Document:

exv10w3

 

Exhibit 10.3

RESTRICTED STOCK UNIT AGREEMENT

     This Restricted Stock Unit Agreement (the “Agreement”) is hereby entered into effective
as of                              , 20         (the “Award Date”), by and between Nuveen Investments, Inc., a Delaware
corporation (the “Company”), and [ Name ], a member of the Company’s Board of Directors (the
“Director”). Any term capitalized but not defined in this Agreement will have the meaning set
forth in the Nuveen Investments, Inc. 2005 Equity Incentive Plan (the “Plan”).

     1. Purpose. The purpose of this Agreement is to provide compensation to the
independent directors of the Company, including the Director, for service in the form of a stock
equivalent ownership interest in the Company. The award contemplated by this Agreement represents
a portion of the Director’s total compensation for serving on the Company’s Board, and the form is
intended to serve as a longer-term incentive to the Director and to further align the Director’s
interests with those of the Company’s stockholders.

     2. Administration. The Board will administer this Agreement, provided that Director
and other independent Board members party to these arrangements shall not participate in the
administration of this Agreement. The Board shall have authority to interpret the Agreement, to
adopt and revise rules and regulations relating to the Agreement and to make any other
determinations that it believes necessary or advisable for the administration of the Agreement.
Determinations by the Board shall be final and binding on all parties with respect to all matters
relating to the Agreement.

     3. Award. In accordance with the terms of the Plan and subject to the terms and
conditions of this Agreement, the Company hereby awards the Director [                    ] (0,000)
Restricted Stock Units, effective as of the Award Date in respect of the Director’s service for the
12-month period ending on the Award Date. The number of Restricted Stock Units granted is equal to
the whole number of the Company’s Class A Common Shares, par value $.01 per share (the “Class A
Shares”) with a value nearest to $70,000, based on the average closing price of the Class A Shares
for the twenty trading days ending on the trading day prior to the Award Date.

     4. Restricted Stock Units. The Company will credit the Restricted Stock Units
contemplated by this Agreement to a Restricted Stock Unit Account (the “Account”) established and
maintained for the Director. The Account shall be the record of Restricted Stock Units awarded to
the Director under the Agreement, is solely for accounting purposes and shall not require a
segregation of any Company assets.

     5. Vesting of Restricted Stock Units. All Restricted Stock Units granted to the
Director will be fully vested at all times.

     6. Dividends on Restricted Stock Units. If the Company pays a dividend on shares of
Common Stock, the Company will

     (a) To the extent the Company pays the dividend in cash, credit the Account with
additional Restricted Stock Units in an amount equal to number of Class A Shares (including
fractions thereof) with a value equal to the value of the dividend that would

 

 

have been paid to the Director if each Restricted Stock Unit was a Class A Share, based on the closing
price of the Class A Shares on the payment date for the cash dividend.

     (b) To the extent the Company pays the dividend in the form of additional Class A
Shares, credit the Account with additional Restricted Stock Units in an amount equal to the
number of Class A Shares (including fractions thereof) that would have been paid to the
Director if each Restricted Stock Unit was a Class A Share.

     7. Distribution of Class A Shares.

     (a) The Company will distribute to the Director a whole number Class A Shares equal to
the whole number of the Director’s Restricted Stock Units on the date that is six months
after the day the Director’s service on the Board terminates for any reason (or, if such day
is not a trading day, on the next succeeding trading day) (the “Distribution Date”). On the
Distribution Date, the Company also will also pay to the Director in cash an amount in lieu
of any fractional Restricted Stock Unit in the Account, based on the closing price of the
Class A Shares on the trading day prior to the Distribution Date.

     (b) In the event of the Director’s death, distribution of the Class A Shares due under
this Agreement shall be made to the appointed and qualified executor or other personal
representative of the Director to be distributed in accordance with the Director’s will or
applicable intestacy law; or in the event that there shall be no such representative duly
appointed and qualified within six months after the date of the Director’s death, then to
such persons as, at the date of his death, would be entitled to share in the distribution of
the Director’s personal estate under the provisions of the applicable statute then in force
governing the descent of intestate property, in the proportion specified in such statute.

     (c) In the event of a Change in Control, all Class A Shares not previously distributed
shall be immediately distributed to the Director, consistent with Section 4.1 of the Plan.

     8. Changes in Capital or Corporate Structure and Change in Control. In the event of
any change in the outstanding shares of common stock of the Company by reason of a
recapitalization, reclassification, reorganization, stock split, reverse stock split, combination
of shares, stock dividend or similar transaction, the Board shall proportionately adjust, in an
equitable manner, the number of Restricted Stock Units held by the Director under this Agreement,
in accordance with the Plan.

     9. Nontransferability. Restricted Stock Units awarded under this Agreement, and any
rights and privileges pertaining thereto, may not be transferred, assigned, pledged or hypothecated
in any manner, by operation of law or otherwise, other than by will or by the laws of descent and
distribution, and shall not be subject to execution, attachment or similar process.

     10. Voting and Dividend Rights. Except as specifically provided herein, the Director
shall not be entitled to any voting rights, to receive any dividends, or to have his or her Account

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credited or increased as a result of any dividends or other distribution with respect to the Class
A Shares.

     11. Binding Effect. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators, successors and permitted
assigns.

     12. Withholding. The Company may withhold from any Class A Shares that it is required
to deliver under this Agreement the number of Class A Shares sufficient to satisfy applicable
withholding requirements under any federal, state or local law, if any.

