Document:

Exhibit 10.9

 

EXECUTION VERSION

 

	
 
    

 

CREDIT AGREEMENT

 

dated as of April 18, 2013

 

among

 

AVINGER, INC.

 

as the Borrower,

 

PDL BIOPHARMA, INC.,

 

as the Lender,

 

and

 

PDL BIOPHARMA, INC.,

 

as the Agent

 

	
 
    

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
Section 1.
    	
Definitions;   Interpretation
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
1.1.
    	
Definitions
    	
1
    
	
 
    	
1.2.
    	
Interpretation
    	
14
    
	
 
    	
 
    	
 
    
	
Section 2.
    	
Credit   Facilities
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.1.
    	
Loans
    	
14
    
	
 
    	
 
    	
2.1.1.
    	
Loans
    	
14
    
	
 
    	
 
    	
2.1.2.
    	
General
    	
15
    
	
 
    	
2.2.
    	
Loan   Accounting
    	
15
    
	
 
    	
 
    	
2.2.1.
    	
Recordkeeping
    	
15
    
	
 
    	
 
    	
2.2.2.
    	
Notes
    	
15
    
	
 
    	
2.3.
    	
Interest
    	
15
    
	
 
    	
 
    	
2.3.1.
    	
Interest   Rate
    	
15
    
	
 
    	
 
    	
2.3.2.
    	
Interest   Payments
    	
16
    
	
 
    	
 
    	
2.3.3.
    	
Computation   of Interest
    	
16
    
	
 
    	
2.4.
    	
Amortization;   Prepayment
    	
16
    
	
 
    	
 
    	
2.4.1.
    	
Amortization
    	
16
    
	
 
    	
 
    	
2.4.2.
    	
Voluntary   Prepayment
    	
16
    
	
 
    	
 
    	
2.4.3.
    	
Payments   in Respect of the Assigned Interests
    	
17
    
	
 
    	
2.5.
    	
Payment   Upon Maturity
    	
17
    
	
 
    	
2.6.
    	
Making   of Payments
    	
17
    
	
 
    	
2.7.
    	
Application   of Payments and Proceeds
    	
17
    
	
 
    	
2.8.
    	
Payment   Dates
    	
17
    
	
 
    	
2.9.
    	
Set-off
    	
17
    
	
 
    	
2.10.
    	
Currency   Matters
    	
17
    
	
 
    	
 
    	
 
    
	
Section 3.
    	
Yield   Protection
    	
18
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.1.
    	
Taxes
    	
18
    
	
 
    	
3.2.
    	
Increased   Cost
    	
20
    
	
 
    	
3.3.
    	
Mitigation   of Circumstances
    	
22
    
	
 
    	
3.4.
    	
Conclusiveness   of Statements; Survival
    	
22
    
	
 
    	
 
    	
 
    
	
Section 4.
    	
Conditions   Precedent
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.1.
    	
Tranche   One Loan
    	
22
    
	
 
    	
 
    	
4.1.1.
    	
Delivery   of Loan Documents
    	
22
    
	
 
    	
 
    	
4.1.2.
    	
Payment   of Fees and Expenses
    	
23
    

 

i

 

	
TABLE OF CONTENTS (continued)
    
	
 
    
	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
4.1.3.
    	
Representations   and Warranties
    	
24
    
	
 
    	
 
    	
4.1.4.
    	
No   Default
    	
24
    
	
 
    	
 
    	
4.1.5.
    	
No   Material Adverse Change
    	
24
    
	
 
    	
 
    	
4.1.6.
    	
Execution   and Delivery of Letter Agreement
    	
24
    
	
 
    	
4.2.
    	
Tranche   Two Loan
    	
24
    
	
 
    	
 
    	
4.2.1.
    	
Delivery   of Borrowing Request
    	
24
    
	
 
    	
 
    	
4.2.2.
    	
Tranche   Two Milestones
    	
24
    
	
 
    	
 
    	
4.2.3.
    	
Payment   of Fees and Expenses
    	
24
    
	
 
    	
 
    	
4.2.4.
    	
Representations   and Warranties
    	
25
    
	
 
    	
 
    	
4.2.5.
    	
No   Default
    	
25
    
	
 
    	
 
    	
4.2.6.
    	
No   Material Adverse Change
    	
25
    
	
 
    	
 
    	
4.2.7.
    	
Note
    	
25
    
	
 
    	
 
    	
 
    
	
Section 5.
    	
Representations   and Warranties
    	
25
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.1.
    	
Organization
    	
25
    
	
 
    	
5.2.
    	
Authorization;   No Conflict
    	
25
    
	
 
    	
5.3.
    	
Validity;   Binding Nature
    	
26
    
	
 
    	
5.4.
    	
Financial   Condition
    	
26
    
	
 
    	
5.5.
    	
No   Material Adverse Change
    	
26
    
	
 
    	
5.6.
    	
Litigation
    	
26
    
	
 
    	
5.7.
    	
Ownership   of Properties; Liens
    	
26
    
	
 
    	
5.8.
    	
Capitalization;   Subsidiaries
    	
26
    
	
 
    	
5.9.
    	
Pension   Plans
    	
27
    
	
 
    	
5.10.
    	
Compliance   with Law; Investment Company Act; Other Regulated Entities
    	
27
    
	
 
    	
5.11.
    	
Margin   Stock
    	
27
    
	
 
    	
5.12.
    	
Taxes
    	
28
    
	
 
    	
5.13.
    	
Solvency
    	
28
    
	
 
    	
5.14.
    	
Environmental   Matters
    	
28
    
	
 
    	
5.15.
    	
Insurance
    	
29
    
	
 
    	
5.16.
    	
Information
    	
29
    
	
 
    	
5.17.
    	
Intellectual   Property
    	
29
    
	
 
    	
5.18.
    	
Labor   Matters
    	
30
    
	
 
    	
5.19.
    	
No   Default
    	
30
    
	
 
    	
5.20.
    	
Foreign   Assets Control Regulations and Anti-Money Laundering
    	
30
    
	
 
    	
 
    	
5.20.1.
    	
OFAC
    	
30
    

 

ii

 

	
TABLE OF CONTENTS (continued)
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
5.20.2.
    	
Patriot   Act
    	
30
    
	
 
    	
5.21.
    	
Non-Competes
    	
30
    
	
 
    	
5.22.
    	
Internal   Controls
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
Section 6.
    	
Affirmative   Covenants
    	
31
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.1.
    	
Information
    	
31
    
	
 
    	
 
    	
6.1.1.
    	
Annual   Report
    	
31
    
	
 
    	
 
    	
6.1.2.
    	
Quarterly   Reports
    	
31
    
	
 
    	
 
    	
6.1.3.
    	
Reserved
    	
31
    
	
 
    	
 
    	
6.1.4.
    	
Compliance   Certificate
    	
31
    
	
 
    	
 
    	
6.1.5.
    	
Net   Revenue Reports
    	
31
    
	
 
    	
 
    	
6.1.6.
    	
Notice   of Default; Litigation; ERISA Matters
    	
32
    
	
 
    	
 
    	
6.1.7.
    	
Reserved
    	
32
    
	
 
    	
 
    	
6.1.8.
    	
Budgets
    	
32
    
	
 
    	
 
    	
6.1.9.
    	
Other   Information
    	
32
    
	
 
    	
6.2.
    	
Books;   Records; Inspections
    	
32
    
	
 
    	
6.3.
    	
Maintenance   of Property; Insurance
    	
33
    
	
 
    	
6.4.
    	
Compliance   with Laws and Contractual Obligations; Payment of Taxes and Liabilities
    	
34
    
	
 
    	
6.5.
    	
Maintenance   of Existence
    	
34
    
	
 
    	
6.6.
    	
Environmental   Matters
    	
34
    
	
 
    	
6.7.
    	
Further   Assurances
    	
35
    
	
 
    	
6.8.
    	
Post-Closing   Obligations
    	
36
    
	
 
    	
6.9.
    	
Assigned   Interests
    	
36
    
	
 
    	
 
    	
6.9.1.
    	
Payments.   The Borrower shall remit to the Lender amounts pursuant to Section 2.4.3
    	
36
    
	
 
    	
 
    	
6.9.2.
    	
True-Up
    	
36
    
	
 
    	
6.10.
    	
Internal   Controls
    	
36
    
	
 
    	
 
    	
 
    	
 
    
	
Section 7.
    	
Negative   Covenants
    	
36
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
7.1.
    	
Debt   
    	
37
    
	
 
    	
7.2.
    	
Liens
    	
38
    
	
 
    	
7.3.
    	
Restricted   Payments
    	
39
    
	
 
    	
7.4.
    	
Mergers;   Consolidations; Asset Sales
    	
40
    
	
 
    	
7.5.
    	
Modification   of Organizational Documents
    	
41
    
	
 
    	
7.6.
    	
Use   of Proceeds
    	
41
    
	
 
    	
7.7.
    	
Transactions   with Affiliates
    	
41
    

 

iii

 

	
TABLE OF CONTENTS (continued)
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
7.8.
    	
Inconsistent   Agreements
    	
42
    
	
 
    	
7.9.
    	
Business   Activities
    	
42
    
	
 
    	
7.10.
    	
Investments
    	
42
    
	
 
    	
7.11.
    	
Fiscal   Year
    	
44
    
	
 
    	
7.12.
    	
Deposit   Accounts and Securities Accounts
    	
44
    
	
 
    	
7.13.
    	
Sale-Leasebacks
    	
44
    
	
 
    	
7.14.
    	
Hazardous   Substances
    	
44
    
	
 
    	
7.15.
    	
ERISA   Liability
    	
44
    
	
 
    	
7.16.
    	
Liquidity
    	
44
    
	
 
    	
7.17.
    	
Post-Prepayment   Date Covenants
    	
44
    
	
 
    	
 
    	
 
    
	
Section 8.
    	
Events   of Default; Remedies
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.1.
    	
Events   of Default
    	
45
    
	
 
    	
 
    	
8.1.1.
    	
Non-Payment   of Credit Agreement
    	
45
    
	
 
    	
 
    	
8.1.2.
    	
Default   Under Other Debt
    	
45
    
	
 
    	
 
    	
8.1.3.
    	
Bankruptcy;   Insolvency
    	
46
    
	
 
    	
 
    	
8.1.4.
    	
Non-Compliance   with Loan Documents
    	
46
    
	
 
    	
 
    	
8.1.5.
    	
Representations;   Warranties
    	
46
    
	
 
    	
 
    	
8.1.6.
    	
Judgments
    	
47
    
	
 
    	
 
    	
8.1.7.
    	
Invalidity   of Collateral Documents
    	
47
    
	
 
    	
 
    	
8.1.8.
    	
Invalidity   of Subordination Provisions
    	
47
    
	
 
    	
 
    	
8.1.9.
    	
Change   of Control
    	
47
    
	
 
    	
8.2.
    	
Remedies
    	
47
    
	
 
    	
 
    	
 
    
	
Section 9.
    	
The   Agent
    	
48
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
9.1.
    	
Appointment;   Authorization
    	
48
    
	
 
    	
9.2.
    	
Delegation   of Duties
    	
48
    
	
 
    	
9.3.
    	
Limited   Liability
    	
48
    
	
 
    	
9.4.
    	
Successor   Agent
    	
49
    
	
 
    	
9.5.
    	
Collateral   Matters
    	
49
    
	
 
    	
 
    	
 
    
	
Section 10.
    	
Miscellaneous
    	
49
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
10.1.
    	
Waiver;   Amendments
    	
49
    
	
 
    	
10.2.
    	
Notices
    	
50
    
	
 
    	
10.3.
    	
Costs;   Expenses
    	
50
    
	
 
    	
10.4.
    	
Indemnification   by the Borrower
    	
50
    

 

iv

 

	
TABLE OF CONTENTS (continued)
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
10.5.
    	
Marshaling;   Payments Set Aside
    	
51
    
	
 
    	
10.6.
    	
Nonliability   of the Lender
    	
51
    
	
 
    	
10.7.
    	
Confidentiality
    	
51
    
	
 
    	
10.8.
    	
Captions
    	
52
    
	
 
    	
10.9.
    	
Nature   of Remedies
    	
52
    
	
 
    	
10.10.
    	
Counterparts
    	
52
    
	
 
    	
10.11.
    	
Severability
    	
52
    
	
 
    	
10.12.
    	
Entire   Agreement
    	
52
    
	
 
    	
10.13.
    	
Successors;   Assigns
    	
53
    
	
 
    	
10.14.
    	
Governing   Law
    	
53
    
	
 
    	
10.15.
    	
Forum   Selection; Consent to Jurisdiction; Service of Process
    	
53
    
	
 
    	
10.16.
    	
Waiver   of Jury Trial
    	
54
    
	
 
    	
10.17.
    	
Collateral   Agent
    	
54
    
					

 

v

 

	
TABLE OF CONTENTS (continued)
    
	
 
    	
 
    	
 
    	
 
    
	
Annexes
    	
 
    	
 
    
	
Annex I
    	
Addresses
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Exhibits
    	
 
    	
 
    
	
Exhibit A
    	
Compliance   Certificate
    	
 
    

 

vi

 

CREDIT AGREEMENT

 

This Credit Agreement dated as of April 18, 2013, (as amended, restated or otherwise modified from time to time, this “Agreement”) is made among AVINGER, INC., a Delaware corporation (the “Borrower”), PDL BIOPHARMA, INC. (the “Lender”), and PDL BIOPHARMA, INC., not individually, but as the Agent (as defined below).

 

The Borrower has agreed to enter into this Agreement with the Lender and the Agent evidencing its agreement to incur the Loan, and in connection therewith, to make the representations and warranties, covenants and undertakings as hereinafter set forth.

 

Section 1.                                           Definitions; Interpretation.

 

1.1.                            Definitions.  When used herein the following terms shall have the following meanings:

 

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of all or substantially all of any business or division of a Person, (b) the acquisition of in excess of 50% of the Stock of any Person, or otherwise causing any Person to become a Subsidiary, (c) a merger, consolidation, amalgamation or any other combination with another Person (other than a combination between two Persons that prior to the merger, consolidation, amalgamation or combination were already Loan Parties) in which the surviving Person is the Borrower or is or becomes a Subsidiary of the Borrower and (d) the acquisition of a brand, line of business, division, branch, product line, marketing rights, patent rights, or other Intellectual Property rights unrelated to Product, with respect to a product line, operating division, product or potential product, or other unit operation of any Person.

 

“Affiliate” of any Person means (a) any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person and (b) any officer or director of such Person.  A Person shall be deemed to be “controlled by” any other Person if such Person possesses, directly or indirectly, power to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managers or power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.  Unless expressly stated otherwise herein, neither the Agent nor the Lender shall be deemed an Affiliate of any Loan Party.

 

“Agent” means PDL BioPharma, Inc. in its capacity as administrative agent for the Lender hereunder and any successor thereto in such capacity.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Applicable Percentage” means, for any period, 1.8% of the Borrower’s Net Revenues for such period; provided that, beginning on the first full Fiscal Quarter after the Prepayment Date, the “Applicable Percentage” for any period shall be 0.9% of the Borrower’s Net Revenues for such period.

 

1

 

“Applicable Law” means all applicable provisions of all (i) constitutions, treaties, statutes, laws, rules, regulations and ordinances of any Governmental Authority, (ii) authorizations, consents, approvals, permits or licenses issued by, or a registration or filing with, any Governmental Authority and (iii) orders, decisions, judgments, awards and decrees of any Governmental Authority (including common law and principles of public policy).

 

“Assigned Interests” shall mean, (i) from the Closing Date until the end of the calendar quarter in which the Prepayment Date occurs, an amount equal to the product of the Applicable Percentage multiplied by the Borrower’s quarterly Net Revenues, and (ii) from the beginning of the first Fiscal Quarter after the Prepayment Date through the Maturity Date, for each of the following Fiscal Quarters the greater of (a) an amount equal to the product of the Applicable Percentage multiplied by the sum of the Borrower’s monthly Net Revenues for each calendar month in such Fiscal Quarter and (b) the following amounts (the “Mandatory Minimum Payments”):

 

(a)         For each Fiscal Quarter in the Fiscal Year ended December 31, 2013, $65,000;

 

(b)         for each Fiscal Quarter in the Fiscal Year ended December 31, 2014, $177,500;

 

(c)          for each Fiscal Quarter in the Fiscal Year ended December 31, 2015, $305,000;

 

(d)         for each Fiscal Quarter in the Fiscal Year ended December 31, 2016, $305,000;

 

(e)          for each Fiscal Quarter in the Fiscal Year ended December 31, 2017, $305,000; and

 

(f)           for each Fiscal Quarter in the Fiscal Year ended December 31, 2018, $310,000.

 

“Audit Costs” means the reasonable out-of-pocket costs of any audit of the books and records of the Borrower and its Subsidiaries with respect to amounts paid or payable under this Agreement, including all fees and expenses incurred in connection therewith.

 

“Borrower” has the meaning set forth in the Preamble.

 

“Borrowing Request” has the meaning set forth in Section 2.1.1(b).

 

“Business Day” means any day on which commercial banks are open for commercial banking business in New York, New York and San Francisco, California.

 

“Capital Lease” means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property by such Person that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of such Person.

 

“Capital Stock” means, with respect to any Person, the Stock and Stock Equivalents of such Person.

 

“Cash Equivalent Investment” means, at any time, (a) any evidence of Debt, maturing not more than one year after such time, issued or guaranteed by the United States Government or any

 

2

 

agency thereof, (b) commercial paper, or corporate demand notes, in each case rated at least A-l by Standard & Poor’s Ratings Group or P-l by Moody’s Investors Service, Inc., (c) any certificate of deposit (or time deposit represented by a certificate of deposit), overnight bank deposit or banker’s acceptance maturing not more than one year after such time, or any overnight Federal Funds transaction that is issued or sold by a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, (d) any repurchase agreement entered into with any commercial banking institution of the nature referred to in clause (c) above which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c) above and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such commercial banking institution thereunder, (e) money market accounts or mutual funds which invest predominantly in assets satisfying the foregoing requirements, (f) other investments set forth in Borrower’s investment policy from time to time and approved in writing by the Agent and (g) other short term liquid investments approved in writing by the Agent.

 

“CFC” means a Person that is a “controlled foreign corporation” as defined in Section 957 of the IRC.

 

“Change of Control” means an event or series of events by which:

 

(a) any “person” or “group” (as such terms are used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) (other than the Holders) becomes the “beneficial owner” (as defined in Rules 13-d and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all Stock that such person or group has the right to acquire (such right, an “option right”), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of fifty percent (50%) or more of the Stock and Stock Equivalents of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right);

 

(b) individuals who on the Closing Date constituted the board of directors or similar governing body of the Borrower (together with any new directors whose election or appointment by such board of directors or similar governing body or whose nomination for election by the shareholders of the Borrower was approved by a vote of a majority of the directors of the Borrower then still in office who were either directors on the Closing Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors or similar governing body of the Borrower then in office;

 

(c) all or substantially all of the assets of the Borrower are disposed of in any one or more transactions; or

 

3

 

(d) at any time prior to the initial public offering of the Borrower’s common Stock, the Holders shall fail to hold directly at least 50% of the Capital Stock of the Borrower, other than as a result of dilution through the sale of equity of the Borrower for purposes of raising capital.

