements. There is a default in any agreement to which Borrower is a party with a
third party or parties resulting in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Fifty Thousand
Dollars ($50,000) or that could have a material adverse effect on Borrower’s business;

     8.7 Judgments. A judgment or judgments for the payment of money in an amount, individually or
in the aggregate, of at least Fifty Thousand Dollars ($50,000) (not covered by independent
third-party insurance) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of ten (10) days after the entry thereof (provided that no Credit Extensions
will be made prior to the satisfaction or stay of such judgment);

     8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any
representation, warranty, or other statement now or later in this Agreement, any Loan Document or
in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document,
and such representation, warranty, or other statement is incorrect in any material respect when
made; or

     8.9 Subordinated Debt. A default or breach occurs under any agreement between Borrower and
any creditor of Borrower that signed a subordination, intercreditor, or other similar agreement
with Bank, or any creditor that has signed such an agreement with Bank breaches any terms of such
agreement.

     9. BANK’S RIGHTS AND REMEDIES

     9.1 Rights and Remedies. While an Event of Default occurs and continues Bank may,
without notice or demand, do any or all of the following:

          (a) declare all Obligations immediately due and payable (but if an Event of Default described
in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);

          (b) stop advancing money or extending credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and Bank;

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

16

 

          (d) terminate any FX Guidance Facility Contract;

          (e) settle or adjust disputes and claims directly with Account Debtors for amounts on terms
and in any order that Bank considers advisable, notify any Person owing Borrower money of Bank’s
security interest in such funds, and verify the amount of such account;

          (f) make any payments and do any acts it considers necessary or reasonable to protect the
Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral
if Bank requests and make it available as Bank designates. Bank may enter premises where the
Collateral is located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of
its premises, without charge, to exercise any of Bank’s rights or remedies;

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

          (h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for
sale, and sell the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or
other right to use, without charge, Borrower’s labels, patents, copyrights, mask works, rights of
use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or
any similar property as it pertains to the Collateral, in completing production of, advertising
for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under
this Section, Borrower’s rights under all licenses and all franchise agreements inure to Bank’s
benefit;

          (i) place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive
control, any entitlement order, or other directions or instructions pursuant to any Control
Agreement or similar agreements providing control of any Collateral;

          (j) demand and receive possession of Borrower’s Books; and

          (k) exercise all rights and remedies available to Bank under the Loan Documents or at law or
equity, including all remedies provided under the Code (including disposal of the Collateral
pursuant to the terms thereof).

     9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of
Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b)
sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account
Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle, and adjust all
claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge,
encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the
Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints
Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of any security interest regardless of whether an Event of

17

 

Default has occurred until all Obligations have been satisfied in full and Bank is under no
further obligation to make Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s
attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable
until all Obligations have been fully repaid and performed and Bank’s obligation to provide Credit
Extensions terminates.

     9.3 Accounts Verification; Collection. Whether or not an Event of Default has occurred and
is continuing, Bank may notify any Person owing Borrower money of Bank’s security interest in such
funds and verify the amount of such account. After the occurrence of an Event of Default, any
amounts received by Borrower shall be held in trust by Borrower for Bank, and, if requested by
Bank, Borrower shall immediately deliver such receipts to Bank in the form received from the
Account Debtor, with proper endorsements for deposit.

     9.4 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.5
or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to
pay under this Agreement or any other Loan Document, Bank may obtain such insurance or make such
payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing
interest at the then highest applicable rate, and secured by the Collateral. Bank will make
reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the time it
is obtained or within a reasonable time thereafter. No payments by Bank are deemed an agreement to
make similar payments in the future or Bank’s waiver of any Event of Default.

     9.5 Application of Payments and Proceeds. Unless an Event of Default has occurred and is
continuing, Bank shall apply any funds in its possession, whether from Borrower account balances,
payments, or proceeds realized as the result of any collection of Accounts or other disposition of
the Collateral, first, to Bank Expenses, including without limitation, the reasonable costs,
expenses, liabilities, obligations and attorneys’ fees incurred by Bank in the exercise of its
rights under this Agreement; second, to the interest due upon any of the Obligations; and third, to
the principal of the Obligations and any applicable fees and other charges, in such order as Bank
shall determine in its sole but reasonable discretion. Any surplus shall be paid to Borrower or
other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency.
If an Event of Default has occurred and is continuing, Bank may apply any funds in its possession,
whether from Borrower account balances, payments, proceeds realized as the result of any collection
of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order
as Bank shall determine in its sole but reasonable discretion. Any surplus shall be paid to
Borrower or other Persons legally entitled thereto; Borrower shall remain liable to Bank for any
deficiency. If Bank, in its good faith business judgment, directly or indirectly enters into a
deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank
shall have the option, exercisable at any time, of either reducing the Obligations by the principal
amount of the purchase price or deferring the reduction of the Obligations until the actual receipt
by Bank of cash therefor.

18

 

     9.6 Bank’s Liability for Collateral. So long as Bank complies with reasonable banking
practices regarding the safekeeping of the Collateral in the possession or under the control of
Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act
or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss,
damage or destruction of the Collateral.

     9.7 No Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to require strict
performance by Borrower of any provision of this Agreement or any other Loan Document shall not
waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance
herewith or therewith. No waiver hereunder shall be effective unless signed by Bank and then is
only effective for the specific instance and purpose for which it is given. Bank’s rights and
remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and
remedies provided under the Code, by law, or in equity. Bank’s exercise of one right or remedy is
not an election, and Bank’s waiver of any Event of Default is not a continuing waiver. Bank’s
delay in exercising any remedy is not a waiver, election, or acquiescence.

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

     10. NOTICES

     All notices, consents, requests, approvals, demands, or other communication by any party to
this Agreement or any other Loan Document must be in writing and shall be deemed to have been
validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business
Days after deposit in the U.S. mail, first class, registered or certified mail return receipt
requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or
facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier
with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which
shall be addressed to the party to be notified and sent to the address, facsimile number, or email
address indicated below. Bank or Borrower may change its address or facsimile number by giving the
other party written notice thereof in accordance with the terms of this Section 10.

19

 

	 	 	 	 	 
	 

	 	If to Borrower:
	 	St. Francis Medical Technologies, Inc.
	 

	 	 	 	960 Atlantic Avenue
	 

	 	 	 	Suite 102
	 

	 	 	 	Alameda, California 94501
	 

	 	 	 	Attn: Michael Bates, CFO
	 

	 	 	 	Fax: (510) 747-3012
	 

	 	 	 	Email: Michael.Bates@sfmt.com
	 
	 	 	 	 
	 

	 	If to Bank:
	 	Silicon Valley Bank
	 

	 	 	 	185 Berry Street, Suite 3000
	 

	 	 	 	San Francisco, California 94107
	 

	 	 	 	Attn: Jason Hughes
	 

	 	 	 	Fax: (415) 856-0810
	 

	 	 	 	Email: jhughes@svb.com

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

     California law governs the Loan Documents without regard to principles of conflicts of law.
Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in
Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed
to operate to preclude Bank from bringing suit or taking other legal action in any other
jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce
a judgment or other court order in favor of Bank. Borrower expressly submits and consents in
advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby
Waives any objection that it may have based upon lack of personal
jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and
other process issued in such action or suit and agrees that service of such summons, complaints,
and other process may be made by registered or certified mail addressed to Borrower at the address
set forth in Section 10 of this Agreement and that service so made shall be deemed completed upon
the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the
U.S. mails, proper postage prepaid.

BORROWER
AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING
OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL
INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS
COUNSEL.