     13. No Limitation on the Company’s Rights. The granting of Restricted Stock Units
shall not in any way affect the Company’s right or power to make adjustments, reclassifications or
changes in its capital or business structure or to merge, consolidate, reincorporate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.

     14. Plan and Agreement Not a Contract of Employment or Service. Neither the Plan nor
this Agreement is a contract of employment or service, and no terms of the Director’s employment or
service will be affected in any way by the Plan, this Agreement or related instruments, except to
the extent specifically expressed therein. Neither the Plan nor this Agreement will be construed
as conferring any legal rights of the Director to continue in service with the Company.

     15. Entire Agreement and Amendment. This Agreement is the entire Agreement between
the parties to it, and all prior oral and written representations are merged in this Agreement.
This Agreement may be amended, modified or terminated only by written agreement between the
Director and the Company. The headings in this Agreement are inserted for convenience and
identification only and are not intended to describe, interpret, define or limit the scope, extent,
or intent of this Agreement or any provision hereof. Each party has cooperated in the preparation
of this Agreement. As a result, this Agreement shall not be construed against any party on the
basis that the party was the draftsperson.

     16. Notices. Notices given pursuant to this Agreement shall be in writing and shall
be deemed received when personally delivered, or on the date of written confirmation of receipt by
(i) overnight carrier, (ii) facsimile, (iii) registered or certified mail, return receipt
requested, addressee only, postage prepaid, or (iv) such other method of delivery that provides a
written confirmation of delivery. Notice to the Company shall be directed to:

Nuveen Investments, Inc.

333 West Wacker Drive

Chicago, Illinois 60606

Attention: General Counsel

The Company may change the person and/or address to whom the Director must give notice under this
Section 16 by giving the Director written notice of such change, in accordance with the procedures
described above. Notices to or with respect to the Director will be directed to the
Director, or to the Director’s executors, personal representatives or distributees, if the Director is

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deceased, or the assignees of the Director, at the Director’s most recent home address on the
records of the Company.

     17. Governing Law. The laws of the State of Illinois shall govern the validity,
interpretation, construction and performance of this Agreement, without regard to the conflict of
laws principles thereof.

     18. Counterparts. This Agreement may be executed in one or more counterparts, all of
which together shall constitute but one Agreement.

     In Witness Whereof, the parties have executed this Agreement effective as of the date
first above written.

	 	 	 	 	 
	 	 	Nuveen Investments, Inc.
	 
	 	 	 	 
	 
	 	By:	 	 
	 
	 	 	 	 
	Director
	 	 	 	 
	 
	 	 	 	 
	 

	 	Its:	 	 
	 

	 	 	 	 

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Exhibit 10.13

LOAN AND SECURITY AGREEMENT

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

     1 ACCOUNTING AND OTHER TERMS

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

     2 LOAN AND TERMS OF PAYMENT

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

     2.1.1 Revolving Advances.

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

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

     2.1.2 Foreign Exchange Sublimit. As part of the Revolving Line, Borrower may enter into
foreign exchange contracts with Bank under which Borrower commits to purchase from or sell to Bank
a specific amount of Foreign Currency (each, a “FX Forward Contract”) on a specified date (the
“Settlement Date”). FX Forward Contracts shall have a Settlement Date of at least one (1) FX
Business Day after the contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract in a maximum aggregate amount equal to One Hundred Thousand Dollars
($100,000) (the “FX Reserve”). The aggregate amount of FX Forward Contracts at any one time may
not exceed ten (10) times the amount of the FX Reserve. The obligations of Borrower relating to
this section may not exceed the Availability Amount.

     2.1.3 Cash Management Services Sublimit. Borrower may use up to $500,000 (the “Cash
Management Services Sublimit”) of the Revolving Line for Bank’s cash management services which may
include merchant services, direct deposit of payroll, business credit card, and check cashing
services identified in Bank’s various cash management services agreements (collectively, the “Cash
Management Services”). Any amounts used by Borrower for Cash Management Services will be treated
as Advances under the Revolving Line, will accrue interest at the interest rate applicable to
Advances, and will reduce the amount otherwise available for Credit Extensions thereunder.

     2.2 Intentionally Omitted.

     2.3 Payment of Interest on the Credit Extensions.

 

 

          (a) Interest Rate. Subject to Section 2.3(b), the principal amount outstanding under
the Revolving Line shall accrue interest at a floating per annum rate equal to one half of one
percentage point (0.50%) above the Prime Rate, which interest shall be payable monthly in
accordance with Section 2.3(f) below.

          (b) Default Rate. Immediately upon the occurrence and during the continuance of an
Event of Default, Obligations shall bear interest at a rate per annum which is five percentage
points above the rate that is otherwise applicable thereto (the “Default Rate”). Payment or
acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Bank.

          (c) Adjustment to Interest Rate. Changes to the interest rate of any Credit Extension
based on changes to the Prime Rate shall be effective on the effective date of any change to the
Prime Rate and to the extent of any such change.