 

“Closing Date” means the date on which the conditions set forth in Section 4.1 have been satisfied or waived by the Lender.

 

“Closing Fee” means the fee due from the Borrower to the Agent on or before (a) with respect to the Tranche One Loan, the Closing Date and (b) with respect to the Tranche Two Loan, the funding date thereof, in each case in an amount equal to 1% of the aggregate principal amount of the applicable Loan.

 

“Collateral” means all property and interests in property and proceeds thereof now owned or hereafter acquired by any Loan Party and any other Person who has granted a Lien to the Agent, in or upon which a Lien now or hereafter exists in favor of the Lender or the Agent for the benefit of the Agent and the Lender, whether under this Agreement or under any other documents executed by any such Persons and delivered to the Agent.

 

“Collateral Access Agreement” means an agreement in form and substance satisfactory to the Agent in its reasonable discretion pursuant to which a mortgagee or lessor of real property on which Collateral is stored or otherwise located, or a warehouseman, processor or other bailee of inventory or other property owned by any Loan Party, acknowledges the Liens of the Agent and waives (or, if approved by the Agent, subordinates) any Liens held by such Person on such property, and, in the case of any such agreement with a mortgagee or lessor, permits the Agent reasonable access to and use of such real property during the continuance of an Event of Default to assemble, complete and sell any Collateral stored or otherwise located thereon.

 

“Collateral Documents” means, collectively, the Security Agreement (including as may be supplemented by the joinder of any Subsidiary of the Borrower thereto), any Subsidiary Guaranty, and each other agreement or instrument pursuant to or in connection with which any Loan Party or any other Person grants a security interest in any Collateral to the Agent for the benefit of the Lender or pursuant to which any such security interest in Collateral is perfected, each as amended, restated or otherwise modified from time to time in accordance with the terms hereof and thereof.

 

“Commitments” means the Tranche One Commitment and the Tranche Two Commitment.

 

“Compliance Certificate” means a certificate substantially in the form of Exhibit A.

 

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes, including, for the avoidance of doubt, those described in clause (i)(A) of Section 3.1(a).

 

“Contingent Obligation” means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to or otherwise to invest in a debtor, to provide security for the obligations of a debtor or otherwise

 

4

 

to assure a creditor against loss) any indebtedness, obligation or other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the Stock of any other Person.  The amount of any Person’s obligation in respect of any Contingent Obligation shall (subject to any limitation set forth therein) be deemed to be the principal amount of the indebtedness, obligation or other liability supported thereby or the amount of the dividends or distributions guaranteed, as applicable.

 

“Control Agreement” means a tri-party deposit account, securities account or commodities account Control Agreement by and among the applicable Loan Party, the Agent and the depository, securities intermediary or commodities intermediary, and each in form and substance  satisfactory in all respects to the Agent in its reasonable discretion and in any event providing to the Agent “control” of such deposit account, securities or commodities account within the meaning of Articles 8 and 9 of the UCC.

 

“Copyrights” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Applicable Law in copyrights and all mask work, database and design rights, whether or not registered or published, all registrations and recordations thereof and all applications in connection therewith.

 

“Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all indebtedness evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person as lessee under Capital Leases which have been or should be recorded as liabilities on a balance sheet of such Person in accordance with GAAP, (d) all obligations of such Person to pay the deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business), (e) all indebtedness secured by a Lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person (with the amount thereof being measured as the fair market value of such property), (f) all obligations, contingent or otherwise, with respect to letters of credit (whether or not drawn), banker’s acceptances and surety bonds issued for the account of such Person, (g) all Hedging Obligations of such Person, (h) all Contingent Obligations of such Person for obligations of any other Person constituting Debt (under another clause of this definition) of such other Person, (i) all earn-out, purchase price adjustment and similar obligations that are required by GAAP to be reflected on the balance sheet of such Person, (j) all obligations of such Person in respect of Disqualified Capital Stock issued by such Person, (k) all indebtedness of the types listed in (a) through (j) and (l) of any partnership of which such Person is a general partner and (l) all obligations of such Person under any synthetic lease transaction, where such obligations are considered borrowed money indebtedness for tax purposes but the transaction is classified as an operating lease in accordance with GAAP.

 

“Default” means any event that, if it continues uncured, will, with the lapse of time or the giving of notice or both, constitute an Event of Default.

 

“Default Rate” has the meaning set forth in Section 2.3.1.

 

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“Disclosure Letter” means the letter dated as of the date of this Agreement delivered by the Borrower to the Agent and the Lender in connection with the execution and delivery of this Agreement.

 

“Disqualified Capital Stock” means any Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable or is redeemable at the option of the holder thereof, in whole or in part, on or prior to April 18, 2019, (b) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) debt securities or (ii) any Stock referred to in (a) above, in each case at any time on or prior to April 18, 2019, or (c) contains any repurchase obligation which may come into effect prior to the Obligations being Paid in Full; provided that any Stock that would not constitute Disqualified Capital Stock but for provisions thereof giving holders thereof (or the holders of any security into or for which such Stock is convertible, exchangeable or exercisable) the right to require the issuer thereof to redeem or repurchase such Stock upon the occurrence of a change in control or an asset sale occurring prior to April 18, 2019 shall not constitute Disqualified Capital Stock if such Stock provides that the issuer thereof will not redeem or repurchase any such Stock pursuant to such provisions prior to the repayment in full of the Obligations.

 

“Dollar” and “$” mean lawful currency of the United States of America.

 

“Eligible Institution” means any Person that is a bank, institutional lender or other recognized financing provider.

 

“Environmental Claims” means all claims, however asserted, by any governmental, regulatory or judicial authority or other Person alleging potential liability or responsibility under or for violation of any Environmental Law, or for release or injury to the environment or any Person or property or natural resources.

 

“Environmental Laws” means all present or future federal, state, provincial or local laws, statutes, common law duties, rules, regulations, ordinances and codes, including all amendments, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case relating to any matter arising out of or relating to health and safety, or pollution or protection of the environment, natural resources or workplace, including any of the foregoing relating to the presence, use, production, recycling, reclamation, generation, handling, transport, treatment, storage, disposal, distribution, discharge, release, emission, control, cleanup or investigation or management of any Hazardous Substance.

 

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

 

“Event of Default” means any of the events described in Section 8.1.

 

“Excluded Accounts” means, collectively, that certain collateral money market account held in the name of Borrower at Silicon Valley Bank as collateral for Borrower’s credit card obligations with Silicon Valley Bank, so long as the balance thereof does not at any time exceed

 

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$300,000, and that certain Euro account held in the name of Borrower at Standard Chartered Bank, so long as the balance thereof does not at any time exceed €250,000.

 

“Excluded Taxes” has the meaning set forth in Section 3.1(a).

 

“Exit Fee” means an amount equal to 1.0% of the aggregate original principal amount of Tranche One Loan and the Tranche Two Loan (to the extent the Tranche Two Loan is made).

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor provision that is substantively comparable and not materially more burdensome to comply with), and any current or future regulations issued thereunder or official interpretations thereof.

 

“Fiscal Quarter” means a fiscal quarter of a Fiscal Year.

 

“Fiscal Year” means the fiscal year of the Borrower and its Subsidiaries, which period shall be the 12-month period ending on December 31 of each year.

 

“FRB” means the Board of Governors of the Federal Reserve System or any successor thereto.

 

“GAAP” means generally accepted accounting principles as in effect in the United States of America.

 

“Governmental Authority” means any nation or government, any state, province, municipality or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank), and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

 

“Gross Revenue” means, for any period of determination, the sum of the following for such period: (i) the amounts recognized as revenue in accordance with GAAP by the Borrower, its Subsidiaries or any of their Affiliates with respect to (a) the sale of Product to a Third Party by the Borrower, its Subsidiaries or any of their Affiliates, (b) the sale, distribution or other commercial use of Product by such Third Party in connection with any marketing, royalty, manufacturing, co-promotion, co-development, or other strategic arrangements, (c) the license, assignment or other transfer of Intellectual Property to market, sell, lease or transfer Product or any other product utilizing such Intellectual Property and (ii) any collections in respect of write-offs or allowances for bad debts in respect of items described in the preceding clause (i) that constitute reversals of allowances for bad debt made in calculating Net Revenue. For purposes of prevention of duplication, “Gross Revenue” shall not include amounts invoiced by Affiliates, distributors, wholesalers or other Persons acting in similar capacities to the extent that such amounts are duplicative.

 

“Hazardous Substances” means any waste, chemical, substance, or material listed, defined, classified, or regulated as a hazardous waste, hazardous substance, pollutant, contaminant, toxic substance, or hazardous, dangerous or radioactive material, chemical or waste

 

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or otherwise regulated by any Environmental Law, including, without limitation, any petroleum or any derivative, waste, or byproduct thereof, radon, asbestos, and polychlorinated biphenyls, and any other substance, the storage, manufacture, disposal, treatment, generation, use, transportation, remediation, release into or concentration in the environment of which is prohibited, controlled, regulated or licensed by any governmental authority under any Environmental Law.

 

“Hedging Obligation” means, with respect to any Person, any liability of such Person under any interest rate, currency or commodity swap agreement, cap agreement or collar agreement, and any other agreement or arrangement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices.  The amount of any Person’s obligation in respect of any Hedging Obligation shall be deemed to be the incremental obligation that would be reflected in the financial statements of such Person in accordance with GAAP.

 

“Holders” means, collectively, the holders of the Capital Stock of the Borrower as of the Closing Date, each natural relative who is a rightful heir of the foregoing, and any trust maintained by or for the benefit of any of the foregoing.

 

“Indemnified Liabilities” has the meaning set forth in Section 10.4.

 

“Intellectual Property” means all rights, title and interests in intellectual property arising under any Applicable Law and all IP Ancillary Rights relating thereto, including all Copyrights, Patents, Trademarks, Internet Domain Names, Trade Secrets, industrial designs, integrated circuit topographies, and rights under IP Licenses.

 

“Interest-Only Period” shall mean the period beginning on the Closing Date and continuing through (i) if a Tranche Two Milestone does not occur, the tenth Interest Payment Date after the Closing Date, or (ii) if a Tranche Two Milestone occurs, the twelfth Interest Payment Date after the Closing Date.

 

“Interest Payment Date” means the last Business Day of each March, June, September  and December.

 

“Internet Domain Name” means all right, title and interest (and all related IP Ancillary Rights) arising under any Applicable Law in internet domain names.

 

“Investment” means, with respect to any Person, (a) the purchase or other acquisition of any debt or equity security of any other Person, (b) the making of any loan, advance or capital contribution to any other Person, (c) becoming obligated with respect to a Contingent Obligation in respect of obligations of any other Person or (d) the making of an Acquisition.  For the avoidance of doubt, a deposit account shall not be an “Investment.”

 

“IP Ancillary Rights” means, with respect to an item of Intellectual Property all foreign counterparts to, and all divisionals, reversions, continuations, continuations-in-part, reissues, reexaminations, renewals and extensions of, such Intellectual Property and all income, royalties, proceeds and liabilities at any time due or payable or asserted under or with respect to any of the foregoing or otherwise with respect to such Intellectual Property, including all rights to sue or

 

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recover at law or in equity for any past, present or future infringement, misappropriation, dilution, violation or other impairment thereof, and, in each case, all rights to obtain any other IP Ancillary Right.

 

“IP License” means all contractual obligations (and all related IP Ancillary Rights), whether written or oral, granting any right, title and interest in any Intellectual Property.

 

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

 

“IRS” has the meaning set forth in Section 3.1(d).

 

“Legal Costs” means, with respect to any Person, (a) all reasonable fees and charges of any counsel, accountants, auditors, appraisers, consultants and other professionals to such Person, (b) the reasonable allocable cost of internal legal services of such Person and all reasonable disbursements of such internal counsel and (c) all court costs and similar legal expenses.

 

“Lender Party” has the meaning set forth in Section 10.4.

 

“Lender” has the meaning set forth in the Preamble.

 

“Letter Agreement” has the meaning set forth in Section 4.1.7.

 

“Lien” means, with respect to any Person, any interest granted by such Person in any real or personal property, asset or other right owned or being purchased or acquired by such Person which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, charge or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise.

 

“Liquidity” means, at any time, the sum of cash and Cash Equivalent Investments held by the Borrower and its Subsidiaries at such time that are not (i) subject to any Liens (other than Liens under the Collateral Documents and customary setoff rights with respect to deposit accounts or other funds maintained with depository institutions that are created by law or by applicable account agreements in favor of such depositary institutions or securities intermediaries), (ii) required to be maintained or kept segregated from the general assets of the applicable Subsidiary for the purpose of securing or providing a source of payment for Debt or other obligations that are or from time to time may be owed to one or more creditors of the Borrower or any Subsidiary (other than to secure the Obligations) or (iii) held by a Subsidiary that is subject to restrictions on its ability to pay dividends or distributions.

 

“Loans” means the Tranche One Loan, the Tranche Two Loan and any PIK Loans.

 

“Loan Documents” means this Agreement, the Notes, the Collateral Documents, the Letter Agreement, the Disclosure Letter and all other documents, instruments and agreements delivered in connection with the foregoing, all as amended, restated or otherwise modified from time to time in accordance with the terms hereof and thereof.

 

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“Loan Party” means the Borrower and each Subsidiary of the Borrower that has executed and delivered a Subsidiary Guaranty and Security Agreement.

 

“Mandatory Minimum Payments” has the meaning set forth in the definition of “Assigned Interests.”

 

“Margin Stock” means any “margin stock” as defined in Regulation T, U or X of the FRB.

 

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, assets, business, properties or condition (financial or otherwise) of the Borrower or the Loan Parties taken as a whole, (b) a material impairment of the ability of any Loan Party to perform in any material respect any of its Obligations under any Loan Document to which it is a party or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.

 

“Maturity Date” means April 18, 2018.

 

“Monthly Net Revenue Report” means, with respect to the relevant calendar month, a report reflecting Net Revenue for such calendar month, including a description of Gross Revenue for such calendar month and the adjustments and other reconciliations used to arrive at Net Revenue, in form and substance acceptable to the Agent and the Lender

 

“Net Revenue” means, for any period of determination, the difference between (a) Gross Revenue for such period, less (b) the sum, with respect to the items described in clauses (i) and (ii) of the definition of Gross Revenue, without duplication, of (i) bona fide cash, trade discounts and rebates actually granted or paid to Third Parties in accordance with customary industry standards, (ii) allowances and adjustments actually credited to customers for Product that is spoiled, damaged, outdated, obsolete, returned or otherwise recalled, but only if and to the extent the same are in accordance with sound business practices and not in excess of customary industry standards, (iii) charges for freight, postage, shipping, delivery, service and insurance charges, to the extent invoiced, (iv) taxes, duties or other governmental charges to the extent invoiced, (v) write-offs or allowances for bad debts, (vi) rebates and chargebacks and other price reduction programs, and (vii) other payments required by Applicable Law, in each case as determined in accordance with GAAP.

 

“Non-Excluded Taxes” has the meaning set forth in Section 3.1(a).

 

“Note” means a promissory note in form and substance acceptable to the Lender and the Agent, as the same may be replaced, substituted, amended, restated or otherwise modified from time to time.

 

“Obligations” means all liabilities, indebtedness and obligations (including interest accrued at the rate provided in the applicable Loan Document after the commencement of a bankruptcy proceeding whether or not a claim for such interest is allowed) of any Loan Party under this Agreement, or any Loan Party under any other Loan Document, any Collateral Document or any other document or instrument executed in connection herewith or therewith, in

 

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each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, including the Assigned Interests.

 

“OFAC” has the meaning set forth in Section 5.20.1.

 

“Other Connection Taxes” means, with respect to the Lender, Taxes imposed as a result of a present or former connection between the Lender and the jurisdiction imposing such Tax (other than any such connection arising from the Lender having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction with respect to the Loan or enforced any Loan Document or sold or assigned an interest in any Loan or Loan Document).

 

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document.

 

“Paid in Full” or “Payment in Full” means, with respect to any Obligations, the payment in full in cash and performance of all such Obligations.

 

“Patents” means all (i) all patents and certificates of invention, or similar property rights, and applications for any of the foregoing, of the United States, any other country or any political subdivision thereof, (ii) all reissues, divisions, continuations, continuations-in-part, extensions, renewals, and reexaminations thereof, (iii) all rights corresponding thereto throughout the world, (iv) all inventions and improvements described therein, (v) all rights to sue for past, present and future infringements thereof, (vi) all licenses, claims, damages, and proceeds of suit arising therefrom, (vii) all proceeds of the foregoing, including, without limitation, licenses, royalties, and income, and (viii) without duplication, all IP Ancillary Rights in respect of the foregoing.

 

“Permitted AR Facility” means a loan facility from an Eligible Institution (i) that is secured solely by the Borrower’s Accounts (as such term is defined in the Security Agreement), Inventory (as such term is defined in the Security Agreement), and cash, deposit accounts and other similar assets and payment intangibles, (ii) the aggregate amount due and outstanding under which does not exceed 85% of the amount of eligible accounts outstanding (as defined in the documentation governing such facility) and securing the obligations thereunder, and which shall provide facilities that shall in no event exceed $10,000,000 in principal amount (including undrawn committed or available amounts), and (iii) with respect to which the Agent and the lender under such facility have entered into a mutually acceptable intercreditor agreement.

 

“Permitted Lien” means any Lien expressly permitted by Section 7.2.

 

“Permitted Refinancing” means any replacement, renewal, refinancing or extension of any existing Debt, in any such case, permitted by this Agreement that (a) does not exceed the aggregate principal amount (plus accrued interest and any applicable premium and associated fees and expenses) of the Debt being replaced, renewed, refinanced or extended, (b) does not have a weighted average life to maturity at the time of such replacement, renewal, refinancing or extension that is less than the weighted average life to maturity of the Debt being replaced, renewed, refinanced or extended, (c) does not rank at the time of such replacement, renewal,

 

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refinancing or extension senior to the Debt being replaced, renewed, refinanced or extended, and (d) does not contain terms (including, without limitation, terms relating to security, amortization, interest rate, premiums, fees, covenants, subordination, event of default and remedies) that, taken as a whole, are materially less favorable to any Loan Party or adverse to the interests of the Agent and the Lender than those applicable to the Debt being replaced, renewed, refinanced or extended.

 

“Person” means any natural person, corporation, partnership, trust, limited liability company, association, Governmental Authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity.

 

“PIK Loans” has the meaning set forth in Section 2.3.1.

 

“PIK Periods” has the meaning set forth in Section 2.3.1.

 

“Prepayment Date” means any date prior to the Maturity Date on which the Loans (including, if applicable, any PIK Loans), and all accrued interest thereon, are Paid in Full.

