Document:

IDA 6.30.12 Ex 10.61 - ESP Amendment

Exhibit 10.61
SECOND AMENDMENT
TO THE EMPLOYEE SAVINGS PLAN OF
IDAHO POWER COMPANY
WHEREAS, Idaho Power Company ("Employer") currently maintains a qualified retirement plan known as Idaho Power Company Employee Savings Plan ("Plan");
WHEREAS, the Plan was most recently restated effective January 1, 2010; and
WHEREAS, the Employer desires to amend the Plan to implement an automatic contribution arrangement beginning January 1, 2012;

NOW THEREFORE, the Employer hereby amends the Plan, effective January 1, 2012, as follows:

1.    Except as otherwise provided, the article, section, and/or paragraph designations and/or numbering in this Amendment are solely for purposes of this Amendment and do not relate to any Plan article, section, paragraph or other numbering designations. The terms used below, whether or not defined, shall be interpreted in a manner consistent with that used in the Plan and/or as required by the applicable law as the context dictates.

2.    Section 3.1.1 is amended to read as follows: 

"3.1.1 Amount of Deferral Contributions.

(a)    Elections.  Upon enrollment, a Participant may direct that his or her Employer make Deferral Contributions to the Trust Fund of from 1% to 100% of his or her Compensation (in 1% increments) for each pay period.

(b)    Default Elective Contributions.  Each eligible Employee who does not make an affirmative election pursuant to subsection (a) in effect (including an affirmative election to not contribute to the Plan) upon becoming eligible to participate in the Plan shall be deemed to have elected to make a Deferral Contribution of 6% of his or her Compensation, commencing as soon as administratively feasible following his or her hire date, subject to the Employee's right to alter or revoke such deemed election at any time thereafter.

(c)    Special One-Time Default Enrollment.  Each eligible Employee who does not have an affirmative election pursuant to subsection (a) in effect as of January 1, 2012, shall be deemed to have elected to make a Deferral Contribution of 6% of his or her Compensation, commencing on or about February 1, 2012, subject to the Employee's right to alter or revoke such deemed election prior to its commencement date or at any time thereafter. An affirmative election not to contribute is considered an affirmative election, excluding the Employee from the auto-enrollment process.

(d)    Notices.  At least 30 days but not more than 90 days before the beginning of each Plan Year, the Employer will provide each Employee a comprehensive notice of the Employee's rights and obligations under the automatic contribution arrangement, written in a manner calculated to be understood by the average Employee. If an Employee becomes eligible within 90 days prior to the beginning of the Plan Year and does not receive the notice for that reason, the notice will be provided no more than 90 days before the Employee becomes eligible but not later than the date the Employee becomes eligible. In addition, notices will be provided to Employees as soon as practical after hire (or as soon as practical after he or she satisfies the Plan participation requirements, if later). The notice will accurately describe: (i) the amount of Deferral Contributions that will be made on the Employee's behalf absent an affirmative election; (ii) the Employee's right to have no Deferral Contributions made on his or her behalf or to have a different amount of Deferral Contributions made; and (iii) how Deferral Contributions will be invested in the absence of the Employee's investment instructions. An Employee will have a reasonable opportunity after receipt of the notice described in this subsection to make an affirmative election regarding Deferral Contributions (either to have no Deferral Contributions made or to have a different amount of Deferral Contributions made) before Default Deferral Contributions are made on the Employee's behalf. Default Deferral Contributions being made on behalf of an Employee will cease as soon as administratively feasible after the Employee makes an affirmative election.

(e)    Limitations.  If a Participant's Deferral Contributions must be reduced to comply with the requirements of Section 10.6 or the requirements of applicable law, the Deferral Contributions as so reduced will be the maximum percentage of his or her Compensation permitted by such Section or law notwithstanding the 1% increments requirement. A Participant's Deferral Contributions, After-Tax Contributions and Roth Deferrals are limited to 100% of a Participant's Compensation for a Plan Year."

3.    The first sentence of Section 3.1.3 is amended to read as follows:

"The percentage or percentages designated by a Participant or deemed designated by a Participant pursuant to Section 3.1.1 shall continue in effect, notwithstanding any changes in the Participant's Compensation."

IN ALL OTHER RESPECTS, the Plan is hereby ratified and approved.

The Plan Administrator is directed to take all actions deemed necessary or advisable in order to effect the foregoing.

This Amendment is adopted this 29th day of November, 2011.

IDAHO POWER COMPANY,
FIDUCIARY COMMITTEE

/s/ Luci McDonald
Luci McDonald

/s/ Darrel Anderson
Darrel Anderson

/s/ Daniel Minor
Daniel Minorexh10-1_17371.htm

EXHIBIT 10.1

 

LOAN AND SECURITY AGREEMENT

 

This LOAN AND SECURITY AGREEMENT (this “Agreement”) is entered into as of July 31, 2012, by and between East West Bank (“Bank”) and CAS Medical Systems, Inc. (“Borrower”).

 

RECITALS

 

Borrower wishes to obtain credit from time to time from Bank, and Bank desires to extend credit to Borrower.  This Agreement sets forth the terms on which Bank will advance credit to Borrower, and Borrower will repay the amounts owing to Bank.

 

AGREEMENT

 

The parties agree as follows:

 

1.   DEFINITIONS AND CONSTRUCTION.

 

1.1 Definitions.  As used in this Agreement, all capitalized terms shall have the definitions set forth on Exhibit A.  Any term used in the Code and not defined herein shall have the meaning given to the term in the Code.

 

1.2 Accounting Terms.  Any accounting term not specifically defined on Exhibit A shall be construed in accordance with GAAP and all calculations shall be made in accordance with GAAP.  The term “financial statements” shall include the accompanying notes and schedules.

 

2.   LOAN AND TERMS OF PAYMENT.

 

2.1 Credit Extensions.

 

(a) Promise to Pay.  Borrower promises to pay to Bank, in lawful money of the United States of America, the aggregate unpaid principal amount of all Credit Extensions made by Bank to Borrower, together with interest on the unpaid principal amount of such Credit Extensions at rates and at such times in accordance with the terms hereof.

 

(b) Advances Under Revolving Line.

 

(i) Amount.  Subject to and upon the terms and conditions of this Agreement, including an audit of the Collateral, the results of which shall be satisfactory to Bank in its sole discretion, Borrower may request Advances in an aggregate outstanding amount not to exceed the lesser of (A) the Revolving Line or (B) the Borrowing Base.  Amounts borrowed pursuant to this Section 2.1(b) may be repaid and reborrowed at any time without penalty or premium prior to the Revolving Maturity Date, at which time all Advances
under this Section 2.1(b) shall be immediately due and payable.

 

(ii) Form of Request.  Whenever Borrower desires an Advance, Borrower will notify Bank by facsimile transmission or telephone no later than 12:00 p.m., Noon, Pacific time, on the Business Day that the Advance is to be made.  Each such notification shall be promptly confirmed by a Payment/Advance Form in substantially the form of Exhibit C.  Bank is authorized to make Advances under this Agreement, based upon instructions received from a Responsible Officer or a designee of a Responsible Officer, or without
instructions if in Bank’s discretion such Advances are necessary to meet Obligations which have become due and remain unpaid.  Bank shall be entitled to rely on any facsimile or telephonic notice given by a person who Bank reasonably believes to be a Responsible Officer or a designee thereof, and Borrower shall indemnify and hold Bank harmless for any damages or loss suffered by Bank as a result of such reliance.  Bank will credit the amount of Advances made under this Section 2.1(b) to Borrower’s deposit account.

 

  

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(c) Term Loan.

 

(i) Subject to and upon the terms and conditions of this Agreement, on the Closing Date or as soon thereafter as is practical, Bank shall make one term loan to Borrower in an aggregate amount equal to Three Million Five Hundred Thousand Dollars ($3,500,00.00) (the “Term Loan”), which amount shall be used for working capital.

 

(ii) Interest shall accrue from the date the Term Loan is made at the rate specified in Section 2.3(a), and shall be payable monthly on the first Business Day of each month commencing on the first Business Day of the first month after the Term Loan is made.  The Term Loan shall be repaid in twenty-four (24) equal monthly installments of principal plus accrued but unpaid interest, commencing on the Interest-Only End Date and continuing on the same day of each month thereafter through the Term Loan Maturity Date, at which time all amounts owing under this Section 2.1(c) shall be immediately due and
payable.  The Term Loan, once repaid, may not be reborrowed.  Borrower may prepay the Term Loan at any time without penalty or premium.

 

2.2 Overadvances.  If the aggregate amount of the outstanding Advances exceeds the lesser of the Revolving Line or the Borrowing Base at any time, Borrower shall immediately pay to Bank, in cash, the amount of such excess.

 

2.3 Interest Rates, Payments, and Calculations.

 

(a) Interest Rates.

 

(i) Advances.  Except as set forth in Section 2.3(b), the Advances shall bear interest, on the outstanding daily balance thereof, at a floating per annum rate equal to two percent (2.00%) above the Prime Rate.

 

(ii) Term Loan.  Except as set forth in Section 2.3(b), the Term Loan shall bear interest, on the outstanding daily balance thereof, at a fixed per annum rate equal to two and one-quarter percent (2.25%) above the Prime Rate fixed on the Closing Date.

 

(b) Late Fee; Default Rate.  If any payment is not made within ten (10) days after the date such payment is due, Borrower shall pay Bank a late fee equal to the lesser of (i) five percent (5%) of the amount of such unpaid amount or (ii) the maximum amount permitted to be charged under applicable law.  All Obligations shall bear interest, from and after the occurrence and during the continuance of an Event of Default, at a rate equal to five (5) percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.

 

(c) Payments.  Interest hereunder shall be due and payable on the first calendar day of each month during the term hereof.  Bank shall, at its option, charge such interest, all Bank Expenses, and all Periodic Payments against any of Borrower’s deposit accounts or against the Revolving Line, in which case those amounts shall thereafter accrue interest at the rate then applicable hereunder.  Any interest not paid when due shall be compounded by becoming a part of the Obligations, and such interest shall thereafter
accrue interest at the rate then applicable hereunder.

 

(d) Computation.  In the event the Prime Rate is changed from time to time hereafter, the applicable rate of interest hereunder shall be increased or decreased, effective as of the day the Prime Rate is changed, by an amount equal to such change in the Prime Rate.  All interest chargeable under the Loan Documents shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed.

 

2.4 Crediting Payments.  Prior to the occurrence of an Event of Default, Bank shall credit a wire transfer of funds, check or other item of payment to such deposit account or Obligation as Borrower specifies.  After the occurrence of an Event of Default, Bank shall have the right, in its sole 

 

  

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discretion, to immediately apply any wire transfer of funds, check, or other item of payment Bank may receive to conditionally reduce Obligations, but such applications of funds shall not be considered a payment on account unless such payment is of immediately available federal funds or unless and until such check or other item of payment is honored when presented for payment.  Notwithstanding anything to the contrary contained herein, any wire transfer or payment received by Bank after 12:00 noon Pacific time shall be deemed to have been received by Bank as of the opening of business on the immediately following Business Day.  Whenever any payment to Bank under the Loan Documents would otherwise be due
(except by reason of acceleration) on a date that is not a Business Day, such payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for the period of such extension.