WITHOUT INTENDING IN ANY WAY
TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A
TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties
hereto agree that any and all disputes or controversies of any nature between them arising at
any time shall be decided by a reference to a  Private judge,
mutually selected by the parties (or, if they cannot agree,
by the Presiding Judge of

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the Santa Clara County, California Superior Court) appointed in accordance with California Code of
Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa
Clara County, California; and the parties hereby submit to the jurisdiction of such court. The
reference proceedings shall be conducted pursuant to and in accordance with the provisions of
California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have
the power, among others, to grant provisional relief, including without limitation, entering
temporary restraining orders, issuing preliminary and permanent injunctions and appointing
receivers. All such proceedings shall be closed to the public and confidential and all records
relating thereto shall be permanently sealed. If during the course of any dispute, a party desires
to seek provisional relief, but a judge has not been appointed at that point pursuant to the
judicial reference procedures, then such party may apply to the Santa Clara County, California
Superior Court for such relief. The proceeding before the private judge shall be conducted in the
same manner as it would be before a court under the rules of evidence applicable to judicial
proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner
as it would be before a court under the rules of discovery applicable to judicial proceedings. The
private judge shall oversee discovery and may enforce all discovery rules and order applicable to
judicial proceedings in the same manner as a trial court judge. The parties agree that the selected
or appointed private judge shall have the power to decide all issues in the action or proceeding,
whether of fact or of law, and shall report a statement of decision thereon pursuant to the
California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any
party at any time to exercise self-help remedies, foreclose against collateral, or obtain
provisional remedies. The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph.

     12. GENERAL PROVISIONS

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

     12.2 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its directors,
officers, employees, agents, attorneys, or any other Person affiliated with or representing
Bank harmless against: (a) all obligations, demands, claims, and liabilities (collectively,
“Claims”) asserted by any other party in connection with the transactions contemplated by the Loan
Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or
arising from transactions between Bank and Borrower (including reasonable attorneys’ fees and
expenses), except for Claims and/or losses directly caused by Bank’s gross negligence or willful
misconduct.

     12.3 Limitation of Actions. Any claim or cause of action by Borrower against Bank, its
directors, officers, employees, agents, accountants, attorneys, or any other Person affiliated with
or representing Bank based upon, arising from, or relating to this Loan Agreement or any other Loan
Document, or any other transaction contemplated hereby or thereby or relating hereto

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or thereto, or any other matter, cause or thing whatsoever, occurred, done, omitted or suffered to
be done by Bank, its directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or proceeding in a court of
competent jurisdiction by (a) the filing of a complaint within one year from the earlier of (i)
the date any of Borrower’s officers or directors had knowledge of the first act, the occurrence or
omission upon which such claim or cause of action, or any part thereof, is based, or (ii) the date
this Agreement is terminated, and (b) the service of a summons and complaint on an officer of
Bank, or on any other person authorized to accept service on behalf of Bank, within thirty (30)
days thereafter. Borrower agrees that such one-year period is a reasonable and sufficient time for
Borrower to investigate and act upon any such claim or cause of action. The one-year period
provided herein shall not be waived, tolled, or extended except by the written consent of Bank in
its sole discretion. This provision shall survive any termination of this Loan Agreement or any
other Loan Document.

     12.4 Right of Set-Off. At any time after the occurrence and during the continuance of an Event
of Default, without demand or notice, Bank may set-off the same or any part of the right of
security interest granted in Section 4.1 and apply the same to any liability or obligation of
Borrower even though unmatured and regardless of the adequacy of any other collateral securing the
Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.

     12.5 Time of Essence. Time is of the essence for the performance of all Obligations in this
Agreement.

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

     12.7 Amendments in Writing; Integration. All amendments to this Agreement must be in writing
and signed by both Bank and Borrower. This Agreement and the Loan Documents represent the entire
agreement about this subject matter and supersede prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations between the parties about
the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan
Documents.

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

     12.9 Survival. All covenants, representations and warranties made in this Agreement continue
in full force until this Agreement has terminated pursuant to its terms and all Obligations (other
than inchoate indemnity obligations and any other obligations which, by their terms, are to survive
the termination of this Agreement) have been satisfied. The obligation of

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Borrower in Section 12.2 to indemnify Bank shall survive until the statute of limitations with
respect to such claim or cause of action shall have run.

     12.10 Confidentiality. In handling any confidential information, Bank shall exercise the
same degree of care that it exercises for its own proprietary information, but disclosure of
information may be made: (a) to Bank’s Subsidiaries or Affiliates; (b) to prospective transferees
or purchasers of any interest in the Credit Extensions (provided,
however, Bank shall use
commercially reasonable efforts to obtain such prospective transferee’s or purchaser’s agreement to
the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to
Bank’s regulators or as otherwise required in connection with Bank’s examination or audit; and (e)
as Bank considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (i) is in the public domain or in Bank’s
possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank;
or (ii) is disclosed to Bank by a third party, if Bank does not know that the third party is
prohibited from disclosing the information.

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

     13. DEFINITIONS

     13.1 Definitions. As used in this Agreement, the following terms have the following meanings:

     “Account” is any “account” as defined in the Code with such additions to such term as may
hereafter be made, and includes, without limitation, all accounts receivable and other sums owing
to Borrower.

     “Account Debtor” is any “account debtor” as defined in the Code with such additions to such
term as may hereafter be made.

     “Advance” or “Advances” means an advance (or advances) under the Revolving Line.

     “Affiliate” of any Person is a Person that owns or controls directly or indirectly the
Person, any Person that controls or is controlled by or is under common control with the Person,
and each of that Person’s senior executive officers, directors, partners and, for any Person that
is a limited liability company, that Person’s managers and members.

     “Agreement” is defined in the preamble hereof.

     “Availability Amount” is the lesser of (i) the Revolving Line or (ii) the Borrowing Base,
minus (a) the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit), plus an amount equal to the Letter of Credit Reserves,
minus (b) the outstanding principal balance of any Advances (including any amounts used
for Cash Management Services); provided, however at no time may advances under the Revolving Line

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against Eligible Inventory exceed twenty-five percent (25%) of the outstanding principal amount of
the Revolving Line.

     “Bank” is defined in the preamble hereof.

     “Bank Expenses” are all audit fees and expenses, costs, and expenses (including reasonable
attorneys’ fees and expenses) for preparing, negotiating, defending and enforcing the Loan
Documents (including, without limitation, those incurred in connection with appeals or Insolvency
Proceedings) or otherwise incurred with respect to Borrower.

     “Borrower” is defined in the preamble hereof.

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

     “Borrowing Base” is the sum of (a) eighty percent (80%) of the value of Borrower’s Eligible
Accounts, plus (b) twenty-five percent (25%) of the value of Borrower’s Eligible Inventory
(valued at the lower of cost or wholesale fair market value), as determined by Bank from
Borrower’s most recent Borrowing Base Certificate; provided, however, that Bank may decrease the
foregoing percentages in its good faith business judgment based on events, conditions,
contingencies, or risks which, as determined by Bank, may adversely affect Collateral.

     “Borrowing Base Certificate” is that certain certificate in the form attached hereto as
Exhibit C.

     “Borrowing Resolutions” are, with respect to any Person, those resolutions substantially in
the form attached hereto as Exhibit G.

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

     “Cash Equivalents” means (a) marketable direct obligations issued or unconditionally
guaranteed by the United States or any agency or any State thereof having maturities of not more
than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1)
year after its creation and having the highest rating from either Standard & Poor’s Ratings Group
or Moody’s Investors Service, Inc.; and (c) Bank’s certificates of deposit issued maturing no more
than one (1) year after issue.

     “Cash Management Services” is defined in Section 2.1.3.

     “Cash Management Services Sublimit” is defined in Section 2.1.3.

     “Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in
effect in the State of California; provided, that, to the extent that the Code is used to define
any term herein or in any Loan Document and such term is defined differently in

24

 

different Articles or Divisions of the Code, the definition of such term contained in Article or
Division 9 shall govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a
jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction solely for purposes on the provisions
thereof relating to such attachment, perfection, priority, or remedies and for purposes of
definitions relating to such provisions.

     “Collateral” is any and all properties, rights and assets of Borrower described on
Exhibit A.

     “Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.

     “Collateral Handling Fee” is defined in Section 2.5.

     “Commodity Account” is any “commodity account” as defined in the Code with such additions to
such term as may hereafter be made.

     “Compliance Certificate” is that certain certificate in the form attached hereto as
Exhibit D.

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

     “Control Agreement” is any control agreement entered into among the depository institution at
which Borrower maintains a Deposit Account or the securities intermediary or commodity
intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower,
and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit
Account, Securities Account, or Commodity Account.