 

“Product” means the Wildcat, Kittycat, Kittycat2, Juicebox, Ocelot, Ocelot PIXL, Lightbox and Pantheris products, and any and all future iterations of any of the foregoing, and any other products developed internally by any Loan Party; provided, that after the date of an Acquisition of the  Borrower, “Product” shall mean those products that existed either as commercialized products or in development by the Borrower, under Borrower’s standard operating procedure defining the product development process as delivered to the Lender prior to the date hereof, immediately prior the date of such Acquisition.  For the avoidance of doubt, “Product” shall not include any product owned or in development by any acquirer immediately prior to such Acquisition.

 

“Qualified Capital Stock” of any person shall mean any Stock of such person that is not Disqualified Capital Stock.

 

“Quarterly Net Revenue Report” means, with respect to the relevant Fiscal Quarter, a report reflecting Net Revenue for such Fiscal Quarter, including a description of Gross Revenue for such Fiscal Quarter and the adjustments and other reconciliations used to arrive at Net Revenue, in form and substance reasonably acceptable to the Agent and the Lender.

 

“Restricted Payment” has the meaning set forth in Section 7.3.

 

“Security Agreement” means the Security Agreement, dated as of the Closing Date, made by the Borrower in favor of the Agent, and governed by the laws of the State of New York, as amended, restated or otherwise modified from time to time in accordance with the terms hereof and thereof.

 

“Stock” means all shares of capital stock (whether denominated as common stock or preferred stock), equity interests, beneficial, partnership or membership interests, joint venture interests, participations or other ownership or profit interests in, or equivalents (regardless of how designated) of, a Person (other than an individual), whether voting or non-voting.

 

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“Stock Equivalents” means all securities convertible into or exchangeable for Stock or any other Stock Equivalent and all warrants, options or other rights to purchase, subscribe for or otherwise acquire any Stock or any other Stock Equivalent, whether or not presently convertible, exchangeable or exercisable.  For the avoidance of doubt, “Stock Equivalents” shall not include debt instruments that are convertible into Stock or Stock Equivalents.

 

“Subsidiary” means, with respect to any Person, a corporation, partnership, limited liability company or other entity of which such Person owns, directly or indirectly, such number of outstanding shares of voting Stock or Stock Equivalents as to have more than 50% of the ordinary voting power for the election of directors or other managers of such corporation, partnership, limited liability company or other entity.  Unless the context otherwise requires, each reference to Subsidiaries herein shall be a reference to Subsidiaries of the Borrower.

 

“Subsidiary Guaranty” means each Subsidiary Guaranty executed and delivered by a Subsidiary in favor of the Agent pursuant to Section 6.7, in form and substance satisfactory to the Agent and the Lender.

 

“Taxes” has the meaning set forth in Section 3.1(a).

 

“Tax Returns” has the meaning set forth in Section 5.12.

 

“Third Party” means any Person other than the Borrower, Lender and Agent.

 

“Trade Secrets” means all right, title and interest (and all related IP Ancillary Rights) arising under any Applicable Law in or relating to trade secrets.

 

“Trademark” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Applicable Law in trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers and, in each case, all goodwill associated therewith, all registrations and recordations thereof and all applications in connection therewith.

 

“Tranche One Commitment” means, as to the Lender, the Lender’s commitment to provide the Loans in the aggregate principal amount of $20,000,000 pursuant to Section 2.1.1(a).

 

“Tranche Two Commitment” means, as to the Lender, the Lender’s commitment to provide the Loans in the aggregate principal amount of up to $20,000,000 pursuant to Section 2.1.1(b).

 

“Tranche One Loan” means the term loan from the Lender in a principal amount of $20,000,000 made to the Borrower on the Closing Date pursuant to Section 2.1.1(a).

 

“Tranche Two Loan” means the term loan from the Lender in a principal amount of at least $10,000,000 and up to $20,000,000, at the Borrower’s discretion, made to the Borrower pursuant to Section 2.1.1(b).

 

“Tranche Two Milestone” has the meaning set forth in Section 4.2.2.

 

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“True-Up Amount” shall have the meaning set forth in Section 6.9.

 

“True-Up Statement” shall have the meaning set forth in Section 6.9.

 

“UCC” means the Uniform Commercial Code as in effect in from time to time in the State of New York.

 

“Wholly-Owned Subsidiary” means, as to any Subsidiary, all of the Stock and Stock Equivalents of which (except directors’ qualifying shares) are at the time directly or indirectly owned by the Borrower and/or another Wholly-Owned Subsidiary of the Borrower.

 

1.2.                            Interpretation.  In the case of this Agreement and each other Loan Document, (a) the meanings of defined terms are equally applicable to the singular and plural forms of the defined terms; (b) Annex, Exhibit, Schedule and Section references in each Loan Document are to the particular Annex, Exhibit, Schedule and Section of such Loan Document unless otherwise specified; (c) the term “including” is not limiting and means “including but not limited to”; (d) in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including”; (e) unless otherwise expressly provided in such Loan Document, (i) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation shall be construed as including all statutory and regulatory provisions amending, replacing, supplementing or interpreting such statute or regulation; (f) this Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters, all of which are cumulative and each shall be performed in accordance with its terms; and (g) this Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agent, the Borrower, the Lender and the other parties hereto and thereto and are the products of all parties; accordingly, they shall not be construed against the Agent or the Lender merely because of the Agent’s or the Lender’s involvement in their preparation.  Any reference in any Loan Document to a Permitted Lien is not intended to subordinate or postpone, and shall not be interpreted as subordinating or postponing, or as any agreement to subordinate or postpone, any Lien created by any of the Loan Documents to any Permitted Lien.

 

Section 2.                                           Credit Facilities.

 

2.1.                            Loans.

 

2.1.1.                  Loans.  On the terms and subject to the conditions of this Agreement, the Lender agrees to lend to the Borrower funds in an aggregate principal amount of up to the Commitment, in installments as follows:

 

(a)                                 on the Closing Date, the entire amount of its Tranche One Commitment, after which the Tranche One Commitment shall terminate;

 

(b)                                 on the date set forth in the Borrower’s written request (the “Borrowing Request”), the amount of the Tranche Two Commitment set forth in

 

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such Borrowing Request (provided that such amount shall be no less than $10,000,000 and no more than $20,000,000), after which the Tranche Two Commitment shall terminate in full; provided that the Borrowing Request must be received by Lender no later than noon Pacific time five (5) Business Days prior to the date of such proposed borrowing.

 

2.1.2.                  General.  No portion of the Loans may be re-borrowed once repaid.  The proceeds of the Loans shall be used for working capital, capital expenditures and general corporate purposes, in compliance with the Loan Documents and Applicable Law.

 

2.2.                            Loan Accounting.

 

2.2.1.                  Recordkeeping.  The Agent, on behalf of the Lender, shall record in its records the date and amount of the Loan made by the Lender, each interest payment paid in kind, accrued interest and each repayment of principal or interest thereon.  The aggregate unpaid principal amount so recorded shall be rebuttably presumptive evidence of the principal amount of the Loan owing and unpaid.  The failure to so record any such amount or any error in so recording any such amount shall not, however, limit or otherwise affect the Obligations of the Borrower hereunder or under any Note to repay the principal amount of the Loan hereunder, together with all interest accruing thereon.

 

2.2.2.                  Notes.  At the request of the Lender, the Loans shall be evidenced by one or more Notes, with appropriate insertions, payable to the order of the Lender in a face principal amount equal to the Loans and payable in such amounts and on such dates as are set forth herein.

 

2.3.                            Interest.

 

2.3.1.                  Interest Rate.

 

(a)                                 The Borrower promises to pay interest on the unpaid principal amount of the Loans for the period commencing on the Closing Date until the Loans are Paid in Full at a rate payable in cash (subject to clause (b) below) per annum equal to (i) 12.0% for the Tranche One Loan and (b) 14.0% for the Tranche Two Loan.

 

(b)                                 The Borrower may elect to pay an amount of interest up to 1.5% per annum in the form of additional term loans (“PIK Loans”) (i) for the first eight Interest Payments Dates after the Closing Date, with respect to the Tranche One Loan, and (ii) for the first four Interest Payment Dates after the Tranche Two Loan is funded, with respect to the Tranche Two Loan (the “PIK Periods”).  The Borrower shall deliver to the Agent a written notice of its election to pay an amount of interest in the form of PIK Loans at least five (5) Business Days prior to the applicable Interest Payment Date.  Any such election shall be deemed to remain in effect until superseded by a subsequent notice delivered as set forth in the preceding sentence, or until the applicable PIK Period has expired.

 

(c)                                  The foregoing notwithstanding, (i) at any time an Event of Default exists, if requested by the Agent or the Lender, the interest rate then

 

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applicable to the Loan shall be increased by two percent (2.00%) per annum (any such increased rate, the “Default Rate”), (ii) any such increase may thereafter be rescinded by the Lender, and (iii) upon the occurrence of an Event of Default under Section 8.1.1 or 8.1.3, any such increase described in the foregoing clause (i) shall occur automatically.  In the event that the Obligations are not Paid in Full as of the Maturity Date, or in the event that the Obligations shall be declared or shall become due and payable pursuant to Section 8.2, the Obligations shall bear interest subsequent thereto at the Default Rate and such interest shall be payable in cash on demand.  In no event shall interest or other amounts payable by the Borrower to the Lender hereunder exceed the maximum rate permitted under Applicable Law, and if any such provision of this Agreement is in contravention of any such law, (x) any amounts paid hereunder shall be deemed to be and shall be applied against the principal amount of the Obligations to the extent necessary such that the amounts paid hereunder do not exceed the maximum rate under Applicable Law and (y) such provision shall otherwise be deemed modified as necessary to limit such amounts paid to the maximum rate permitted under Applicable Law.

 

2.3.2.                  Interest Payments.  Interest accrued on the Loan during the period from the Closing Date until the Maturity Date shall accrue and be payable in cash (subject to Section 2.3.1(b)) quarterly on each Interest Payment Date, in arrears (provided, however, that PIK Loans, if any, shall accrue, be capitalized and be compounded and added to the aggregate principal balance of the Loans in arrears on each Interest Payment Date), and, to the extent not paid in advance, upon a prepayment of the Loan in accordance with Section 2.4 and at maturity, in each such case, in cash.  After maturity and at any time an Event of Default exists, all accrued interest on the Loan shall be payable in cash on demand at the rates specified in Section 2.3.1.

 

2.3.3.                  Computation of Interest.  Interest shall be computed for the actual number of days elapsed on the basis of a year of 360 days consisting of twelve 30-day months.

 

2.4.                            Amortization; Prepayment.

 

2.4.1.                  Amortization.  Commencing on the first Interest Payment Date following the Interest-Only Period, the Borrower shall repay to the Agent for the account of the Lender on each Interest Payment Date an installment payment in respect of the Loans (including, if applicable, any PIK Loans).  Such installment payments shall be in equal principal amounts (which amounts shall be reduced as a result of the application of prepayments in accordance with Section 2.7), plus accrued and unpaid interest, which principal amounts shall be determined by the Agent based on the principal amount of the Loans (including, if applicable, any PIK Loans) outstanding on the first Interest Payment Date following the Interest Only Period.

 

2.4.2.                  Voluntary Prepayment.  The Borrower may, on at least three (3) Business Days’ written notice to the Agent, not later than 12:00 noon New York City time on such day, prepay the Loan in whole or in part (together with accrued and unpaid interest to the date of prepayment on such prepaid amount and without premium or penalty); provided, however, that each partial prepayment that is not of the entire outstanding amount of any Loan shall be in an

 

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aggregate amount that is an integral multiple of $100,000; and provided, further, that any prepayment in full shall be accompanied by the Exit Fee.

 

2.4.3.                  Payments in Respect of the Assigned Interests.  The Borrower shall pay to the Lender the Assigned Interests (a) in respect of Net Revenues earned during the immediately preceding Fiscal Quarter concurrently with the delivery of each Quarterly Net Revenue Report in the amount set forth thereon, until the end of the Fiscal Quarter in which the Prepayment Date occurs and (b) commencing with the first calendar month beginning after the end of the Fiscal Quarter in which the Prepayment Date occurs, in respect of Net Revenues earned during the immediately preceding month concurrently with the delivery of each Monthly Net Revenue Report in the amount set forth thereon, until the Maturity Date.

 

2.5.                            Payment Upon Maturity.  The Loans, together with the Exit Fee, shall be Paid in Full on the Maturity Date.

 

2.6.                            Making of Payments.  All payments on the Loans in accordance with this Agreement, including any payment in respect of the Assigned Interests and all payments of fees and expenses, shall be made by the Borrower to the Agent without setoff, recoupment or counterclaim and in immediately available funds, in United States Dollars, by wire transfer to the account of the Agent set forth on Annex I or as otherwise specified by the Agent, in any case, not later than 1:00 p.m. New York City time on the date due, and funds received after that hour shall be deemed to have been received by the Agent on the following Business Day.  The Agent shall promptly remit to the Lender all payments received in collected funds by the Agent for the account of such Lender.

 

2.7.                            Application of Payments and Proceeds.  Each prepayment of the outstanding Loans pursuant to Section 2.4.2 shall be applied to the principal repayment installments of the Loans as directed by the Borrower.

 

2.8.                            Payment Dates.  If any payment of principal of or interest on a Loan, or of any fees, falls due on a day which is not a Business Day, then such due date shall be extended to the immediately following Business Day and, in the case of principal, additional interest shall accrue and be payable for the period of any such extension.

 

2.9.                            Set-off.  The Borrower agrees that the Agent and the Lender and its Affiliates have all rights of set-off and bankers’ lien provided by Applicable Law, and in addition thereto, the Borrower agrees that at any time an Event of Default has occurred and is continuing, the Agent and the Lender may apply to the payment of any Obligations of the Borrower hereunder, whether or not then due, any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with the Agent or such Lender.

 

2.10.                     Currency Matters.  All amounts payable under this Agreement and the other Loan Documents to the Agent and the Lender shall be payable in Dollars.

 

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Section 3.                                           Yield Protection.

 

3.1.                            Taxes.

 

(a)                                 Except as otherwise provided in this Section 3.1, all payments of principal and interest on the Loan and all other amounts payable under any Loan Document shall be made free and clear of and without deduction or withholding for any present or future income, excise, stamp, documentary, property or franchise taxes or other taxes, fees, duties, levies, withholdings or other charges of any nature whatsoever imposed by any taxing authority, including any interest, additions to tax or penalties applicable thereto (“Taxes”), excluding (i) taxes imposed on or measured by the Lender’s net income, franchise taxes in lieu of taxes on net income, and branch profits taxes imposed by (A) the jurisdiction under which the Lender is organized or has its principal office or (B) that are Other Connection Taxes, (ii) U.S. federal withholding taxes pursuant to a law in effect at the time such Lender first becomes a party to this Agreement, except to the extent that, pursuant to this Section 3.1(a), amounts with respect to such Taxes were payable to such Lender’s assignor immediately before such Lender became a party hereto, and (iii) any U.S. federal withholding taxes imposed pursuant to FATCA (collectively, “Excluded Taxes” and all such non-Excluded Taxes, “Non-Excluded Taxes”)).  If any withholding or deduction from any payment to be made by the Borrower hereunder is required in respect of any Taxes pursuant to any Applicable Law (as determined in the good faith reasonable discretion of the Borrower or the Agent), rule or regulation, then the Borrower shall:  (i) timely pay directly to the relevant taxing authority the full amount required to be so withheld or deducted; (ii) within thirty (30) days after the date of any such payment of Taxes, forward to the Agent an official receipt or other documentation satisfactory to the Agent evidencing such payment to such relevant taxing authority; and (iii) in the case of Non-Excluded Taxes, pay to the Agent for the account of the Lender such additional amount or amounts as is necessary to ensure that the net amount actually received by the Lender will equal the full amount the Lender would have received had no such withholding or deduction for Non-Excluded Taxes (including withholdings and deductions for Non-Excluded Taxes applicable to any additional sums payable under this Section 3.1) been required.

 

(b)                                 the Borrower shall timely pay to the relevant Governmental Authority in accordance with Applicable Law, or at the option of the Agent timely reimburse it for the payment of, any Other Taxes.

 

(c)                                  The Borrower shall reimburse and indemnify, within 10 days after receipt of demand therefor (with copy to the Agent), the Agent and the Lender for all Non-Excluded Taxes and Other Taxes (including any additional Non-Excluded Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.1) paid by the Agent or the Lender, or required to be withheld or deducted from a payment to the Agent or the Lender, and any liabilities arising therefrom or with respect thereto (including any penalty, interest

 

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or expense), whether or not such Taxes were correctly or legally asserted.  A certificate of the Agent or the Lender (or of the Agent on behalf of the Lender) claiming any compensation under this clause (c), setting forth the amounts to be paid thereunder and delivered to the Borrower with a copy to the Agent, shall be conclusive, binding and final for all purposes, absent manifest error.

 

(d)                                 On or prior to the date it becomes a party to this Agreement, and from time to time thereafter as required by law or reasonably requested in writing by the Borrower, the Lender (including for this purpose any assignee of the Lender that becomes a party to this Agreement) shall (but only so long as the Lender remains lawfully able to do so) provide the Borrower with such documents and forms as prescribed by the Internal Revenue Service (“IRS”) in order to certify that payments to the Lender are exempt from or entitled to a reduced rate of U.S. federal withholding tax on payments pursuant to this Agreement or any other Loan Document. For the avoidance of doubt, if the documents and forms provided by the Lender at the time the Lender first becomes a party to this Agreement indicate a U.S. federal withholding tax rate on payments to the Lender in excess of zero, withholding tax at such rate shall be considered an Excluded Tax unless and until the Lender provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered an Excluded Tax for periods governed by such form.  Without limiting the generality of the foregoing, any Lender that is the beneficial owner of payments made under this Agreement will (but only so long as the Lender remains lawfully able to do so) provide: (i) in the case of a beneficial owner that is U.S. person within the meaning of Section 7701 of the IRC, IRS  Form W-9 certifying that such beneficial owner is exempt from U.S. Federal backup withholding tax, (ii) in the case of a beneficial owner claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code both (A) IRS Form W-8BEN and (B) a certificate to the effect that such beneficial owner is not (1) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (2) a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or (3) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code, (iii) in the case of a beneficial owner that is not a U.S. person within the meaning of Section 7701 of the IRC claiming the benefits of an income tax treaty to which the United States is a party, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty; and (iv) in the case of a beneficial owner for whom payments under this Agreement constitute income that is effectively connected with such beneficial owner’s conduct of a trade or business in the United States, IRS Form W-8ECI.  Any Lender that is not the beneficial owner of payments made under this Agreement, such as an entity treated as a partnership for U.S. federal income tax purposes, will (but only so long as the Lender remains lawfully able to do so) provide (x) an IRS Form W-8IMY on behalf of itself and (y) on behalf of each such beneficial owner, the forms set forth in clauses (i) through (iv) of the preceding sentence that would be required of such beneficial owner if such beneficial owner were a Lender.  If a payment made to the Lender under this

 

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Agreement would be subject to U.S. federal withholding tax imposed by FATCA if the Lender were to fail to comply with the applicable reporting requirements of FATCA, the Lender shall (but only so long as the Lender remains lawfully able to do so) deliver to the Borrower, at the time or times prescribed by law or reasonably requested in writing by the Borrower, such documentation prescribed by applicable law or reasonably requested in writing by the Borrower as may be necessary for the Borrower to comply with its obligations under FATCA, to determine that the Lender has complied with its  obligations under FATCA, or to determine the amount to deduct and withhold from such payment.  Solely for purposes of the preceding sentence, FATCA shall include any amendments made to FATCA after the date of this Agreement (and thus shall not be limited to amendments or successor provisions that are substantively comparable to (and not materially more onerous to comply with than) Section 1471 through 1474 of the Code as of the date of this Agreement).