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

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

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

     2.4 Fees. Borrower shall pay to Bank:

          (a) Commitment Fee. A fully earned, non-refundable commitment fee of $25,000, on the
Effective Date; and

          (b) Unused Revolving Line Facility Fee. A fee (the “Unused Revolving Line Facility
Fee”), payable quarterly, in arrears, on a calendar year basis, in an amount equal to one quarter
of one percent (0.25%) per annum of the average unused portion of the Revolving Line, as determined
by Bank. Borrower shall not be entitled to any credit, rebate or repayment of any Unused Revolving
Line Facility Fee previously earned by Bank pursuant to this Section notwithstanding any
termination of the Agreement or the suspension or termination of Bank’s obligation to make loans
and advances hereunder; and

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

     3 CONDITIONS OF LOANS

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

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

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

 

 

          (c) duly executed original signatures to the completed Borrowing Resolutions for Borrower;

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

          (e) the Perfection Certificate executed by Borrower;

          (f) the insurance policies and/or endorsements required pursuant to Section 6.5 hereof; and

          (g) the fees and Bank Expenses then due as specified in Section 2.4 hereof.

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

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

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

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

     3.3 Covenant to Deliver.

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

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

     4 CREATION OF SECURITY INTEREST 

     4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and
performance in full of all of the Obligations, a continuing security interest in, and pledges to
Bank, the Collateral,

 

 

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

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

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

     4.3 Release of Collateral. If this Agreement is terminated, Bank’s Lien in the Collateral
shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full
in cash. Upon payment in full in cash of the Obligations (other than inchoate indemnity
obligations) and at such time as Bank’s obligations to make Advances have terminated, Bank’s Liens
in the Collateral granted hereunder shall automatically terminate and all rights therein shall
revert to Borrower, and Bank shall, at Borrower’s sole cost and expense, deliver such documents and
make such filings as Borrower shall reasonably request to evidence such termination.

     5 REPRESENTATIONS AND WARRANTIES

          Borrower represents and warrants as follows:

     5.1 Due Organization, Authorization; Power and Authority. Borrower is duly existing and in
good standing in its jurisdiction of formation and is qualified and licensed to do business and is
in good standing in any jurisdiction in which the conduct of its business or its ownership of
property requires that it be qualified except where the failure to do so could not reasonably be
expected to have a material adverse effect on Borrower’s business. In connection with this
Agreement, Borrower has delivered to Bank a completed certificate signed by Borrower, entitled
“Perfection Certificate”. Borrower represents and warrants to Bank that (a) Borrower’s exact legal
name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower
is an organization of the type and is organized in the jurisdiction set forth in the Perfection
Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s organizational
identification number or accurately states that Borrower has none; (d) the Perfection Certificate
accurately sets forth Borrower’s place of business, or, if more than one, its chief executive
office as well as Borrower’s mailing address (if different than its chief executive office); (e)
Borrower (and each of its predecessors) has not, in the past five (5) years, changed its
jurisdiction of formation, organizational structure or type, or any organizational number assigned
by its jurisdiction; and (f) all other information set forth on the Perfection Certificate
pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being understood
and agreed that Borrower may from time to time update certain information in the Perfection
Certificate after the Effective Date to the extent permitted by one or more specific provisions in
this Agreement).

     The execution, delivery and performance by Borrower of the Loan Documents to which it is a
party have been duly authorized, and do not (i) conflict with any of Borrower’s Operating
Documents, (ii) contravene, conflict with, constitute a default under or violate any material
Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by which Borrower or any
its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any
action by, filing, registration, or qualification with, or Governmental Approval from, any
Governmental Authority (except such Governmental Approvals which have already been obtained and are
in full force and effect, or (v) constitute an event of default under any material agreement by
which Borrower is bound. Borrower is not in default

 

 

under any agreement to which it is a party or by which it is bound in which the default could
[reasonably be expected to] have a material adverse effect on Borrower’s business.

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

     The Collateral is not in the possession of any third party bailee (such as a warehouse) except
as otherwise provided in the Perfection Certificate. None of the components of the Collateral
shall be maintained at locations other than (i) as provided in the Perfection Certificate; (ii) as
Borrower has given Bank notice pursuant to Section 7.2.; or, (iii) product inventory which has been
consigned at customer locations or as traveling stock in the possession of Borrower’s sales
representatives. In the event that Borrower, after the date hereof, intends to store or otherwise
deliver any material portion of the Collateral to a bailee, then Borrower will first receive the
written consent of Bank and such bailee must execute and deliver a bailee agreement in form and
substance reasonably satisfactory to Bank.

     Borrower has sufficient rights to use its intellectual property material to its business To
the best of Borrower’s knowledge, no claim has been made that any part of the intellectual property
material to Borrower’s business violates the rights of any third party except to the extent such
claim could not reasonably be expected to have a material adverse effect on Borrower’s business.

     5.3 Intentionally Omitted.

     5.4 Litigation. There are no actions or proceedings pending or, to the knowledge of the
Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries
involving more than One Hundred Thousand Dollars ($100,000).

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

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

     5.7 Regulatory Compliance. Borrower is not an “investment company” or a company “controlled”
by an “investment company” under the Investment Company Act. Borrower is not engaged as one of its
important activities in extending credit for margin stock (under Regulations T and U of the Federal
Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair
Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding company” or an
“affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is
defined and used in the Public Utility Holding Company Act of 2005. Borrower has not violated any
laws, ordinances or rules, the violation of which could reasonably be expected to have a material
adverse effect on its business. None of Borrower’s or any of its Subsidiaries’ properties or
assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by
previous Persons, in disposing, producing, storing, treating, or transporting any hazardous
substance other than in compliance with applicable law. Borrower and each of its Subsidiaries have
obtained all consents, approvals and authorizations of, made all declarations or filings with, and
given all notices to, all Government Authorities that are necessary to continue their respective
businesses as currently conducted..