 

2.5 Fees.  Borrower shall pay to Bank the following:

 

(a) Facility Fee.  On the Closing Date, a fee equal to Twelve Thousand Five Hundred Dollars ($12,500.00), on account of the Revolving Line, and Twenty Six Thousand Two Hundred Fifty Dollars ($26,250.00) on account of the Term Loan; each of which shall be nonrefundable; and

 

(b) Bank Expenses.  On the Closing Date, all Bank Expenses incurred through the Closing Date, and, after the Closing Date, all Bank Expenses, as and when they become due.

 

2.6 Term.  This Agreement shall become effective on the Closing Date and, subject to Section 12.8, shall continue in full force and effect for so long as any Obligations remain outstanding or Bank has any obligation to make Credit Extensions under this Agreement.  Notwithstanding the foregoing, Bank shall have the right to terminate its obligation to make Credit Extensions under this Agreement immediately and without notice upon the occurrence and during the continuance of an Event of Default.

 

3.   CONDITIONS OF LOANS.

 

3.1 Conditions Precedent to Initial Credit Extension.  The obligation of Bank to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, the following:

 

(a) this Agreement;

 

(b) an officer’s certificate of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Agreement;

 

(c) UCC National Form Financing Statement;

 

(d) evidence of insurance;

 

(e) the certificate for the Shares, together with Assignment(s) Separate from Certificate, duly executed in blank;

 

(f) payment of the fees and Bank Expenses then due specified in Section 2.5;

 

(g) current SOS Reports indicating that except for Permitted Liens, there are no other security interests or Liens of record in the Collateral;

 

(h) current financial statements, including audited statements for Borrower’s most recently ended fiscal year, together with an unqualified opinion, company prepared consolidated and consolidating balance sheets and income statements for the most recently ended month in accordance with Section 6.2, and such other updated financial information as Bank may reasonably request;

 

  

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(i) current Compliance Certificate in accordance with Section 6.2;

 

(j) a Warrant in form and substance satisfactory to Bank;

 

(k) a Perfection Certificate;

 

(l) Subject to Section 6.6, deposit account control agreements with respect to any accounts permitted hereunder to be maintained outside Bank;

 

(m) a Lessor’s Acknowledgment and Subordination with respect to each of Borrower’s leased locations, and a Bailee Waiver with respect to each third-party location where Borrower maintains any Material Collateral;

 

(n) a Post Closing Letter;

 

(o) an Automatic Debit Authorization; and

 

(p) such other documents or certificates, and completion of such other matters, as Bank may reasonably deem necessary or appropriate.

 

3.2 Conditions Precedent to all Credit Extensions.  The obligation of Bank to make each Credit Extension, including the initial Credit Extension, is further subject to the following conditions:

 

(a) timely receipt by Bank of the Payment/Advance Form as provided in Section 2.1; and

 

(b) the representations and warranties contained in Article 5 shall be true and correct in all material respects on and as of the date of such Payment/Advance Form and on the effective date of each Credit Extension as though made at and as of each such date, and no Event of Default shall have occurred and be continuing, or would exist after giving effect to such Credit Extension (provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of such date).  The making of each Credit Extension shall be
deemed to be a representation and warranty by Borrower on the date of such Credit Extension as to the accuracy of the facts referred to in this Section 3.2.

 

4.   CREATION OF SECURITY INTEREST.

 

4.1 Grant of Security Interest.  Borrower grants and pledges to Bank a continuing security interest in the Collateral to secure prompt repayment of any and all Obligations and to secure prompt performance by Borrower of each of its covenants and duties under the Loan Documents.  Except as set forth in the Schedule, and subject only to Permitted Liens that may have priority by operation of law, such security interest constitutes a valid, first priority security interest in the presently existing Collateral, and will constitute a
valid, first priority security interest in later-acquired Collateral.  Borrower also hereby agrees not to sell, transfer, assign, mortgage, pledge, lease, grant a security interest in, or encumber any of its Intellectual Property, except as provided in this Agreement in connection with Permitted Liens and Permitted Transfers.  Notwithstanding any termination of this Agreement, Bank’s Lien on the Collateral shall remain in effect for so long as any Obligations are outstanding.

 

4.2 Perfection of Security Interest.  Borrower authorizes Bank to file at any time financing statements, continuation statements, and amendments thereto that (i) either specifically describe the Collateral or describe the Collateral as all assets of Borrower of the kind pledged hereunder, and (ii) contain any other information required by the Code for the sufficiency of filing office acceptance of any financing statement, continuation statement, or amendment, including whether Borrower is an organization, the type of organization and any
organizational identification number issued to Borrower, if 

 

  

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applicable.  Any such financing statements may be filed by Bank at any time in any jurisdiction whether or not Revised Article 9 of the Code is then in effect in that jurisdiction. Borrower shall from time to time endorse and deliver to Bank, at the request of Bank, all Negotiable Collateral and other documents that Bank may reasonably request, in form satisfactory to Bank, to perfect and continue perfection of Bank’s security interests in the Collateral and in order to fully consummate all of the transactions contemplated under the Loan Documents.  Borrower shall have possession of the Collateral, except where expressly otherwise provided in this Agreement or where Bank deems it reasonably prudent to
perfect its security interest by possession in addition to the filing of a financing statement.  Where Collateral is in possession of a third party bailee, Borrower shall take such steps as Bank reasonably requests for Bank to (i) obtain an acknowledgment, in form and substance satisfactory to Bank, of the bailee that the bailee holds such Collateral for the benefit of Bank, and (ii) obtain “control” of any Collateral consisting of investment property, deposit accounts, letter-of-credit rights or electronic chattel paper (as such items and the term “control” are defined in Revised Article 9 of the Code) by causing the securities intermediary or depositary institution or issuing bank to execute a control agreement in form and substance satisfactory to Bank.  Borrower will not create any chattel paper without placing a legend on the chattel
paper acceptable to Bank indicating that Bank has a security interest in the chattel paper.  Borrower from time to time may deposit with Bank specific cash collateral to secure specific Obligations; Borrower authorizes Bank to hold such specific balances in pledge and to decline to honor any drafts thereon or any request by Borrower or any other Person to pay or otherwise transfer any part of such balances for so long as the specific Obligations are outstanding.

 

4.3 Right to Inspect.  Bank (through any of its officers, employees, or agents) shall have the right, in addition to the initial audit of the Collateral, upon reasonable prior notice, from time to time during Borrower’s usual business hours but no more than twice a year (unless an Event of Default has occurred and is continuing), to inspect Borrower’s Books and to make copies thereof and to check, test, and appraise the Collateral in order to verify Borrower’s financial condition or the amount, condition of, or any other
matter relating to, the Collateral.

 

4.4 Pledge of Collateral.  Borrower hereby pledges, assigns and grants to Bank a security interest in all the Shares, together with all proceeds and substitutions thereof, all cash, stock and other moneys and property paid thereon, all rights to subscribe for securities declared or granted in connection therewith, and all other cash and noncash proceeds of the foregoing, as security for the performance of the Obligations.  On the Closing Date, the certificate or certificates for the Shares will be delivered to Bank, accompanied by an instrument of assignment duly executed in blank
by Borrower.  To the extent required by the terms and conditions governing the Shares, Borrower shall cause the books of each entity whose Shares are part of the Collateral and any transfer agent to reflect the pledge of the Shares.  Upon the occurrence of an Event of Default hereunder, Bank may effect the transfer of any securities included in the Collateral (including but not limited to the Shares) into the name of Bank and cause new certificates representing such securities to be issued in the name of Bank or its transferee.  Borrower will execute and deliver such documents, and take or cause to be taken such actions, as Bank may reasonably request to perfect or continue the perfection of Bank’s security interest in the Shares.  Unless an Event of Default shall have occurred and be continuing, Borrower shall be entitled to exercise any
voting rights with respect to the Shares and to give consents, waivers and ratifications in respect thereof, provided that no vote shall be cast or consent, waiver or ratification given or action taken which would be inconsistent with any of the terms of this Agreement or which would constitute or create any violation of any of such terms.  All such rights to vote and give consents, waivers and ratifications shall terminate upon the occurrence and continuance of an Event of Default.

 

5.   REPRESENTATIONS AND WARRANTIES.

 

Borrower represents and warrants as follows:

 

5.1 Due Organization and Qualification.  Borrower and each Subsidiary is an entity duly existing under the laws of the jurisdiction in which it is organized and qualified and licensed to do business in any state in which the conduct of its business or its ownership of property requires that it be so qualified, except where the failure to do so could not reasonably be expected to cause a Material Adverse Effect.

 

  

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5.2 Due Authorization; No Conflict.  The execution, delivery, and performance of the Loan Documents are within Borrower’s powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in Borrower’s organizational documents, nor will they constitute an event of default under any material agreement by which Borrower is bound.  Borrower is not in default under any agreement by which it is bound, except to the extent such default would not reasonably be expected to
cause a Material Adverse Effect.

 

5.3 Collateral.  Borrower has rights in or the power to transfer the Collateral, and its title to the Collateral is free and clear of Liens, adverse claims, and restrictions on transfer or pledge except for Permitted Liens.  The Eligible Accounts are bona fide existing obligations.  The property or services giving rise to such Eligible Accounts has been delivered or rendered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor.  Borrower has not
received notice of actual or imminent Insolvency Proceeding of any account debtor whose accounts are included in any Borrowing Base Certificate as an Eligible Account. No licenses or agreements giving rise to such Eligible Accounts is with any Prohibited Territory or with any Person organized under or doing business in a Prohibited Territory.  All Inventory is in all material respects of good and merchantable quality, free from all material defects, except for Inventory for which adequate reserves have been made.  Except as set forth in the Schedule, none of the Collateral is maintained or invested with a Person other than Bank or Bank’s Affiliates.

 

5.4 Intellectual Property Collateral.  Borrower is the sole owner of the Intellectual Property Collateral, except for non-exclusive licenses granted by Borrower to its customers in the ordinary course of business.  To the best of Borrower’s knowledge, each of the Copyrights, Trademarks and Patents is valid and enforceable, and no part of the Intellectual Property Collateral has been judged invalid or unenforceable, in whole or in part, and no claim has been made to Borrower that any part of the Intellectual Property
Collateral violates the rights of any third party except to the extent such claim could not reasonably be expected to cause a Material Adverse Effect.  Except as set forth in the Schedule, Borrower’s rights as a licensee of intellectual property do not give rise to more than five percent (5%) of its gross revenue in any given month, including without limitation revenue derived from the sale, licensing, rendering or disposition of any product or service.

 

5.5 Name; Location of Chief Executive Office.  Except as disclosed in the Schedule, Borrower has not done business under any name other than that specified on the signature page hereof, and its exact legal name is as set forth in the first paragraph of this Agreement.  The chief executive office of Borrower is located in the Chief Executive Office State at the address indicated in Section 10 hereof.

 

5.6 Actions, Suits, Litigation, or Proceedings.  Except as set forth in the Schedule or Borrower’s periodic filings under the Securities Exchange Act of 1934, as amended (“Exchange Act Filings”), there are no actions, suits, litigation or proceedings, at law or in equity, pending by or against Borrower or any Subsidiary before any court, administrative agency, or arbitrator in which a likely adverse decision could reasonably be expected to have a Material Adverse Effect.