 

(e)                                  If the Lender determines, in its sole discretion, that it has received a refund of any Non-Excluded Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, the Lender shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) incurred by the Lender, and without interest (other than any interest paid by the relevant taxing authority with respect to such refund), provided that the Borrower, upon the request of the Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant taxing authority) to the Lender in the event the Lender is required to repay such refund to such taxing authority.  Notwithstanding anything to the contrary in this paragraph (e), in no event will the Lender be required to pay any amount to the Borrower pursuant to this paragraph (e) the payment of which would place the Lender in a less favorable net after-Tax position than the Lender would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.  This paragraph (e) shall not be construed to require the Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

 

(f)                                   The provisions of this Section 3.1 shall survive the termination of this Agreement and repayment of all Obligations.

 

3.2.                            Increased Cost.

 

(a)                                 If, after the Closing Date, the adoption or taking effect of, or any change in, any Applicable Law, rule, regulation or treaty, or any change in the interpretation or administration of any Applicable Law, rule, regulation or treaty by any Governmental Authority, central bank or comparable agency

 

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charged with the interpretation or administration thereof, or compliance by the Lender with any request, rule, guideline or directive (whether or not having the force of law) of any such authority, central bank or comparable agency:  (i) shall impose, modify or deem applicable any reserve (including any reserve imposed by the FRB), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by the Lender; (ii) subject the Lender or the Agent to any Taxes (other than Taxes described in clauses (ii) and (iii) of the definition of Excluded Taxes, Taxes indemnified pursuant to Section 3.1 and Connection Income Taxes); or (iii) shall impose on the Lender any other condition affecting its Loan, its Note or its obligation to make the Loan; and the result of anything described in clauses (i) through (iii) above is to increase the cost to (or to impose a cost on) such Lender of making or maintaining its Loan, or to reduce the amount of any sum received or receivable by such Lender under this Agreement or under its Note with respect thereto, then, upon demand by such Lender (which demand shall be accompanied by a statement setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to the Agent), the Borrower shall pay directly to the Lender such additional amount as will compensate the Lender for such increased cost or such reduction.

 

 

(b)                                 If the Lender shall reasonably determine that any change in, or the adoption or phase-in of, any Applicable Law, rule or regulation regarding capital adequacy, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or the compliance by the Lender or any Person controlling the Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the Lender’s or such controlling Person’s capital as a consequence of such Lender’s Commitments hereunder to a level below that which the Lender or such controlling Person could have achieved but for such change, adoption, phase-in or compliance (taking into consideration the Lender’s or such controlling Person’s policies with respect to capital adequacy) by an amount deemed by the Lender or such controlling Person to be material, then from time to time, upon demand by the Lender (which demand shall be accompanied by a statement setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to the Agent), the Borrower shall pay to the Lender such additional amount as will compensate the Lender or such controlling Person for such reduction.

 

(c)                                  Notwithstanding anything herein to the contrary, (i) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or by United States or foreign regulatory authorities, in each case pursuant to Basel III, and (ii) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder or issued in connection therewith or in

 

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implementation thereof, shall in each case be deemed to be a change in law, regardless of the date enacted, adopted, issued or implemented.  Notwithstanding anything to the contrary in this Section 3.2, the Borrower shall not be required to compensate the Lender for any amounts incurred more than 180 days prior to the date that the Lender delivers the statement making the demand for such payment.

 

3.3.                            Mitigation of Circumstances.

 

The Lender shall promptly notify the Borrower and the Agent of any event of which it has knowledge which will result in, and will use reasonable commercial efforts available to it (and not, in such Lender’s sole judgment, otherwise disadvantageous to such Lender) to mitigate or avoid, any obligation by the Borrower to pay any amount pursuant to Section 3.1 or 3.2; provided, that this Section 3.3 shall not apply to, or operate to prevent, any assignment of the Loan and the rights and obligations of the Lender pursuant to Section 10.13.  The Borrower hereby agrees to pay all reasonable costs and expenses incurred by the Lender in connection with this Section 3.3.

 

3.4.                            Conclusiveness of Statements; Survival.  Determinations and statements of the Lender pursuant to Sections 3.1 or 3.2 shall be conclusive absent demonstrable error provided that the Lender or the Agent provides the Borrower with written notification of such determinations and statements.  The Lender may use reasonable averaging and attribution methods in determining compensation under Sections 3.1 or 3.2 and the provisions of such Sections shall survive repayment of the Loan, cancellation of the Notes and termination of this Agreement.

 

Section 4.                                           Conditions Precedent.

 

4.1.                            Tranche One Loan.  The obligation of the Lender to make the Tranche One Loan on the Closing Date is subject to the following conditions precedent, each of which shall be satisfactory in all respects to the Agent and the Lender:

 

4.1.1.                  Delivery of Loan Documents.  The Borrower shall have delivered the following documents in form and substance satisfactory to the Agent (and, as applicable, duly executed by all Persons named as parties thereto and dated the Closing Date or an earlier date satisfactory to the Agent):

 

(a)                                 Agreement.  This Agreement.

 

(b)                                 Notes.  A Note in respect of the Tranche One Loan.

 

(c)                                  Collateral Documents.  The Security Agreement and all other Collateral Documents, and all instruments, documents, certificates and agreements executed or delivered pursuant thereto (including Intellectual Property assignments and pledged equity and limited liability company interests in the Borrower and the Borrower’s Subsidiaries, if any, with undated irrevocable transfer powers executed in blank), in each case, executed and delivered by each Loan Party and each other Person named as a party thereto.

 

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(d)                                 Financing Statements.  Properly completed Uniform Commercial Code financing statements and other filings and documents required by law or the Loan Documents to provide the Agent perfected Liens (subject only to Permitted Liens) in the Collateral.

 

(e)                                  Lien Searches.  Copies of Uniform Commercial Code search reports listing all effective financing statements or equivalent filings filed against any Loan Party, with copies of such financing statements and filings; and copies of Patent, Trademark, Copyright and Internet Domain Name search reports in material jurisdictions listing all effective collateral assignments in respect of such Intellectual Property filed with respect to any Loan Party, with copies of such collateral assignment documentation.

 

(f)                                   Authorization Documents.  For each Loan Party, such Person’s (i) charter (or similar formation document), certified by the appropriate Governmental Authority (as applicable) in its jurisdiction of incorporation (or formation), (ii) good standing certificates in its jurisdiction of incorporation (or formation) and in each other jurisdiction requested by the Agent or the Lender, (iii) limited liability company agreement, partnership agreement, bylaws (and similar governing document) (as applicable), (iv) resolutions of its board of directors (or similar governing body) approving and authorizing such Person’s execution, delivery and performance of the Loan Documents to which it is party and the transactions contemplated thereby, and (v) signature and incumbency certificates of its directors and/or officers executing any of the Loan Documents, all certified by its secretary or an assistant secretary (or similar officer) as being in full force and effect without modification.

 

(g)                                  Opinions of Counsel.  Opinions of counsel for each Loan Party, in form and substance requested by the Agent.

 

(h)                                 Insurance.  Certificates or other evidence of insurance in effect as required by Section 6.3(b), with endorsements naming the Agent as lenders’ loss payee and/or additional insured, as applicable.

 

(i)                                     Chattel Paper.  Any tangible chattel paper (or any other instrument (other than checks received in the ordinary course of business) evidencing any account of Borrower) held by Borrower, accompanied by instruments of transfer or assignment duly executed in blank, to be held by the Agent as Collateral pursuant to the Security Agreement.

 

(j)                                    Other Documents.  Such other certificates, documents and agreements that may be listed on the closing checklist provided by the Agent to the Borrower or as the Agent or the Lender may request.

 

4.1.2.                  Payment of Fees and Expenses.  The Borrower shall have paid, on or prior to the Closing Date, (i) all fees and expenses owing and payable to the Agent and the Lender as of the Closing Date, including the Closing Fee with respect to the Tranche One Loan; and (ii)

 

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subject to Section 10.3 and without duplication, all fees, expenses and other amounts payable set forth herein and costs and expenses incurred by the Agent and the Lender in connection with the transactions contemplated hereby which are required to be paid by the Borrower, and shall provide evidence acceptable to the Agent of each of the foregoing; provided, that the Closing Fee shall be reduced by, and the out-of-pocket costs and expenses of Lender paid by the Borrower shall be limited to, for the period through the Closing Date, an amount not to exceed $150,000.

 

4.1.3.                  Representations and Warranties.  Each representation and warranty by each Loan Party contained herein or by each Loan Party in any other Loan Document to which such Loan Party is a party, shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of the Closing Date.

 

4.1.4.                  No Default.  No Default or Event of Default shall have occurred and be continuing.

 

4.1.5.                  No Material Adverse Change.  Since December 31, 2012, there has been no event or occurrence that has or could reasonably be expected to result in a Material Adverse Effect.

 

4.1.6.                  Execution and Delivery of Letter Agreement.  The Borrower shall have executed and delivered a letter agreement to the Agent dated as of the Closing Date (the “Letter Agreement”) containing, among other items, certain representations and warranties regarding its Intellectual Property, on terms and conditions acceptable to the Lender and Agent.

 

4.2.                            Tranche Two Loan.  The obligation of the Lender to make the Tranche Two Loan is subject to the following conditions precedent, each of which shall be satisfactory in all respects to the Agent and the Lender:

 

4.2.1.                  Delivery of Borrowing Request.  The Borrower shall have delivered a Borrowing Request in respect of the Tranche Two Loan no later than noon Pacific time at least five (5) Business Days prior to the proposed borrowing date.

 

4.2.2.                  Tranche Two Milestones.  The Borrower’s Net Revenue shall have been greater than either: (i) $18,000,000 in the Fiscal Year ended December 31, 2013 (and Net Revenue for the fourth Fiscal Quarter of such Fiscal Year is no more than 45% of the total Net Revenue for such Fiscal Year) or (ii) $8,000,000 in the aggregate in any three consecutive months ending in the first six months of 2014 (each of the events described in clauses (i) and (ii), a “Tranche Two Milestone”), and Borrower shall have delivered to Lender a certificate of the Borrower signed by the chief financial officer of the Borrower certifying to the foregoing.

 

4.2.3.                  Payment of Fees and Expenses.  The Borrower shall have paid, on or prior to the borrowing date of the Tranche Two Loan, (i) all fees and expenses owing and payable to the Agent and the Lender as of such date, including the Closing Fee with respect to the Tranche Two Loan and (ii) subject to Section 10.3 and without duplication, all fees, expenses and other amounts payable set forth herein and costs and expenses incurred by the Agent and the Lender in connection with the transactions contemplated hereby which are required to be paid by the Borrower, and shall provide evidence acceptable to the Agent of each of the foregoing.

 

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4.2.4.                  Representations and Warranties.  Each representation and warranty by each Loan Party contained herein or by in any other Loan Document to which such Loan Party is a party, shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of the proposed borrowing date.

 

4.2.5.                  No Default.  No Default or Event of Default shall have occurred and be continuing.

 

4.2.6.                  No Material Adverse Change.  Since December 31, 2012, there has been no event or occurrence that has or could reasonably be expected to result in a Material Adverse Effect.

 

4.2.7.                  Note.  The Borrower shall have delivered a Note in respect of the Tranche Two Loan in form and substance satisfactory to the Agent, duly executed by the Borrower.

 

Section 5.                                           Representations and Warranties.

 

To induce the Agent and the Lender to enter into this Agreement and to induce the Lender to advance the Loans hereunder, the Borrower represents and warrants to the Agent and the Lender that each of the following are, and after giving effect to the borrowing of the Loans, will be, true, correct and complete:

 

5.1.                            Organization.  The Borrower is a corporation validly existing and in good standing under the laws of the State of Delaware; and each other Loan Party is validly existing and in good standing (as applicable) under the laws of the jurisdiction of its organization; and each Loan Party is duly qualified to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification is required, except for such jurisdictions where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect.

 

5.2.                            Authorization; No Conflict.  Each of the Borrower and each other Loan Party is duly authorized to execute and deliver each Loan Document to which it is a party, the Borrower is duly authorized to borrow monies hereunder, the granting of the security interests pursuant to the Collateral Documents is within the corporate purposes of the Borrower and each other Loan Party party thereto, and the Borrower and each other Loan Party is duly authorized to perform its Obligations under each Loan Document to which it is a party.  The execution, delivery and performance by the Borrower of this Agreement and by the Borrower and each Loan Party of each Loan Document to which it is a party, and the borrowings by the Borrower hereunder, do not and will not (a) require any consent or approval of any Governmental Authority (other than (i) any consent or approval which has been obtained and is in full force and effect and (ii) recordings and filings in connection with the Liens granted to the Agent under the Collateral Documents), (b) conflict with (i) any provision of Applicable Law, (ii) the charter, by-laws, limited liability company agreement, partnership agreement or other organizational documents of any Loan Party or (iii) any agreement, indenture, instrument or other document, or any judgment, order or decree, which is binding upon any Loan Party or any of their respective properties or (c) require, or result in, the creation or imposition of any Lien on any asset of the Borrower or any other Loan Party (other than Liens in favor of the Agent created pursuant to the Collateral Documents).

 

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5.3.                            Validity; Binding Nature.  Each of this Agreement and each other Loan Document to which the Borrower or any other Loan Party is a party is the legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditors’ rights generally and to general principles of equity.

 

5.4.                            Financial Condition.  The unaudited consolidated financial statements of the Borrower and its Subsidiaries (presented on a consolidated basis) as at December 31, 2012 and the audited consolidated financial statements of the Borrower and its Subsidiaries (presented on a consolidated basis) as at December 31, 2011 have been prepared in accordance with GAAP and present fairly the consolidated financial condition of such Persons as at such dates and the results of their operations for the periods then ended.  As of the Closing Date, the Borrower and its Subsidiaries have no liabilities other than as set forth on the foregoing financial statements other than trade payables and compensation costs incurred in the ordinary course of business.

 

5.5.                            No Material Adverse Change.  Since December 31, 2011, there has been no event or occurrence that has or could reasonably be expected to result in a Material Adverse Effect.

 

5.6.                            Litigation.  No litigation (including derivative actions), arbitration proceeding or governmental investigation or proceeding is pending or, to any Loan Party’s knowledge, threatened, against any Loan Party or any of their respective properties which (i) purport to affect or pertain to this Agreement, any other Loan Document or any of the transactions contemplated hereby or (ii) could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.  No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement, any other Loan Document, or directing that the transactions provided for herein not be consummated as herein provided.  As of the Closing Date, no Loan Party is the subject of an audit or, to each Loan Party’s knowledge, any review or investigation by any Governmental Authority (excluding the IRS and other taxing authorities) concerning the violation or possible violation of any requirement of law.

 

5.7.                            Ownership of Properties; Liens.  There are no Liens on the Collateral other than those granted in favor of the Agent to secure the Obligations and Permitted Liens.  Each of the Borrower and each other Loan Party owns good and, in the case of real property, marketable, title to all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges and claims (including infringement claims with respect to Intellectual Property) other than Permitted Liens.  As of the Closing Date, Section 5.7 of the Disclosure Letter lists all of the real property owned, leased, subleased or otherwise owned or occupied by any Loan Party.

 

5.8.                            Capitalization; Subsidiaries.

 

(a)                                 Equity Interests.  As of the Closing Date, the Borrower has no Subsidiaries and does not hold any Capital Stock of any other Person.  All

 

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Stock and Stock Equivalents of each Loan Party are duly and validly issued and, in the case of each entity that is a corporation, are fully paid and non-assessable, and, other than the Stock and Stock Equivalents of the Borrower, are owned by the Borrower, directly or indirectly through Wholly-Owned Subsidiaries.  Each Loan Party is the record and beneficial owner of, and has good and marketable title to, the Stock and Stock Equivalents pledged by it to the Agent under the Collateral Documents, free of any and all Liens, rights or claims of other persons, except the security interest created by the Collateral Documents, and there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that is convertible into, or that requires the issuance or sale of, any such Stock and Stock Equivalents. As of the Closing Date, no Loan Party is engaged in any joint venture with any other Person.

 

(b)                                 No Consent of Third Parties Required.  No consent of any Person including any other general or limited partner, any other member of a limited liability company, any other shareholder or any other trust beneficiary is necessary or reasonably desirable (from the perspective of a secured party) in connection with the creation, perfection or first priority status of the security interest of the Agent in any Stock and Stock Equivalents pledged to the Agent for the benefit of the Lender under the Collateral Documents or the exercise by the Agent of the voting or other rights provided for in the Collateral Documents or the exercise of remedies in respect thereof.

 

5.9.                            Pension Plans.  No Loan Parties have any liability under ERISA and no Loan Party sponsors any “pension plan” or has any liability subject to Title IV of ERISA.

 

5.10.                     Compliance with Law; Investment Company Act; Other Regulated Entities.  The Borrower and each other Loan Party possesses all necessary authorizations, permits, licenses and approvals from all Governmental Authorities in order to conduct their respective businesses as presently conducted, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.  All business and operations of the Borrower and each other Loan Party complies with all applicable federal, state and local laws and regulations, except where the failure so to comply could not reasonably be expected to result in a Material Adverse Effect.  Neither the Borrower nor any other Loan Party is operating any aspect of its business under any agreement, settlement, order or other arrangement with any Governmental Authority. Neither the Borrower nor any other Loan Party is an “investment company” or a company “controlled” by an “investment company” or a “subsidiary” of an “investment company”, within the meaning of the Investment Company Act of 1940.  None of any Loan Party, any Person controlling any Loan Party, or any Subsidiary of any Loan Party, is subject to regulation under any Federal or state statute, rule or regulation limiting its ability to incur Debt, pledge its assets or perform its Obligations under the Loan Documents.

 

5.11.                     Margin Stock.  Neither the Borrower nor any Loan Party is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock.  No portion of the Obligations is secured directly or indirectly by Margin Stock.