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

 

 

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

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

5.11 Designation of Indebtedness under this Agreement as Senior Indebtedness.

     All principal of, interest (including all interest accruing after the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowable as
a claim in any such proceeding), and all fees, costs, expenses and other amounts accrued or due
under this Agreement shall constitute “Designated Senior Indebtedness” under the terms of the
Indenture.

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

     6 AFFIRMATIVE COVENANTS

     Borrower shall do all of the following:

     6.1 Government Compliance.

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

          (b) Obtain all of the Governmental Approvals necessary for the performance by Borrower of its
obligations under the Loan Documents to which it is a party and the grant of a security interest to
Bank in all of its property. Borrower shall, upon request therefore by Bank, promptly provide
copies of any such obtained Governmental Approvals to Bank.

6.2 Financial Statements, Reports, Certificates.

          (a) Deliver to Bank: (i) as soon as available, but no later than five (5) days after filing
with the Securities Exchange Commission, Borrower’s 10K, 10Q, and 8K reports; (ii) as soon as
available, but no later

 

 

than thirty (30) days after the last day of each month, a company-prepared consolidated and
consolidating balance sheet and income statement covering Borrower’s and each of its Subsidiary’s
operations during the period, certified by a Responsible Officer and in a form acceptable to Bank;
(iii) a prompt report of any legal actions pending or threatened in writing against Borrower or any
Subsidiary that could result in damages or costs to Borrower or any Subsidiary of $500,000 or more;
and (v) budgets, sales projections, operating plans or other financial information Bank reasonably
requests.

     Borrower’s 10K, 10Q, and 8K reports required to be delivered pursuant to Section 6.2(a)(i)
shall be deemed to have been delivered on the date on which Borrower posts such report or provides
a link thereto on Borrower’s or another website on the Internet; provided, that Borrower
shall provide paper copies to Bank of the Compliance Certificates required by Section 6.2(a)(ii).

          (b) As requested by Bank, Borrower will deliver to Bank aged listings of accounts receivable
and accounts payable (by invoice date).

          (c) Within thirty (30) days after the last day of the first two months of each calendar
quarter and with delivery of the 10K and 10Q, deliver to Bank with the monthly financial
statements, a duly completed Compliance Certificate signed by a Responsible Officer setting forth
calculations showing compliance with the financial covenants set forth in this Agreement.

     6.3 Inventory; Returns. Keep all Inventory in good and marketable condition, free from
material defects. Returns and allowances between Borrower and its Account Debtors shall follow
Borrower’s customary practices as they exist at the Effective Date. Borrower must promptly notify
Bank of all returns, recoveries, disputes and claims that involve more than One Hundred Thousand
Dollars ($100,000).

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

     6.5 Insurance. Keep its business and the Collateral insured for risks and in amounts standard
for companies in Borrower’s industry and location and as Bank may reasonably request. Insurance
policies shall be in a form, with companies, and in amounts that are satisfactory to Bank. All
property policies shall have a lender’s loss payable endorsement showing Bank as lender loss payee
and waive subrogation against Bank, and all liability policies shall show, or have endorsements
showing, Bank as an additional insured. All policies (or the loss payable and additional insured
endorsements) shall provide that the insurer must give Bank at least twenty (20) days notice before
canceling, amending, or declining to renew its policy. At Bank’s request, Borrower shall deliver
certified copies of policies and evidence of all premium payments. Proceeds payable under any
policy shall, at Bank’s option, be payable to Bank on account of the Obligations. If Borrower
fails to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any
required proof of payment to third persons and Bank, Bank may make all or part of such payment or
obtain such insurance policies required in this Section 6.5, and take any action under the policies
Bank deems prudent.

     6.6 Operating Accounts.

          (a) Within thirty (30) days of the Effective Date, maintain a at least one account with Bank
or Bank’s Affiliates which account shall represent the lesser of Ten Million Dollars ($10,000,000)
or at least 80% of Borrower’s cash and Cash Equivalents (excluding cash held at Wells Fargo Bank
that is restricted as security for Borrower’s credit card program) available for investment.

          (b) Provide Bank five (5) days prior written notice before establishing any Collateral Account
at or with any bank or financial institution other than Bank or its Affiliates. For each
Collateral Account that Borrower at any time maintains at SVB Securities, Borrower shall cause SVB
Securities to execute and deliver

 

 

a Control Agreement or other appropriate instrument with respect to such Collateral Account to
perfect Bank’s Lien in such Collateral Account in accordance with the terms hereunder.

     6.7 Financial Covenants.

          Borrower shall maintain, at all times to be tested, as of the last day of each month, unless
otherwise noted, on a consolidated basis with respect to Borrower and its Subsidiaries:

          (a) Quick Ratio. A ratio of Quick Assets (excluding any restricted cash) to Current
Liabilities of at least 1.50 to 1.0.

          (b) Tangible Net Worth. A Tangible Net Worth of at least $16,000,000, which amount
shall be increased by fifty percent (50%) of issuances of equity (other than issuances under
Borrower’s equity compensation plans) or Subordinated Debt received after the Effective Date in the
month following such issuance and by fifty percent (50%) of Net Income in the first month following
the calendar quarter which Net Income is earned.

