Document:

Exhibit 10.2

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

 

 

 

 

 

 

Form of Side Letter

 

December 28, 2016

Dear Willow
Oak Asset Management:

 

This
side letter agreement (this “Side Letter”) is being entered into by Willow Oak Asset Management, LLC (the “Investor”)
and Alluvial Capital Management, LLC (the “General Partner”), for itself and on behalf of Alluvial Fund,
LP, to which it serves as general partner and investment adviser, in connection with the Investor’s
investment in Alluvial Fund, LP as set forth herein. Capitalized terms that are used but not
defined in this Side Letter shall have the respective meanings ascribed to such terms in Alluvial Fund, LP’s
Confidential Private Placement Memorandum, Limited Partnership Agreement, or Subscription Agreement, in each case, as in effect
on the date of this Side Letter (collectively, the “Fund Documents”).

 

1.             
No Incentive Fees. Notwithstanding any provision contained in the Fund Documents, the Investor’s
Capital Account shall not be subject to any incentive fee.

 

2.             
Most Favored Nation. None of the General Partner or any of its affiliates shall enter into, effective on or after the date
of this Side Letter, any side letter or similar agreement or understanding (an “Other Agreement”) with any
current or prospective investor in Alluvial Fund, LP or any Future Fund (as defined below) that would grant to such investor any
more favorable fee terms than those set forth in Section 1 hereof (No Incentive Fees), unless the Investor is provided
with: (x) reasonable advance notice of the proposed Other Agreement; (y) any agreements or other materials relevant to understanding
the terms of the proposed Other Agreement; and (z) the opportunity, after time to consider of no less than 60 days, to receive
the more favorable fee terms included in the proposed Other Agreement. The General Partner represents and warrants that it has
disclosed to the Investor all side letters and similar agreements or understandings with respect to Alluvial Fund, LP, any Future
Fund or their investors or their prospective investors that would, if effective on or after the date of this Side Letter, trigger
the Investor’s rights as described in this Section.

 

3.             
Capacity Rights. The Investor may in its sole discretion make Capital Contributions exceeding
the Seed Investment, and such Capital Contributions shall be subject to the terms of Section 1 hereof (No Incentive Fees).

    	 	

	 

    	 

    

 

4.             
Exclusivity. The General Partner agrees that, during the term of this Side Letter, neither it nor of any its affiliates
shall directly or indirectly launch, organize, sponsor, manage or advise any pooled investment vehicle other than Alluvial Fund,
LP, whether publicly or privately offered (each, a “Future Fund,” and collectively, the “Future Funds”),
without first providing the Investor the right of first refusal with regards to participation in any Future Fund. Any participation
offer shall include the opportunity to negotiate in good faith of the General Partner or any of its affiliates and the Investor
or any of its affiliates of a seeding arrangement with respect to such Future Fund, which includes the terms of Section 2
(Most Favored Nation) and Section 3 (Capacity Rights) hereof. If the Investor chooses to participate in such Future Fund,
and regardless of whether such a seeding arrangement is entered into, the terms of Section 6 hereof (Fee Share), shall
also apply to any management fees or incentive fees earned by the General Partner or any of its affiliates with respect to such
Future Fund; provided, however, that the Investor or its affiliates have paid or have agreed to pay 100% of the
organizational fees, costs and expenses of such Future Fund, including, without limitation, legal expenses, which shall be reasonable,
and which shall be communicated in advance to the Investor or such affiliate to the extent reasonably practicable. In addition,
during the term of this Side Letter, the General Partner shall not into, or cause Alluvial Fund, LP, to enter into, a fee sharing
arrangement with respect to any management fees or incentive fees paid by Alluvial Fund, LP, except as set forth in Section
6 hereto (Fee Share). Investor may choose to participate in any Future Fund in its sole discretion, according to the terms
herein. If Investor chooses not to participate in a Future Fund, both the General Partner and Investor retain their respective
rights as defined in this Side Letter.

 

5.             
Funding. The Investor shall make the following incremental Capital Contributions to Alluvial
Fund, LP, the timing of such Capital Contributions subject to waiver by the Investor in its sole
discretion: $2,500,000 in four equal installments - December 31, 2016, March 31, 2017, June 30, 2017 and September 30, 2017 -
for an aggregate Capital Contribution of $10,000,000 (the “Seed Investment”). The Investor, in its sole discretion,
may accelerate the foregoing schedule; provided, however, that it does so in $2,500,000 increments.