 

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5.12.                     Taxes.  Each of the Borrower and each other Loan Party has filed all federal, state, provincial, local and foreign income, and all material sales, goods and services, harmonized sales and franchise and all other material tax returns, reports and statements (collectively, the “Tax Returns”) with the appropriate Governmental Authorities in all jurisdictions in which such Tax Returns are or were required to be filed. All such Tax Returns are true, correct and complete in all material respects. All Taxes, charges and other impositions reflected therein or otherwise due and payable have been paid prior to the date on which any liability may be added thereto for non-payment thereof, except for those contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves are maintained on the books of the appropriate Loan Party, as applicable.  As of the Closing Date, no Tax Return is under audit or examination by any Governmental Authority and no written notice of such an audit or examination or any written assertion of any claim for Taxes, except as set forth in Section 5.12 of the Disclosure Letter, has been given or made by any Governmental Authority.  Amounts have been withheld by each Loan Party, as applicable, from their respective employees for all periods in compliance with the tax, social security and unemployment withholding provisions of Applicable Law and such withholdings have been timely paid to the respective Governmental Authorities in accordance with Applicable Law.  No Loan Party has been a member of an affiliated, combined or unitary group other than the group of which a Loan Party is the common parent or has liability for Taxes of any other person by contract, as a successor or transferor or otherwise by operation of law.

 

5.13.                     Solvency.  Both immediately before and after giving effect to (a) the Loan made on or prior to the date this representation and warranty is made or remade, (b) the disbursement of proceeds of such Loan, and (c) the payment and accrual of all transaction costs in connection with the foregoing, with respect to the Borrower and each other Loan Party, on a consolidated basis, (i) the fair value of its assets is greater than the amount of its liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated, (ii) the present fair saleable value of its assets is not less than the amount that will be required to pay the probable liability on its debts as they become absolute and matured, (iii) it is able to realize upon its assets and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business, (iv) it does not intend to, and does not believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature and (v) it is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which its property would constitute unreasonably small capital.

 

5.14.                     Environmental Matters.  The on-going operations of the Borrower and each other Loan Party comply in all respects with all Environmental Laws, except such non-compliance which could not (if enforced in accordance with Applicable Law) reasonably be expected to result in a Material Adverse Effect.  The Borrower and each other Loan Party have obtained, and maintained in good standing, all licenses, permits, authorizations and registrations required under any Environmental Law and necessary for their respective ordinary course operations, and the Borrower and each other Loan Party are in compliance with all material terms and conditions thereof, except where the failure to do so could not reasonably be expected to result in material liability to the Borrower or any other Loan Party and could not reasonably be expected to result in a Material Adverse Effect.  None of the Borrower, any other Loan Party or any of their respective properties or operations is subject to any outstanding written order from

 

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or agreement with any federal, state or local Governmental Authority, nor subject to any judicial or docketed administrative proceeding, nor subject to any indemnification agreement or other contractual obligation, respecting any Environmental Law, Environmental Claim or Hazardous Substance.  There are no Hazardous Substances or other conditions or circumstances existing with respect to any property, or arising from operations prior to the Closing Date, of the Borrower or any other Loan Party that could reasonably be expected to result in a Material Adverse Effect.  Neither the Borrower nor any other Loan Party has any underground or above ground storage tanks that are not properly registered or permitted under applicable Environmental Laws or that are leaking or disposing of Hazardous Substances.

 

5.15.                     Insurance.  The Borrower and each other Loan Party and their respective properties are insured with financially sound and reputable insurance companies which are not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or such other Loan Party operates.  A true and complete listing of such insurance as of the Closing Date, including issuers, coverages and deductibles, is set forth in Section 5.15 of the Disclosure Letter.

 

5.16.                     Information.  All information heretofore or contemporaneously herewith furnished in writing by the Borrower or any other Loan Party to the Agent or the Lender for purposes of or in connection with this Agreement and the transactions contemplated hereby is, and all written information hereafter furnished by or on behalf of the Borrower or any Loan Party to the Agent or the Lender pursuant hereto or in connection herewith will be, true and accurate in every material respect on the date as of which such information is dated or certified, and none of such information is or will be, taken as a whole, incomplete by omitting to state any material fact necessary to make such information not misleading in light of the circumstances under which made (it being recognized by the Agent and the Lender that any projections and forecasts provided by the Borrower are based on good faith estimates and assumptions believed by the Borrower to be reasonable as of the date of the applicable projections or assumptions and that actual results during the period or periods covered by any such projections and forecasts may differ from projected or forecasted results).

 

5.17.                     Intellectual Property.  Each Loan Party owns, or is licensed or otherwise has the right to use, all Intellectual Property necessary to conduct its business as currently conducted except for such Intellectual Property the failure of which to own or have a license or other right to use would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.  To the knowledge of each Loan Party, (a) the conduct and operations of the businesses of each Loan Party do not, and the anticipated products and Intellectual Property applications of the Loan Parties will not, infringe upon, misappropriate, dilute or violate any Intellectual Property owned by any other Person and (b) no other Person has contested any right, title or interest of any Loan Party in any Intellectual Property or any anticipated products and applications derived or expected to be derived therefrom, other than, in each case, as cannot reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  The Intellectual Property of the Loan Parties is sufficient, and conveys adequate rights, title and interests, for the Borrower and other Loan Parties to develop and commercialize its anticipated products and Intellectual Property applications.

 

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5.18.                     Labor Matters.  Neither the Borrower nor any other Loan Party is subject to any labor or collective bargaining agreement.  There are no existing or threatened strikes, lockouts or other labor disputes involving the Borrower or any other Loan Party that singly or in the aggregate could reasonably be expected to have a Material Adverse Effect.  Hours worked by and payment made to employees of the Borrower and the other Loan Parties are not in violation of the Fair Labor Standards Act or any other Applicable Law, rule or regulation dealing with such matters.

 

5.19.                     No Default.  No Loan Party is in default under or with respect to any contractual obligation in any respect which, individually or together with all such defaults, would reasonably be expected to have a Material Adverse Effect.

 

5.20.                     Foreign Assets Control Regulations and Anti-Money Laundering.

 

5.20.1.           OFAC.  Each Loan Party is and will remain in compliance in all material respects with all U.S. economic sanctions laws, Executive Orders and implementing regulations as promulgated by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) and all applicable anti-money laundering and counter-terrorism financing provisions of the Bank Secrecy Act and all regulations issued pursuant to any of the foregoing.  No Loan Party (i) is a Person designated by the U.S. government on the list of the Specially Designated Nationals and Blocked Persons (the “SDN List”) with which a U.S. Person cannot deal with or otherwise engage in business transactions, (ii) is a Person who is otherwise the target of U.S. economic sanctions laws such that a U.S. Person cannot deal or otherwise engage in business transactions with such Person or (iii) is controlled by (including without limitation by virtue of such person being a director or owning voting shares or interests), or acts, directly or indirectly, for or on behalf of, any person or entity on the SDN List or a foreign government that is the target of U.S. economic sanctions prohibitions such that the entry into, or performance under, this Agreement or any other Loan Document would be prohibited under U.S. law.

 

5.20.2.           Patriot Act.  The Loan Parties and each of their Affiliates are in compliance in all material respects with (a) the Trading with the Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B Chapter V, as amended) and any other enabling legislation or executive order relating thereto and (b) the Patriot Act.  No part of the proceeds of any Loan will be used directly or indirectly for any payments to any government official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977.

 

5.21.                     Non-Competes.  None of the Loan Parties nor any of their officers or, to any Loan Party’s knowledge, employees is subject to a non-compete agreement that prohibits or will interfere with the development, commercialization or marketing of any Product.

 

5.22.                     Internal Controls.  Borrower acknowledges that its management is responsible for establishing and maintaining effective internal control over financial reporting and assessing the effectiveness of internal control over financial reporting. Borrower has performed an evaluation and made an assessment of the effectiveness of the Company’s internal

 

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control over financial reporting as of December 31, 2011. Based on Borrower’s assessment, Borrower has concluded that it maintained effective internal control over financial reporting as of December 31, 2011.

 

Section 6.                                           Affirmative Covenants.

 

Until all Obligations (other than contingent indemnification obligations to the extent no claim giving rise thereto has been asserted and other than the Assigned Interests after the Prepayment Date are Paid in Full) (except with respect to Sections 6.1.2, 6.1.5, 6.2, 6.4, 6.5, 6.7 (to the extent applicable after the Prepayment Date) and 6.9, which shall continue to be in effect after the Prepayment Date until the Assigned Interests are Paid in Full), the Borrower agrees that, unless at any time the Lender shall otherwise expressly consent in writing, it will:

 

6.1.                            Information.  Furnish to the Agent and the Lender:

 

6.1.1.                  Annual Report.  Promptly when available and in any event within 270 days of the end of the Fiscal Year ended December 31, 2012, and within 180 days of the end of each Fiscal Year of the Borrower beginning with the Fiscal Year ending December 31, 2013, the audited consolidated financial statements of the Borrower and the Subsidiaries as at the end of such Fiscal Year prepared on a basis consistent with GAAP.

 

6.1.2.                  Quarterly Reports.  Commencing with respect to the first Fiscal Quarter of 2013, promptly when available and in any event within 45 days of the end of such Fiscal Quarter and each subsequent Fiscal Quarter, a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal quarter, together with consolidated statements of income and cash flows for such period prepared on a basis consistent with GAAP, certified by the chief financial officer of the Borrower.

 

6.1.3.                  Reserved.

 

6.1.4.                  Compliance Certificate.  Contemporaneously with the furnishing of the financial statements required pursuant to Sections 6.1.1 and 6.1.2, a duly completed Compliance Certificate signed by the chief financial officer of the Borrower to the effect that such officer has not become aware of any Event of Default or Default that has occurred and is continuing or, if there is any such Event of Default, describing it and the steps, if any, being taken to cure it, and providing such other information as required thereby.

 

6.1.5.                  Net Revenue Reports.  (a) Until the first Fiscal Quarter after the occurrence of the Prepayment Date, promptly when available and in any event within forty-five (45) days after the end of each Fiscal Quarter, a Quarterly Net Revenue Report, and (b) after the end of the Fiscal Quarter in which the Prepayment Date occurs, promptly when available and in any event within 20 days after the end of each calendar month, a Monthly Net Revenue Report, in each case, together with a certificate of the Borrower signed by the chief financial officer or other executive officer of the Borrower certifying that the foregoing report is true, correct and accurate in all material respects as of such date.

 

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6.1.6.                  Notice of Default; Litigation; ERISA Matters.  Promptly upon becoming aware of any of the following, written notice describing the same and the steps being taken by the Borrower or the applicable Loan Party affected thereby with respect thereto:

 

(a)                                 the occurrence of an Event of Default or a Default;

 

(b)                                 any litigation, arbitration or governmental investigation or proceeding not previously disclosed by the Borrower to the Lender which has been instituted or, to the knowledge of the Borrower, is threatened against the Borrower or any other Loan Party, or to which any of the properties of any thereof is subject, which could reasonably be expected to have a Material Adverse Effect;

 

(c)                                  any cancellation or material change in coverage in any insurance maintained by the Borrower or any other Loan Party; or

 

(d)                                 any other event (including (i) any violation of any Environmental Law or the assertion of any Environmental Claim, (ii) the enactment or effectiveness of any law, rule or regulation, (iii) any violation or noncompliance with any law or (iv) any breach or non-performance of, or any default under, any contractual obligation of any Loan Party) which could reasonably be expected to have a Material Adverse Effect.

 

6.1.7.                  Reserved.

 

6.1.8.                  Budgets.  As soon as practicable, and in any event not later than 30 days after the commencement of each Fiscal Year, a budget of the Borrower and its Subsidiaries for such Fiscal Year (including quarterly operating and cash flow budgets) prepared in a manner reasonably satisfactory to the Agent, accompanied by a certificate of the chief financial officer of the Borrower to the effect that (a) such budget was prepared by the Borrower, in good faith, (b) the Borrower has a reasonable basis for the assumptions contained in such budget and (c) such budget has been prepared in accordance with such assumptions.

 

6.1.9.                  Other Information.  Promptly from time to time, such other information concerning the Borrower and any other Loan Party as the Lender or the Agent may reasonably request.

 

6.2.                            Books; Records; Inspections.  Keep, and cause the Borrower and each other Loan Party to keep, its books and records in accordance with sound business practices sufficient to allow the preparation of financial statements in accordance with GAAP; permit, and cause the Borrower and each other Loan Party to permit, the Agent, the Lender, or any representative of the foregoing to inspect, at any reasonable time and with reasonable notice (or at any time without notice if an Event of Default exists), the properties and operations of the Borrower or such other Loan Party; and permit, and cause the Borrower and each other Loan Party to permit, at any reasonable time and with reasonable notice (or at any time without notice if an Event of Default exists), the Agent, the Lender, or any representative thereof to visit any or all of its offices, to discuss its financial matters with its directors or officers and its independent auditors, if any (and the Borrower hereby authorizes such independent auditors, if any, to discuss such financial matters with the Lender or the Agent or any representative thereof), and to

 

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examine (and, at the expense of the Borrower or the applicable Loan Party, photocopy extracts from) any of its books or other records; and permit, and cause the Borrower and each other Loan Party to permit, the Agent, the Lender and their representatives to inspect, at any reasonable time and with reasonable notice (or at any time without notice if an Event of Default exists), the Collateral and other tangible assets of the Borrower or such Loan Party, to perform appraisals of the equipment of the Borrower or such Party, and to inspect, audit, check and make copies of and extracts from the books, records, computer data, computer programs, journals, orders, receipts, correspondence and other data relating to any Collateral, including the Assigned Interests for purposes of or otherwise in connection with conducting a review, audit or appraisal of such books and records.  In the event that the Agent or Lender shall determine pursuant to any audit of the books and records of the Borrower and its Subsidiaries conducted pursuant to this Section 6.2 that the aggregate amount paid to the Lender hereunder during any period covered by such audit is less than the aggregate amount that was in fact due and payable in respect of such period the Borrower shall promptly remit the amount of such shortfall to the Agent together with interest thereon payable at the Default Rate.

 

6.3.                            Maintenance of Property; Insurance.

 

(a)                                 Keep, and cause each other Loan Party to keep, all property useful and necessary in the business of the Borrower or such other Loan Party in good working order and condition, ordinary wear and tear excepted, and maintain, and cause each other Loan Party to maintain, its Intellectual Property in accordance with the provisions of the Collateral Documents.

 

(b)                                 Maintain, and cause each other Loan Party to maintain, with responsible insurance companies, such insurance coverage as shall be required by all laws, governmental regulations and court decrees and orders applicable to it and such other insurance, to such extent and against such hazards and liabilities, as is customarily maintained by companies similarly situated; provided that in any event, such insurance shall insure against all risks and liabilities of the type insured against as of the Closing Date and shall have insured amounts no less than, and deductibles no higher than, those amounts provided for as of the Closing Date.  Upon request of the Agent or the Lender, the Borrower shall furnish to the Agent or such Lender a certificate setting forth in reasonable detail the nature and extent of all insurance maintained by the Borrower and each other Loan Party.  The Borrower shall cause each issuer of an insurance policy to provide the Agent with an endorsement (i) showing the Agent as a loss payee with respect to each policy of property or casualty insurance and naming the Agent as an additional insured with respect to each policy of liability insurance, (ii) providing that 30 days’ notice will be given to the Agent prior to any cancellation of such policy and (iii) reasonably acceptable in all other respects to the Agent.  The Borrower shall execute and deliver to the Agent, upon request of the Agent, a collateral assignment, in form and substance satisfactory to the Agent, of each business interruption insurance policy maintained by the Loan Parties.

 

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(c)                                  Unless the Borrower provides the Agent with evidence of the continuing insurance coverage required by this Agreement, the Agent may purchase insurance (to the extent of such insurance coverage as shall be required by clause (b) above) at the Borrower’s expense to protect the Agent’s and the Lender’s interests in the Collateral.  This insurance may, but need not, protect the Borrower’s and each other Loan Party’s interests.  The coverage that the Agent purchases may, but need not, pay any claim that is made against the Borrower or any other Loan Party in connection with the Collateral.  The Borrower may later cancel any insurance purchased by the Agent, but only after providing the Agent with evidence that the Borrower has obtained the insurance coverage required by this Agreement.  If the Agent purchases insurance for the Collateral, as set forth above, the Borrower will be responsible for the costs of that insurance, including interest and any other charges that may be imposed with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance and the costs of the insurance may be added to the principal amount of the Loan owing hereunder.

 

6.4.                            Compliance with Laws and Contractual Obligations; Payment of Taxes and Liabilities.  Comply, and cause each other Loan Party to comply, in all material respects with all Applicable Laws, rules, regulations, decrees, orders, judgments, licenses and permits and all indentures, agreements and other instruments binding upon it or its property, except where failure to comply could not reasonably be expected to have a Material Adverse Effect; (b) without limiting clause (a) above, ensure, and cause each other Loan Party to ensure, that no person who owns a controlling interest in or otherwise controls a Loan Party is or shall be (i) listed on the Specially Designated Nationals and Blocked Person List maintained by OFAC, Department of the Treasury, and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, Executive Order or regulation or (ii) a person designated under Section 1(b), (c) or (d) of Executive Order 13224, any related enabling legislation or any other similar Executive Orders; (c) without limiting clause (a) above, comply and cause each other Loan Party to comply, with all applicable Bank Secrecy Act and anti-money laundering laws and regulations; and (d) timely prepare and file all Tax Returns required to be filed by Applicable Law and pay, and cause each other Loan Party to pay, prior to delinquency, all Taxes (reflected in the Tax Returns) against it or any of its property, as well as claims of any kind which, if unpaid, could become a Lien on any of its property; provided that the foregoing shall not require the Borrower or any other Loan Party to pay any such Tax or charge so long as it shall promptly contest the validity thereof in good faith by appropriate proceedings and shall set aside on its books adequate reserves with respect thereto in accordance with GAAP.

 

6.5.                            Maintenance of Existence.  Maintain and preserve, and (subject to Section 7.4) cause each other Loan Party to maintain and preserve, (a) its existence and good standing (as applicable) in the jurisdiction of its organization and (b) its qualification to do business and good standing (as applicable) in each jurisdiction where the nature of its business makes such qualification necessary, other than any such jurisdiction where the failure to be qualified or in good standing could not reasonably be expected to have a Material Adverse Effect.

 

6.6.                            Environmental Matters.  If any release or disposal of Hazardous Substances shall occur or shall have occurred on or from any real property or any other assets of

 

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the Borrower or any other Loan Party, cause, or direct the applicable Loan Party to cause, the prompt containment and removal of such Hazardous Substances and the remediation of such real property or other assets as is necessary to comply with all Environmental Laws and to preserve the value of such real property or other assets.  Without limiting the generality of the foregoing, the Borrower shall, and shall cause each other Loan Party to, comply with each valid Federal or state judicial or administrative order requiring the performance at any real property by the Borrower or any other Loan Party of activities in response to the release or threatened release of a Hazardous Substance.  If any violation of any Environmental Law shall occur or shall have occurred at any real property or any other assets of the Borrower or any other Loan Party or otherwise in connection with their operations, cause, or direct the applicable Loan Party to cause, the prompt correction of such violation.