 

5.7 No Material Adverse Change in Financial Statements.  All consolidated and consolidating financial statements related to Borrower and any Subsidiary that are delivered by Borrower to Bank fairly present in all material respects Borrower’s consolidated and consolidating financial condition as of the date thereof and Borrower’s consolidated and consolidating results of operations for the period then ended.  There has not been a material adverse change in the consolidated or in the consolidating financial condition
of Borrower since the date of the most recent of such financial statements submitted to Bank.

 

5.8 Solvency, Payment of Debts.  Borrower is able to pay its debts (including trade debts) as they mature; the fair saleable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; and Borrower is not left with unreasonably small capital after the transactions contemplated by this Agreement.

 

  

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5.9 Compliance with Laws and Regulations.  Borrower and each Subsidiary have met the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA.  No event has occurred resulting from Borrower’s failure to comply with ERISA that is reasonably likely to result in Borrower’s incurring any liability that could reasonably be expected to have a Material Adverse Effect.  Borrower is not an “investment company” or a company “controlled” by an
“investment company” within the meaning of the Investment Company Act of 1940.  Borrower is not engaged principally, or as one of the important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T and U of the Board of Governors of the Federal Reserve System).  Borrower has complied in all material respects with all the provisions of the Federal Fair Labor Standards Act.  Borrower is in compliance with all environmental laws, regulations and ordinances except where the failure to comply is not reasonably likely to have a Material Adverse Effect.  Borrower has not violated any statutes, laws, ordinances or rules applicable to it, the violation of which could reasonably be expected to have a Material Adverse Effect.  Borrower and each
Subsidiary have filed or caused to be filed all tax returns required to be filed, and have paid, or have made adequate provision for the payment of, all taxes reflected therein except those being contested in good faith with adequate reserves under GAAP or where the failure to file such returns or pay such taxes could not reasonably be expected to have a Material Adverse Effect.

 

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

 

5.11 Government Consents.  Borrower and each Subsidiary have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all governmental authorities that are necessary for the continued operation of Borrower’s business as currently conducted, except where the failure to do so would not reasonably be expected to cause a Material Adverse Effect.

 

5.12 Inbound Licenses.  Except as disclosed on the Schedule, Borrower is not a party to, nor is bound by, any inbound license or other agreement, the failure, breach, or termination of which could reasonably be expected to cause a Material Adverse Effect, or that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property.

 

5.13 Shares.  Borrower has full power and authority to create a first lien on the Shares and no disability or contractual obligation exists that would prohibit Borrower from pledging the Shares pursuant to this Agreement.  To Borrower’s knowledge, there are no subscriptions, warrants, rights of first refusal or other restrictions on transfer relative to, or options exercisable with respect to the Shares.  The Shares have been and will be duly authorized and validly issued, and are fully paid and
non-assessable.  To Borrower’s knowledge, the Shares are not the subject of any present or threatened suit, action, arbitration, administrative or other proceeding, and Borrower knows of no reasonable grounds for the institution of any such proceedings.

 

5.14 Full Disclosure.  No representation, warranty or other statement made by Borrower in any certificate or written statement furnished to Bank taken together with all such certificates and written statements furnished to Bank contains any untrue statement of a material fact or, together with the Company’s Exchange Act Filings, omits to state a material fact necessary in order to make the statements contained in such 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 to be viewed as facts and that actual results during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results.

 

  

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6.   AFFIRMATIVE COVENANTS.

 

Borrower covenants that, until payment in full of all outstanding Obligations, and for so long as Bank may have any commitment to make a Credit Extension hereunder, Borrower shall do all of the following:

 

6.1 Good Standing and Government Compliance.  Borrower shall maintain its and each of its Subsidiaries’ organizational existence and good standing in the Borrower State, shall maintain qualification and good standing in each other jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Effect, and shall furnish to Bank the organizational identification number issued to Borrower by the authorities of the jurisdiction in which Borrower is organized, if applicable.  Borrower
shall meet, and shall cause each Subsidiary to meet, the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA.  Borrower shall comply in all material respects with all applicable Environmental Laws, and maintain all material permits, licenses and approvals required thereunder where the failure to do so could reasonably be expected to have a Material Adverse Effect.  Borrower shall comply, and shall cause each Subsidiary to comply, with all statutes, laws, ordinances and government rules and regulations to which it is subject, and shall maintain, and shall cause each of its Subsidiaries to maintain, in force all licenses, approvals and agreements, the loss of which or failure to comply with which would reasonably be expected to have a Material Adverse Effect.

 

6.2 Financial Statements, Reports, Certificates.  Borrower shall deliver to Bank:  (i) as soon as available, but in any event within thirty (30) days after the end of each calendar month, a company prepared consolidated balance sheet, income statement and statement of cash flow, covering Borrower’s operations during such period, in a form reasonably acceptable to Bank and certified by a Responsible Officer; (ii) as soon as available, but in any event within ninety (90) days after the end of Borrower’s fiscal year,
audited consolidated financial statements of Borrower prepared in accordance with GAAP, consistently applied, together with an opinion which is unqualified (including no going concern comment or qualification) on such financial statements of a PCAOB-registered independent certified public accounting firm reasonably acceptable to Bank (Bank acknowledges that J.H. Cohn LLP is acceptable); (iii) copies of all statements, reports and notices sent or made available generally by Borrower to its security holders or to any holders of Subordinated Debt and all reports on Forms 8-K. 10-K and 10-Q as and when filed with the Securities and Exchange Commission, provided that prompt notice from Borrower to Bank of the filing of such statements, reports, notices and forms on EDGAR shall be considered sufficient delivery of such statements, reports, notices and forms pursuant to the requirements
of this Section 6.2; (iv) promptly upon receipt of notice thereof, a report of any legal actions pending or threatened against Borrower or any Subsidiary that could result in damages or costs to Borrower or any Subsidiary of One Hundred Thousand Dollars ($100,000.00) or more; (v) promptly upon receipt, each management letter prepared by Borrower’s independent certified public accounting firm regarding Borrower’s management control systems; (vi) as soon as available, but in any event not later than January 31 of each calendar year, Borrower’s financial and business projections and budget, presented in a month-by-month format, for such year, with written certification signed by a Responsible Officer of approval thereof by Borrower’s board of directors; (vii) such budgets, sales projections, operating plans or other financial information generally prepared by
Borrower in the ordinary course of business as Bank may reasonably request from time to time; and (viii) within thirty (30) days of the last day of each fiscal quarter, a report signed by Borrower, in form reasonably acceptable to Bank, listing any applications or registrations that Borrower has made or filed in respect of any Patents, Copyrights or Trademarks and the status of any outstanding applications or registrations, as well as any material change in Borrower’s Intellectual Property Collateral, including but not limited to any subsequent ownership right of Borrower in or to any Trademark, Patent or Copyright not previously identified to Bank.

 

(a) Within thirty (30) days after the last day of each month, Borrower shall deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in substantially the form of Exhibit D hereto, together with aged listings by invoice date of accounts receivable and accounts payable.

 

  

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(b) Within thirty (30) days after the last day of each month, and within ninety (90) days after the end of Borrower’s fiscal year, Borrower shall deliver to Bank with the financial statements a Compliance Certificate certified as of the last day of the applicable period and signed by a Responsible Officer in substantially the form of Exhibit E hereto.

 

(c) Promptly upon becoming aware of the occurrence or existence of an Event of Default hereunder, a written statement of a Responsible Officer setting forth details of the Event of Default, and the action which Borrower has taken or proposes to take with respect thereto.

 

(d) Bank shall have a right from time to time hereafter (and in addition to the initial audit) to audit Borrower’s Accounts and appraise Collateral at Borrower’s expense, provided that such audits will be conducted no more often than every six (6) months unless an Event of Default has occurred and is continuing.

 

Borrower may deliver to Bank on an electronic basis any certificates, reports or information required pursuant to this Section 6.2, and Bank shall be entitled to rely on the information contained in the electronic files, provided that Bank in good faith believes that the files were delivered by a Responsible Officer.  If Borrower delivers this information electronically, it shall also deliver to Bank by U.S. Mail, reputable overnight courier service, hand delivery, facsimile or .pdf file within five (5) Business Days of submission of the unsigned electronic copy the certification of monthly financial statements, the intellectual property report, the Borrowing Base Certificate and the Compliance
Certificate, each bearing the physical signature of the Responsible Officer.

 

6.3 Inventory; Returns.  Borrower shall keep all Inventory in good and merchantable condition, free from all material defects except for Inventory for which adequate reserves have been made.  Returns and allowances, if any, as between Borrower and its account debtors shall be on the same basis and in accordance with the usual customary practices of Borrower, as they exist on the Closing Date.  Borrower shall promptly notify Bank of all returns and recoveries and of all disputes and claims involving more than One
Hundred Thousand Dollars ($100,000.00).

 

6.4 Taxes.  Borrower shall make, and cause each Subsidiary to make, due and timely payment or deposit of all material federal, state, and local taxes, assessments, or contributions required of it by law, including, but not limited to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and state disability, and will execute and deliver to Bank, on demand, proof satisfactory to Bank indicating that Borrower or a Subsidiary has made such payments or deposits and any appropriate certificates attesting to the payment or deposit thereof;
provided that Borrower or a Subsidiary need not make any payment if the amount or validity of such payment is contested in good faith by appropriate proceedings and is reserved against (to the extent required by GAAP) by Borrower.

 

6.5 Insurance.

 

(a) Borrower, at its expense, shall keep the Collateral insured against loss or damage by fire, theft, explosion, sprinklers, and all other hazards and risks, and in such amounts, as ordinarily insured against by other owners in similar businesses conducted in the locations where Borrower’s business is conducted on the date hereof.  Borrower shall also maintain liability and other insurance in amounts and of a type that are customary to businesses similar in size and scope to Borrower’s.

 

(b) All such policies of insurance shall be in such form, with such companies, and in such amounts as reasonably satisfactory to Bank.  All policies of property insurance shall contain a lender’s loss payable endorsement, in a form satisfactory to Bank, showing Bank as an additional loss payee, and all liability insurance policies shall show Bank as an additional insured and specify that the insurer must give at least twenty (20) days notice to Bank before canceling its policy for any reason.  Upon Bank’s request, Borrower shall deliver to Bank certified copies of the policies of
insurance and evidence of all premium payments.  All proceeds payable under any such policy shall, at Bank’s option, be payable to Bank to be applied on account of the Obligations.  Notwithstanding the 

 

  

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foregoing, (a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral; (ii) shall be deemed Collateral in which Bank has been granted a first priority security interest and (iii) either (x) such replacement or repaired property is in Borrower’s possession within ninety (90) days of receipt of such proceeds or (y) firm orders have been placed by Borrower for such replacement or repaired property within thirty (30) days of receipt of such
proceeds, and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Bank, be payable to Bank on account of the Obligations.

 

6.6 Accounts.  Borrower shall maintain its primary depository, operating and investment accounts with Bank.  Any accounts permitted hereunder to be maintained outside Bank shall be subject to control agreements in form and content reasonably acceptable to Bank.  Notwithstanding the forgoing, Borrower may maintain the accounts set forth on the Schedule of Accounts, so long as (i) no Event of Default has occurred and is continuing; (ii) at no time shall the aggregate amount in any such account exceed the amount listed in
respect of such account on the Schedule of Accounts; (iii) each such account is closed by the Closure Date set forth for such account on the Schedule of Accounts and (iv) each such account shall be subject to a control agreement in form and content reasonably acceptable to Bank by the Control Date set forth for such account on the Schedule of Accounts, as applicable.