 

6.             
Fee Share.

 

(a)   In
consideration for the Investor’s Seed Investment in Alluvial Fund, LP, the General Partner shall pay to the Investor an
amount equal to [***] of the management fees and incentive fees received by the General Partner,
if any, from Alluvial Fund, LP, which shall be payable to the Investor in arrears within 30 Business Days from the end of the
month in which such fees were received. If this Side Letter is terminated on a date other than the last day of the relevant calculation
period with respect to such fees, the Investor shall receive a pro rata share of the management fees and the incentive
fees based upon the ratio of the number of days in the relevant calculation period for such fees under the Limited Partnership
Agreement and the number of days in such period that this Side Letter was effective.

 

(b)  Notwithstanding
any of the foregoing, no share of any management fees or incentive fees earned by the General Partner shall be due to the Investor
with respect to any initial Capital Contributions made by any separately-managed portfolios, which are advised by the General
Partner as of the date of this Side Letter (each, an “Existing Client”); provided, however, that
the Investor shall be entitled to a [***] share of any management fees and incentive fees
received by the General Partner with respect to any additional Capital Contributions made to Alluvial Fund, LP by any Existing
Client; provided, further, that if any Existing Client begins a new account with Alluvial Fund, LP (e.g., an IRA,
joint, or trust account), the Investor shall be entitled to its full [***] share of any management fees and incentive fees received
by the General Partner with respect to such new account.

 

    	 	
2
	 

    	 

    

(c)   Notwithstanding
any of the foregoing, the Investor’s share of any management fees and incentive fees otherwise due shall be reduced on a
pro rata basis by that portion of the Seed Investment that has been received by Alluvial Fund, LP at the beginning of the
relevant calculation period for such fees. For example, assuming a management fee and incentive fee is charged to Alluvial Fund,
LP, and in respect of a fee calculation period beginning January 31, 2017, and where, as of January 1, 2017 (the beginning of
such fee calculation period), the Investor has contributed $2,500,000 of the Seed Investment to Alluvial Fund, LP, the Investor
shall be entitled to a [***] share of any management fees and incentive fees earned by the General Partner (subject to Section
6(b) hereof), or 1⁄4 of the amount otherwise due to the Investor, to reflect that it had contributed 1⁄4 of the
Seed Investment (as of the beginning of such calculation period).

 

7.             
Lockup. Notwithstanding any restrictions contained in the Fund Documents, the Investor shall
be entitled to withdraw all or any portion of any share of its management fees or incentive fees from its Capital Account as of
June 30 and December 31 of each calendar year; provided, however, that the Investor may not make any withdrawal
from its Capital Account (whether with respect to the Seed Investment or its share of any management fees or incentive fees) until
its Capital Account balance exceeds $50,000,000, and in that case any partial withdrawals may not reduce the Investor’s
Capital Account balance below $50,000,000; provided, further, that a full withdrawal may be made at any time in
accordance with the terms of the Fund Documents and Section 13 hereof (Term and Termination) provided, further,
that a full withdrawal shall not be permitted prior to a date five years after the effective date of this Side Letter. Notwithstanding
the foregoing or any term in the Fund Documents, the Investor shall be permitted to withdraw any portion of its Capital Account
(whether with respect to the Seed Investment or its share of any management fees or incentive fees), for the sole reason to prevent
the Investor, its parent, or any of their affiliates, from registering as an “investment company” under the Investment
Company Act of 1940, as amended, or registering as an “investment adviser” under the Investment Advisers Act of the
1940, as amended, or under the securities laws of any state securities authority, or otherwise where doing so would prevent the
Investor, its parent or any of their affiliates from experiencing a materially adverse tax, legal or pecuniary consequence as
a result of its continued investment in Alluvial Fund, LP.