 

6.7.                            Further Assurances.  Promptly upon request by the Agent, the Loan Parties shall (and, subject to the limitations hereinafter set forth, shall cause each of their Subsidiaries to) take such additional actions as the Agent may reasonably require from time to time in order (i) to subject to the Liens created by any of the Collateral Documents any of the properties, rights or interests, whether now owned or hereafter acquired, covered or intended to be covered by any of the Collateral Documents, (ii) to perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and the Liens intended to be created thereby, and (iii) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Agent and the Lender the rights granted or now or hereafter intended to be granted to the Agent and the Lender under any Loan Document or under any other document executed in connection therewith.  Without limiting the generality of the foregoing and except as otherwise approved in writing by the Lender, the Loan Parties shall cause each of their Subsidiaries other than CFCs (including any such Subsidiary formed or acquired after the Closing Date within 30 days of such formation or acquisition) to guaranty the Obligations and cause each such Subsidiary to grant to the Agent, for the benefit of the Agent and the Lender, a security interest in, subject to the limitations hereinafter set forth or set forth in the Security Agreement, all of such Subsidiary’s property to secure such guaranty, in each case pursuant to the execution and delivery of a Subsidiary Guaranty and a joinder to the Security Agreement and such other documents as may be reasonably requested, each in form and substance reasonably satisfactory to the Agent.  Furthermore and except as otherwise approved in writing by the Lender, the Borrower shall, and shall cause each of its Subsidiaries to, pledge all of the Stock and Stock Equivalents of each of its Subsidiaries that are not CFCs, all of the nonvoting Stock and Stock Equivalents of each of its Subsidiaries that are CFCs, and 65% of the voting Stock and Stock Equivalents of each of its Subsidiaries that are CFCs, to the Agent for the benefit of the Agent and the Lender, to secure the Obligations, in each case pursuant to documents in form and substance reasonably satisfactory to the Agent.  In connection with each pledge of Capital Stock that is certificated, the Borrower and each Subsidiary shall deliver, or cause to be delivered, to the Agent, irrevocable proxies and stock powers and/or assignments, as applicable, duly executed in blank, in each case pursuant to documents in form and substance reasonably satisfactory to the Agent.  The Borrower and each Loan Party shall be under an ongoing obligation to use commercially reasonable efforts to obtain a Collateral Access Agreement from the lessor of each leased property and bailee in possession of any Collateral with a book value in excess of $250,000 with respect to each location in the United States where any Collateral is stored or located, which Collateral Access Agreement shall be in form and substance reasonably satisfactory to the Agent.  Without limiting the requirements of the Collateral Documents, in the

 

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event that any Loan Party shall acquire, develop, or otherwise obtain, register or seek to register any Patent, Copyright, Trademark, or other Intellectual Property with any United States Governmental Authority, or obtain, register or seek to register any application for, or license in respect of, any of the foregoing, the Borrower shall notify the Agent thereof within 45 days of the end of each calendar quarter and shall promptly thereafter execute and deliver to the Agent, for the benefit of the Lender, such Intellectual Property security agreements, other Collateral Documents or other documents as the Agent may request in order to secure and perfect the security interest in respect of such Intellectual Property (it being understood that this sentence only applies to registered Intellectual Property).

 

6.8.                            Post-Closing Obligations.  Within thirty (30) days after the Closing Date (subject to extension by the Agent in its sole discretion), the Loan Parties shall deliver to the Agent a deposit account or securities account, as applicable, Control Agreement for each deposit account and securities account maintained by any Loan Party (other than the Excluded Accounts (provided, that if at any time any such account fails to meet the requirements set forth in the definition of “Excluded Accounts,” the Loan Parties shall deliver a Control Agreement for such account within thirty (30) days after such date) and zero balance payroll and similar accounts), in form and substance satisfactory to the Agent.

 

6.9.                            Assigned Interests.

 

6.9.1.                  Payments.  The Borrower shall remit to the Lender amounts pursuant to Section 2.4.3.

 

6.9.2.                  True-Up.

 

(a)                                 Following the end of each Fiscal Quarter after the Prepayment Date, concurrently with the delivery of the Monthly Net Revenue Report for the third month in such Fiscal Quarter, the Borrower shall deliver to the Lender a calculation of the difference between (i) the amount Lender has received in payments from the Borrower under Section 2.4.3 in respect of such Fiscal Quarter and (ii) the Mandatory Minimum Payments (the “True-Up Amount”).

 

(b)                                 If the True-Up Amount calculated pursuant to clause (a) above is negative, the Borrower shall pay the absolute value of such amount to Lender within five (5) days of the receipt by Lender of the True-Up Statement.

 

6.10.                     Internal Controls.  Borrower will maintain internal controls over financial reporting that are no less effective in maintaining control over financial reporting than those in effect on the Closing Date.

 

Section 7.                                           Negative Covenants.

 

Until the Obligations (other than contingent indemnification obligations to the extent no claim giving rise thereto has been asserted and other than the Assigned Interests after the Prepayment Date) are Paid in Full (except with respect to Section 7.17, which shall be in effect

 

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from the Prepayment Date until the Assigned Interests are Paid in Full), the Borrower agrees that, unless at any time the Lender shall otherwise expressly consent in writing (such consent to be withheld in the Lender’s sole discretion), it will:

 

7.1.                            Debt.  Not, and not suffer or permit any Loan Party to, create, incur, assume or suffer to exist any Debt, except for the following Debt of the Borrower and/or Loan Party Subsidiaries:

 

(a)                                 Obligations under this Agreement and the other Loan Documents;

 

(b)                                 Debt in respect of Capital Leases and purchase money Debt, in each case incurred for the purpose of financing all or any part of the cost of acquiring, repair, construction or improvement of fixed or capital assets; provided that the aggregate principal amount of all such Debt at any time outstanding shall not exceed $100,000;

 

(c)                                  Debt of the Borrower to any Loan Party that is a Wholly-Owned Subsidiary of the Borrower or Debt of any Loan Party that is a Wholly-Owned Subsidiary of the Borrower to the Borrower or another Loan Party that is a Wholly-Owned Subsidiary of the Borrower; provided that all such Debt shall be evidenced by a global intercompany demand note in form and substance satisfactory to the Agent and pledged and delivered to the Agent pursuant to the applicable Collateral Document as additional collateral security for the Obligations, and the obligations under such demand note shall be subordinated to the Obligations hereunder in a manner satisfactory to the Agent;

 

(d)                                 Debt described in Section 7.1 of the Disclosure Letter as of the Closing Date, and any Permitted Refinancing thereof;

 

(e)                                  Contingent Obligations arising with respect to customary indemnification obligations in favor of purchasers in connection with dispositions permitted under Section 7.4;

 

(f)                                   Debt arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, provided that such Debt is extinguished within two (2) Business Days of notice to the Borrower or the relevant Subsidiary of its incurrence;

 

(g)                                  Debt incurred in connection with the financing of insurance premiums in the ordinary course of business;

 

(h)                                 guaranties by the Borrower of the Debt of any Loan Party that is a Wholly-Owned Subsidiary of the Borrower or guaranties by any Subsidiary thereof of the Debt of the Borrower in each case so long as such Debt is otherwise permitted under Section 7.1(a) or (b);

 

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(i)                                     Debt under a Permitted AR Facility;

 

(j)                                    Debt consisting of Hedging Obligations;

 

(k)                                 unsecured Debt of the Borrower or any Subsidiary (i) that is convertible into Stock or Stock Equivalents and is validly subordinated by its terms to the payment of the Obligations on terms which shall provide that no payments of principal or interest may be made on such Debt prior to the Prepayment Date, (ii) that is validly subordinated by its terms to the payment of the Obligations on terms reasonably satisfactory to the Agent or (iii) in respect of earn-out, purchase price adjustment and similar obligations; provided that the aggregate principal amount of all such Debt under this clauses (ii) and (iii) at any time outstanding shall not exceed $10,000,000.

 

7.2.                            Liens.  Not, and not suffer or permit any Loan Party to, create or permit to exist any Lien on any of its real or personal properties, assets or rights of whatsoever nature (whether now owned or hereafter acquired), except:

 

(a)                                 Liens for Taxes or other governmental charges not at the time delinquent or thereafter payable without penalty, or being diligently contested in good faith by appropriate proceedings and for which it maintains adequate reserves in accordance with GAAP and the execution or other enforcement of which is effectively stayed;

 

(b)                                 Liens arising in the ordinary course of business (such as (i) Liens of carriers, warehousemen, mechanics, customs brokers, landlords and materialmen and other similar Liens imposed by law and (ii) Liens consisting of pledges or deposits incurred in connection with worker’s compensation, unemployment compensation and other types of social security (excluding Liens arising under ERISA) or in connection with surety bonds, bids, performance bonds and similar obligations) for sums not more than 30 days overdue or being diligently contested in good faith by appropriate proceedings and not involving any deposits or advances or borrowed money or the deferred purchase price of property or services and, in each case, for which it maintains adequate reserves to the extent required in accordance with GAAP and the execution or other enforcement of which is effectively stayed;

 

(c)                                  Liens described in Section 7.2 of the Disclosure Letter as of the Closing Date;

 

(d)                                 Liens securing Debt permitted by Section 7.1(b); provided, however, that any such Lien (i) attaches only to the property being leased or financed and any accessions thereto and proceeds thereof, and (ii) attaches to such property within 60 days of the acquisition thereof and attaches solely to the property so acquired and any accessions thereto and proceeds thereof;

 

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(e)                                  attachments, appeal bonds, judgments and other similar Liens, in connection with judgments the existence of which do not constitute an Event of Default;

 

(f)                                   easements, encroachments, rights of way, leases, subleases, restrictions, minor defects or irregularities in title and other similar Liens not interfering in any material respect with the ordinary conduct of the business of the Borrower or any Subsidiary;

 

(g)                                  any interest or title of a lessor or sublessor under any lease (other than a Capital Lease) or of a licensor or sublicensor under any license, in each case permitted by this Agreement;

 

(h)                                 leases, licenses, subleases or sublicenses granted to third parties in the ordinary course of business which do not (i) interfere in any material respect with, or materially detract from the value of, the business of the Borrower and its Subsidiaries, taken as a whole or (ii) secure any Debt, and in each case permitted by this Agreement;

 

(i)                                     Liens arising from precautionary uniform commercial code financing statements filed under any lease (other than a Capital Lease) permitted by this Agreement;

 

(j)                                    Liens with respect to a Permitted AR Facility;

 

(k)                                 Liens arising under the Loan Documents;

 

(l)                                     bankers’ liens, rights of setoff and Liens in favor of financial institutions incurred in the ordinary course of business arising in connection with deposit accounts or securities accounts held at such institutions solely to secure payment of fees and similar costs and expenses; and

 

(m)                             the replacement, extension or renewal of any Lien permitted by clauses (c) or (d) above upon or in the same property subject thereto arising out of the Permitted Refinancing of the Debt secured thereby.

 

7.3.                            Restricted Payments.  Not, and not suffer or permit any Loan Party to, (i) declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any Stock or Stock Equivalent, (ii) purchase, redeem or otherwise acquire for value any Stock or Stock Equivalent now or hereafter outstanding or (iii) make any payment or prepayment of principal of, premium, if any, interest, fees, redemption, exchange, purchase, retirement, defeasance, sinking fund or similar payment with respect to, Debt that is subordinated by its terms to the payment of the Obligations (the items described in clauses (i), (ii) and (iii) above are referred to as “Restricted Payments”) except that (i) any Subsidiary of the Borrower may declare and pay dividends to, repay intercompany debt owed to, and make internal profit-sharing payments to, the Borrower or any other Loan Party that is a Wholly-Owned Subsidiary of the Borrower, (ii) the Borrower may make repurchases from any present or former employee, director, officer or consultant (or the assigns, estate, heirs or current

 

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or former spouses thereof) upon the death, disability or termination of employment of such employee, director, officer or consultant provided such repurchases do not exceed $1,000,000 in the aggregate per Fiscal Year, (iii) the Borrower may convert its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange therefor (provided that such securities shall not be converted or exchanged into Disqualified Capital Stock or Debt that is not permitted by Section 7.1), and (iv) the Borrower may make cash payments in lieu of the issuance of fractional shares upon such conversion or in connection with the exercise of warrants or similar securities).

 

7.4.                            Mergers; Consolidations; Asset Sales.

 

(a)                                 Not, and not suffer or permit any Loan Party to, be a party to any merger, consolidation or amalgamation, except for any such merger or consolidation (i) of any Subsidiary of the Borrower into the Borrower (so long as the Borrower survives such merger) or any Loan Party that is a Wholly-Owned Subsidiary of the Borrower, as applicable (so long as such Loan Party that is a Wholly-Owned Subsidiary survives such merger) or (ii) in which the Obligations (other than the Assigned Interests) shall be Paid in Full prior to or concurrently with the consummation of such transaction and in which provision is made for the Assigned Interests to be assumed by the surviving or acquiring Person and such Person delivers written notice to the Lender acknowledging such assumption.

 

(b)                                 Not, and not suffer or permit any Loan Party to, sell, transfer, dispose of, convey or lease any of its assets or the Capital Stock of any Loan Party, or sell or assign with or without recourse any receivables (any such transaction, a “Disposition”), except for (i) Dispositions of worn-out or surplus equipment, all in the ordinary course of business, (ii) the abandonment or other Disposition of Intellectual Property that is no longer useful or material to the conduct of the business of the Loan Parties as determined by the Borrower in its reasonable business judgment, (iii) Dispositions of cash and Cash Equivalent Investments, (iv) licenses, sublicenses, leases or subleases (including any license or sublicense of Intellectual Property) granted to third parties in the ordinary course of business not interfering with the business of the Loan Parties in any material respect as determined by the Borrower in its reasonable business judgment, (v) the granting of Liens permitted under Section 7.2, Restricted Payments permitted by Section 7.3, transactions permitted by Section 7.4(a) and Investments permitted by Section 7.10, (vi) Dispositions resulting from any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of any Loan Party provided the proceeds thereof are promptly applied to replace such assets and (vii) other Dispositions of assets having a book value of not more than $500,000 in the aggregate in any Fiscal Year; provided that, for the avoidance of doubt, nothing in this Section 7.4(b) shall prevent the Borrower from selling and issuing its Capital Stock.

 

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(c)                                  Not, and not suffer or permit any Loan Party to, sell, transfer, dispose of, convey or license any of its Intellectual Property other than as permitted by the foregoing clauses (a) and (b) of this Section 7.4.

 

7.5.                            Modification of Organizational Documents.  Not waive, amend or modify, and not suffer or permit any waiver, amendment or modification of, any term of the charter, limited liability company agreement, partnership agreement, articles of incorporation, by-laws or other organizational documents of the Borrower or any other Loan Party, in each case except for those amendments and modifications that do not materially adversely affect the interests of the Agent or the Lender under the Loan Documents or in the Collateral (it being understood and agreed that any adverse impact on the effectiveness or validity of any Collateral Document or the Liens granted to the Agent thereunder shall each be deemed to materially adversely affect such interests of the Agent and the Lender).

 

7.6.                            Use of Proceeds.  Not use the proceeds of the Loan for any purposes other than solely as expressly provided in Section 2.1.2.

 

7.7.                            Transactions with Affiliates.  Not, and not suffer or permit any Loan Party to, enter into any transaction or arrangement with any Affiliate of the Borrower or of any such Loan Party, except:

 

(a)                                 Restricted Payments permitted by Section 7.3, intercompany loans among Loan Parties permitted by Section 7.1(c), transactions permitted by Section 7.4(a) and Investments permitted by Section 7.10(a) and (b);

 

(b)                                 in the ordinary course of business and pursuant to the reasonable requirements of the business of such Loan Party or such Subsidiary; provided that, in the case of this clause (b), such transaction shall be upon fair and reasonable terms no less favorable to such Loan Party or such Subsidiary than would be obtained in a comparable arm’s length transaction with a Person not an Affiliate of the Borrower or such Subsidiary and which are disclosed in writing to the Agent;

 

(c)                                  payment of compensation and benefits (including customary indemnities) to officers, directors and employees of the Loan Parties for actual services rendered to the Loan Parties in the ordinary course of business;

 

(d)                                 payment of reasonable and customary fees to members of the boards of directors (or similar governing body) of the Loan Parties, and the reimbursement of actual out of pocket expenses incurred in connection with attending board of director meetings;

 

(e)                                  advances for reasonable travel and entertainment expenses and reasonable relocation costs and expenses and other reasonable loans and advances in the ordinary course of business; and

 

(f)                                   the subordinated Debt investments by the Borrower’s stockholders in the Borrower, to the extent permitted by Section 7.1(k), and

 

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equity investments by the Borrower’s stockholders in the Borrower for purposes of raising capital.

 

7.8.                            Inconsistent Agreements.  Not, and not suffer or permit any other Loan Party to, enter into any agreement containing any provision which would (i) be violated or breached by any borrowing by the Borrower hereunder or by the performance by the Borrower or any other Loan Party of any of its Obligations hereunder or under any other Loan Document, (ii) prohibit the Borrower or any other Loan Party from granting to the Agent and the Lender a Lien on any of its assets that constitute Collateral or (iii) other than pursuant to the Loan Documents, create or permit to exist or become effective any encumbrance or restriction on the ability of any other Subsidiary to (x) pay dividends or make other distributions to the Borrower or any Wholly-Owned Subsidiary, or pay any Debt owed to the Borrower or any Wholly-Owned Subsidiary, (y) make loans or advances to the Borrower or any Wholly-Owned Subsidiary or (z) transfer any of its assets or properties to the Borrower or any Wholly-Owned Subsidiary, except, in the case of clause (ii) and (iii) above: (a) negative pledges and restrictions on Liens in favor of any holder of Debt permitted under Section 7.1(b) but solely to the extent any negative pledge or limitation on Liens relates to the property that is the subject of such Debt and the proceeds and products thereof, (b) customary restrictions on leases, subleases, licenses or asset sale agreements otherwise permitted hereby so long as such restrictions relate to the assets subject thereto, (c) customary provisions restricting assignment of any agreement entered into in the ordinary course of business, (d) prohibitions and limitations that exist pursuant to Applicable Law, (e) customary restrictions and conditions contained in agreements relating to (A) the sale of a Subsidiary or assets pending such sale, provided such restrictions and conditions apply only to the Subsidiary or assets that are to be sold and such sale is permitted hereunder, and (B) the acquisition of the Borrower provided that the acquisition agreement shall provide that all amounts due and payable under this Agreement shall be Paid in Full upon the closing of such transaction; (f) customary provisions in joint venture agreements (and other similar agreements) provided that such provisions apply only to such joint venture or such other arrangement and to the Capital Stock of such joint venture or such other arrangement; and (g) customary net worth provisions or similar financial maintenance provisions contained in any agreement entered into by a Subsidiary.

 

7.9.                            Business Activities.  Not, and not suffer or permit any Loan Party to, engage in any line of business other than the businesses engaged in on the Closing Date and businesses directly related thereto including businesses constituting extensions thereof or which are incidental thereto.  As of the Closing Date the Borrower and other Loan Parties engage in the business of the development, manufacture, maintenance, sale, rental and distribution of minimally-invasive imaging systems and medical devices used in the treatment and/or diagnosis of various medical conditions.