     “Credit Extension” is any Advance, Letter of Credit, Term Loan, amount utilized for Cash
Management Services, FX Guidance Facility Contract or any other extension of credit by Bank for
Borrower’s benefit.

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     “Current
Liabilities” are all obligations and liabilities of Borrower
to Bank, plus,
without duplication, the aggregate amount of Borrower’s Total Liabilities that mature within one
(l) year.

     “Default” means any event which with notice or passage of time or both, would constitute an
Event of Default.

     “Default Rate” is defined in Section 2.4(b).

     “Deferred Revenue” is all amounts received or invoiced in advance of performance under
contracts and not yet recognized as revenue.

     “Deposit Account” is any “deposit account” as defined in the Code with such additions to
such term as may hereafter be made.

     “Designated
Deposit Account” is Borrower’s deposit account, account
number_______ , maintained with
Bank.

     “Dollars,”
“dollars” and “$” each mean lawful money of the United States.

     “Effective Date” is the date Bank executes this Agreement and as indicated on the signature
page hereof.

     “Eligible Accounts” are Accounts which arise in the ordinary course of Borrower’s business
that meet all Borrower’s representations and warranties in Section 5.3. Bank reserves the right
at any time and from time to time after the Effective Date, to adjust any of the criteria set
forth below and to establish new criteria in its good faith business judgment. Unless Bank agrees
otherwise in writing, Eligible Accounts shall not include:

          (a) Accounts for which the Account Debtor has not been invoiced;

          (b) Accounts that the Account Debtor has not paid within ninety (90) days of invoice date;

          (c) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose Accounts have
not been paid within ninety (90) days of invoice date;

          (d) Credit balances;

          (e) Accounts owing from an Account Debtor, including Affiliates, whose total obligations to
Borrower exceed twenty-five percent (25%) of all Accounts, for the amounts that exceed that
percentage, unless Bank approves in writing;

          (f) Accounts owing from an Account Debtor which does not have its principal place of business
in the United States except for Eligible Foreign Accounts;

          (g) Accounts owing from an Account Debtor which is a federal, state or local government entity
or any department, agency, or instrumentality thereof except for Accounts of

26

 

the United States if Borrower has assigned its payment rights to Bank and the assignment has been
acknowledged under the Federal Assignment of Claims Act of 1940, as amended;

          (h) Accounts owing from an Account Debtor to the extent that Borrower is indebted or obligated
in any manner to the Account Debtor (as creditor, lessor, supplier or otherwise — sometimes called
“contra” accounts, accounts payable, customer deposits or credit accounts), with the exception of
customary credits, adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;

          (i) Accounts for demonstration or promotional equipment, or in which goods are consigned, or
sold on a “sale guaranteed”, “sale or return”, “sale on approval”, “bill and hold”, or other terms
if Account Debtor’s payment may be conditional;

          (j) Accounts for which the Account Debtor is Borrower’s Affiliate, officer, employee, or
agent;

          (k) Accounts in which the Account Debtor disputes liability or makes any claim (but only up
to the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency
Proceeding, or becomes insolvent, or goes out of business;

          (1) Accounts owing from an Account Debtor with respect to which Borrower has received
deferred revenue (but only to the extent of such deferred revenue);

          (m) Accounts for which Bank in its good faith business judgment determines collection to be
doubtful; and

          (n) other Accounts Bank deems ineligible in the exercise of its good faith business judgment.

     “Eligible Foreign Accounts” are Accounts for which the Account Debtor does not have its
principal place of business in the United States but are otherwise Eligible Accounts and that are,
as determined by Bank in its sole discretion on a case-by-case basis: (a) covered by credit
insurance satisfactory to Bank, less any deductible; (b) supported by letter(s) of credit
acceptable to Bank; or (c) that Bank approves in writing.

     “Eligible Inventory” means, at any time, the aggregate of Borrower’s Inventory that (a)
consists of finished goods, in good, new, and salable condition, which is not perishable,
returned, consigned, obsolete, not sellable, damaged, or defective, and is not comprised of
demonstrative or custom inventory, works in progress, packaging or shipping materials, or
supplies, or raw materials; (b) meets all applicable governmental standards; (c) has been
manufactured in compliance with the Fair Labor Standards Act; (d) is not subject to any Liens,
except the first priority Liens granted or in favor of Bank under this Agreement or any of the
other Loan Documents; and (e) is located at Borrower’s principal place of business (or any
location permitted under Section 7.2).

     “Equipment” is all “equipment” as defined in the Code with such additions to such term as
may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles
(including motor vehicles and trailers), and any interest in any of the foregoing.

27

 

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

     “Event of Default” is defined in Section 8.

     “Foreign Currency” means lawful money of a country other than the United States.

     “Funding Date” is any date on which a Credit Extension is made to or on account of Borrower
which shall be a Business Day.

     “FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is conducting its
normal business and (b) the Foreign Currency being purchased or sold by Borrower is available to
Bank from the entity from which Bank shall buy or sell such Foreign Currency.

     “FX Guidance Facility Contract” is defined in Section 2.2.

     “FX Guidance Facility Reserve” is defined in Section 2.2.

     “FX Guidance Facility Settlement Date” is defined in Section 2.2.

     “FX Line” is Guidance Facility Contract or Guidance Facility Contracts in an aggregate amount
of up to One Million Dollars ($1,000,000) outstanding at any time.

     “FX Maturity Date” is the day that is twelve (12) months after the Effective Date.

     “GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other Person as may be approved by a significant segment of the
accounting profession, which are applicable to the circumstances as of the date of determination.

     “General Intangibles” is all “general intangibles” as defined in the Code in effect on the
date hereof with such additions to such term as may hereafter be made, and includes without
limitation, all copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work, whether published or unpublished, any
patents, trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights, including any rights to
unpatented inventions, payment intangibles, royalties, contract rights, goodwill, franchise
agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims,
income and other tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending (whether in contract,
tort or otherwise), insurance policies (including without limitation key man, property damage, and
business interruption insurance), payments of insurance and rights to payment of any kind.

     “Guidance Facility Contract” or “Guidance Facility Contracts” means an advance (or advances)
under the FX Line.

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

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

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

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

     “Letter of Credit” means a standby letter of credit issued by Bank or another institution
based upon an application, guarantee, indemnity or similar agreement on the part of Bank as set
forth in Section 2.1.2.

     “Letter of Credit Application” is defined in Section 2.1.2(a).

     “Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(d).

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

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

     “Lockbox” is defined in Section 2.6.

     “Material Adverse Change” is (a) a material impairment in the perfection or priority of
Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in
the business, operations, or condition (financial or otherwise) of Borrower; (c) a material
impairment of the prospect of repayment of any portion of the Obligations; or (d) Bank determines,
based upon information available to it and in its reasonable judgment, that there is a reasonable
likelihood that Borrower shall fail to comply with one or more of the financial covenants in
Section 6 during the next succeeding financial reporting period.

29

 

     “Obligations” are Borrower’s obligation to pay when due any debts, principal, interest,
Bank Expenses and other amounts Borrower owes Bank now or later, whether under this Agreement, the
Loan Documents, or otherwise, including, without limitation, all obligations relating to letters
of credit, cash management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of
Borrower assigned to Bank, and the performance of Borrower’s duties under the Loan Documents.

     “Operating Documents” are, for any Person, such Person’s formation documents, as certified
with the Secretary of State of such Person’s state of formation on a date that is no earlier than
30 days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in
current form, (b) if such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its partnership
agreement (or similar agreement), each of the foregoing with all current amendments or
modifications thereto.

     “Payment/Advance Form” is that certain form attached hereto as Exhibit B.

     “Perfection Certificate” is defined in Section 5.1.

     “Permitted Indebtedness” is:

     (a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan
Documents;

     (b) Indebtedness existing on the Effective Date and shown on the Perfection
Certificate;

     (c) Subordinated Debt;

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

     (e) Indebtedness incurred as a result of endorsing negotiable instruments received in
the ordinary course of business;

     (f) Indebtedness secured by Permitted Liens;

     (g) Indebtedness consisting of unsecured bridge loans which are (i) convertible into
 Borrower’s next round of equity financing, (ii) do not otherwise mature prior to the
Obligations
under this Agreement, and (iii) Subordinated Debt;

     (h) Indebtedness consisting of capitalized lease obligations that, in the aggregate, do not
exceed the Threshold Amount at an given time; and

     (i) extensions, refinancings, modifications, amendments and restatements of any items of
Permitted Indebtedness (a) through (h) above, provided that the principal amount

30

 

thereof is not increased or the terms thereof are not modified to impose more burdensome terms
upon Borrower or its Subsidiary, as the case may be.