 

6.7 Financial Covenants; Milestone Covenants.  Borrower shall maintain and/or achieve the following financial ratios and covenants:

 

(a) Tangible Net Worth.  Tangible Net Worth, measured at the end of each calendar quarter, shall not be more than One Million Dollars ($1,000,000.00) below projected Tangible Net Worth, as set forth in the financial projections provided to, and approved by, Bank prior to the Closing Date and thereafter in accordance with Section 6.2 hereof.

 

(b) Minimum Tangible Net Worth.  Tangible Net Worth shall increase by not less than Five Million Dollars ($5,000,000.00) in net cash by the end of the fourth (4th) calendar quarter of 2013, compared to the projections provided, and approved by, Bank prior to the Closing Date and thereafter in accordance with Section 6.2 hereof.

 

(c) Vital Signs Monitor Product Approval.  Receive Food and Drug Administration 510K approval for Borrower’s next-generation vital signs monitor, by not later than September 30, 2013.

 

(d) Cerebral Oximeter Product Approval.  Receive Food and Drug Administration 510K approval for Borrower’s next-generation cerebral oximeter, by not later than September 30, 2013.

 

Bank reserves the right to change and/or reset the foregoing financial covenants upon (i) an Event of Default, and (ii) Bank’s receipt of the projections required to be delivered in connection with Section 6.2 hereof.

 

6.8 Registration of Intellectual Property Rights.

 

(a) Borrower shall register or cause to be registered on an expedited basis (to the extent not already registered) with the United States Patent and Trademark Office or the United States Copyright Office, as the case may be, those registrable intellectual property rights now owned or hereafter developed or acquired by Borrower, to the extent that Borrower, in its reasonable business judgment, deems it appropriate to so protect such intellectual property rights.

 

  

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(b) Borrower shall promptly give Bank written notice of any applications or registrations of intellectual property rights filed with the United States Patent and Trademark Office, including the date of such filing and the registration or application numbers, if any.

 

(c) Borrower shall (i) give Bank not less than thirty (30) days prior written notice of the filing of any applications or registrations with the United States Copyright Office, including the title of such intellectual property rights to be registered, as such title will appear on such applications or registrations, and the date such applications or registrations will be filed; (ii) prior to the filing of any such applications or registrations, after an Event of Default, execute such documents as Bank may reasonably request for Bank to maintain its perfection in such intellectual property rights to be registered
by Borrower; (iii) upon the request of Bank, either deliver to Bank or file such documents simultaneously with the filing of any such applications or registrations; (iv) upon filing any such applications or registrations, promptly provide Bank with a copy of such applications or registrations together with any exhibits, evidence of the filing of any documents requested by Bank to be filed for Bank to maintain the perfection and priority of its security interest in such intellectual property rights, and the date of such filing.

 

(d) Borrower shall execute and deliver such additional instruments and documents from time to time after an Event of Default, as Bank shall reasonably request to perfect and maintain the perfection and priority of Bank’s security interest in the Intellectual Property Collateral.

 

(e) Borrower shall use commercially reasonably efforts in its reasonable business judgment to (i) protect, defend and maintain the validity and enforceability of the Trademarks, Patents, Copyrights, and trade secrets, (ii) detect infringements of the Trademarks, Patents and Copyrights and promptly advise Bank in writing of material infringements detected and (iii) not allow any material Trademarks, Patents or Copyrights to be abandoned, forfeited or dedicated to the public without the written consent of Bank, which shall not be unreasonably withheld.

 

(f) Bank may audit Borrower’s Intellectual Property Collateral to confirm compliance with this Section 6.8, provided such audit may not occur more often than twice per year, unless an Event of Default has occurred and is continuing.  Bank shall have the right, but not the obligation, to take, at Borrower’s sole expense, any actions that Borrower is required under this Section 6.8 to take but which Borrower fails to take, after fifteen (15) days’ notice to Borrower.  Borrower shall reimburse and indemnify Bank for all reasonable costs and reasonable expenses related to the
reasonable exercise of its rights under this Section 6.8.

 

6.9 Consent of Inbound Licensors.  Prior to entering into or becoming bound by any inbound license or agreement (other than over-the-counter software that is commercially available to the public), the failure, breach, or termination of which could reasonably be expected to cause a Material Adverse Effect, Borrower shall:  (i) provide written notice to Bank of the material terms of such license or agreement with a description of its likely impact on Borrower’s business or financial condition; and (ii) in good faith take
such actions as Bank may reasonably request to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (A) Borrower’s interest in such licenses or contract rights to be deemed Collateral and for Bank to have a security interest in it that might otherwise be restricted by the terms of the applicable license or agreement, whether now existing or entered into in the future, and (B) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Bank’s rights and remedies under this Agreement and the other Loan Documents, provided, however, that the failure to obtain any such consent or waiver shall not constitute a default under this Agreement.

 

6.10 Creation/Acquisition of Subsidiaries.  In the event Borrower or any Subsidiary creates or acquires any Subsidiary, Borrower and such Subsidiary shall promptly notify Bank of the creation or acquisition of such new Subsidiary and take all such action as may be reasonably required by Bank to cause each such domestic Subsidiary to guarantee the Obligations of Borrower under the Loan Documents and grant a continuing pledge and security interest in and to the collateral of such Subsidiary (substantially as described on Exhibit B
hereto), and Borrower shall grant and pledge to Bank a perfected security interest in the Shares of each Subsidiary (whether foreign or domestic).

 

  

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6.11 Further Assurances.  At any time and from time to time Borrower shall execute and deliver such further instruments and take such further action as may reasonably be requested by Bank to effect the purposes of this Agreement.

 

7.   NEGATIVE COVENANTS.

 

Borrower covenants and agrees that, so long as any credit hereunder shall be available and until the outstanding Obligations are paid in full or for so long as Bank may have any commitment to make any Credit Extensions, Borrower will not do any of the following without Bank’s prior written consent, which shall not be unreasonably withheld:

 

7.1 Dispositions.  Convey, sell, lease, license, transfer or otherwise dispose of (collectively, to “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, or subject to Section 6.6 of the Agreement, move cash balances on deposit with Bank to accounts opened at another financial institution, other than Permitted Transfers.  Without limiting the foregoing, Borrower shall not make any Transfers to Statcorp.

 

7.2 Change in Name, Location, Executive Office, or Executive Management; Change in Business; Change in Fiscal Year; Change in Control.  Change its name or the Borrower State or relocate its chief executive office without thirty (30) days’ prior written notification; replace its chief executive officer or chief financial officer (i) without prompt notice to Bank and (ii) unless a replacement for such officer is approved by Borrower’s Board of Directors and engaged by Borrower within ninety (90) days of such change; engage
in any business, or permit any of its Subsidiaries to engage in any business, other than or reasonably related or incidental to the businesses currently engaged in by Borrower; change its fiscal year end; have a Change in Control; provided that the foregoing clause shall not apply to any Change of Control pursuant to which the Obligations are indefeasibly paid in full in cash contemporaneously with the close or consummation of such transaction and the Bank’s obligations to make any Credit Extensions are terminated as of the close or consummation of such transaction.

 

7.3 Mergers or Acquisitions.  Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business organization (other than mergers or consolidations of a Subsidiary into another Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person, or enter into any agreement to do any of the same, except where (i) such transactions do not in the aggregate exceed One Hundred Thousand Dollars
($100,000.00) during any fiscal year, (ii) no Event of Default has occurred, is continuing or would exist after giving effect to such transactions, (iii) such transactions do not result in a Change in Control, and (iv) Borrower is the surviving entity; provided that the foregoing Section 7.3 shall not apply to any transaction pursuant to which the Obligations are indefeasibly paid in full in cash contemporaneously with the close or consummation of such transaction and the Bank’s obligations to make any Credit Extensions are terminated as of the close or consummation of such transaction.

 

7.4 Indebtedness.  Create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness, or prepay any Indebtedness or take any actions which impose on Borrower an obligation to prepay any Indebtedness, except Indebtedness to Bank.

 

7.5 Encumbrances.  Create, incur, assume or allow any Lien with respect to any of its property, or assign or otherwise convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries so to do, except for Permitted Liens, or covenant to any other Person that Borrower in the future will refrain from creating, incurring, assuming or allowing any Lien with respect to any of Borrower’s property.

 

7.6 Distributions.  Pay any dividends or make any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock, except that Borrower may (i) repurchase the stock of former employees pursuant to stock repurchase agreements as long as an Event 

 

  

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of Default does not exist prior to such repurchase or would not exist after giving effect to such repurchase, (ii) repurchase the stock of former employees pursuant to stock repurchase agreements by the cancellation of indebtedness owed by such former employees to Borrower regardless of whether an Event of Default exists, and (iii) fulfill its obligations pursuant to the terms of the Borrower’s currently outstanding preferred stock by making non-cash, in kind distributions.

 

7.7 Investments.  Directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries to do so, other than Permitted Investments, or maintain or invest any of its property with a Person other than Bank or Bank’s Affiliates or permit any Subsidiary to do so unless such Person has entered into a control agreement with Bank, in form and substance satisfactory to Bank, or suffer or permit any Subsidiary to be a party to, or be bound by, an agreement that restricts such Subsidiary from
paying dividends or otherwise distributing property to Borrower. Further, Borrower shall not enter into any license or agreement with any Prohibited Territory or with any Person organized under or doing business in a Prohibited Territory.

 

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.  Make any payment in respect of any Subordinated Debt, or permit any of its Subsidiaries to make any such payment, except in compliance with the terms of such Subordinated Debt and the terms of the subordination agreement relating to such Subordinated Debt, or amend any provision of any document evidencing such Subordinated Debt, except in compliance with the terms of the subordination agreement relating to such Subordinated Debt, or amend any provision affecting Bank’s rights contained in any documentation
relating to the Subordinated Debt without Bank’s prior written consent.

 

7.10 Inventory and Equipment.  Store any Material Collateral with a bailee, warehouseman, or similar third party unless the third party has been notified of Bank’s security interest and Bank (a) has received an acknowledgment from the third party that it is holding or will hold the Inventory or Equipment for Bank’s benefit or (b) is in possession of the warehouse receipt, where negotiable, covering such Inventory or Equipment.  Except for Inventory sold in the ordinary course of business and except for such other
locations as Bank may approve in writing, Borrower shall keep the Material Collateral only at the location set forth in Section 10 and such other locations of which Borrower gives Bank prior written notice and as to which Bank files a financing statement where needed to perfect its security interest.

 

7.11 No Investment Company; Margin Regulation.  Become or be controlled by an “investment company,” within the meaning of the Investment Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the business of extending credit for the purpose of purchasing or carrying margin stock, or use the proceeds of any Credit Extension for such purpose.