 

7.10.                     Investments.  Not, and not suffer or permit any Loan Party to, make or permit to exist, any Investment in any other Person, except the following:

 

(a)                                 Investments (i) between or among the Loan Parties; (ii) by Subsidiaries that are not Loan Parties in Loan Parties; (iii) by Subsidiaries that are not Loan Parties in Subsidiaries that are not Loan Parties; and (iv) by Loan Parties in Subsidiaries that are not Loan Parties in an amount not to exceed $250,000 in

 

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the aggregate in any Fiscal Year, provided, that the Lender’s consent to any such Investments in an amount exceeding $250,000 but less than $1,000,000 shall not be unreasonably withheld;

 

(b)                                 Investments constituting Debt permitted by Section 7.1(c);

 

(c)                                  Contingent Obligations constituting Debt permitted by Section 7.1 or constituting guarantees of commercial obligations of Subsidiaries (not constituting Debt) in the ordinary course of business not prohibited hereby;

 

(d)                                 Cash Equivalent Investments;

 

(e)                                  Investments listed in Section 7.10 of the Disclosure Letter as of the Closing Date;

 

(f)                                   extensions of trade credit in the ordinary course of business;

 

(g)                                  notes payable, or stock or other securities issued by an account debtor pursuant to settlement in the ordinary course of business of such account debtor’s accounts receivable owing to the Borrower or its Subsidiaries;

 

(h)                                 Investments in connection with Hedging Obligations;

 

(i)                                     Investments of any Person existing at the time such Person becomes a Subsidiary of a Borrower or consolidates or merges with the Borrower or any of the Subsidiaries so long as such Investments were not made in contemplation of such Person becoming a Subsidiary or of such merger;

 

(j)                                    Investments received in connection with the dispositions of assets permitted by Section 7.4;

 

(k)                                 loans or advances to employees, officers and directors of a Loan Party for reasonable travel and entertainment expenses and reasonable relocation costs and expenses and other ordinary business purposes; provided, however, that the aggregate outstanding principal amount of all loans and advances permitted pursuant to this clause (k) shall not exceed $500,000 at any time;

 

(l)                                     Investments consisting of non-cash loans to employees, officers, directors or consultants for the purpose of purchasing Capital Stock in the Borrower so long as the proceeds of such loans are used entirely to pay the purchase price of such Capital Stock; and

 

(m)                             other Investments in an aggregate amount not to exceed $250,000 at any time outstanding.

 

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7.11.                     Fiscal Year.  Not, and not suffer or permit any other Loan Party to, change its Fiscal Year.

 

7.12.                     Deposit Accounts and Securities Accounts.  Not, and not suffer or permit any Loan Party to, maintain or establish any deposit account or securities account other than the deposit accounts and securities accounts set forth in Section 7.12 of the Disclosure Letter without prior written notice to the Agent and unless the Agent, the Borrower or such other Loan Party and the bank or securities intermediary at which such deposit account or securities account, as applicable, is to be opened or maintained enter into a Control Agreement regarding such deposit account or securities account, as applicable, on terms satisfactory to the Agent.

 

7.13.                     Sale-Leasebacks.  Not and not suffer or permit any Loan Party to, engage in a sale leaseback (except as permitted under Section 7.1(b)), synthetic lease or similar transaction involving any of its assets.

 

7.14.                     Hazardous Substances.  Not, and not suffer or permit any other Loan Party to, cause or suffer to exist any release of any Hazardous Substances at, to or from any real property owned, leased, subleased or otherwise operated or occupied by any Loan Party that would violate any Environmental Law, form the basis for any Environmental Claims or otherwise adversely affect the value or marketability of any real property (whether or not owned by any Loan Party), other than such violations, Environmental Claims and effects that would not, in the aggregate, be reasonably be expected to have a Material Adverse Effect.  Notwithstanding the foregoing, under no circumstances will any Loan Party cause or suffer to exist any disposal of any Hazardous Substances at, on, under or in any real property owned, leased, subleased, or otherwise operated or occupied by any Loan Party.

 

7.15.                     ERISA Liability.  Not suffer or permit any liability under ERISA and the sponsorship of any “pension plan” or any liability subject to Title IV of ERISA that is in excess of $250,000.

 

7.16.                     Liquidity.  Not suffer or permit Liquidity to be less than $2,000,000 at any time.

 

7.17.                     Post-Prepayment Date Covenants.  After the Prepayment Date through the earlier to occur of (i) December 31, 2018, and (ii) the Acquisition of the Borrower:

 

(a)                                 Merger; Consolidations; Asset Sales

 

(i)             Not, and not suffer or permit any Loan Party to, be a party to any merger, consolidation or amalgamation, or any Disposition of all or substantially all of the assets of the Borrower, except for (A) any such merger, consolidation or amalgamation of any Subsidiary of the Borrower into the Borrower (so long as the Borrower survives such merger) or any Loan Party that is a Wholly-Owned Subsidiary of the Borrower, as applicable (so long as a Loan Party that is a Wholly-Owned Subsidiary survives such merger) or (B) any such merger, consolidation or amalgamation or any such Disposition in which the Obligations (other than the Assigned Interests) shall be Paid in Full prior to or concurrently with the consummation of such transaction and in which provision is made for the Assigned Interests to be assumed by

 

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the surviving or acquiring Person and such Person delivers written notice to the Lender acknowledging such assumption.

 

(ii)          Not, and not suffer or permit any Loan Party to, sell, transfer, dispose of, convey or license any of its Intellectual Property related to the Products other than as permitted by the foregoing clause (a)(i)(B) of this Section 7.17 and except for (A) the abandonment or other Disposition of Intellectual Property that is no longer useful or material to the conduct of the business of the Loan Parties as determined by the Borrower in its reasonable business judgment, and (B) licenses and sublicenses granted to third parties in the ordinary course of business not interfering with the business of the Loan Parties in any material respect as determined by the Borrower in its reasonable business judgment.

 

(b)                                 Modification of Organizational Documents.  Not waive, amend or modify, and not suffer or permit any waiver, amendment or modification of, any term of the charter, limited liability company agreement, partnership agreement, articles of incorporation, by-laws or other organizational documents of the Borrower or any other Loan Party, in each case except as permitted by Section 7.17(a)(i) and for those amendments and modifications that do not materially adversely affect the interests of the Agent or the Lender in the Assigned Interests.

 

(c)                                  Inconsistent Agreements.  Not, and not suffer or permit any other Loan Party to, enter into any agreement containing any provision which would be violated or breached by the performance by the Borrower or any other Loan Party of any of its Obligations with respect to the Assigned Interests.

 

(d)                                 Fiscal Year.  Not, and not suffer or permitted any other Loan Party to, change its Fiscal Year, except in connection with an Acquisition of the Borrower, in which case any necessary adjustment shall be made such that Lender receives the benefits of the Assigned Interests contemplated hereunder.

 

Section 8.                                           Events of Default; Remedies.

 

8.1.                            Events of Default.  Each of the following shall constitute an Event of Default under this Agreement:

 

8.1.1.                  Non-Payment of Credit Agreement.  Any default (i) in the payment when due of the principal of the Loan, (ii) for a period in excess of three (3) Business Days in the payment when due of any interest, fee, or other amount payable hereunder, including any payment in respect of the Assigned Interests, by any Loan Party, or (iii) for a period in excess of three (3) Business Days in any payment of any amount due under any other Loan Document, shall occur.

 

8.1.2.                  Default Under Other Debt.

 

(a)                                 Any default in the payment of principal or interest when due (giving effect to all applicable grace periods, if any) shall occur under the terms applicable to any Debt (other than the Obligations) of any Loan Party in an aggregate amount (for all such Debt so affected and including amounts owing to

 

45

 

all creditors under any combined or syndicated credit arrangement) exceeding $250,000; and

 

(b)                                 Any default shall occur under the terms applicable to any Debt (other than the Obligations) of any Loan Party in an aggregate amount (for all such Debt so affected and including undrawn committed or available amounts and amounts owing to all creditors under any combined or syndicated credit arrangement) exceeding $250,000 and such default shall result in the acceleration of the maturity of such Debt or permit the holder or holders thereof, or any trustee or agent for such holder or holders, to cause such Debt to become due and payable (or require the Borrower or any other Loan Party to purchase or redeem such Debt or post cash collateral in respect thereof) prior to its expressed maturity.

 

8.1.3.                  Bankruptcy; Insolvency.  (i) Any Loan Party generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; (ii) any Loan Party commences any case, proceeding or other action (x) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (y) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets; or (iii) there shall be commenced against any Loan Party any case, proceeding or other action of a nature referred to in clause (ii) above that (x) results in the entry of an order for relief or any such adjudication or appointment or (y) remains undismissed or undischarged for a period of 60 days; (iv) there shall be commenced against any Loan Party any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; (v) any Loan Party shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (ii), (iii) or (iv) above; or (vi) any Loan Party shall make a general assignment for the benefit of its creditors.

 

8.1.4.                  Non-Compliance with Loan Documents.

 

(a)                                 Failure by the Borrower or any other Loan Party to comply with or to perform any covenant set forth in Sections 6.1, 6.4, 6.5(a) (with respect to the maintenance of existence of the Borrower or any other Loan Party), 6.5(b), 6.6, 6.8, 6.9 and 7, in each case during the period when each such covenant is applicable; or (b) failure by the Borrower or any other Loan Party to comply with or to perform any other provision of this Agreement or any other Loan Document applicable to it (and not constituting an Event of Default under any other provision of this Section 8), in each case during the period when each such provision is applicable, and continuance of such failure described in this clause (b) for 30 days.

 

8.1.5.                  Representations; Warranties.  Any representation or warranty made by or in respect of any Loan Party herein or any other Loan Document is breached or is false or misleading in any material respect (without duplication of any materiality qualifier contained

 

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therein), or any schedule, certificate, financial statement, report, notice or other writing furnished by any Loan Party to the Agent or the Lender in connection herewith is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified.

 

8.1.6.                  Judgments.

 

(a)                                 Final judgments which exceed an aggregate of $500,000 shall be rendered against any Loan Party and shall not have been paid, discharged or vacated or had execution thereof stayed pending appeal within 30 days after entry or filing of such judgments; or

 

(b)                                 One or more non-monetary judgments, orders or decrees shall be rendered against any one or more of the Loan Parties or any of their respective Subsidiaries which has had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, and there shall be any period of ten (10) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect.

 

8.1.7.                  Invalidity of Collateral Documents.  Any Collateral Document shall cease to be in full force and effect, except as provided for under the release provisions of the Security Agreement; or any Loan Party or other grantor or pledgor (or any Person by, through or on behalf of any Loan Party, grantor or pledgor) shall contest in any manner the validity, binding nature or enforceability of any Collateral Document.

 

8.1.8.                  Invalidity of Subordination Provisions.  Any subordination provision in any document or instrument governing Debt that is intended to be subordinated to the Obligations or any subordination provision in any subordination agreement that relates to any such Debt, or any subordination provision in any guaranty by any Loan Party of any such Debt, shall cease to be in full force and effect, or any Person (including the holder of any applicable Debt) shall contest in any manner the validity, binding nature or enforceability of any such provision.

 

8.1.9.                  Change of Control.  (a) A Change of Control shall occur, or (b) a “Change of Control” or other similar event shall occur, as defined in, or under, any indenture, agreement, instrument or other documentation evidencing or otherwise relating to any Debt; provided, however, that no Event of Default shall exist under this Section 8.1.9 to the extent the transaction giving rise thereto is not in violation of Section 7.4(a) or 7.17(a).

 

8.2.                            Remedies.  If any Event of Default described in Section 8.1.3 shall occur, the Loan and all other Obligations shall become immediately due and payable and all outstanding Commitments shall terminate, all without presentment, demand, protest or notice of any kind; and, if any other Event of Default shall occur and be continuing, the Agent may, and upon the written request of the Lender shall, declare all or any part of the Loan and other Obligations to be due and payable and/or all or any part of the Commitments then outstanding to be terminated, whereupon the Loan and other Obligations shall become immediately due and payable (in whole or in part, as applicable), and such Commitments shall immediately terminate

 

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(in whole or in part, as applicable), all without presentment, demand, protest or notice of any kind.  The Agent shall promptly advise the Borrower of any such declaration, but failure to do so shall not impair the effect of such declaration.  Any cash collateral delivered hereunder shall be applied by the Agent to any remaining Obligations and any excess remaining after the Obligations shall have been Paid in Full shall be delivered to the Borrower or as a court of competent jurisdiction may elect.  Upon the declaration of the Obligations to be, or the Obligations becoming, due and payable pursuant to this Section 8.2 such Obligations shall bear interest at the Default Rate as provided in Section 2.3.1.

 

Section 9.                                           The Agent.

 

9.1.                            Appointment; Authorization.

 

(a)                                 Lender hereby irrevocably appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duty or responsibility except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with the Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent.

 

9.2.                            Delegation of Duties.  The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys in fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  The Agent shall not be responsible for the negligence or misconduct of any agent or attorney in fact that it selects with reasonable care.

 

9.3.                            Limited Liability.  None of the Agent or any of its directors, officers, employees or agents shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except to the extent resulting from its own gross negligence or willful misconduct as determined in a final non-appealable judgment by a court of competent jurisdiction), or (b) be responsible in any manner to the Lender for any recital, statement, representation or warranty made by any Loan Party or Affiliate of any Loan Party, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document (or the creation, perfection or priority of any Lien or security interest therein), or for any failure of any Loan Party or any other party to any Loan Document to perform its Obligations hereunder or thereunder.  The Agent shall not be under any obligation to the Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this

 

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Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or Affiliate of any Loan Party.

 

9.4.                            Successor Agent.  The Agent may resign as the Agent at any time upon 30 days’ prior notice to the Lender.  If the Agent resigns under this Agreement, the Lender shall, with (so long as no Event of Default exists) the consent of the Borrower (which shall not be unreasonably withheld or delayed), appoint a successor agent for the Lender.  If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, on behalf of the Lender after consulting with the Lender and (so long as no Event of Default exists) the Borrower, a successor agent.  Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term “the Agent” shall mean such successor agent, and the retiring Agent’s appointment, powers and duties as the Agent shall be terminated.  After any retiring the Agent’s resignation hereunder as the Agent, the provisions of this Section 9 and Sections 10.4 and 10.5 shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement.  If no successor agent has accepted appointment as the Agent by the date which is 30 days following a retiring the Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and the Lender shall perform all of the duties of the Agent hereunder until such time as the Lender shall appoint a successor agent as provided for above.

 

9.5.                            Collateral Matters.  Lender irrevocably authorizes the Agent, at its option and in its discretion, to release any Lien granted to or held by the Agent under any Collateral Document (i) when all Obligations have been Paid in Full; (ii) constituting property sold or to be sold or disposed of as part of or in connection with any sale or other disposition permitted hereunder (it being agreed and understood that the Agent may conclusively rely without further inquiry on a certificate of an officer of the Borrower as to the sale or other disposition of property being made in compliance with this Agreement); or (iii) subject to Section 10.1, if approved, authorized or ratified in writing by the Lender.  Upon request by the Agent at any time, the Lender will confirm in writing the Agent’s authority to release types or items of Collateral pursuant to this Section 9.5.  The Agent shall have the right, in accordance with the Collateral Documents, to sell, lease or otherwise dispose of any Collateral for cash, credit or any combination thereof, and the Agent may purchase any Collateral at public or, if permitted by law, private sale and, in lieu of actual payment of the purchase price, may credit bid and setoff the amount of such price against the Obligations.

 

Section 10.                                    Miscellaneous.

 

10.1.                     Waiver; Amendments.  No delay on the part of the Agent or the Lender in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy.  No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement, the Notes or any of the other Loan Documents (or any subordination and intercreditor agreement or other subordination provisions relating to any other Debt) shall in any event be effective unless the same shall be in writing and approved by the Agent and the Lender, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and

 

49

 

for the specific purpose for which given.  No provision of Section 9 or other provision of this Agreement affecting the Agent in its capacity as such shall be amended, modified or waived without the consent of the Agent.

 

10.2.       Notices.  All notices hereunder shall be in writing (including facsimile transmission) and shall be sent to the applicable party at its address shown on Annex I or at such other address as such party may, by written notice received by the other parties, have designated as its address for such purpose.  Notices sent by facsimile or other electronic transmission shall be deemed to have been given when sent; notices sent to the Borrower by mail shall be deemed to have been given three Business Days after the date when sent by registered or certified mail, postage prepaid; and notices sent by hand delivery or overnight courier service shall be deemed to have been given when received.

 

10.3.       Costs; Expenses.  The Borrower agrees to pay on demand (a) all reasonable out-of-pocket costs and expenses of the Agent and the Lender (including Legal Costs, but excluding Audit Costs except as provided below) after the Closing Date in connection with the administration (including perfection and protection of Collateral subsequent to the Closing Date) of this Agreement, the other Loan Documents and all other documents provided for herein or delivered or to be delivered hereunder or in connection herewith (including any proposed or actual amendment, supplement or waiver to any Loan Document), and (b) all out-of-pocket costs and expenses (including Legal Costs) incurred by the Agent and the Lender in connection with the collection of the Obligations and enforcement of this Agreement, the other Loan Documents or any such other documents.  In addition, the parties agree that in the event that the Agent or Lender determines pursuant to any audit of the books and records of the Borrower and its Subsidiaries conducted pursuant to Section 6.2 that the aggregate amount paid to the Lender hereunder during any period covered by such audit was less than the aggregate amount that was in fact due and payable in respect of such period and the amount of such shortfall exceeds five percent (5%) of the amount that was due and payable, then all Audit Costs in respect of such audit shall be borne by the Borrower and reimbursed to the Agent or Lender, as applicable, and in all other cases, such Audit Costs shall be borne by the Agent or Lender conducting such audit.  All Obligations provided for in this Section 10.3 shall survive repayment of the Loan, cancellation of the Notes and termination of this Agreement.

 

10.4.       Indemnification by the Borrower.  In consideration of the execution and delivery of this Agreement by the Agent and the Lender and the agreement to extend the Commitments provided hereunder, the Borrower hereby agrees to indemnify, exonerate and hold the Agent, the Lender and each of the officers, directors, employees, Affiliates, controlling persons, advisors and agents of the Agent and the Lender (each a “the Lender Party”) free and harmless from and against any and all actions, causes of action, suits, losses, liabilities (including, without limitation, strict liabilities), obligations, damages, penalties, judgments, fines, disbursements, expenses and costs, including Legal Costs (collectively, the “Indemnified Liabilities”), incurred by the Lender Parties or asserted against the Lender Party by any Person (including in connection with any action, suit or proceeding brought by any Holder, the

 

50

 

Borrower, any other Loan Party or any Lender Party) as a result of, or arising out of, or relating to the execution, delivery, performance, administration or enforcement of this Agreement or any other Loan Document, the use of proceeds of the Loans, or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of any Loan Party, except to the extent any such Indemnified Liabilities result from the applicable Lender Party’s own gross negligence, willful misconduct, or material breach of any Loan Document, in each case as determined by a court of competent jurisdiction in a final, non-appealable determination.  If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under Applicable Law.  All Obligations provided for in this Section 10.4 shall survive repayment of the Loan, cancellation of the Notes, any foreclosure under, or any modification, release or discharge of, any or all of the Collateral Documents and termination of this Agreement.