     “Permitted
Investments” are:

     (a) Investments shown on the Perfection Certificate and existing on the Effective
Date;

     (b) Cash Equivalents;

     (c) Investments consisting of the endorsement of negotiable instruments for deposit
 or collection or similar transactions in the ordinary course of Borrower;

     (d) Investments consisting of deposit accounts in which Bank has a perfected security
interest;

     (e) Investments accepted in connection with Transfers permitted by Section 7.1;

     (f) Investments
of Subsidiaries in or to other Subsidiaries or Borrower and Investments by Borrower in Subsidiaries not to exceed the Threshold Amount in the aggregate in
any fiscal year;

     (g) Investments consisting of (i) travel advances and employee relocation loans and
other employee loans and advances that, in the aggregate, do not exceed Fifty Thousand Dollars
($50,000) in any calendar year, and (ii) loans to employees, officers or directors relating to
the
purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of Directors;

     (h) Investments (including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent obligations of, and other
disputes with, customers or suppliers arising in the ordinary course of business; and

     (i) Investments consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business;
provided that this paragraph (i) shall not apply to Investments of Borrower in any Subsidiary.

     “Permitted
Liens” are:

     (a) Liens existing on the Effective Date and shown on the Perfection Certificate or
arising under this Agreement and the other Loan Documents;

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

     (c) purchase money Liens (i) on Equipment acquired or held by Borrower incurred
for financing the acquisition of the Equipment securing no more than Fifty Thousand Dollars

31

 

($50,000) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired,
if the Lien is confined to the property and improvements and the proceeds of the Equipment;

     (d) statutory Liens securing claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other Persons imposed without action of such parties, provided,
they have no priority over any of Bank’s Lien and the aggregate amount of such Liens does not
at
any time exceed Fifty Thousand Dollars ($50,000);

     (e) Liens to secure payment of workers’ compensation, employment insurance, old
age pensions, social security and other like obligations incurred in the ordinary course of
business, provided, they have no priority over any of Bank’s Liens and the aggregate amount of
the Indebtedness secured by such Liens does not at any time exceed Fifty Thousand Dollars
($50,000);

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

     (g) leases or subleases of real property granted in the ordinary course of business, and
leases, subleases, non-exclusive licenses or sublicenses of property (other than real property
or
intellectual property) granted in the ordinary course of Borrower’s business, if the leases,
subleases, licenses and sublicenses do not prohibit granting Bank a security interest;

     (h) non-exclusive license of intellectual property granted to third parties in the ordinary
course of business;

     (i) Liens arising from judgments, decrees or attachments in circumstances not constituting an
Event of Default under Section 8.4 or 8.7; and

     (j) Liens in favor of other financial institutions arising in connection with Borrower’s
deposit and/or securities accounts held at such institutions, provided that Bank has a perfected
security interest in the amounts held in such deposit and/or securities accounts.

     “Permitted Asset Disposition” is (i) non-exclusive licenses for the use of intellectual
property consistent with standard business practices in Borrower’s industry and exclusive licenses
for the use of intellectual property with respect to a limited geographic location, field of use
or customized products for specific customers, consistent with standard business practices in
Borrower’s industry; (ii) transfers of worn-out, obsolete or surplus Equipment; (iii) Transfers of
Inventory; (iv) Transfers in connection with Permitted Liens or Permitted Investments; and (v)
Transfers of Collateral for fair and reasonably equivalent consideration and consistent with
standard business practices in Borrower’s industry, so long as Bank, at all times, has a
first-priority perfected Lien in the proceeds of such Transfer.

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

32

 

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

     “Quick Assets” is, on any date, Borrower’s unrestricted cash, Cash Equivalents and net billed
accounts receivable.

     “Quick Ratio” is the ratio of Borrower’s Quick Assets to Current Liabilities.

     “Quick Ratio Threshold Period” is a period commencing the first day of the month following
the reporting date of the financial statements that show Borrower’s Quick Ratio is below 1.25:1.00
until Borrower’s Quick Ratio exceeds 1.25:1.0 for three consecutive months-end.

     “Registered Organization” is any “registered organization” as defined in the Code with such
additions to such term as may hereafter be made.

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

     “Revolving Line” is an Advance or Advances in an aggregate amount of up to Two Million
Dollars ($2,000,000) outstanding at any time.

     “Revolving Line Maturity Date” is the day that is twelve (12) months after the Effective
Date.

     “Securities Account” is any “securities account” as defined in the Code with such additions
to such term as may hereafter be made.

     “Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now
or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar
agreement in form and substance reasonably satisfactory to Bank entered into between Bank and the
other creditor), on terms acceptable to Bank.

     “Subsidiary” means, with respect to any Person, any Person of which more than 50% of the
voting stock or other equity interests is owned or controlled, directly or indirectly, by such
Person or one or more Affiliates of such Person.

     “Tangible Net Worth” is, on any date, the consolidated total assets of Borrower and its
Subsidiaries minus (a) any amounts attributable to (i) goodwill, (ii) intangible items
including unamortized debt discount and expense, patents, trade and service marks and names,
copyrights and research and development expenses except prepaid expenses, (iii) notes, accounts
receivable and other obligations owing to Borrower from its officers or other Affiliates, and (iv)
reserves not already deducted from assets, minus (b) Total Liabilities, plus (c)
Subordinated Debt.

     “Threshold Amount” is Two Hundred Fifty Thousand Dollars ($250,000).

     “Total Liabilities” is on any day, obligations that should, under GAAP, be classified as
liabilities on Borrower’s consolidated balance sheet, including all Indebtedness, and current

33

 

portion of Subordinated Debt permitted by Bank to be paid by Borrower, but excluding all other
Subordinated Debt.

     “Transfer” is defined in Section 7.1.

[Signature page follows.]

34

 

     IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date.

	 	 	 	 	 
	BORROWER:	 	 
	 
	 	 	 	 
	ST. FRANCIS MEDICAL TECHNOLOGIES, INC.	 	 
	 
	 	 	 	 
	By

	 	/s/ Michael A. Bates	 	 
	 

	 	 

	 	 
	Name: Michael A. Bates	 	 
	Title: CFO, Treasurer & Secretary	 	 
	 
	 	 	 	 
	BANK:	 	 
	 
	 	 	 	 
	SILICON VALLEY BANK	 	 
	 
	 	 	 	 
	By

	 	/s/ Jason Hughes	 	 
	 

	 	 

	 	 
	Name: Jason Hughes	 	 
	Title: Vice President	 	 
	 
	 	 	 	 
	Effective Date:
April 24, 2006	 	 

[Signature page to Loan and Security Agreement]

35

 

EXHIBIT A

     All other terms contained in this Exhibit, unless otherwise indicated, shall have the meanings
provided by the Code (as defined herein), to the extent such terms are defined in the Code. For
purposes hereof, the following terms shall have the following meanings:

     “Accounts” are all existing and later arising accounts, contract rights, and other obligations
owed Borrower in connection with its sale or lease of goods (including licensing software and other
technology) or provision of services, all credit insurance, guaranties, other security and all
merchandise returned or reclaimed by Borrower and Borrower’s Books relating to any of the
foregoing, as such definition may be amended from time to time according to the Code.

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

     “Code” is the Uniform Commercial Code as adopted in California as amended and in effect from
time to time.

     “Copyrights” are all copyright rights, applications or registrations and like protections in
each work or authorship or derivative work, whether published or not (whether or not it is a trade
secret) now or later existing, created, acquired or held.

     “Equipment” is all present and future machinery, equipment, tenant improvements, furniture,
fixtures, vehicles, tools, parts and attachments in which Borrower has any interest.