6.8 Intentionally Omitted.

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

     6.10 Designated Senior Indebtedness. Borrower shall designate all principal of, interest
(including all interest accruing after the commencement of any bankruptcy or similar proceeding,
whether or not a claim for post-petition interest is allowable as a claim in any such proceeding),
and all fees, costs, expenses and other amounts accrued or due under this Agreement as “Designated
Senior Indebtedness”, or such similar term, in any future Subordinated Debt incurred by Borrower
after the date hereof, if such Subordinated Debt contains such term or similar term and if the
effect of such designation is to grant to Bank the same or similar rights as granted to Bank as a
holder of “Designated Senior Indebtedness” under the Indenture.

     6.11 Further Assurances. Execute any further instruments and take further action as Bank
reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the purposes
of this Agreement. Deliver to Bank, within five (5) days after the same are sent or received,
copies of all correspondence, reports, documents and other filings with any Governmental Authority
that could reasonably be expected to have a material effect on any of the Governmental Approvals or
otherwise on the operations of Borrower or any of its Subsidiaries.

     7 NEGATIVE COVENANTS

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

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

          (a) Transfers in the ordinary course of business for reasonably equivalent consideration
(including, but not limited to, Transfers of Inventory);

          (b) Transfers to Borrower or any of its Subsidiaries from Borrower or any of its Subsidiaries;

          (c) Transfers of property in connection with sale-leaseback transactions;

 

 

          (d) Transfers of property to the extent such property is exchanged for credit against, or
proceeds are promptly applied to, the purchase price of other property used or useful in the
business of Borrower or its Subsidiaries;

          (e) Transfers constituting licenses and similar arrangements for the use of the property of
Borrower or its Subsidiaries in the ordinary course of business that could not result in a legal
transfer of Borrower’s title in the licensed property;

          (f) Transfers otherwise permitted by the Loan Documents;

          (g) sales or discounting of delinquent accounts in the ordinary course of business;

          (h) Transfers associated with the making or disposition of a Permitted Investment;

          (i) Transfers in connection with a permitted acquisition of a portion of the assets or rights
acquired; and

          (j) Transfers of other assets for fair market value in an amount not to exceed One Hundred
Thousand Dollars ($100,000) in any fiscal year.

     7.2 Changes in Business; Change in Control; Jurisdiction of Formation. Engage in any material
line of business other than those lines of business conducted by Borrower and its Subsidiaries on
the date hereof and any businesses reasonably related, complementary or incidental thereto or
reasonable extensions thereof; permit or suffer any Change in Control. Borrower will not, without
prior written notice, change its jurisdiction of formation.

     7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge
or consolidate, with any Person other than with Borrower or any Subsidiary, or acquire, or permit
any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of a
Person other than Borrower or any Subsidiary, except where no Event of Default has occurred and is
continuing or would result from such action during the term of this Agreement, and (a) Borrower is
the surviving or ultimate parent entity or (b) such merger or consolidation is a Transfer otherwise
permitted pursuant to Section 7.1 hereof.

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

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

     7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to
the terms of Section 6.6.(b) hereof.

     7.7 Distributions; Investments. (a) Directly or indirectly acquire or own any Person, or make
any Investment in any Person, other than Permitted Investments, or permit any of its Subsidiaries
to do so; or (b) pay any dividends or make any distribution or payment or redeem, retire or
purchase any capital stock other than Permitted Distributions.

     7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any
material transaction with any Affiliate of Borrower except for (a) transactions that are in the
ordinary course of Borrower’s business, upon fair and reasonable terms (when viewed in the context
of any series of transactions of which it may

 

 

be a part, if applicable) that are no less favorable to Borrower than would be obtained in an
arm’s length transaction with a non-affiliated Person; or (b) transactions among Borrower and its
Subsidiaries and among Borrower’s Subsidiaries so long as no Event of Default exists or could
result therefrom.

     7.9 Subordinated Debt. Make or permit any payment on or amendments of any Subordinated Debt,
except (a) payments pursuant to the terms of the Subordinated Debt; (b) payments made with
Borrower’s capital stock or other Subordinated Debt; or (c) amendments to Subordinated Debt so long
as such Subordinated Debt remains subordinated in right of payment to this Agreement and any Liens
securing such Subordinated Debt remain subordinate in priority to Bank’s Lien hereunder.

     7.10 Compliance. Become an “investment company” or a company controlled by an “investment
company”, under the Investment Company Act of 1940 or undertake as one of its important activities
extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor
Standards Act or violate any other law or regulation, if the violation could reasonably be expected
to have a material adverse effect on Borrower’s business, or permit any of its Subsidiaries to do
so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any present pension,
profit sharing and deferred compensation plan which could reasonably be expected to result in any
liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.