 

8.   EVENTS OF DEFAULT.

 

Any one or more of the following events shall constitute an Event of Default by Borrower under this Agreement:

 

8.1 Payment Default.  If Borrower fails to pay any of the Obligations when due;

 

8.2 Covenant Default.

 

(a) If Borrower fails to perform any obligation under Article 6 or violates any of the covenants contained in Article 7 of this Agreement; or

 

  

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(b) If Borrower fails or neglects to perform or observe any other material term, provision, condition, covenant contained in this Agreement, in any of the Loan Documents, or in any other present or future agreement between Borrower and Bank and as to any default under such other term, provision, condition or covenant that can be cured, has failed to cure such default within ten (10) days after Borrower receives notice thereof or any officer of Borrower becomes aware 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 reasonable period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, so long as Borrower continues to diligently attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default but no Credit Extensions will be made;

 

8.3 Material Adverse Change.  If there occurs any circumstance or circumstances that could reasonably be expected to have a Material Adverse Effect.

 

8.4 Defective Perfection.  If Bank shall receive at any time following the Closing Date an SOS Report indicating that except for Permitted Liens, Bank’s security interest in the Collateral is not prior to all other security interests or Liens of record reflected in the report;

 

8.5 Attachment.  If any material portion of Borrower’s assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any trustee, receiver or person acting in a similar capacity and such attachment, seizure, writ or distress warrant or levy has not been removed, discharged or rescinded within five (5) days, or if Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, or if a
judgment or other claim becomes a lien or encumbrance upon any material portion of Borrower’s assets, or if a notice of lien, levy, or assessment is filed of record with respect to any of Borrower’s assets by the United States Government, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, and the same is not paid within five (5) days after Borrower receives notice thereof, provided that none of the foregoing shall constitute an Event of Default where such action or event is stayed or an adequate bond has been posted pending a good faith contest by Borrower (provided that Bank may determine, in its sole and absolute discretion, that no Credit Extensions will be made during such cure period);

 

8.6 Insolvency.  If Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced against Borrower and is not dismissed or stayed within thirty (30) days (provided that no Credit Extensions will be made prior to the dismissal of such Insolvency Proceeding);

 

8.7 Other Agreements.  If there is a default or other failure to perform 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 One Hundred Thousand Dollars ($100,000.00) or that would reasonably be expected to have a Material Adverse Effect;

 

8.8 Subordinated Debt.  If Borrower makes any payment on account of Subordinated Debt, except to the extent the payment is allowed under any subordination agreement entered into with Bank;

 

8.9 Judgments.  If one or more final judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least One Hundred Thousand Dollars ($100,000.00) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower or any Subsidiary and the same are not, within ten (10) days after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to
the expiration of any such stay (provided that Bank may determine, in its sole and absolute discretion, that no Credit Extensions will be made prior to the discharge, stay, or bonding of such judgment, order, or decree).

 

  

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8.10 Misrepresentations.  If any material misrepresentation or material misstatement exists now or when made hereafter in any warranty or representation set forth herein or in any certificate delivered to Bank by any Responsible Officer pursuant to this Agreement or to induce Bank to enter into this Agreement or any other Loan Document.

 

9.   BANK’S RIGHTS AND REMEDIES.

 

9.1 Rights and Remedies.  Upon the occurrence and during the continuance of an Event of Default, Bank may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Borrower:

 

(a) Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable (provided that upon the occurrence of an Event of Default described in Section 8.6 (insolvency), all Obligations shall become immediately due and payable without any action by Bank);

 

(b) Demand that Borrower  (i) deposit cash with Bank in an amount equal to the amount of any Letters of Credit remaining undrawn, and (ii) pay in advance all Letter of Credit fees scheduled to be paid or payable over the remaining term of the Letters of Credit, and Borrower shall promptly deposit and pay such amounts;

 

(c) Cease advancing money or extending credit to or for the benefit of Borrower under this Agreement or under any other agreement between Borrower and Bank;

 

(d) Settle or adjust disputes and claims directly with account debtors for amounts, upon terms and in whatever order that Bank reasonably considers advisable;

 

(e) Make such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral.  Borrower agrees to assemble the Collateral if Bank so requires, and to make the Collateral available to Bank as Bank may designate.  Borrower authorizes Bank to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Bank’s determination appears to be prior or superior to its security interest and to
pay all expenses incurred in connection therewith.  With respect to any of Borrower’s owned premises, Borrower hereby grants Bank a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of Bank’s rights or remedies provided herein, at law, in equity, or otherwise;

 

(f) Set off and apply to the Obligations any and all (i) balances and deposits of Borrower held by Bank, and (ii) indebtedness at any time owing to or for the credit or the account of Borrower held by Bank;

 

(g) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral.  Bank is hereby granted a license or other right, solely pursuant to the provisions of this Section 9.1, to use, without charge, Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, 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 9.1, Borrower’s rights under all licenses and all franchise agreements shall inure to Bank’s benefit;

 

(h) Sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrower’s premises) as Bank determines is commercially reasonable, and apply any proceeds to the Obligations in whatever manner or order Bank deems appropriate.  Bank may sell the Collateral without 

 

  

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giving any warranties as to the Collateral.  Bank may specifically disclaim any warranties of title or the like.  This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.  If Bank sells any of the Collateral upon credit, Borrower will be credited only with payments actually made by the purchaser, received by Bank, and applied to the indebtedness of the purchaser.  If the purchaser fails to pay for the Collateral, Bank may resell the Collateral and Borrower shall be credited with the proceeds of the sale;

 

(i) Bank may credit bid and purchase at any public sale;

 

(j) Apply for the appointment of a receiver, trustee, liquidator or conservator of the Collateral, without notice and without regard to the adequacy of the security for the Obligations and without regard to the solvency of Borrower, any guarantor or any other Person liable for any of the Obligations; and

 

(k) Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrower.

 

Bank may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.

 

9.2 Power of Attorney.  Effective only upon the occurrence and during the continuance of an Event of Default, Borrower hereby irrevocably appoints Bank (and any of Bank’s designated officers, or employees) as Borrower’s true and lawful attorney to:  (a) send requests for verification of Accounts or notify account debtors of Bank’s security interest in the Accounts; (b) endorse Borrower’s name on any checks or other forms of payment or security that may come into Bank’s possession; (c) sign
Borrower’s name on any invoice or bill of lading relating to any Account, drafts against account debtors, schedules and assignments of Accounts, verifications of Accounts, and notices to account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims under and decisions with respect to Borrower’s policies of insurance; (f) settle and adjust disputes and claims respecting the accounts directly with account debtors, for amounts and upon terms which Bank determines to be reasonable; (g) enter into a short-form  intellectual property security agreement consistent with the terms of this Agreement for recording purposes only or modify, in its sole discretion, any intellectual property security agreement entered into between Borrower and Bank without first obtaining Borrower’s approval of or signature to such modification by amending Exhibits
A, B, and C, thereof, as appropriate, to include reference to any right, title or interest in any Copyrights, Patents or Trademarks acquired by Borrower after the execution hereof or to delete any reference to any right, title or interest in any Copyrights, Patents or Trademarks in which Borrower no longer has or claims to have any right, title or interest; and (h) file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of Borrower where permitted by law; provided Bank may exercise such power of attorney to sign the name of Borrower on any of the documents described in clause (h) above, regardless of whether an Event of Default has occurred.  The appointment of Bank as Borrower’s attorney in fact, and each and every one of Bank’s rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been fully repaid and performed and Bank’s obligation to provide advances hereunder is terminated.

 

9.3 Accounts Collection.  At any time after the occurrence and during the continuation of an Event of Default, Bank may notify any Person owing funds to Borrower of Bank’s security interest in such funds and verify the amount of such Account.  Borrower shall collect all amounts owing to Borrower for Bank, receive in trust all payments as Bank’s trustee, and immediately deliver such payments to Bank in their original form as received from the account debtor, with proper endorsements for deposit.

 

9.4 Bank Expenses.  If Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as required under the terms of this Agreement, then Bank may do any or all of the following after reasonable notice to Borrower:  (a) make payment of the 

 

  

16

  

same or any part thereof; (b) set up such reserves under the Revolving Line as Bank deems necessary to protect Bank from the exposure created by such failure; or (c) obtain and maintain insurance policies of the type discussed in Section 6.5 of this Agreement, and take any action with respect to such policies as Bank deems prudent.  Any amounts so paid or deposited by Bank shall constitute Bank Expenses, shall be immediately due and payable, and shall bear interest at the then applicable rate hereinabove provided, and shall be secured by the Collateral.  Any payments made by Bank shall not constitute an agreement by Bank to make similar payments in the future or a waiver by Bank of any Event of Default under
this Agreement.

 

9.5 Bank’s Liability for Collateral.  Bank has no obligation to clean up or otherwise prepare the Collateral for sale.  All risk of loss, damage or destruction of the Collateral shall be borne by Borrower.

 

9.6 No Obligation to Pursue Others.  Bank has no obligation to attempt to satisfy the Obligations by collecting them from any other person liable for them and Bank may release, modify or waive any collateral provided by any other Person to secure any of the Obligations, all without affecting Bank’s rights against Borrower.  Borrower waives any right it may have to require Bank to pursue any other Person for any of the Obligations.

 

9.7 Remedies Cumulative.  Bank’s rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative.  Bank shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity.  No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on Borrower’s part shall be deemed a continuing waiver.  No delay by Bank shall constitute a waiver, election, or
acquiescence by it.  No waiver by Bank shall be effective unless made in a written document signed on behalf of Bank and then shall be effective only in the specific instance and for the specific purpose for which it was given.  Borrower expressly agrees that this Section 9.7 may not be waived or modified by Bank by course of performance, conduct, estoppel or otherwise.

 

9.8 Demand; Protest.  Except as otherwise provided in this Agreement, Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment and any other notices relating to the Obligations.

 

10.   NOTICES.

 

Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements, compliance certificates and other informational documents which may be sent by first-class mail, postage prepaid or email) shall be personally delivered or sent by a recognized overnight delivery service, certified mail, postage prepaid, return receipt requested, or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses set forth below:

If to Borrower:                                     CAS Medical Systems, Inc.

44 East Industrial Road

Branford, CT 06405

Attn:  Jeffery A. Baird, Chief Financial Officer

FAX:  (203) 488-9438

Email:  Jbaird@casmed.com

If to Bank:                                             East West Bank

2350 Mission College Blvd., Suite 988

Santa Clara, CA 95054

Attn:  Linda Le Beau, Managing Director

FAX:  (408) 588-9688

Email:  linda.lebeau@eastwestbank.com

  

17

  

The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other.

 

11.   CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; 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, or subsequently provided by Borrower in accordance with, 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 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 orders 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 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.

 

  

18

  

12.   GENERAL PROVISIONS.

 

12.1 Successors and Assigns.  This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties and shall bind all persons who become bound as a debtor to this Agreement; provided, however, that neither this Agreement nor any rights hereunder may be assigned by Borrower without Bank’s prior written consent, which consent may be granted or withheld in Bank’s sole discretion.  Bank shall have 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 hereunder.

 

12.2 Indemnification.  Borrower shall defend, indemnify and hold harmless Bank and its officers, employees, and agents against:  (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this Agreement and/or the Loan Documents; and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank, its officers, employees and agents as a result of or in any way arising out of, following, or consequential to transactions between
Bank and Borrower whether under this Agreement, or otherwise (including without limitation reasonable attorneys fees and expenses), except for losses caused by Bank’s gross negligence or willful misconduct.