     “Intellectual Property” is:

          (a) Copyrights, Trademarks, Mask Works and Patents including amendments, renewals,
extensions, and all licenses or other rights to use and all license fees and royalties from
the use;

          (b) Any trade secrets and any intellectual property rights in computer
software, chip design, chip mask works and computer software products now or later
existing, created, acquired or held;

          (c) All design rights, including chips, masks and associated software
which may be available to Borrower now or later created, acquired or held;

          (d) Any claims for damages (past, present or future) for infringement
of any of the rights above, with the right, but not the obligation, to sue and collect
damages
for use or infringement of the intellectual property rights above;

          (e) All Proceeds and products of the foregoing, including all
insurance, indemnity or warranty payments.

Exhibit A Page 1

 

 

     “Inventory” is present and future inventory in which Borrower has any interest, including
merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and
finished products intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or possession or in
transit and including returns on any accounts or other proceeds (including insurance proceeds) from
the sale or disposition of any of the foregoing and any documents of title.

     “Letter-of-Credit Right” means a right to payment or performance under a letter of credit,
whether or not the beneficiary has demanded or is at the time entitled to demand payment or
performance.

     “Mask Works” are all mask works or similar rights available for the protection of
semiconductor chips, now owned or later acquired.

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

     “Proceeds” has the meaning described in the Code as in effect from time to time.

     “Supporting Obligation” means a letter-of-credit right, secondary obligation or obligation of
a secondary obligor or that supports the payment or performance of an account, chattel paper, a
document, a general intangible, an instrument or investment property.

     “Trademarks” are trademark and service mark rights, registered or not, applications to
register and registrations and like protections, and the entire goodwill of the business of
Borrower connected with the trademarks.

The Collateral consists of all of Borrower’s right, title and interest in and to the following
personal property:

     All goods, Accounts (including health-care receivables), Equipment, Inventory, contract
rights or rights to payment of money, leases, license agreements, franchise agreements, General
Intangibles (except as provided below), commercial tort claims, documents, instruments (including
any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts,
fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a
writing), securities, and all other investment property, supporting obligations, and financial
assets, whether now owned or hereafter acquired, wherever located; and

     all Borrower’s Books relating to the foregoing, and any and all claims, rights and interests
in any of the above and all substitutions for, additions, attachments, accessories, accessions and
improvements to and replacements, products, proceeds and insurance proceeds of any or all of the
foregoing.

Exhibit A Page 2

 

 

     Notwithstanding the foregoing, the Collateral does not include any of the following,
whether now owned or hereafter acquired any copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative work, whether
published or unpublished, any patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part
of the same, trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, and the goodwill of the business of Borrower
connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to
unpatented inventions, and any claims for damage by way of any past, present, or future
infringement of any of the foregoing; provided, however, the Collateral shall include all Accounts,
license and royalty fees and other revenues, proceeds, or income arising out of or relating to any
of the foregoing.

     Pursuant to the terms of a certain negative pledge arrangement with Bank, Borrower has agreed
not to encumber any of its copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work, whether published or unpublished,
any patents, patent applications and like protections, including improvements, divisions,
continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks,
service marks and, to the extent permitted under applicable law, any applications therefor,
whether registered or not, and the goodwill of the business of Borrower connected with and
symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented
inventions, and any claims for damage by way of any past, present, or future infringement of any
of the foregoing, without Bank’s prior written consent.

Exhibit A Page 3

 

 

EXHIBIT B 

LOAN PAYMENT/ADVANCE REQUEST FORM

Deadline
for same day processing is Noon P.S.T.

	 	 	 	 	 	 	 	 	 
	 

	 	Fax To: CA
(408) 748-9478
	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 

	 	 	 	 	 	 	 	 	 
	LOAN PAYMENT:	 	 	 	 	 	 
	 	 	 	 	St. Francis Medical
Technologies, Inc.	 	 
	 
	 	 	 	 	 	 	 	 
	From Account # 

	 	 	To Account# 	 	 	 	 
	 

	 	(Deposit Account #)

	 	 	(Loan Account #)

	 	 
	 
	 	 	 	 	 	 	 	 
	Principal $ 

	 	 	 	and/or Interest $	 	 	 
	 

	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 	 	 
	Authorized
Signature: 

	 	 	Phone Number:	 	 	 	 
	Print Name/Title: 

	 	 

	 	 	 	 

	 	 
	 

	 

	 	 
	 	 
	 	 

	 	 	 	 	 	 	 	 	 
	Loan Advance:	 	 	 	 	 	 

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

	 	 	 	 	 	 	 	 	 
	From Account # 

	 	 	 	To Account# 	 	 	 	 
	 

	(Loan Account #)

	 	 	(Deposit Account #)

	 	 
	 
	 	 	 	 	 	 	 	 
	Amount of Advance $ 

	 	 	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 

All Borrower’s representations and warranties in the Loan and Security Agreement are
true, correct and complete in all material respects on the date of the request for an advance;
provided, however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by materiality in the
text thereof; and provided, further that those representations and warranties expressly
referring to a specific date shall be true, accurate and complete in all material respects as
of such date:

	 	 	 	 	 	 	 	 	 
	Authorized
Signature: 

	 	 	Phone Number:	 	 	 	 
	Print Name/Title: 

	 	 

	 	 	 	 

	 	 
	 

	 

	 	 
	 	 
	 	 

Outgoing Wire Request:

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

Deadline for same day processing is noon, P.S.T.

	 	 	 	 	 	 	 	 	 
	Beneficiary Name:

	 	 	 	Amount of Wire: $	 	 	 	 
	Beneficiary Bank:

	 	 

	 	Account Number:	 	 

	 	 
	City and State:

	 

	 	 	 

	 	 

	 	 	 	 	 	 	 	 	 
	Beneficiary Bank Transit (ABA) #:

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

	 	(For International Wire Only)	 	 

	 	 

	 	 	 	 	 	 	 	 	 
	Intermediary Bank:
	 	 	 	Transit (ABA)#:	 	 	 	 
	For Further Credit to: 	 
	 	 	 	 
	 
	 	 
	 
	For Further Credit to: 	 
	 

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

	 	 	 	 	 	 	 	 	 
	Authorized Signature: 

	 	 	2nd Signature (if required):	 	 	 	 
	 
	 	 
	 	 
	Print Name/Title:

	 	 

	 	Print Name/Title:	 	 

	 	 
	 
	 	 
	 	 
	Telephone #:

	 	 

	 	Telephone #:	 	 

	 	 
	 
	 	 
	 	 
	 

	 	 

	 	 
	 	 

	 	 

Exhibit B Page 1

 

 

EXHIBIT C 

BORROWING BASE CERTIFICATE

Borrower: St. Francis Medical Technologies, Inc.

Lender: Silicon Valley Bank

Commitment Amount: $2,000,000

	 	 	 	 	 	 	 	 	 
	ACCOUNTS RECEIVABLE	 	 	 	 	 	 
	1.

	 	Accounts Receivable Book Value as of                                         
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	2.

	 	Additions (please explain on reverse)
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	3.

	 	TOTAL ACCOUNTS RECEIVABLE
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)	 	 	 	 	 	 
	4.

	 	Amounts over 90 days due
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	5.

	 	Balance of 50% over 90 day accounts
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	6.

	 	Credit balances over 90 days
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	7.

	 	Concentration Limits
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	8.

	 	Foreign Accounts
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	9.

	 	Governmental Accounts
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	10.

	 	Contra Accounts
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	11.

	 	Promotion or Demo Accounts
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	12.

	 	Intercompany/Employee Accounts
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	13.

	 	Disputed Accounts
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	14.

	 	Deferred Revenue
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	15.

	 	Other (please explain on reverse)
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	16.

	 	TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	17.

	 	Eligible Accounts (#3 minus #16)
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	18.

	 	ELIGIBLE AMOUNT OF ACCOUNTS (80% of #17)
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	INVENTORY	 	 	 	 	 	 
	19.

	 	Eligible Inventory Value as of                                         
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	20.

	 	ELIGIBLE AMOUNT OF INVENTORY (25% of #19)
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	BALANCES	 	 	 	 	 	 
	21.

	 	Maximum Loan Amount
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	22.

	 	Total Funds Available (Lesser of #21 or (#18 plus #20))
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	23.

	 	Present balance owing on Line of Credit
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	24.