     8 EVENTS OF DEFAULT

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

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

     8.2 Covenant Default.

          (a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4, 6.5, 6.6 or 6.7
or violates any covenant in Section 7; or

          (b) Borrower fails or neglects to perform, keep, or observe any other term, provision,
condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any
default (other than those specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within ten (10) days after
the occurrence thereof; provided, however, that if the default cannot by its nature be cured within
the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10)
day period, and such default is likely to be cured within a reasonable time, then Borrower shall
have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to cure the default shall not be
deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Grace
periods provided under this section shall not apply, among other things, to financial covenants or
any other covenants set forth in subsection (a) above;

     8.3 Material Adverse Change. A Material Adverse Change occurs;

     8.4 Attachment. (a) Any material portion of Borrower’s assets is attached, seized, levied on,
or comes into possession of a trustee or receiver; (b) the service of process seeking to attach, by
trustee or similar process, any funds of Borrower or of any entity under control of Borrower
(including a Subsidiary) on deposit with Bank or any Bank Affiliate; (c) Borrower is enjoined,
restrained, or prevented by court order from conducting any

 

 

part of its business; or (d) a notice of lien, levy, or assessment is filed against any of
Borrower’s assets by any government agency, and the same under clauses (a) through (d) hereof are
not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the
posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any
ten (10) day cure period;

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

     8.6 Other Agreements. If Borrower fails to (a) make any payment that is due and payable with
respect to any Material Indebtedness and such failure continues after the applicable grace or
notice period, if any, specified in the agreement or instrument relating thereto, or (b) perform or
observe any other condition or covenant, or any other event shall occur or condition exist under
any agreement or instrument relating to any Material Indebtedness, and such failure continues after
the applicable grace or notice period, if any, specified in the agreement or instrument relating
thereto and the effect of such failure, event or condition is to cause the holder or holders of
such Material Indebtedness to accelerate the maturity of such Material Indebtedness or cause the
mandatory repurchase of any Material Indebtedness;

     8.7 Judgments. One or more 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) (not
covered by independent third-party insurance as to which liability has been accepted by such
insurance carrier) shall be rendered against Borrower and shall remain unsatisfied, unvacated, or
unstayed for a period of ten (10) days after the entry thereof (provided that no Credit Extensions
will be made prior to the satisfaction, vacation, or stay of such judgment, order, or decree);

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

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

     8.10 Governmental Approvals. Any Governmental Approval shall have been (a) revoked,
rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a
full term or (b) subject to any decision by a Governmental Authority that designates a hearing with
respect to any applications for renewal of any of such Governmental Approval or that could result
in the Governmental Authority taking any of the actions described in clause (a) above, and such
decision or such revocation, rescission, suspension, modification or non-renewal (i) has, or could
reasonably be expected to have, a Material Adverse Change, or (ii) materially adversely affects the
legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in
any applicable jurisdiction and such revocation, rescission, suspension, modification or
non-renewal could reasonably be expected to affect the status of or legal qualifications of
Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction

     9 BANK’S RIGHTS AND REMEDIES

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

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

 

 

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

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

          (d) terminate any FX Forward Contracts;

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

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

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

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

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

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

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

     9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of
Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b)
sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account
Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle, and adjust all
claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge,
encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the
Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints
Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of any security interest regardless of whether an Event of Default has
occurred until all Obligations have been satisfied in full and Bank is under no further obligation
to make Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s attorney in fact,
and all of Bank’s rights and

 

 

powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid
and performed and Bank’s obligation to provide Credit Extensions terminates.

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

     9.4 Application of Payments and Proceeds. Borrower shall have no right to specify the order
or the accounts to which Bank shall allocate or apply any payments required to be made by Borrower
to Bank or otherwise received by Bank under this Agreement when any such allocation or application
is not specified elsewhere in this Agreement. If an Event of Default has occurred and is
continuing, Bank may apply any funds in its possession, whether from Borrower account balances,
payments, proceeds realized as the result of any collection of Accounts or other disposition of the
Collateral, or otherwise, to the Obligations in such order as Bank shall determine in its sole
discretion. Any surplus shall be paid to Borrower or other Persons legally entitled thereto;
Borrower shall remain liable to Bank for any deficiency. If Bank, in its good faith business
judgment, directly or indirectly enters into a deferred payment or other credit transaction with
any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of
either reducing the Obligations by the principal amount of the purchase price or deferring the
reduction of the Obligations until the actual receipt by Bank of cash therefor..

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

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

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

     10 NOTICES

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

 

 

	 	 	 
	If to Borrower:

	 	Endologix, Inc.

11 Studebaker

Irvine, CA 92618

Attn: Chief Financial Officer

Fax: (949) 457-9561

Email: bkrist@endologix.com
	 
	 	 
	If to Bank:

	 	Silicon Valley Bank

38 Technology Drive, Suite 150

Irvine, CA 92618

Attn: Derek Hoyt

Fax: (949) 789-1930

Email: dhoyt@svb.com

     11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

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

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, 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 order applicable to judicial proceedings in the same manner as
a trial court judge. The parties agree that the selected or appointed private judge shall have the
power to decide all issues in the action or proceeding, whether of fact or of law, and shall report
a statement of decision thereon pursuant to the California Code of Civil Procedure § 644(a).
Nothing in this paragraph shall limit the right of any party at any time to exercise self-help
remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall
also determine all issues relating to the applicability, interpretation, and enforceability of this
paragraph.

     12 GENERAL PROVISIONS

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

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

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

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

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

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

     12.7 Survival. All covenants, representations and warranties made in this Agreement continue
in full force until this Agreement has terminated pursuant to its terms and all Obligations (other
than inchoate indemnity obligations and any other obligations which, by their terms, are to survive
the termination of this Agreement) have been satisfied. The obligation of Borrower in Section 12.2
to indemnify Bank shall survive until the statute of limitations with respect to such claim or
cause of action shall have run.

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

 

 

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

     13 DEFINITIONS

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

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

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

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

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

     “Agreement” is defined in the preamble hereof.

     “Availability Amount” is (a) the Revolving Line minus (b) the FX Reserve, and minus (c) the
outstanding principal balance of any Advances (including any amounts used for Cash Management
Services).