 

8.             
Key Man Event. In the event that David Waters, Jr. is no longer actively involved in the day-to-day management of Alluvial
Fund, LP for any reason for 90 consecutive days, the Investor, in its sole discretion, may replace the General Partner as the
general partner of Alluvial Fund, LP, or appoint a new general partner. In such case, the Investor’s share of the management
fees and incentive fees paid pursuant to Section 6 hereof (Fee Share) shall increase to [***],
with David Waters, Jr. or his beneficiaries or assigns receiving the remaining [***]. In such case, the parties hereto undertake
to enter into such definitive documentation as may be necessary or advisable to memorialize the foregoing, including, without
limitation, amended or modified Fund Documents.

 

9.             
Start-up Costs. The Investor acknowledges and agrees that it will be responsible for 100%
of the organizational fees, costs and expenses of Alluvial Fund, LP, including, without limitation,
legal expenses. The Investor may, but shall not be required to, pay such fees, costs and expenses with respect to any Future Fund.

 

10.          
Fund Documents. In the event of any conflict between the terms of this Side Letter and the
Fund Documents, the parties acknowledge that the terms of this Side Letter shall prevail.

 

11.          
Nature of Relationship. Nothing in this Side Letter, including, without limitation, Section
6 hereof (Fee Share) shall give the Investor any power or authority to govern or otherwise make decisions for or on behalf
of Alluvial Fund, LP or the General Partner. Nothing in this Side Letter shall be deemed to
establish a joint venture or general partnership between the Investor on the one hand, and the General Partner and/or Alluvial
Fund, LP, on the other hand.

 

    	 	
3
	 

    	 

    

12.          
Further Assurances. The parties to this Side Letter shall (and shall cause any entities under
their respective control to) cooperate with each other to execute and deliver any other documents and do all further acts and
things as may reasonably be necessary to carry out the intent of the parties under this Side Letter.

 

13.          
Term and Termination. This Side Letter shall remain in full force and effect so long as the
Investor remains a Limited Partner in Alluvial Fund, LP, and shall automatically terminate
upon the complete withdrawal from Alluvial Fund, LP by the Investor. In addition, the parties
may choose to terminate this Side Letter at any time in a written instrument signed by each of them.

 

14.          
Amendments; No Waiver. This Side Letter may not be amended or supplemented, and no provisions hereof may be modified or
waived, except by an instrument in writing signed by each party hereto. No waiver of any provisions hereof by any party shall
be deemed a waiver of any other provisions hereof by such party, nor shall any such waiver be deemed a continuing waiver of any
provision hereof by such party.

 

15.          
Assignment. No party to this Side Letter may assign any of its rights or obligations under this Side Letter without the
prior written consent of each party hereto.

 

16.          
Governing Laws; Jurisdiction. This Side Letter shall be construed in accordance with and governed by the laws of the State
of New York, without reference to its principles of conflicts of laws or those of any other State. Each party hereto hereby submits
to the jurisdiction of the courts of the State of New York and the Federal Courts in and for the Southern District of New York
(collectively, the “New York Courts”) in connection with any action or proceeding relating to this Side Letter
and any other document executed in connection herewith. Each party agrees that any action or proceeding involving any dispute
arising out of or in connection with this Side Letter shall be brought only in the New York Courts.

 

17.          
Severability. If any term or provision of this Side Letter is held invalid, illegal or unenforceable in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other term or provision of this Side Letter or invalidate
or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision
is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Side Letter so as to effect
the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the greatest extent possible.

 

18.          
Counterparts. This Side Letter may be executed in one or more counterparts, each of which shall be deemed to be an original
but all of which together shall constitute one and the same instrument, and may be in pdf or other form of electronic copy.

 

19.          
Section Headings. All section headings herein are for convenience of reference only and are not part of this Side Letter,
and no construction or reference shall be derived therefrom.

 

20.          
Confidentiality. The parties agree that the terms of this Side Letter are confidential. The parties shall not divulge or
publicize the terms hereof except as may be necessary to enforce the promises, covenants and/or understandings contained herein
or as either party may be required to do so by law, court order, subpoena or other judicial action or governmental authorities;
provided, that in such event, the disclosing party will seek appropriate confidentiality of those portions of this Side
Letter for which confidential treatment is typically permitted by the relevant governmental authority.

 

 

(Signature Page
Follows)

    	 	
4
	 

    	 

    

IN WITNESS WHEREOF, the
parties hereto have caused this Side Letter to be duly executed as of the date first set forth above.