	 	Outstanding under Sublimits
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 
	25.

	 	RESERVE POSITION (#22 minus #23 and #24)
	 	 	$	 	 	 
	 

	 	 	 	 	 	 	 	 

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

Exhibit C Page 1

 

 

	 	 	 	 	 
	COMMENTS:	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Authorized Signer
	 	 
	 
	 	 	 	 
	Date:	 	 

BANK
USE ONLY

	 	 	 	 	 
	Received by:
	 	 	 	 
	 

	 	 

          AUTHORIZED SIGNER
	 	 
	Date:
	 	 

	 	 
	Verified:
	 	 	 	 
	 

	 	 

          AUTHORIZED SIGNER
	 	 
	Date:
	 	 	 	 
	Compliance Status:

	 	 

Yes                     No
	 	 

Exhibit C Page 2

 

 

EXHIBIT D

COMPLIANCE CERTIFICATE

	 	 	 
	     TO: SILICON VALLEY BANK

	 	Date:
	     FROM: ST. FRANCIS MEDICAL TECHNOLOGIES, INC.
	 	 

     The undersigned authorized officer of St. Francis Medical Technologies, Inc.
(“Borrower”) certifies that under the terms and conditions of the Loan and Security
Agreement between Borrower and Bank (the “Agreement”), (1) Borrower is in complete
compliance for the
period ending _____ with all required covenants except as noted below, (2) there are
no Events of Default, (3) all representations and warranties in the Agreement are true and
correct in all material respects on this date except as noted below; provided, however,
that such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring to a
specific date shall be true, accurate and complete in all material respects as of such
date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state and local
taxes, assessments, deposits and contributions owed by Borrower except as otherwise
permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have
been levied or claims made against Borrower relating to unpaid employee payroll or
benefits of which Borrower has not previously provided written notification to Bank.
Attached are the required documents supporting the certification. The undersigned
certifies that these are prepared in accordance with GAAP consistently applied from one
period to the next except as explained in an accompanying letter or footnotes. The
undersigned acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the Agreement,
and that compliance is determined not just at the date this certificate is delivered.
Capitalized terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.

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

	 	 	 	 	 
	Reporting Covenant	 	Required	 	Complies
	Monthly financial

	 	Monthly within 30 days
	 	Yes No
	Compliance Certificate

	 	Monthly within 15 days
	 	Yes No
	Annual financial statement (CPA Audited) + CC

	 	FYE within 180 days
	 	Yes No
	10-Q, 10-K and 8-K

	 	Within 5 days after filing
with SEC
	 	Yes No
	Borrowing Base Certificate A/R & A/P Agings

	 	Monthly within 15 days
	 	Yes No
	Board Projections

	 	Annual within 30 days FYE
	 	Yes No
	Transaction Report*

	 	Weekly/with each Advance
	 	Yes No

 

			
	*	 	Only required during Quick Ratio Threshold Period; If no outstanding Advances, may
be provided monthly with Bank approval with 30 days notice of borrowing prior to any
Advance;

Exhibit D Page 1

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial Covenant	 	Required	 	 	Actual	 	 	Complies	 
	Maintain on a Monthly Basis:
	 	 	 	 	 	 	 	 	 	 	 	 
	Minimum Tangible Net Worth
	 	$	 	 	 	$	 	 	 	Yes No

     The following financial covenant analyses and information set forth in
Schedule 1 attached hereto are true and accurate as of the date of this Certificate.

     The following are the exceptions with respect to the certification above: (If
no exceptions exist, state “No exceptions to note.”)

 

 

 

	 	 	 	 	 	 	 	 	 	 	 
	ST. FRANCIS MEDICAL	 	 	 	BANK USE ONLY	 	 
	TECHNOLOGIES, INC.	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Received by:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	AUTHORIZED SIGNER	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	Date:	 	 	 	 
	 
	 	 	 	 
	 	 
	Name:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Verified:	 	 	 	 
	 
	 	 	 	 
	 	 
	 

	 	 	 	 	 	 	 	AUTHORIZED SIGNER	 	 
	 

	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Compliance Status: Yes No	 	 

Exhibit D Page 2

 

 

Schedule 1
to Compliance Certificate

Financial
Covenants of Borrower

Dated:                                         

	 	 	 	 	 	 	 	 	 
	I.
	 	Quick Ratio
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Required to avoid Quick Ratio Threshold Period: 1.25:1.00	 	 
	 
	 	 	 	 	 	 	 	 
	Actual:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	A.	 	Aggregate value of the unrestricted cash and cash equivalents of Borrower and its Subsidiaries	 	$                    
	B.	 	Aggregate value of the net billed accounts receivable of Borrower and its Subsidiaries	 	$                    
	C.	 	Aggregate value of the Investments with maturities of fewer than 12 months of Borrower and it
Subsidiaries	 	$                    
	D.	 	Quick Assets (the sum of lines A through C)	 	$                    
	E.	 	Aggregate value of Obligations to Bank	 	$                    
	F.	 	Aggregate value of liabilities of Borrower and its Subsidiaries (including all Indebtedness) that matures
within one (1) year and current portion of Subordinated Debt permitted by Bank to be paid by
Borrower	 	$                    
	 
	 	 	 	 	 	 	 	 
	G.	 	Current Liabilities (the sum of lines E and F)	 	$                    
	H.	 	Quick Ratio (line D divided by line G)	 	 
	 
	 	 	 	 	 	 	 	 
	Is line H below 1.25:1:00?	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	                     No, no trigger a Quick Ratio Threshold Period	 	                     Yes, triggers Quick Ratio Threshold Period	 	 
	 
	 	 	 	 	 	 	 	 
	II.	 	Tangible Net
Worth (Section 6.8(a))	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Required:

	 	$	3,250,000	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Actual:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	A.	 	Value of Line I. (Tangible Net Worth)	 	$                    
	Is line A equal to or greater than $3,250,000?	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	                     No, not in compliance	 	                     Yes, in compliance	 	 

Addendum C Page 3

 

 

EXHIBIT E 

TRANSACTION REPORT

Exhibit E Page 1

 

 

EXHIBIT F 

PERFECTION CERTIFICATE

TO: SILICON VALLEY BANK

The undersigned, the CFO of St. Francis Medical Technologies, Inc. (the “Company”), hereby
represents and warrants to you on behalf of the Company as follows:

1. NAMES OF THE COMPANY

a. The name of the Company as it appears in its current Articles or Certificate of
Incorporation is: St. Francis Medical Technologies, Inc.

b. The federal employer identification number of the Company is: 94-3366462

c. The Company is formed under the laws of the State of Delaware.

d. The organizational identification number of the Company is: 3314063

e. The Company transacts business in the following jurisdictions (list jurisdictions other
than jurisdiction of formation): employees located in CO, RI, PA, TX, IL

f. The Company is duly qualified to transact business as a foreign entity in the following
jurisdictions (list jurisdictions other than jurisdiction of formation): the State of California
and the Netherlands.

g. The following is a list of all other names (including fictitious names, d/b/a’s, trade names
or similar names) currently used by the Company or used within the past five years:

	 	 	 
	Name	 	Period of Use
	See paragraph below
	 	 

St. Francis Medical Technologies, LLC, a Nevada limited liability company, was formed on
July 19,1996. St. Francis Medical Technologies, Inc. was incorporated in the state of Nevada on
January 20,1999 and reincorporated in Delaware on
December 26, 2000.

Exhibit F Page 1

 

 

h. The following are the names of all entities which have been merged into the Company
during the past five years:

	 	 	 
	Name of Merged Entity	 	Year of Merger
	See last paragraph of g. above for predecessor entities.
	 	 

i. The following are the names and addresses of all entities from whom the
Company has
acquired any personal property in a transaction not in the ordinary course of business during
the
past five years, together with the date of such acquisition and the type of personal property
acquired (e.g., equipment, inventory, etc.):

	 	 	 	 	 	 	 
	Name	 	Address	 	Date of Acquisition	 	Type of Property
	 

	 	 
	 	 
	 	 

2. PARENT/SUBSIDIARIES OF THE COMPANY.

a. The legal name of each subsidiary and parent of the Company is as follows. (A
“parent” is an entity owning more than 50% of the outstanding capital stock of the Company. A
“subsidiary” is an entity, 50% or more of the outstanding capital stock of which is owned by
the Company.)