     “Bank” is defined in the preamble hereof.

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

     “Borrower” is defined in the preamble hereof

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

     “Borrowing Resolutions” are those resolutions substantially in the form attached hereto as
Exhibit C.

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

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

     “Cash Management Services” is defined in Section 2.1.3.

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

     “Change in Control” means any event, transaction, or occurrence as a result of which (a) any
“person” (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act
of 1934, as an amended (the

 

 

     “Exchange Act”)), other than a trustee or other fiduciary holding securities under an employee
benefit plan of Borrower, is or becomes a beneficial owner (within the meaning Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of Borrower,
representing thirty-five percent (35%) or more of the combined voting power of Borrower’s then
outstanding securities; or (b) during any period of twelve consecutive calendar months, individuals
who at the beginning of such period constituted the Board of Directors of Borrower (together with
any new directors whose election by the Board of Directors of Borrower was approved by a vote of at
least two-thirds of the directors then still in office who either were directions at the beginning
of such period or whose election or nomination for election was previously so approved) cease for
any reason other than death or disability to constitute a majority of the directors then in office.

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

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

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

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

     “Communication” is defined in Section 10.

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

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

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

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

     “Current Liabilities” are all obligations and liabilities of Borrower to Bank, plus, without
duplication, the aggregate amount of Borrower’s Total Liabilities that mature within one (1) year.

     “Default Rate” is defined in Section 2.3(b).

 

 

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

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

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

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

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

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

     “Event of Default” is defined in Section 8.

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

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

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

     “FX Forward Contract” is defined in Section 2.1.2.

     “FX Reserve” is defined in Section 2.1.2.

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

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

     “Governmental Approval” is any consent, authorization, approval, order, license, franchise,
permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or
other act by or in respect of, any Governmental Authority.

     “Governmental Authority” is any nation or government, any state or other political subdivision
thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other
entity exercising executive,

 

 

legislative, judicial, taxing, regulatory or administrative functions of or pertaining to
government, any securities exchange and any self-regulatory organization.

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

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

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

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

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

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

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

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

     “Material Indebtedness” is any Indebtedness the principal amount of which is equal to or
greater than One Hundred Thousand Dollars ($100,000).

     “Net Income” means, as calculated on a consolidated basis for Borrower and its Subsidiaries
for any period as at any date of determination, the net profit (or loss), after provision for
taxes, of Borrower and its Subsidiaries for such period taken as a single accounting period, as
indicated on Borrower’s financial statements.

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

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

 

 

partnership agreement (or similar agreement), each of the foregoing with all current
amendments or modifications thereto.

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

     “Perfection Certificate” is defined in Section 5.1.

     “Permitted Distributions” means:

     (a) purchases of capital stock from former employees, consultants and directors pursuant to
repurchase agreements or other similar agreements in an aggregate amount not to exceed One Hundred
Thousand Dollars ($100,000) in any fiscal year provided that at the time of such purchase no
Default or Event of Default has occurred and is continuing;

     (b) distributions or dividends consisting solely of Borrower’s capital stock;

     (c) purchases for value of any rights distributed in connection with any stockholder rights
plan;

     (d) purchases of capital stock or options to acquire such capital stock with the proceeds
received from a substantially concurrent issuance of capital stock or convertible securities;

     (e) purchases of capital stock pledged as collateral for loans to employees;

     (f) purchases of capital stock in connection with the exercise of stock options or stock
appreciation rights by way of cashless exercise or in connection with the satisfaction of
withholding tax obligations;

     (g) purchases of fractional shares of capital stock arising out of stock dividends, splits or
combinations or business combinations; and

     (h) the settlement or performance of such Person’s obligations under any equity derivative
transaction, option contract or similar transaction or combination of transactions.

     “Permitted Indebtedness” is:

     (a) Borrower’s Indebtedness to Bank under this Agreement or any other Loan Document;

     (b) (i) any Indebtedness that does not exceed One Hundred Thousand Dollars ($100,000) in
principal amount existing on the Effective Date, and (ii) any Indebtedness in excess of One Hundred
Thousand Dollars ($100,000) in principal amount existing on the Effective Date and shown on the
Perfection Certificate;

     (c) Subordinated Debt;

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

     (e) guaranties of Permitted Indebtedness;

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

     (g) Indebtedness consisting of interest rate, currency, or commodity swap agreements, interest
rate cap or collar agreements or arrangements designated to protect Borrower against fluctuations
in interest rates, currency exchange rates, or commodity prices;

     (h) Indebtedness between Borrower and any of its Subsidiaries or among any of Borrower’s
Subsidiaries;

 

 

     (i) Indebtedness with respect to documentary letters of credit;

     (j) capitalized leases and purchase money Indebtedness not to exceed Five Hundred Thousand
Dollars ($500,000) in the aggregate in any fiscal year secured by Permitted Liens;

     (k) Indebtedness of entities acquired in any permitted merger or acquisition transaction;

     (l) Indebtedness outstanding under the Wells Fargo Bank card program used for the purpose of
employee expense reimbursement and certain vendor payments in an amount not to exceed Two Million
Dollars ($2,000,000) provided that any cash securing such Indebtedness shall be classified as
restricted cash; and

     (m) refinanced Permitted Indebtedness, provided that the amount of such Indebtedness is not
increased except by an amount equal to a reasonable premium or other reasonable amount paid in
connection with such refinancing and by an amount equal to any existing, but unutilized, commitment
thereunder.