 

 

ALLUVIAL FUND, LP

 

By:_____________________

Name: David Waters, Jr.

Title:_____________________

 

Willow Oak Asset Management, LLC

 

By: Sitestar Corporation, its sole member

 

By:_____________________

Name: Steven L. Kiel

Title: Chief Executive Officer,

Chief Financial Officer and Director

 

(Signature Page to Side Letter)Exhibit 10.1

 

FIRST LOAN MODIFICATION AGREEMENT

 

This First Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of December 30, 2016, by and among (a) SILICON VALLEY BANK, a California corporation (“SVB”), in its capacity as Administrative Agent (“Agent”), (b) SVB, as a Revolving Line Lender and as a Term Loan Lender, MIDCAP FUNDING IV TRUST, a Delaware statutory trust, as a Revolving Line Lender (in such capacity and together with its successors and assigns, “MidCap Revolving Line Lender”), MIDCAP FUNDING III TRUST, a Delaware Statutory Trust and ELM 2016-1 TRUST, a Delaware statutory trust, each as a Term Loan Lender (in such capacity and together with their respective successors and assigns, “MidCap Term Loan Lender”; SVB, the MidCap Revolving Line Lender and the MidCap Term Loan Lender are each referred to herein as a “Lender” and collectively, the “Lenders”), and (c) VERICEL CORPORATION, a Michigan corporation (the “Borrower”).

 

1.                                      DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations which may be owing by Borrower to the Lenders, Borrower is indebted to the Lenders pursuant to a loan arrangement dated as of September 9, 2016, evidenced by, among other documents, a certain Loan and Security Agreement dated as of September 9, 2016, by and among Borrower, Agent and the Lenders (as amended, the “Loan Agreement”).  Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.

 

2.                                      DESCRIPTION OF COLLATERAL.  Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement (together with any other collateral security granted to the Lenders, the “Security Documents”).

 

Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the “Existing Loan Documents”.

 

3.                                      DESCRIPTION OF CHANGE IN TERMS.

 

A.                                    Modifications to Loan Agreement.

 

1                                         Section 6.9(a) of the Loan Agreement shall be deleted in its entirety and replaced with the following:

 

(a)  Minimum Revenue.  Achieve minimum net revenue (determined in accordance with GAAP), measured on a trailing twelve month basis ending as of the date of measurement, on a consolidated basis of Borrower and its Subsidiaries, in an amount equal to or greater than the amount listed below for each corresponding trailing twelve month period:

 

1

 

	
Trailing Twelve Month Period Ended
    	
 
    	
Minimum Net Revenue
    	
 
    
	
August 31,   2016
    	
 
    	
$
    	
52,000,000.00
    	
 
    
	
September 30,   2016
    	
 
    	
$
    	
52,000,000.00
    	
 
    
	
October 31,   2016
    	
 
    	
$
    	
52,280,500.00
    	
 
    
	
November 30,   2016
    	
 
    	
$
    	
50,695,400.00
    	
 
    
	
December 31,   2016
    	
 
    	
$
    	
52,000,000.00
    	
 
    
	
January 31,   2017
    	
 
    	
$
    	
52,000,000.00
    	
 
    
	
February 28,   2017
    	
 
    	
$
    	
52,000,000.00
    	
 
    
	
March 31,   2017
    	
 
    	
$
    	
52,000,000.00
    	
 
    
	
April 30,   2017
    	
 
    	
$
    	
53,000,000.00
    	
 
    
	
May 31,   2017
    	
 
    	
$
    	
53,000,000.00
    	
 
    
	
June 30,   2017
    	
 
    	
$
    	
53,000,000.00
    	
 
    
	
July 31,   2017
    	
 
    	
$
    	
53,000,000.00
    	
 
    
	
August 31,   2017
    	
 
    	
$
    	
53,000,000.00
    	
 
    
	
September 30,   2017
    	
 
    	
$
    	
55,250,000.00
    	
 
    
	
October 31,   2017
    	
 
    	
$
    	
56,000,000.00
    	
 
    
	
November 30,   2017
    	
 
    	
$
    	
58,000,000.00
    	
 
    