	 	 	 	 	 
	Name	 	Subsidiary/Parent	 	Fed. Employer ID No.
	St. Francis Medical Technologies, Inc.

	 	Parent
	 	94-3366462
	SFMT Europe BV

	 	Subsidiary	 	 
	St. Francis Medical Technologies UK Ltd. (inactive)

	 	Subsidiary	 	 

b. The following is a list of the respective jurisdictions and dates of formation of the parent
and each subsidiary of the Company:

	 	 	 	 	 
	Name	 	Jurisdiction	 	Date of Formation
	St. Francis Medical Technologies, Inc.

	 	Delaware
	 	12/26/2000
	SFMT Europe BV

	 	Netherlands
	 	7/12/2002
	St. Francis Medical Technologies UK Ltd.
(inactive)

	 	UK
	 	9/8/2005

c. The following is a list of all other names (including fictitious names, d/b/a’s,
trade names or similar names) currently used by each subsidiary of the Company or used
during the past five years:

	 	 	 
	Name	 	Subsidiary
	N/A — None
	 	 

d. The following are the names of all corporations which have been
merged into a subsidiary of the Company during the five years:

Exhibit F Page 2

 

 

	 	 	 
	Name	 	Subsidiary
	N/A — None
	 	 

e. The following are the names and addresses of all entities from whom each
subsidiary of
the Company has acquired any personal property in a transaction not in the ordinary course of
business during the past five years, together with the date of such acquisition and the type
of
personal property acquired (e.g., equipment, inventory, etc.):

	 	 	 	 	 	 	 	 	 
	 	 	 	 	Date of	 	Type of	 	 
	Name	 	Address	 	Acquisition	 	Property	 	Subsidiary
	N/A — None
	 	 	 	 	 	 	 	 

3. LOCATIONS OF COMPANY AND ITS SUBSIDIARIES

a. The chief executive offices of the Company and its subsidiaries are presently located at
the following addresses:

	 	 	 
	Complete Street and Mailing Address, including County and Zip Code	 	Company/Subsidiary
	960 Atlantic Avenue, Suite 102

Alameda, CA 94501

	 	Company
	Hoofdstraat 248

3972 LK Driebergen, Netherlands

	 	SFMT Europe

BV
	Carmelite

	 	St. Francis Medical
	50 Victoria Embankment

	 	Technologies UK Ltd.
	London

	 	(Registered Office)
	EC4Y 0DX

	 	

b. The Company’s books and records and those of its subsidiaries are
located at the following additional addresses (if different from the above):

	 	 	 
	Complete Street and Mailing Address, including County and Zip Code	 	Company/Subsidiary
	960 Atlantic Avenue, Suite 102

Alameda, CA 94501

	 	Company
	Hoofdstraat 248

3972 LK Driebergen, Netherlands

	 	SFMT Europe

BV
	960 Atlantic Avenue, Suite 102

Alameda, CA 94501

	 	St. Francis Medical

Technologies UK Ltd.
(Registered Office)

Exhibit F Page 3

 

 

c. The following are all the locations where the Company and its subsidiaries
own, lease, or occupy any real property:

	 	 	 
	Complete Street and Mailing Address, including County and Zip Code	 	Company/Subsidiary
	960 Atlantic Avenue, Suite 102

	 	Company

	 	 	 
	Alameda, CA 94501
	 	 
	Hoofdstraat 248

	 	SFMT Europe
	3972 LK Driebergen, Netherlands

	 	BV
	The subsidiary has been formed, but
contains no operations at this time and
has no office space in the UK other
than its Registered Office, which is
the
office of our law firm in the UK.

	 	St. Francis Medical Technologies UK Ltd.

(Registered Office)

d. The following are all of the locations where the Company and its
subsidiaries maintain
any inventory, equipment, or other property:

	 	 	 
	Complete Address	 	Company/Subsidiary
	960 Atlantic Avenue, Suite 102

Alameda, CA 94501

	 	Company
	Hoofdstraat 248

	 	SFMT Europe
	3972 LK Driebergen, Netherlands

	 	BV
	TMI, Tilburg, Netherlands (Logistics Company houses inventory)

	 	SFMT Europe BV

e. The following are the names and addresses of all warehousemen, bailees,
or other third parties who have possession of any of the Company’s inventory or
equipment or any of the inventory or equipment of its subsidiaries:

	 	 	 	 	 
	 	 	Complete Street and Mailing Address, including	 	 
	Name	 	County and Zip Code	 	Company/Subsidiary
	TMI (Logistics

	 	TMI
	 	SFMT Europe BV
	company that holds

	 	Centaurusweg 123	 	 
	inventory)

	 	TC Tilburg NL-5015	 	 
	 

	 	The Netherlands	 	 

4. SPECIAL TYPES OF COLLATERAL

a. The Company and its subsidiaries own the following kinds of assets. (If the
answer is “Yes” to any of the following questions, please attach a schedule describing
each such asset owned by the Company or its subsidiaries and identifying which party
owns the asset.)

	 	 	 
	Copyrights or copyright applications registered with the U.S. Copyright Office

	 	Yes o   No þ
	Software registered with the U.S. Copyright Office

	 	Yes o   No þ
	Software
not registered with the U.S. Copyright Office

	 	Yes o   No þ
	Patents and patent applications (See Note 1 below)

	 	Yes þ   No o
	Trademarks or trademark applications (including any service marks, collective marks
and certification marks) (See Note 1 below)

	 	Yes þ   No o
	Licenses to use trademarks, patents and copyrights of others (See Note 1 below)

	 	Yes þ   No o

Exhibit F Page 4

 

 

	 	 	 
	Licenses, permits (including environmental), authorizations, or certifications
issued by federal, state, or local governments issued to the Company and/or its
subsidiaries or with respect to their assets, properties, or businesses (See Note 2)

	 	Yes o   No o
	Stocks, bonds or other securities

	 	Yes o   No o
	Promissory notes, or other instruments or evidence of indebtedness (Note 3)

	 	Yes o   No o
	Leases of equipment, security agreements naming such person as secured party or
other chattel paper

	 	Yes o   No o
	Aircraft

	 	Yes o   No o
	Vessels, Boats or Ships

	 	Yes o   No o
	Railroad Rolling Stock

	 	Yes o   No o
	Motor Vehicles

	 	Yes o   No o

Note 1: SFMT Inc. holds approximately 44 issued US. Patents and approximately 85
additional applications and approximately 9 issued foreign Patents
and 41 additional foreign applications.
The Company also holds 10 U.S. Trademark registrations and 22 Foreign registrations.

Note 2: SFMT Inc. has such authorizations and licenses as are required in the jurisdictions and
industry in which it operates.

Note 3: SFMT holds a promissory note from its CEO related to the exercise of stock options that
is secured by the underlying shares (which are held in escrow.)

b. The following is a list of material contracts to which the Company is a party
(include any equipment leases) or in which the Company has an interest (including whether
such contract has a nonassignability provision which would require the other party’s or
another person’s consent to the granting of a security interest in such contract):

	 	 	 	 	 	 	 	 	 
	 	 	 	 	Nonassignability Clause
		 	 	 	 	 	Security Interest	 	Consent Obtained
	Other Party to Contract	 	Title/Date of Contract	 	Asset Sale (Y/N)	 	(Y/N)	 	(Y/N)
	Various Distribution Agreements

	 	(See Note 1 below)	 	 	 	 	 	 
	Agreement with Contract Mfgr & for 

certain raw materials

	 	(See Note 1 below)	 	 	 	 	 	 
	Building lease

	 	(See Note 1 below)	 	 	 	 	 	 

Note 1: The Company is party to contracts as is customary for its
industry; these contracts have not been reviewed specifically for consent
requirements with respect to assets sales or grants of security interests.

c. The following are all banks or savings institutions at which the Company and its subsidiaries maintain
deposit accounts:

	 	 	 	 	 	 	 
	Bank Name	 	Account Number	 	Branch Address	 	Company/Subsidiary
	Bank of America

	 	18045-01439
	 	1200 “A” Street
Hayward, CA 94541
	 	Company

Exhibit F Page 5

 

 

	 	 	 	 	 	 	 
	Bank of America

	 	 18041-01498
	 	 	 	Company
	State Street Bank and Trust (Investments)

	 	 DE1435
	 	1200 Crown Colony

 Quincy, MA 02169
	 	Company
	ABN AMRO

	 	 502304001433685019
	 	Germany
	 	SFMT Europe BV
	ABNAMRO

	 	 53.0.01.769
	 	Netherlands
	 	SFMT Europe BV
	ABN AMRO

	 	 57.15.35.755
	 	Netherlands
	 	SFMT Europe BV

d. Does or is it contemplated that the Company will regularly receive letters of credit from
customers or other third parties to secure payments of sums owed to the Company? The following is
a list of letters of credit naming the Company as “beneficiary” thereunder:

	 	 	 	 	 	 	 	 	 
	LC Number	 	Name of LC Issuer	 	 	LC Applicant	 
	N/A — No letters of credit
	 	 	 	 	 	 	 	 

Exhibit F Page 6

 

 

5.