 

12.3 Time of Essence.  Time is of the essence for the performance of all obligations set forth in this Agreement.

 

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

 

12.5 Correction of Loan Documents.  Bank may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties.

 

12.6 Amendments in Writing, Integration. All amendments to or terminations of this Agreement or the other Loan Documents must be in writing signed by the parties.  All prior agreements, understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of this Agreement and the other Loan Documents, if any, are merged into this Agreement and the Loan Documents.

 

12.7 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, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement.

 

12.8 Survival.  All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any Obligations remain outstanding or Bank has any obligation to make any Credit Extension to Borrower.  The obligations of Borrower to indemnify Bank with respect to the expenses, damages, losses, costs and liabilities described in Section 12.2 shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Bank have run.

 

12.9 Confidentiality.  In handling any confidential information, Bank and all employees and agents of Bank shall exercise the same degree of care that Bank exercises with respect to its own proprietary information of the same types to maintain the confidentiality of any non-public information thereby received or received pursuant to this Agreement except that disclosure of such information may be made (i) to the subsidiaries or Affiliates of Bank in connection with their present or prospective business relations with Borrower, (ii) to
prospective transferees or purchasers of any interest in the Loans, (iii) as required by law, regulations, rule or order, subpoena, judicial order or similar order, (iv) as may be required in connection with the examination, audit or similar investigation of Bank, (v) to Bank’s 

 

  

19

  

accountants, auditors and regulators, and (vi) as Bank may determine in connection with the enforcement of any remedies hereunder.  Confidential information hereunder shall not include information that either:  (a) is in the public domain or in the knowledge or possession of Bank when disclosed to Bank, or becomes part of the public domain after disclosure to Bank through no fault of Bank; or (b) is disclosed to Bank by a third party, provided Bank does not have actual knowledge that such third party is prohibited from disclosing such information.

 

 

 

[Balance of Page Intentionally Left Blank]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

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

 

 

	  	  	
CAS MEDICAL SYSTEMS, INC.

	  	  	  
	  	  	
By: /s/ Thomas M. Patton

	  	  	
Name: Thomas M. Patton

	  	  	
Title: President & CEO

	  	  	  
	 	 	 
	 	 	 
	  	  	
EAST WEST BANK

	  	  	  
	  	  	
By: /s/ Linda S. LeBeau

	  	  	
Name: Linda S. LeBeau

	  	  	
Title: Managing Director, Life Sciences

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Loan and Security Agreement]

 

  

  

  

EXHIBIT A

 

DEFINITIONS

 

“Accounts” means all presently existing and hereafter arising accounts, contract rights, payment intangibles and all other forms of obligations owing to Borrower arising out of the sale or lease of goods (including, without limitation, the licensing of software and other technology) or the rendering of services by Borrower and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower’s Books relating to any of the foregoing.

 

“Advance” or “Advances” means a cash advance or cash advances under the Revolving Line.

 

“Affiliate” means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person, and each of such Person’s senior executive officers, directors, and partners.

 

“Bank Expenses” means all reasonable costs or expenses (including reasonable attorneys’ fees and expenses, whether generated in-house or by outside counsel) incurred in connection with the preparation, negotiation, administration, and enforcement of the Loan Documents;  reasonable Collateral audit fees; and Bank’s reasonable attorneys’ fees and expenses (whether generated in-house or by outside counsel) incurred in amending, or validly enforcing or defending the Loan Documents (including fees and expenses of appeal), incurred before, during and after an Insolvency Proceeding, whether or not suit is brought.

 

“Borrower State” means Delaware, the state under whose laws Borrower is organized.

 

“Borrower’s Books” means all of Borrower’s books and records including:  ledgers; records concerning Borrower’s assets or liabilities, the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment, containing such information.

 

“Borrowing Base” means an amount equal to eighty percent (80.00%) of Eligible Accounts, as determined by Bank with reference to the most recent Borrowing Base Certificate delivered by Borrower.

 

“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks in the State of California are authorized or required to close.

 

“Cash” means unrestricted cash and cash equivalents.

 

“Change in Control” shall mean a transaction in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of Borrower, who did not have such power before such transaction.

 

“Chief Executive Office State” means Connecticut, where Borrower’s chief executive office is located.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the California Uniform Commercial Code as amended or supplemented from time to time.

 

“Collateral” means the property described on (x) prior to the occurrence of an Event of Default, Exhibit B-1 attached hereto, and (y) after the occurrence of an Event of Default, Exhibit B-2 attached hereto; and, in each case, all Negotiable Collateral to the extent not described on Exhibit B, except to the extent (i) any such property is nonassignable by its terms without the consent of the licensor thereof or another party 

 

  

1

  

(but only to the extent such prohibition on transfer is enforceable under applicable law, including, without limitation, Sections 9406 and 9408 of the Code), (ii) the granting of a security interest therein is contrary to applicable law, provided that upon the cessation of any such restriction or prohibition, such property shall automatically become part of the Collateral, or (iii) any such property constitutes the capital stock of a controlled foreign corporation (as defined in the IRC), in excess of sixty five percent (65%) of the voting power of all classes of capital stock of such controlled foreign corporations entitled to vote; provided that in no case shall the definition of “Collateral” exclude
any Accounts, proceeds of the disposition of any property, or general intangibles consisting of rights to payment.

 

“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement,
interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of business.  The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.

 

“Copyrights” means any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held.

 

“Credit Extension” means each Advance, the Term Loan or any other extension of credit by Bank to or for the benefit of Borrower hereunder.

 

“Eligible Accounts” means those Accounts that arise in the ordinary course of Borrower’s business that comply with all of Borrower’s representations and warranties to Bank set forth in Section 5.3; provided, that Bank may change the standards of eligibility by giving Borrower thirty (30) days prior written notice.  Unless otherwise agreed to by Bank, Eligible Accounts shall not include the following:

 

	
(a)  

	
Accounts that the account debtor has failed to pay in full within ninety (90) days of invoice date;

 

	
(b)  

	
Credit balances over ninety (90) days;

 

	
(c)  

	
Accounts with respect to an account debtor, twenty-five percent (25%) of whose Accounts the account debtor has failed to pay within ninety (90) days of invoice date, except as approved in writing by Bank;

 

	
(d)  

	
Accounts with respect to an account debtor, including Subsidiaries and Affiliates, whose total obligations to Borrower exceed twenty-five percent (25%) of all Accounts, to the extent such obligations exceed the aforementioned percentage, except as approved in writing by Bank;

 

	
(e)  

	
Accounts with respect to which the account debtor does not have its principal place of business in the United States, except for Eligible Foreign Accounts;

 

	
(f)  

	
Accounts with respect to which the account debtor is the United States or any department, agency, or instrumentality of the United States, except for (i) Accounts of the United States, or (ii) Accounts with the United States Department of Veterans Affairs (and related hospitals), if in each case the payee has assigned its payment rights to Bank and the assignment has been acknowledged under the Assignment of Claims Act of 1940 (31 U.S.C. 3727);

 

  

2

  

	
(g)  

	
Accounts with respect to which Borrower is liable to the account debtor for goods sold or services rendered by the account debtor to Borrower, but only to the extent of any amounts owing to the account debtor against amounts owed to Borrower;

 

	
(h)  

	
Accounts with respect to which goods are placed on consignment, guaranteed sale, sale or return, sale on approval, bill and hold, demo or promotional, or other terms by reason of which the payment by the account debtor may be conditional;

 

	
(i)  

	
Accounts with respect to which the account debtor is an officer, employee, agent or Affiliate of Borrower;

 

	
(j)  

	
Accounts that have not yet been billed to the account debtor or that relate to deposits (such as good faith deposits) or other property of the account debtor held by Borrower for the performance of services or delivery of goods which Borrower has not yet performed or delivered;

 

	
(k)  

	
Accounts with respect to which the account debtor disputes liability or makes any claim with respect thereto as to which Bank believes, in its sole discretion, that there may be a basis for dispute (but only to the extent of the amount subject to such dispute or claim), or is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of business;

 

	
(l)  

	
Accounts the collection of which Bank reasonably determines after inquiry and consultation with Borrower to be doubtful; and

 

	
(m)  

	
Retentions and hold-backs.

 

“Eligible Foreign Accounts” means Accounts with respect to which the account debtor does not have its principal place of business in the United States and is not located in an OFAC sanctioned country and that are (i) supported by one or more letters of credit in an amount and of a tenor, and issued by a financial institution, acceptable to Bank, (ii) insured by the Export Import Bank of the United States, (iii) generated by an account debtor with its principal place of business in Canada, provided that the Bank has perfected its security interest in the appropriate Canadian province, and (iv) in each case, approved by Bank on a case-by-case basis.  All Eligible Foreign Accounts must be
calculated in U.S. Dollars.

 

“Environmental Laws” means all laws, rules, regulations, orders and the like issued by any federal state, local foreign or other governmental or quasi-governmental authority or any agency pertaining to the environment or to any hazardous materials or wastes, toxic substances, flammable, explosive or radioactive materials, asbestos or other similar materials.

 

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

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.

 

“Event of Default” has the meaning assigned in Article 8.

 

“GAAP” means United States generally accepted accounting principles, consistently applied, as in effect from time to time.

 

“Indebtedness” means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations, and (d) all Contingent Obligations, if any.

 

  

3

  

“Insolvency Proceeding” means any proceeding commenced by or against any Person or entity under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

 

“Intellectual Property Collateral” means all of Borrower’s right, title, and interest in and to the following:

 

	
(a)  

	
Copyrights, Trademarks and Patents;

 

	
(b)  

	
Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held;

 

	
(c)  

	
Any and all design rights which may be available to Borrower now or hereafter existing, created, acquired or held;

 

	
(d)  

	
Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above;

 

	
(e)  

	
All licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such use to the extent permitted by such license or rights;

 

	
(f)  

	
All amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents; and

 

	
(g)  

	
All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.

 

“Interest-Only End Date” means twelve (12) months from the date Bank makes the Term Loan, but not later than July 31, 2013.

 

“Inventory” means all present and future inventory in which Borrower has any interest.

 

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

 

“IRC” means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

 

“Letter of Credit” means a commercial or standby letter of credit or similar undertaking issued by Bank at Borrower’s request.

 

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

 

“Loan Documents” means, collectively, this Agreement, any note or notes executed by Borrower in connection therewith, and any other document, instrument or agreement entered into in connection with this Agreement, all as amended or extended from time to time.

 

“Material Adverse Effect” means (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 or milestone covenants in Section 6 during the next succeeding financial reporting period.

 

  

4

  

“Material Collateral” means, Collateral held at any particular location from time to time, the aggregate value of which exceeds One Hundred Thousand Dollars ($100,000) at any time.

 

“Negotiable Collateral” means all of Borrower’s present and future letters of credit of which it is a beneficiary, drafts, instruments (including promissory notes), securities, documents of title, and chattel paper, and Borrower’s Books relating to any of the foregoing.

 

“Obligations” means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement or any other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from Borrower to others that Bank may have obtained by assignment or otherwise.

 

“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.

 

“Periodic Payments” means all installments or similar recurring payments that Borrower may now or hereafter become obligated to pay to Bank pursuant to the terms and provisions of any instrument, or agreement now or hereafter in existence between Borrower and Bank.