	
December 31,   2017
    	
 
    	
$
    	
60,000,000.00
    	
 
    

 

Minimum net revenue financial covenant requirements for the monthly periods ending after December 31, 2017 will be determined by the Lenders in their reasonable discretion after consultation with Borrower, no later than December 31 of the year immediately preceding the each applicable fiscal year, based on the projections delivered by Borrower to Agent and the Lenders in accordance with Section 6.2(e) (which for the avoidance of doubt shall be delivered by Borrower no later than November 30 of the year immediately preceding each applicable fiscal year); provided that, such minimum net revenue threshold for any month following December 31, 2017 shall be in an amount equal to eighty percent (80%) of net revenue set forth with respect to such month in such projections, but in any event not less than $60,000,000.00 for any monthly period.

 

2

 

2                                         The definition of “Term Loan Final Payment” appearing in Section 13.1 of the Loan Agreement shall be deleted in its entirety and replaced with the following: “Term Loan Final Payment” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest, and supplemental of all other fees and expenses due and owing in connection with the Term Loan Advances), in an amount equal to the aggregate original principal amount of the Term Loan Advances advanced to Borrower multiplied by five percent (5.00%).

 

3                                   Compliance Certificate.  The Compliance Certificate attached as Exhibit B to the Loan Agreement is deleted in its entirety and replaced with Exhibit A attached hereto.

 

4.                                      FEES.  Borrower shall reimburse the Lenders for all legal fees and expenses incurred in connection with the Existing Loan Documents and this Loan Modification Agreement.

 

5.                                      RATIFICATION OF PERFECTION CERTIFICATE.  Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in a certain Perfection Certificate, dated as of September 9, 2016, as updated from time to time through the date hereof, and acknowledges, confirms and agrees the disclosures and information above Borrower provided to the Agent and the Lenders in such Perfection Certificate remains true and correct in all material respects as of the date hereof.

 

6.                                      AUTHORIZATION TO FILE.  Borrower hereby authorizes Agent to file UCC financing statements without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in order to further perfect or protect Agent’s interest in the Collateral, including a notice that any disposition of the Collateral, by either the Borrower or any other Person, shall be deemed to violate the rights of the Agent under the Code.

 

7.                                      CONSISTENT CHANGES.  The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.

 

8.                                      RATIFICATION OF LOAN DOCUMENTS.  Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of the Loan Agreement, each other Loan Document and all security or other collateral granted to the Lenders, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.

 

9.                                      NO DEFENSES OF BORROWER.  Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against the Lenders with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against any of the Lenders, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES each of the Lenders from any liability thereunder.

 

10.                               CONTINUING VALIDITY.  Borrower understands and agrees that in modifying the existing Obligations, each Lender is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents.  Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect.  The Lenders’ agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate any Lender to make any future modifications to the Obligations.  Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations.  It is the intention of the Agent, each Lender and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by the Agent and the Lenders in writing.  No maker will be released by virtue of this Loan Modification Agreement.

 

3

 

11.                               RIGHT OF SET-OFF.  In consideration of Lenders’ agreement to enter into this Loan Modification Agreement, Borrower hereby reaffirms and hereby grants to Agent for the benefit of the Lenders, a lien, security interest and right of set off as security for all Obligations owed to the Lenders, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Agent or any entity under the control of Agent or any Lender (including a Subsidiary thereof) or in transit to any of them.  At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Agent may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the loan.  ANY AND ALL RIGHTS TO REQUIRE ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

12.                               CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER.  Section 12 of the Loan Agreement is hereby incorporated by reference in its entirety.

 

13.                               COUNTERSIGNATURE.  This Loan Modification Agreement shall become effective only when it shall have been executed by Borrower, Agent and each Lender.