ENCUMBRANCES

The Company’s and its subsidiaries’ property are subject to the following liens or
encumbrances:

	 	 	 	 	 
	Name of Holder of	 	 	 	 	 
	Lien/Encumbrance	 	Description of Property Encumbered	 	 	Company/Subsidiary

6. LITIGATION

a. The following is a complete list of pending and threatened litigation or claims involving
amounts claimed against the Company in an indefinite amount or in excess of $50,000 in each case:

No threatened or pending litigation in excess of $50,000 at this time.

b. The following are the only claims which the Company has against others (other than claims on
accounts receivable), which the Company is asserting or intends to assert, and in which the
potential recovery exceeds $50,000:

No claims against others with potential recovery of $50,000 at this time.

7.
TAXES

The following tax assessments are currently outstanding and unpaid:

	 	 	 	 	 
	Assessing Authority	 	Amount and Description	 
	No tax assessments outside of the ordinary course of business
	 	 	 	 

8.
INSURANCE BROKER

The following broker handles the Company’s property
insurance:

	 	 	 	 	 	 	 	 	 
	Broker	 	Contact	 	Telephone	 	Fax	 	Email
	Woodruff Sawyer

	 	Craig Brandt
	 	(415) 399-6315
	 	(415) 989-9923
	 	cbrandt@woodruff-sawyer.com

9.
OFFICERS OF THE COMPANY AND ITS SUBSIDIARIES

The following are the names and titles of the officers of the Company and its subsidiaries.

	 	 	 	 	 
	Office/Title	 	Name of Officer	 	Company/Subsidiary
	President and CEO

	 	Kevin K. Sidow
	 	Company
	Chief Financial Officer

	 	Michael A. Bates
	 	Company
	VP Regulatory and Clinical Affairs

	 	Yvonne Lysakowski
	 	Company
	VP Sales

	 	Chris Fair
	 	Company
	VP Engineering

	 	Burney Winslow
	 	Company
	VP R&D

	 	Scott Yerby
	 	Company
	 
	 	 	 	 
	Managing Director

	 	Kevin K. Sidow
	 	SFMT Europe BV

Exhibit F Page 7

 

 

10. IRS FORM W9

The Company’s completed and executed IRS Form W9 is attached hereto as Exhibit A.

11. LEGAL COUNSEL

The following attorney will represent the Company in connection with the loan documents:

	 	 	 	 	 	 	 	 	 
	Attorney	 	Law Firm	 	Telephone	 	Fax	 	Email
	Tom Gump

	 	Pillsbury Winthrop
	 	(415) 983-1823
	 	(415) 983-1200
	 	thomas.gump@pillsburylaw.com

The Company agrees to advise you of any change or modification to any of the foregoing information
or any supplemental information provided on any continuation pages attached hereto, and, until such
notice is received by you, you shall be entitled to rely upon such information and presume it is
correct. The Company acknowledges that your acceptance of this Perfection Certificate and any
continuation pages does not imply any commitment on your part to enter into a loan transaction with
the Company, and that any such commitment may only be made by an express written loan commitment,
signed by one of your authorized officers.

Date: March __, 2006

	 	 	 	 	 	 
	 	 	St. Francis Medical Technologies, Inc.	 
	 
	 

	 	By:
	 	/s/ Michael A. Bates	 
	 
	 		 	 Michael A. Bates	 
	 

	 	   Its:
	 	Chief Financial Officer	 
	 

	 	Email:
	 	Michael.Bates@sfmt.com	 
	 

	 	Phone:
	 	(510) 337-2600	 
	 

	 	Fax:
	 	(510) 747-3012	 

Exhibit F Page 8

 

 

CORPORATE BORROWING CERTIFICATE

	 	 	 	 	 
	Borrower:

	 	St. Francis Medical Technologies, Inc.
	 	Date: April 5, 2006
	Bank:

	 	Silicon Valley Bank	 	 

          I hereby certify as follows, as of the date set forth above:

	1.	 	I am the Secretary, Assistant Secretary or other officer of the Borrower. My title is as set
forth below.
	 
	2.	 	Borrower’s exact legal name is set forth above. Borrower is a corporation existing under the
laws of the State of Delaware
	 
	3.	 	Attached hereto are true, correct and complete copies of Borrower’s Articles/Certificate of
Incorporation (including amendments), as filed with the Secretary of State of the state in
which Borrower is incorporated as set forth in paragraph 2 above. Such Articles/Certificate of
Incorporation have not been amended, annulled, rescinded, revoked or supplemented, and remain
in full force and effect as of the date hereof.
	 
	4.	 	The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a
duly held meeting of such directors (or pursuant to a unanimous written consent or other
authorized corporate action). Such resolutions are in full force and effect as of the date
hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and
Bank may rely on them until Bank receives written notice of revocation from Borrower.
	 
	 	 	Resolved, that any one of the following officers or employees of Borrower, whose
names, titles and signatures are below, may act on behalf of Borrower:

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Authorized to
	 	 	 	 	 	 	Add or Remove
	Name	 	Title	 	Signature	 	Signatories
	Michael A. Bates

	 	CFO, Treasurer & Secretary
	 	/s/ Michael A. Bates
	 	þ
	 

	 	 

	 	 

	 	o
	Kevin K. Sidow

	 	CEO
	 	/s/ Kevin K. Sidow
	 	þ
	 

	 	 

	 	 

	 	o

Resolved Further, that any one of the persons designated above with a checked box
beside his or her name may, from time to time, add or remove any individuals to and from the above
list of persons authorized to act on behalf of Borrower.

     Resolved Further, that such individuals may, on behalf of Borrower:

Borrow Money. Borrow money from Silicon Valley Bank (“Bank”).

 

 

Execute Loan Documents. Execute any loan documents Bank requires.

Grant Security. Grant Bank a security interest in any of Borrower’s assets.

Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory notes,
or other indebtedness in which Borrower has an interest and receive
cash or otherwise use the proceeds.

Letters of Credit. Apply for letters of credit from Bank.

Foreign Exchange Contracts. Execute spot or foreign exchange contracts.

Further Acts. Designate other individuals to request advances, pay fees and costs and
execute other documents or agreements (including documents or agreement that waive
Borrowers right to a jury trial) they believe to be necessary to effectuate such
resolutions.

Resolved Further, that all acts authorized by the above resolutions and any prior acts
relating thereto are ratified.

	5.	 	The persons listed above are Borrower’s officers or employees, with their titles and
signatures shown next to their names.

	 	 	 	 	 
	 	 	 
	 	By:  	                                                /s/ Michael A. Bates
 	 
	 	Name:  	Michael A. Bates 	 
	 	Title:  	Secretary 	 
	 

     *** If the Secretary, Assistant Secretary or other certifying officer executing above is
designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers,
this Certificate must also be signed by a second authorized officer or director of Borrower.

     I,
the Kevin K. Sidow of Borrower, hereby certify as to paragraphs 1 through 5 above, as of the
date set forth above.

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Kevin K. Sidow
 	 
	 	Name:  	Kevin K. Sidow 	 
	 	Title:  	President, CEO & Director 	 

2

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