 

“Permitted Indebtedness” means:

 

	
(a)  

	
Indebtedness of Borrower in favor of Bank arising under this Agreement or any other Loan Document;

 

	
(b)  

	
Indebtedness existing on the Closing Date and disclosed in the Schedule;

 

	
(c)  

	
Indebtedness not to exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate in any fiscal year of Borrower secured by a lien described in clause (c) of the defined term “Permitted Liens,” provided such Indebtedness does not exceed the lesser of the cost or fair market value of the equipment financed with such Indebtedness;

 

	
(d)  

	
Subordinated Debt;

 

	
(e)  

	
Indebtedness to trade creditors or vendors incurred in the ordinary course of business; and

 

	
(f)  

	
Extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the principal amount is not increased or the terms modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.

 

“Permitted Investment” means:

 

	
(a)  

	
Investments existing on the Closing Date disclosed in the Schedule;

 

	
(b)  

	
(i) consistent with the Borrower’s investment policy, marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within two (2) years from the date of acquisition thereof, (ii) consistent with the Borrower’s investment policy, commercial paper maturing no more than two (2) years from the date of creation thereof and currently having rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service, (iii) Bank’s certificates of deposit maturing no more than one (1) year from the date of investment therein, and (iv) Bank’s money market accounts;

 

  

5

  

	
(c)  

	
Repurchases of stock from former employees or directors of Borrower under the terms of applicable repurchase agreements (i) in an aggregate amount not to exceed One Hundred Thousand Dollars ($100,000.00) in any fiscal year, provided that no Event of Default has occurred, is continuing or would exist after giving effect to the repurchases, or (ii) in any amount where the consideration for the repurchase is the cancellation of indebtedness owed by such former employees to Borrower regardless of whether an Event of Default exists;

 

	
(d)  

	
Investments accepted in connection with Permitted Transfers;

 

	
(e)  

	
Investments of Subsidiaries in or to Borrower and Investments by Borrower in Subsidiaries, other than Statcorp, not to exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate in any fiscal year; provided that Borrower may not make any Investments in Statcorp;

 

	
(f)  

	
Investments not to exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate in any fiscal year consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, 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 plan agreements approved by Borrower’s Board of Directors;

 

	
(g)  

	
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 Borrower’s business;

 

	
(h)  

	
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 subparagraph (h) shall not apply to Investments of Borrower in any Subsidiary; and

 

	
(i)  

	
Joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support, provided that any cash Investments by Borrower do not exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate in any fiscal year.

 

“Permitted Liens” means the following:

 

	
(a)  

	
Any Liens existing on the Closing Date and disclosed in the Schedule (excluding Liens to be satisfied with the proceeds of the Advances) or arising under this Agreement or the other Loan Documents;

 

	
(b)  

	
Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings and for which Borrower maintains adequate reserves, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

 

	
(c)  

	
Liens not to exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate at any time (i) upon or in any Equipment acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such Equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such Equipment, or (ii) existing on such Equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such Equipment;

 

	
(d)  

	
Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (a) through (c) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase;

 

  

6

  

	
(e)  

	
Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Sections 8.5 (attachment) or 8.9 (judgments); and

 

	
(f)  

	
Liens in favor of other financial institutions arising in connection with Borrower’s deposit accounts held at such institutions to secure standard fees for deposit services charged by, but not financing made available by such institutions, provided that Bank has a perfected security interest in the amounts held in such deposit accounts.

 

“Permitted Transfer” means the conveyance, sale, lease, transfer or disposition by Borrower or any Subsidiary of:

 

	
(a)  

	
Inventory in the ordinary course of business;

 

	
(b)  

	
Non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business;

 

	
(c)  

	
Worn-out or obsolete Equipment; or

 

	
(d)  

	
Other assets of Borrower or its Subsidiaries that do not in the aggregate exceed One Hundred Thousand Dollars ($100,000.00) during any fiscal year.

 

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

 

“Prime Rate” means the greater of three and one-quarter percent (3.25%) per year, or the variable rate of interest, per annum, most recently announced by Bank, as its “prime rate,” whether or not such announced rate is the lowest rate available from Bank.

 

“Prohibited Territory” means any person or country listed by the Office of Foreign Assets Control of the United States Department of Treasury as to which transactions between a United States Person and that territory are prohibited.

 

“Responsible Officer” means each of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer and the Controller of Borrower.

 

“Revolving Line” means a Credit Extension of up to Two Million Five Hundred Thousand Dollars ($2,500,000.00).

 

“Revolving Maturity Date” means January 31, 2014.

 

“Schedule” means the schedule of exceptions attached hereto and approved by Bank (the execution of this Agreement constituting such approval by Bank).

 

“Schedule of Accounts” means the Schedule of Accounts provided to and approved by Bank prior to the Closing Date.

 

“Shares” means (i) sixty-five percent (65%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by Borrower in any Subsidiary of Borrower which is not an entity organized under the laws of the United States or any territory thereof, and (ii) one hundred percent (100%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by Borrower in any Subsidiary of Borrower which is an entity organized under the laws of the United States or any territory thereof.

 

  

7

  

“SOS Reports” means the official reports from the Secretaries of State of the Chief Executive Office State and the Borrower State and other applicable federal, state or local government offices identifying all current security interests filed in the Collateral and Liens of record as of the date of such report.

 

“Statcorp” means Statcorp, Inc., a Delaware corporation and wholly-owned, dormant Subsidiary of Borrower.

 

“Subordinated Debt” means any debt incurred by Borrower that is subordinated in writing to the debt owing by Borrower to Bank on terms reasonably acceptable to Bank (and identified as being such by Borrower and Bank).

 

“Subsidiary” means any corporation, partnership or limited liability company or joint venture in which (i) any general partnership interest or (ii) more than fifty percent (50%) of the stock, limited liability company interest or joint venture of which by the terms thereof ordinary voting power to elect the Board of Directors, managers or trustees of the entity, at the time as of which any determination is being made, is owned by Borrower, either directly or through an Affiliate.

 

“Tangible Net Worth” means at any date as of which the amount thereof shall be determined, the sum of the capital stock, partnership interest or limited liability company interest of Borrower and its Subsidiaries minus intangible assets, determined in accordance with GAAP.

 

“Term Loan” has the meaning set forth in Section 2.1(c).

 

“Term Loan Maturity Date” means July 31, 2015.

 

“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.

 

 

 

 

 

  

8

  

 

DEBTOR                                           CAS Medical Systems, Inc.

 

SECURED PARTY:                         EAST WEST BANK

 

EXHIBIT B-1

 

COLLATERAL DESCRIPTION ATTACHMENT TO LOAN AND SECURITY AGREEMENT

 

All personal property of Borrower (herein referred to as “Borrower” or “Debtor”) whether presently existing or hereafter created or acquired, and wherever located, including, but not limited to:

 

All personal property of Debtor of every kind, whether presently existing or hereafter created or acquired, and wherever located, including but not limited to: (a) all accounts (including health-care-insurance receivables), chattel paper (including tangible and electronic chattel paper), deposit accounts, documents (including negotiable documents), equipment (including all accessions and additions thereto), general intangibles (including payment intangibles and software), goods (including fixtures), instruments (including promissory notes), inventory (including all goods held for sale or lease or to be furnished under a contract of service, and including returns and repossessions), investment property (including
securities and securities entitlements), letter of credit rights, money, and all of Debtor's books and records with respect to any of the foregoing, and the computers and equipment containing said books and records; and (b) any and all cash proceeds and/or noncash proceeds thereof, including, without limitation, insurance proceeds, and all supporting obligations and the security therefor or for any right to payment.  All terms above have the meanings given to them in the California Uniform Commercial Code, as amended or supplemented from time to time.

 

Notwithstanding the foregoing, the Collateral shall not include any copyrights, patents, trademarks, servicemarks and applications therefor, now owned or hereafter acquired, or any claims for damages by way of any past, present and future infringement of any of the foregoing (collectively, the “Intellectual Property”); provided, however, that the Collateral shall include all accounts and general intangibles that consist of rights to payment from the sale, licensing or disposition of all or any part of, or rights in, the Intellectual Property (the “Rights to Payment”).  Notwithstanding the foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security
interest in the underlying Intellectual Property is necessary to have a security interest in the Rights to Payment, then the Collateral shall automatically, and effective as of July 31, 2012, include the Intellectual Property to the extent necessary to permit perfection of Bank’s security interest in the Rights to Payment.

 

 

 

 

  

  

  

DEBTOR                                           CAS Medical Systems, Inc.

 

SECURED PARTY:                         EAST WEST BANK

 

EXHIBIT B-2

 

COLLATERAL DESCRIPTION ATTACHMENT TO LOAN AND SECURITY AGREEMENT

 

All personal property of Borrower (herein referred to as “Borrower” or “Debtor”) whether presently existing or hereafter created or acquired, and wherever located, including, but not limited to:

 

	
(a)  

	
all accounts (including health-care-insurance receivables), chattel paper (including tangible and electronic chattel paper), deposit accounts, documents (including negotiable documents), equipment (including all accessions and additions thereto), general intangibles (including payment intangibles and software), goods (including fixtures), instruments (including promissory notes), inventory (including all goods held for sale or lease or to be furnished under a contract of service, and including returns and repossessions), investment property (including securities and securities entitlements), letter of credit rights, money, and all of Debtor’s books and records with respect to any of the foregoing, and the computers and
equipment containing said books and records;

 

	
(b)  

	
all common law and statutory copyrights and copyright registrations, applications for registration, now existing or hereafter arising, in the United States of America or in any foreign jurisdiction, obtained or to be obtained on or in connection with any of the foregoing, or any parts thereof or any underlying or component elements of any of the foregoing, together with the right to copyright and all rights to renew or extend such copyrights and the right (but not the obligation) of Secured Party to sue in its own name and/or in the name of the Debtor for past, present and future infringements of copyright;

 

	
(c)  

	
all trademarks, service marks, trade names and service names and the goodwill associated therewith, together with the right to trademark and all rights to renew or extend such trademarks and the right (but not the obligation) of Secured Party to sue in its own name and/or in the name of the Debtor for past, present and future infringements of trademark;

 

	
(d)  

	
all (i) patents and patent applications filed in the United States Patent and Trademark Office or any similar office of any foreign jurisdiction, and interests under patent license agreements, including, without limitation, the inventions and improvements described and claimed therein, (ii) licenses pertaining to any patent whether Debtor is licensor or  licensee, (iii) income, royalties, damages, payments, accounts and accounts receivable now or hereafter due and/or payable under and with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof, (iv) right (but not the obligation) to sue in the name of Debtor and/or in the name of Secured Party for past,
present and future infringements thereof, (v) rights corresponding thereto throughout the world in all jurisdictions in which such patents have been issued or applied for, and (vi) reissues, divisions, continuations, renewals, extensions and continuations-in-part with respect to any of the foregoing; and

 

	
(e)  

	
any and all cash proceeds and/or noncash proceeds of any of the foregoing, including, without limitation, insurance proceeds, and all supporting obligations and the security therefor or for any right to payment.  All terms above have the meanings given to them in the California Uniform Commercial Code, as amended or supplemented from time to time.

 

  

  

  

EXHIBIT C

LOAN ADVANCE/PAYDOWN REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS Noon, P.S.T.

 

	
To: ­ ________________

FAX #: (408) 588-9688

 

	
DATE: ____________________               TIME: ___________

 

	
 

FROM:

	
 

CAS Medical Systems, Inc.