     “Permitted Investments” are:

     (a) Investments existing on the Effective Date;

     (b) (i) marketable direct obligations issued or unconditionally guaranteed by the United
States or its agencies or any State maturing within 1 year from its acquisition, (ii) commercial
paper maturing no more than 2 years after its creation and having the highest rating from either
Standard & Poor’s Corporation or Moody’s Investors Service, Inc., and (iii) Bank’s certificates of
deposit maturing no more than 2 years after issue;

     (c) Investments approved by Borrower’s Board of Directors or otherwise pursuant to a
Board-approved investment policy;

     (d) Investments in or to Borrower or any of its Subsidiaries;

     (e) Investments consisting of Collateral Accounts in the name of Borrower or any Subsidiary so
long as Bank has a first priority, perfected security interest in such Collateral Accounts;

     (f) Investments consisting of extensions of credit to Borrower’s or its Subsidiaries’
customers in the nature of accounts receivable, prepaid royalties or notes receivable arising from
the sale or lease of goods, provision of services or licensing activities of Borrower;

     (g) Investments received in satisfaction or partial satisfaction of obligations owed by
financially troubled obligors;

     (h) Investments acquired in exchange for any other Investments in connection with or as a
result of a bankruptcy, workout, reorganization or recapitalization;

     (i) Investments acquired as a result of a foreclosure with respect to any secured Investment;

     (j) Investments consisting of interest rate, currency, or commodity swap agreements, interest
rate cap or collar agreements or arrangements designated to protect a Person against fluctuations
in interest rates, currency exchange rates, or commodity prices; and

     (k) Investments consisting of loans and advances to employees in an aggregate amount not to
exceed One Hundred Thousand Dollars ($100,000).

     “Permitted Liens” are:

     (a) (i) Liens securing Permitted Indebtedness described under clause (b) of the definition of
“Permitted Indebtedness” or (ii) Liens arising under this Agreement or other Loan Documents;

 

 

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

     (c) Liens (including with respect to capital leases) (i) on property (including accessions,
additions, parts, replacements, fixtures, improvements and attachments thereto, and the proceeds
thereof) acquired or held by Borrower or its Subsidiaries incurred for financing such property
(including accessions, additions, parts, replacements, fixtures, improvements and attachments
thereto, and the proceeds thereof), or (ii) existing on property (and accessions, additions, parts,
replacements, fixtures, improvements and attachments thereto, and the proceeds thereof) when
acquired, if the Lien is confined to such property (including accessions, additions, parts,
replacements, fixtures, improvements and attachments thereto, and the proceeds thereof);

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

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

     (f) licenses of intellectual property granted to third parties in the ordinary course of
business, and licenses of intellectual property that would not result in a legal transfer of title
of the licensed property;

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

     (h) Liens on insurance proceeds securing the payment of financed insurance premiums;

     (i) customary Liens granted in favor of a trustee to secure fees and other amounts owing to
such trustee under an indenture or other similar agreement;

     (j) Liens on assets acquired in mergers and acquisitions not prohibited by Section 7 of this
Agreement;

     (k) Liens consisting of pledges of cash, cash equivalents or government securities to secure
swap or foreign exchange contracts or letters of credit;

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

     (m) Liens in favor of other financial institutions arising in connection with Borrower’s
deposit or securities accounts held at such institutions;

     (n) Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature
arising in the ordinary course of business so long as such Liens attach only to Inventory, securing
liabilities in the aggregate amount not to exceed One Hundred Thousand Dollars ($100,000) and which
are not delinquent or remain payable without penalty or which are being contested in good faith and
by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale
of the property subject thereto; and

     (o) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions,
social security and other like obligations incurred in the ordinary course of business (other than
Liens imposed by ERISA);

 

 

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

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

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

     “Requirement of Law” is as to any Person, the organizational or governing documents of such
Person, and any law (statutory or common), treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any of its property is subject.

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

     “Revolving Line” is an Advance or Advances in an aggregate amount of up to $5,000,000.

     “Revolving Maturity Date” is February 21, 2009.

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

     “Settlement Date” is defined in Section 2.1.2.

     “Subordinated Debt” is (a) Indebtedness incurred by Borrower subordinated to Borrower’s
Indebtedness owed to Bank and which is reflected in a written agreement in a manner and form
reasonably acceptable to Bank and approved by Bank in writing and (b) to the extent the terms of
subordination do not change adversely to Bank, refinancings, refundings, renewals, amendments or
extensions of any of the foregoing.

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

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

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

     “Transfer” is defined in Section 7.1.

     “Unused Revolving Line Facility Fee” is defined in Section 2.4(b).

[Signature page follows.]

 

 

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

BORROWER:

ENDOLOGIX, INC.

	 	 	 	 	 
	By

	 	/s/ Robert Krist 	 	 
	 

	 	 	 	 
	Name:

	 	Robert Krist	 	 
	 

	 	 	 	 
	Title:                   

	 	Chief Financial Officer 	 	 
	 

	 	 	 	 

BANK:

SILICON VALLEY BANK

	 	 	 	 	 
	By

	 	/s/ Derek Hoyt
	 	 
	 

	 	 	 	 
	Name:

	 	Derek Hoyt 	 	 
	 

	 	 	 	 
	Title:

	 	Relationship Manager 	 	 
	 

	 	 	 	 
	Effective Date:

	 	2/21/2007

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}]]