 

[The remainder of this page is intentionally left blank]

 

4

 

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

 

	
BORROWER:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
VERICEL CORPORATION
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
/s/ Dominick C.   Colangelo
    	
 
    	
 
    
	
Name:
    	
Nick Colangelo
    	
 
    	
 
    
	
Title:
    	
CEO
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
AGENT:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
SILICON VALLEY BANK,   as Agent
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
/s/ Ryan Roller
    	
 
    	
 
    
	
Name:
    	
Ryan Roller
    	
 
    	
 
    
	
Title:
    	
Vice President
    	
 
    	
 
    

 

 

	
TERM LOAN LENDERS:
    	
 
    	
REVOLVING LINE LENDERS:
    
	
 
    	
 
    	
 
    
	
SILICON VALLEY BANK
    	
 
    	
SILICON VALLEY BANK
    
	
 
    	
 
    	
 
    
	
By
    	
/s/ Ryan Roller
    	
 
    	
By
    	
/s/ Ryan Roller
    
	
Name:
    	
Ryan Roller
    	
 
    	
Name:
    	
Ryan Roller
    
	
Title:
    	
Vice President
    	
 
    	
Title:
    	
Vice President
    

 

 

	
MIDCAP FUNDING III TRUST
    	
 
    	
MIDCAP FUNDING IV TRUST
    
	
 
    	
 
    	
 
    
	
By: 
    	
Apollo Capital   Management, L.P., its investment manager
    	
 
    	
By: 
    	
Apollo Capital   Management, L.P., its investment manager
    
	
 
    	
 
    	
 
    
	
By: 
    	
Apollo Capital   Management GP, LLC, its general partner    
    	
 
    	
By: 
    	
Apollo Capital   Management GP, LLC, its general 
   partner  
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Maurice Amsellem
    	
 
    	
By:
    	
/s/ Maurice Amsellem
    
	
Name:
    	
Maurice Amsellem
    	
 
    	
Name:
    	
Maurice Amsellem
    
	
Title:
    	
Authorized Signatory
    	
 
    	
Title:
    	
Authorized Signatory
    

 

5

 

TERM LOAN LENDERS:

 

ELM 2016-1 TRUST

 

	
By:
    	
MidCap Financial   Services Capital Management, LLC, as Servicer
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Adam Day
    	
 
    	
 
    	
 
    
	
Name:
    	
Adam Day
    	
 
    	
 
    	
 
    
	
Title:
    	
Authorized Signatory
    	
 
    	
 
    	
 
    

 

6

 

Exhibit A to First Loan Modification Agreement

 

EXHIBIT B

 

COMPLIANCE CERTIFICATE

 

	
TO:
    	
SILICON   VALLEY BANK, as Agent
    	
Date:
    
	
FROM:
    	
VERICEL   CORPORATION
    	
 
    

 

The undersigned authorized officer of Vericel Corporation (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement among Borrower, SILICON VALLEY BANK, a California corporation (“SVB”), in its capacity as Administrative Agent (“Agent”), (b) SVB, as a Revolving Line Lender and as a Term Loan Lender, MIDCAP FUNDING IV TRUST, a Delaware statutory trust, as a Revolving Line Lender (in such capacity and together with its successors and assigns, “MidCap Revolving Line Lender”), MIDCAP FUNDING III TRUST, a Delaware Statutory Trust and ELM 2016-1 TRUST, a Delaware statutory trust, each as a Term Loan Lender (in such capacity and together with their respective successors and assigns, “MidCap Term Loan Lender”; SVB, the MidCap Revolving Line Lender and the MidCap Term Loan Lender are each referred to herein as a “Lender” and collectively, the “Lenders”) (as amended, the “Loan Agreement”), (1) Borrower is in compliance for the period ending                 with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries, if any, relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Agent.  Attached are the required documents supporting the certification.  The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes.  The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered.  Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

 

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

 

	
Reporting Covenant
    	
 
    	
Required
    	
 
    	
Complies
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Monthly financial statements with
   Compliance Certificate
    	
 
    	
Monthly within 30 days (for the monthly periods   ending March 31, June 30, September 30 and December 31,   no later than forty-five (45) days after the last day of each such month)
    	
 
    	
Yes   No
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Annual financial statement (CPA Audited) + CC
    	
 
    	
FYE within 90 days
    	
 
    	
Yes   No
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
10-Q, 10-K and 8-K
    	
 
    	
Within 5 days after filing with SEC
    	
 
    	
Yes   No
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

7

 

	
A/R & A/P Agings, Deferred Revenue report   and general ledger
    	
 
    	
Monthly within 30 days
    	
 
    	
Yes   No
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Transaction Reports
    	