Borrower's Name

	
 

TELEPHONE REQUEST (For Bank Use Only):

	
 

FROM:

	
 

____________________

Authorized Signer's Name

	
The following person is authorized to request the loan payment transfer/loan advance on the designated account and is known to me.

	
 

FROM:

	
 

________________________

Authorized Signature (Borrower)

	
 

________________________________

Authorized Request & Phone #

	
 

PHONE #:

	
  

___________________

	
 

                ________________________________

Received by (Bank) & Phone #

	
FROM ACCOUNT#:

	___________________	  
	
(please include Note number, if applicable)

	                ________________________________
	
TO ACCOUNT #:

	___________________	
Authorized Signature (Bank)

	
(please include Note number, if applicable)

	  

	
REQUESTED  TRANSACTION TYPE 

	
REQUESTED DOLLAR AMOUNT

	
For Bank Use Only

	  	  	  
	
PRINCIPAL INCREASE* (ADVANCE)

	
$__________________________________

	
Date Rec'd:

	
PRINCIPAL PAYMENT (ONLY)

	
$__________________________________

	
Time:

	  	  	
Comp. Status:

	
YES

	
NO

	
OTHER INSTRUCTIONS:

	  	
Status Date:

	  	  	
Time:

	  	  	
Approval:

	  	  
	  	  

 

All representations and warranties of Borrower stated in the Loan and Security Agreement are true, correct and complete in all material respects as of the date of the telephone request for and advance confirmed by this Loan Advance/Paydown Request Form; provided, however, that those representations and warranties the date expressly referring to another date shall be true, correct and complete in all material respects as of such date.

 

	
*IS THERE A WIRE REQUEST TIED TO THIS LOAN ADVANCE?  (PLEASE CIRCLE ONE)

	
YES

	
NO

	
If YES, the Outgoing Wire Transfer Instructions must be completed below.

 

 

	
OUTGOING WIRE TRANSFER INSTRUCTIONS

	
Fed Reference Number

 

	
Bank Transfer Number

	
The items marked with an asterisk (*) are required to be completed.

	
*Beneficiary Name

	  
	
*Beneficiary Account Number

	  
	
*Beneficiary Address

	  
	
Currency Type

	
US DOLLARS ONLY

	
*ABA Routing Number (9 Digits)

	  
	
*Receiving Institution Name

	  
	
*Receiving Institution Address

	  
	
*Wire Amount

	
 $

  

  

  

EXHIBIT D

BORROWING BASE CERTIFICATE

 

	
Borrower:  CAS Medical Systems, Inc.

	  	
Bank:

	
East West Bank

	  	  	  	  
	
Commitment Amount:                                           $2,500,000.00

	  	  
	  	  	  	
2350 Mission College Blvd., Suite 988

	  	  	  	
Santa Clara, CA 95054

	  	  	  	
Fax:  (408) 588-9688

	  	  	  
	
ACCOUNTS RECEIVABLE

	  	  
	
1.       Accounts Receivable Book Value as of

	  	  
	
2.       Additions (please explain on reverse)

	  	  
	
3.       TOTAL ACCOUNTS RECEIVABLE AS OF                         

	  	
$___________

	  	  	  
	
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

	  	  
	
4.       Amounts over 90 days

	
$___________

	  
	
5.       Credit Balances over 90 days

	
$___________

	  
	
6.       Balance of 25% over 90 day

	
$___________

	  
	
7.       Concentration limits 25%

	
$___________

	  
	
8.       Foreign Accounts

	
$___________

	  
	
9.       Governmental Accounts

	
$___________

	  
	
10.     Contra Accounts

	
$___________

	  
	
11.     Promotion or Demo Accounts

	
$___________

	  
	
12.     Intercompany/Employee Accounts

	
$___________

	  
	
13.     Not Yet Billed/Deposit Held

	
$___________

	  
	
14.     Accounts in Dispute

	
$___________

	  
	
15.     Doubtful Accounts

	
$___________

	  
	
16.     Retentions/Hold-backs

	
$___________

	  
	
17.     Other (please explain below)

	
$___________

	  
	
18.     TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

	  	
$___________

	
19.     Eligible Accounts (#3 minus #18)

	
$___________

	  
	
20.     LOAN VALUE OF ACCOUNTS RECEIVABLE(80.00% of #19)

	
$___________

	  	  	  
	  	  	  
	
BALANCES

	  	  
	
21.       Maximum Loan Amount

	
$2,500,000.00

	  
	
22.       Total Funds Available (Lesser of #20 or #21)

	  	
$___________

	
23.       Outstanding under Sublimits (if any)

	  	
$___________

	
24.       Present balance owing on Line of Credit

	  	
$___________

	
25.       Reserve Position (#22 minus #23 and #24)

	  	
$___________

	  	  	  

The undersigned represents and warrants that the foregoing is true, complete and correct, and that the information reflected in this Borrowing Base Certificate complies with the representations and warranties set forth in the Loan and Security Agreement between the undersigned and East West Bank.

 

	
Comments:

	  	  
	  	  	  
	  	
BANK USE ONLY

 

 

Rec’d By:__________________________

Date:_____________________________

Reviewed By:_______________________

Date:______________________________

 

 

	
 

 

 

 

 

______________________________

Authorized Signer

  

  

  

EXHIBIT E

COMPLIANCE CERTIFICATE

 

	
Please send all Required Reporting to:

	
East West Bank

2350 Mission College Blvd., Suite 988

Santa Clara, CA 95054

Fax: (408) 588-9688

 

	
FROM:

	
CAS Medical Systems, Inc.

 

The undersigned authorized Officer of CAS Medical Systems, Inc. (“Borrower”), hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in complete compliance for the period ending ______________ with all required covenants, including without limitation the ongoing registration of intellectual property rights in accordance with Section 6.8, except as noted below and (ii) all representations and warranties of Borrower stated in the Agreement are true and correct in all material respects as of the date hereof.  Attached herewith are the required documents supporting the above
certification.  The Officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes.

 

Please indicate compliance status by circling Yes/No under "Complies" or "Applicable" column.

 

	

REPORTING COVENANTS

 

	

REQUIRED

 

	

COMPLIES

 

	

Company Prepared Monthly F/S; Compl. Cert.

	

Monthly, within 30 days

	

YES

	

NO

	

CPA Audited, Unqualified F/S; Compl. Cert.

	

Annually, within 90 days of FYE

	

YES

	

NO

	

Borrowing Base Cert., A/R & A/P Agings

	

Monthly, within 30 days

	

YES

	

NO

	

Annual Business Plan (incl. operating budget)/Projections (detailed monthly)

	

By 1/31

	

YES

	

NO

	

Intellectual Property Report

	

Quarterly within 30 days

	

YES

	

NO

	

Audit

 

	

Initial and Semi-annual

 

	

YES

 

	

NO

 

	  	  	  	  
	

10-Q

	

Quarterly, within 5 days of SEC filing (50 days)

	

YES

	

NO

	

10-K

 

	

Annually, within 5 days of SEC filing (95 days)

 

	

YES

 

	

NO

 

	

Total amount of Borrower's cash and

	

Amount: $                                               

	

YES

	

NO

	

investments

	  	  	  
	

Total amount of Borrower's cash and

	

Amount: $                                               

	

YES

	

NO

	

investments maintained with Bank

	  	  	  

	

FINANCIAL/MILESTONE COVENANTS

 

	

REQUIRED

 

	

ACTUAL

 

	

COMPLIES

 

	

TNW (measured quarterly)

	

Variance not greater than $1MM from projections as provided in the Agreement

	

$  _____________

	

YES

	

NO

	

Minimum TNW

	

Increase to TNW by not less than $5MM in net cash by the end of the fourth (4th) quarter of 2013, compared to projections as provided in the Agreement

	

$  _____________

	

YES

	

NO

	

FDA 510K approval – Next-Generation Vital Signs Monitor

	

9/30/13

	  	

YES

	

NO

	

FDA 510K approval – Next-Generation Cerebral Oximiter

	

9/30/13

	  	

YES

	

NO

 

Please Enter Below Comments Regarding Violations:

 

  

  

  

The Officer further acknowledges that at any time Borrower is not in compliance with all the terms set forth in the Agreement, including, without limitation, the financial covenants, no credit extensions will be made.

 

Very truly yours,

 

_____________________________

Authorized Signer

 

Name:                                                        
                                                                

 

Title:                                                          
                                                      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

  

SCHEDULE OF EXCEPTIONS

 

Permitted Indebtedness  (Exhibit A)

 

None.

 

Permitted Investments  (Exhibit A)

 

Ownership of one hundred percent (100%) of Statcorp.

 

Permitted Liens  (Exhibit A)

 

None.

 

Prior Names  (Section 5.5)

 

The Borrower also operates under the trade name “CASMED”.

 

Litigation  (Section 5.6)

 

1) Graves vs CAS Medical Systems – This is a product liability case awaiting decision by the South Carolina Supreme Court of an appeal filed by the plaintiff and heard by the Supreme Court during November 2011. The trial court granted summary judgment to CAS during April 2010 on all causes of action. Legal costs have been covered by CAS product liability insurance.

 

2) Nellcor vs. CAS Medical Systems. - On August 7, 2009, Somanetics Corporation filed an action against the Company in the United States District Court for the Eastern District of Michigan alleging patent infringement, false advertising, and common law unfair competition and libel.  The complaint requested injunctive relief and unspecified monetary damages, including treble damages and reasonable attorneys’ fees.  On October 19, 2009, the Company answered the complaint, denying all allegations against it.  In addition, the Company asserted counterclaims against Somanetics for violation of the antitrust laws and for a
declaration that the patents sued upon were invalid, unenforceable, and/or have not been infringed by the Company.

 

On October 27, 2010, a settlement was reached with Nellcor Puritan Bennett, LLC, (“Nellcor”) as successor in interest to Somanetics Corporation, on Somanetics’ action for patent infringement and other claims against the Company.  The terms of the confidential settlement (the “Settlement”) resolved all matters between the two parties as of the initiation of the lawsuit and caused the dismissal of the action with prejudice in a manner by which no payments were made to either party.

 

On December 29, 2011, Nellcor filed an action against the Company in the United States District Court for the Eastern District of Michigan alleging (i) breach of the Settlement, (ii) violation of the Lanham Act, (iii) common law unfair competition and (iv) trade libel.  The complaint requested injunctive relief and unspecified monetary damages, including compensatory damages and reasonable attorneys’ fees.  On February 24, 2012, the Company answered the complaint and denied substantially all of the claims and set forth certain affirmative defenses.  The Court has issued a scheduling order requiring the parties to complete discovery by December 3, 2012, requiring the filing of
dispositive motions by January 7, 2013 and setting a tentative trial date of July or August 2013.  On July 20, 2012, Nellcor filed a partial motion for summary judgment asking the Court to determine that the Company breached the Settlement and to enter an order enjoining the Company from taking any further action before the United States Patent and Trademark Office regarding a certain patent reexamination/reissue proceeding. The summary judgment motion does not seek a determination that Nellcor is entitled to damages, but does reserve the right to seek damages in a later motion. The Company's time for filing a response has not run, and it plans on opposing the summary judgment motion.

 

Inbound Licenses  (Section 5.12)

 

None.

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