 
    	
(i) With each request for an Advance and   (ii) within thirty (30) days after the last day of each month
    	
 
    	
Yes   No
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Projections
    	
 
    	
FYE within 30 days, and as amended/updated
    	
 
    	
Yes   No
    

 

	
Financial Covenant
    	
 
    	
Required
    	
 
    	
Actual
    	
 
    	
Complies
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Maintain as indicated:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Minimum Revenue (monthly, on a trailing 12 month
    basis)
    	
 
    	
*
    	
 
    	
$
    	
 
    	
 
    	
Yes  No
    
								

 

* See Section 6.9(a)

 

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

 

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

 

 

 

 

	
Vericel Corporation
    	
 
    	
BANK USE ONLY
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Received by:
    	
 
    
	
By:
    	
 
    	
 
    	
AUTHORIZED   SIGNER
    
	
Name:
    	
 
    	
 
    	
Date:
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Verified:
    	
 
    
	
 
    	
 
    	
AUTHORIZED   SIGNER
    
	
 
    	
 
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Compliance Status: 
    	
Yes  No
    
									

 

8

 

SCHEDULE 1 TO COMPLIANCE CERTIFICATE

 

FINANCIAL COVENANTS OF BORROWER

 

In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.

 

Dated:

 

I.             Minimum Revenue (Section 6.9(a))

 

Required:  Minimum Revenue.  Achieve minimum net revenue (determined in accordance with GAAP), measured on a trailing twelve month basis ending as of the date of measurement, on a consolidated basis of Borrower and its Subsidiaries, in an amount equal to or greater than the amount listed below for each corresponding trailing twelve month period:

 

9

 

	
Trailing Twelve Month Period Ended
    	
 
    	
Minimum Net Revenue
    
	
 
    	
 
    	
 
    
	
August 31, 2016
    	
 
    	
$
    	
52,000,000.00
    
	
September 30, 2016
    	
 
    	
$
    	
52,000,000.00
    
	
October 31, 2016
    	
 
    	
$
    	
52,280,500.00
    
	
November 30, 2016
    	
 
    	
$
    	
50,695,400.00
    
	
December 31, 2016
    	
 
    	
$
    	
52,000,000.00
    
	
January 31, 2017
    	
 
    	
$
    	
52,000,000.00
    
	
February 28, 2017
    	
 
    	
$
    	
52,000,000.00
    
	
March 31, 2017
    	
 
    	
$
    	
52,000,000.00
    
	
April 30, 2017
    	
 
    	
$
    	
53,000,000.00
    
	
May 31, 2017
    	
 
    	
$
    	
53,000,000.00
    
	
June 30, 2017
    	
 
    	
$
    	
53,000,000.00
    
	
July 31, 2017
    	
 
    	
$
    	
53,000,000.00
    
	
August 31, 2017
    	
 
    	
$
    	
53,000,000.00
    
	
September 30, 2017
    	
 
    	
$
    	
55,250,000.00
    
	
October 31, 2017
    	
 
    	
$
    	
56,000,000.00
    
	
November 30, 2017
    	
 
    	
$
    	
58,000,000.00
    
	
December 31, 2017
    	
 
    	
$
    	
60,000,000.00
    

 

Minimum net revenue financial covenant requirements for the monthly periods ending after December 31, 2017 will be determined by the Lenders in their reasonable discretion after consultation with Borrower, no later than November 30 of the year immediately preceding the each applicable fiscal year, based on the projections delivered by Borrower to Agent and the Lenders in accordance with Section 6.2(e) (which for the avoidance of doubt shall be delivered by Borrower no later than November of the year immediately preceding each applicable fiscal year); provided that, such minimum net revenue threshold for any month following December 31, 2017 shall be in an amount equal to eighty percent (80%) of net revenue set forth with respect to such month in such projections, but in any event not less than $60,000,000.00 for any monthly period.

 

10

 

Actual: all amounts measured on a trailing twelve month basis

 

	
A.
    	
Aggregate   value of net revenue of Borrower and its Subsidiaries
    	
$
    

 

Is line A equal to or greater than $                                                       ?

 

	
 
    	
o  No,   not in compliance
    	
o  Yes,   in compliance
    

 

11

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