 

10.5.       Marshaling; Payments Set Aside.  Neither the Agent nor the Lender shall be under any obligation to marshal any assets in favor of the Borrower or any other Person or against or in payment of any or all of the Obligations.  To the extent that the Borrower makes a payment or payments to the Agent or the Lender, or the Agent or the Lender enforces its Liens or exercises its rights of set-off, and such payment or payments or the proceeds of such enforcement or set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent or the Lender in its discretion) to be repaid to a trustee, receiver or any other party in connection with any bankruptcy, insolvency or similar proceeding, or otherwise, then (a) to the extent of such recovery, the obligation hereunder or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred and (b) the Lender severally agrees to pay to the Agent upon demand its ratable share of the total amount so recovered from or repaid by the Agent to the extent paid to such Lender.

 

10.6.       Nonliability of the Lender.  The relationship between the Borrower on the one hand and the Lender and the Agent on the other hand shall be solely that of borrower and lender.  Neither the Agent nor the Lender shall have any fiduciary responsibility to the Borrower or any other Loan Party.  Neither the Agent nor the Lender undertakes any responsibility to the Borrower or any other Loan Party to review or inform (including payment of all outstanding principal), the Borrower or any other Loan Party of any matter in connection with any phase of the Borrower’s or any other Loan Party’s business or operations.  Execution of this Agreement by the Borrower constitutes a full, complete and irrevocable release of any and all claims which the Borrower may have at law or in equity in respect of all prior discussions and understandings, oral or written, relating to the subject matter of this Agreement and the other Loan Documents.  Neither the Borrower, the Agent nor the Lender shall have any liability with respect to, and the Borrower, Agent and Lender each hereby waives, releases and agrees not to sue for, any special, indirect, punitive or consequential damages or liabilities.

 

10.7.       Confidentiality.  The Agent and the Lender agree to use commercially reasonable efforts (equivalent to the efforts the Agent or such Lender applies to maintain the confidentiality of its own confidential information) to maintain as confidential all information provided to them by any Loan Party, except that the Agent and the Lender may disclose such

 

51

 

information (a) to Persons employed or engaged by the Agent or such Lender or any of their Affiliates (including collateral managers of the Lender) in evaluating, approving, structuring or administering the Loan and the Commitments; (b) to any assignee or participant or potential assignee or participant that has agreed to comply with the covenant contained in this Section 10.7 (and any such assignee or participant or potential assignee or participant may disclose such information to Persons employed or engaged by them as described in clause (a) above); (c) as required or requested by any federal or state regulatory authority or examiner, or as reasonably believed by the Agent or such Lender to be compelled by any court decree, subpoena or legal or administrative order or process; (d) as, on the advice of the Agent’s or such Lender’s counsel, is required by law; (e) in connection with the exercise of any right or remedy under the Loan Documents or in connection with any litigation to which the Agent or such Lender is a party arising out of, under or in connection with the Loan Documents; (f) to any nationally recognized rating agency or investor of the Lender that requires access to information about the Lender’s investment portfolio in connection with ratings issued or investment decisions with respect to such Lender to the extent consisting of general portfolio information that does not identify Loan Parties; (g) that ceases to be confidential through no fault of the Agent or the Lender; or (h) to a Person that is an investor or prospective investor in the Agent or any of its Affiliates to the extent such Person agrees to be bound by provisions substantially similar to the provisions of this Section 10.7.

 

10.8.       Captions.  Captions used in this Agreement are for convenience only and shall not affect the construction of this Agreement.

 

10.9.       Nature of Remedies.  All Obligations of the Borrower and rights of the Agent and the Lender expressed herein or in any other Loan Document shall be in addition to and not in limitation of those provided by Applicable Law.  No failure to exercise and no delay in exercising, on the part of the Agent or the Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

10.10.     Counterparts.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement.  Receipt by telecopy or electronic transmission of any executed signature page to this Agreement or any other Loan Document shall constitute effective delivery of such signature page.

 

10.11.     Severability.  The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.

 

10.12.     Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the parties hereto and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof and any prior arrangements made

 

52

 

with respect to the payment by the Borrower of (or any indemnification for) any fees, costs or expenses payable to or incurred (or to be incurred) by or on behalf of the Agent or the Lender

 

10.13.     Successors; Assigns.  This Agreement shall be binding upon the Borrower, the Lender and the Agent and their respective successors and assigns, and shall inure to the benefit of the Borrower, the Lender and the Agent and the successors and assigns of the Lender and the Agent.  No other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents.  The Borrower may not assign or transfer any of its rights or Obligations under this Agreement without the prior written consent of the Agent and the Lender.  With the prior written consent of the Borrower (not to be unreasonably withheld), the Lender may sell, transfer, or assign all (but not less than all) of its rights and obligations hereunder to any Person acceptable to the Lender pursuant to assignment documentation reasonably acceptable to Lender and such assignee.  The Agent (acting solely for this purpose as the agent of the Borrower) shall maintain a register for the recordation of the names and addresses of the Lender and its assignees, and the amounts of principal and interest owing to any of them hereunder from time to time (the “Register”), in order to establish that the Borrower’s obligations hereunder are in registered form for purposes of Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Register shall be the only means of transfer hereunder and shall be conclusive absent manifest error, and the Borrower, Agent, the Lender and its assignees shall treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement.  The Register shall be available for inspection by the Borrower and the Lender at any reasonable time and from time to time upon reasonable prior notice.

 

10.14.     Governing Law.  THIS AGREEMENT AND EACH NOTE SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

 

10.15.     Forum Selection; Consent to Jurisdiction; Service of Process.  ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE.  EACH LOAN PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW

 

53

 

YORK.  EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

10.16.     Waiver of Jury Trial.  EACH LOAN PARTY, AGENT AND LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

10.17.     Collateral Agent.  Lender hereby appoints PDL BioPharma, Inc. as its collateral agent under the Security Agreement and agrees that in so acting PDL BioPharma, Inc. will have all the rights, protections, exculpations, indemnities and other benefits provided to PDL BioPharma, Inc. under Section 9 hereof, and authorizes and directs PDL BioPharma, Inc. to take or refrain from taking any and all action that it deems necessary or advisable in fulfilling its role as Collateral Agent under the Security Agreement.

 

[signature pages follow]

 

54

 

The parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first set forth above.

 

 

	
 
    	
AVINGER, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 /s/   Matthew Ferguson
    
	
 
    	
Name:   
    	
Matthew   Ferguson
    
	
 
    	
Title:
    	
Co-President   and Chief Financial Officer
    

 

[Credit Agreement — Signature Page]

 

 

	
 
    	
PDL   BIOPHARMA, INC.,
    
	
 
    	
as   the Agent and the Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
  /s/   John P. McLaughlin
    
	
 
    	
Name:   John   P. McLaughlin
    
	
 
    	
Title:       President and Chief Executive Officer
    

 

[Credit Agreement — Signature Page]

 

 

ANNEX I

 

Addresses

 

LOAN PARTIES

 

Address for Notices:

 

Avinger, Inc.

400 Chesapeake Drive

Attn: Matt Ferguson, Co-President

Telephone: 650-241-7900

Facsimile: 650-241-7901

 

AGENT

 

PDL BioPharma, Inc.,

as the Agent and the Lender

 

Address for Notices:

932 Southwood Boulevard

Incline Village, NV 89451

Attention: General Counsel

Telephone: (775) 832-8500

Facsimile: (775) 832-8501

 

Bank:

Wells Fargo Bank, N.A.

San Francisco, CA 94136

 

Account #:

4040016214

 

ABA Routing #:

121000248

 

Swift Code:

WFBIUS6S

 

II-1

 

Exhibit A — Compliance Certificate

 

See attached.

 

A-1

 

EXHIBIT A

 

COMPLIANCE CERTIFICATE

 

Date:                 , 201  

 

This Compliance Certificate (this “Certificate”) is given by AVINGER, INC., a Delaware corporation (“Borrower”), pursuant to that certain Credit Agreement dated as of April 18, 2013 (the “Credit Agreement”; capitalized terms used and not defined herein shall have the meaning set forth in the Credit Agreement), between Borrower and PDL BIOPHARMA, INC., as Lender and Agent (“Agent”).

 

Pursuant to Section 6.1.4 of the Credit Agreement, the undersigned hereby certifies that he or she is the duly appointed, qualified, and acting chief financial officer of Borrower, and in such capacity, certifies on behalf of Borrower to Agent that:

 

1. The financial statements delivered with this Certificate fairly present, on a basis consistent with GAAP, the financial condition and the results of operations of Borrower and its Subsidiaries as of the dates of and for the periods covered by such financial statements as required by the Credit Agreement;

 

2. Such officer has reviewed the terms of the Credit Agreement and made, or caused to be made under such officer’s supervision, a review in reasonable detail of the transactions and conditions of Borrower and its Subsidiaries during the accounting period covered by such financial statements; and

 

3. Such review has not disclosed the existence during or at the end of such accounting period, and such officer has no knowledge of, the existence, as of the date hereof, of any condition or event that constitutes a Default or an Event of Default, except as set forth on Schedule 1 hereto1, which includes a description of the nature and period of existence of such Default or Event of Default and what action Borrower has taken, is undertaking and proposes to take with respect thereto.

 

IN WITNESS WHEREOF, Borrower has caused this Certificate to be executed as of the date first written above.

 

	
 
    	
AVINGER, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:   Chief Financial Officer
    

 

Schedule 1 should be prepared and attached if a Default or Event of Default has occurred.

 

A-1Exhibit 10.10

 

EXECUTION VERSION

 

SECURITY AGREEMENT

 

DATED AS OF APRIL 18, 2013

 

BY

 

AVINGER, INC.
 AS GRANTOR,

 

IN FAVOR OF

 

PDL BIOPHARMA, INC.,

 

AS COLLATERAL AGENT

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
Section 1. DEFINITIONS
    	
1
    
	
 
    	
 
    	
 
    
	
1.01.
    	
Definition of Terms Used Herein Generally
    	
1
    
	
 
    	
 
    	
 
    
	
1.02.
    	
Definition of Certain Terms Used Herein
    	
1
    
	
 
    	
 
    	
 
    
	
1.03.
    	
Rules of Interpretation
    	
4
    
	
 
    	
 
    	
 
    
	
Section 2. GRANT OF SECURITY   INTEREST
    	
4
    
	
 
    	
 
    	
 
    
	
Section 3. AUTHORIZATION TO   FILE FINANCING STATEMENTS
    	
6
    
	
 
    	
 
    	
 
    
	
Section 4. RELATION TO INTELLECTUAL   PROPERTY SECURITY AGREEMENTS
    	
6
    
	
 
    	
 
    	
 
    
	
Section 5. Representations   and Warranties
    	
6
    
	
 
    	
 
    	
 
    
	
5.01.
    	
Grantors’ Legal Status
    	
6
    
	
 
    	
 
    	
 
    
	
5.02.
    	
Grantors’ Legal Names
    	
6
    
	
 
    	
 
    	
 
    
	
5.03.
    	
Grantors’ Locations
    	
7
    
	
 
    	
 
    	
 
    
	
5.04.
    	
Representations in the Credit Agreement
    	
7
    
	
 
    	
 
    	
 
    
	
5.05.
    	
Title to Collateral
    	
7
    
	
 
    	
 
    	
 
    
	
5.06.
    	
Nature of Collateral
    	
7
    
	
 
    	
 
    	
 
    
	
5.07.
    	
Compliance with Laws
    	
8
    
	
 
    	
 
    	
 
    
	
5.08.
    	
Validity of Security Interest
    	
8
    
	
 
    	
 
    	
 
    
	
5.09.
    	
Perfection Certificate; Intellectual Property Filings
    	
8
    
	
 
    	
 
    	
 
    
	
5.10.
    	
Investment Property
    	
8
    
	
 
    	
 
    	
 
    
	
5.11.
    	
Reserved
    	
8
    
	
 
    	
 
    	
 
    
	
5.12.
    	
Accounts
    	
8
    
	
 
    	
 
    	
 
    
	
5.13.
    	
Equipment and Inventory
    	
9
    
	
 
    	
 
    	
 
    
	
Section 6. COVENANTS
    	
9
    
	
 
    	
 
    	
 
    
	
6.01.
    	
Grantors’ Legal Status
    	
9
    
	
 
    	
 
    	
 
    
	
6.02.
    	
Grantors’ Names
    	
9
    
	
 
    	
 
    	
 
    
	
6.03.
    	
Grantors’ Organizational Numbers
    	
9
    
	
 
    	
 
    	
 
    
	
6.04.
    	
Locations
    	
9
    
	
 
    	
 
    	
 
    
	
6.05.
    	
Covenants in Credit Agreement
    	
9
    
	
 
    	
 
    	
 
    
	
6.06.
    	
Promissory Notes and Tangible Chattel Paper
    	
9
    
	
 
    	
 
    	
 
    
	
6.07.
    	
Deposit Accounts
    	
10
    
	
 
    	
 
    	
 
    
	
6.08.
    	
Investment Property
    	
10
    
	
 
    	
 
    	
 
    
	
6.09.
    	
Reserved
    	
12
    
	
 
    	
 
    	
 
    
	
6.10.
    	
Electronic Chattel Paper and Transferable Records
    	
12
    

 

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
6.11.
    	
Letter-of-Credit Rights
    	
12
    
	
 
    	
 
    	
 
    
	
6.12.
    	
Commercial Tort Claims
    	
12
    
	
 
    	
 
    	
 
    
	
6.13.
    	
Intellectual Property
    	
13
    
	
 
    	
 
    	
 
    
	
6.14.
    	
Maintenance of Collateral; Compliance with Laws
    	
15
    
	
 
    	
 
    	
 
    
	
6.15.
    	
Dispositions of Collateral
    	
15
    
	
 
    	
 
    	
 
    
	
6.16.
    	
Maintenance of Insurance
    	
15
    
	
 
    	
 
    	
 
    
	
6.17.
    	
Periodic Certification
    	
15
    
	
 
    	
 
    	
 
    
	
6.18.
    	
Other Actions as to any and all Collateral
    	
16
    
	
 
    	
 
    	
 
    
	
6.19.
    	
Treatment of Accounts
    	
16
    
	
 
    	
 
    	
 
    
	
Section 7. INSPECTION AND   VERIFICATION
    	
16
    
	
 
    	
 
    	
 
    
	
Section 8. COLLATERAL   PROTECTION EXPENSES; PRESERVATION OF COLLATERAL
    	
16
    
	
 
    	
 
    	
 
    
	
8.01.
    	
Expenses Incurred by the Agent
    	
16
    
	
 
    	
 
    	
 
    
	
8.02.
    	
Agent’s Obligations and Duties
    	
17
    
	
 
    	
 
    	
 
    
	
8.03.
    	
Duties as to Pledged Securities
    	
17
    
	
 
    	
 
    	
 
    
	
Section 9. SECURITIES AND   DEPOSITS
    	
18
    
	
 
    	
 
    	
 
    
	
Section 10. NOTIFICATION TO   ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON COLLATERAL
    	
18
    
	
 
    	
 
    	
 
    
	
Section 11. POWER OF   ATTORNEY
    	
19
    
	
 
    	
 
    	
 
    
	
11.01.
    	
Appointment and Powers of Agent
    	
19
    
	
 
    	
 
    	
 
    
	
11.02.
    	
Failure of Grantor to Perform
    	
20
    
	
 
    	
 
    	
 
    
	
11.03.
    	
Expenses of Attorney-in-Fact
    	
21
    
	
 
    	
 
    	
 
    
	
11.04.
    	
Ratification by Grantor
    	
21
    
	
 
    	
 
    	
 
    
	
11.05.
    	
No Duty on Agent
    	
21
    
	
 
    	
 
    	
 
    
	
Section 12. REMEDIES
    	
21
    
	
 
    	
 
    	
 
    
	
12.01.
    	
Default
    	
21
    
	
 
    	
 
    	
 
    
	
12.02.
    	
Remedies Upon Default
    	
21
    
	
 
    	
 
    	
 
    
	
12.03.
    	
Grant of License to Use Intellectual Property
    	
23
    
	
 
    	
 
    	
 
    
	
12.04.
    	
Waivers by Grantors
    	
23
    
	
 
    	
 
    	
 
    
	
12.05.
    	
Application of Proceeds
    	
23
    
	
 
    	
 
    	
 
    
	
12.06.
    	
Surplus; Deficiency
    	
24
    
	
 
    	
 
    	
 
    
	
12.07.
    	
Information Related to the Collateral
    	
24
    
	
 
    	
 
    	
 
    
	
12.08.
    	
Sale Exempt from Registration
    	
24
    
	
 
    	
 
    	
 
    
	
12.09.
    	
Rights and Remedies Cumulative
    	
25
    

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
12.10.
    	
No Direct Enforcement by Secured Creditors
    	
25
    
	
 
    	
 
    	
 
    
	
Section 13. STANDARDS FOR   EXERCISING REMEDIES
    	
25
    
	
 
    	
 
    	
 
    
	
13.01.
    	
Commercially Reasonable Manner
    	
25
    
	
 
    	
 
    	
 
    
	
13.02.
    	
Standard of Care
    	
26
    
	
 
    	
 
    	
 
    
	
Section 14. WAIVERS BY   GRANTOR; OBLIGATIONS ABSOLUTE
    	
26
    
	
 
    	
 
    	
 
    
	
14.01.
    	
Specific Waivers
    	
26
    
	
 
    	
 
    	
 
    
	
14.02.
    	
Obligations Absolute
    	
26
    
	
 
    	
 
    	
 
    
	
Section 15. MARSHALLING
    	
26
    
	
 
    	
 
    	
 
    
	
Section 16. INTEREST
    	
27
    
	
 
    	
 
    	
 
    
	
Section 17. REINSTATEMENT
    	
27
    
	
 
    	
 
    	
 
    
	
Section 18. MISCELLANEOUS
    	
27
    
	
 
    	
 
    	
 
    
	
18.01.
    	
Notices
    	
27
    
	
 
    	
 
    	
 
    
	
18.02.
    	
GOVERNING LAW; CONSENT TO JURISDICTION; SERVICE OF PROCESS
    	
27
    
	
 
    	
 
    	
 
    
	
18.03.
    	
WAIVER OF JURY TRIAL, ETC.
    	
28
    
	
 
    	
 
    	
 
    
	
18.04.
    	
Counterparts
    	
28
    
	
 
    	
 
    	
 
    
	
18.05.
    	
Headings
    	
28
    
	
 
    	
 
    	
 
    
	
18.06.
    	
No Strict Construction
    	
28
    
	
 
    	
 
    	
 
    
	
18.07.
    	
Severability
    	
28
    
	
 
    	
 
    	
 
    
	
18.08.
    	
Survival of Agreement
    	
28
    
	
 
    	
 
    	
 
    
	
18.09.
    	
Fees and Expenses; Indemnification
    	
28
    
	
 
    	
 
    	
 
    
	
18.10.
    	
Binding Effect; Several Agreement
    	
29
    
	
 
    	
 
    	
 
    
	
18.11.
    	
Waivers; Amendment
    	
29
    
	
 
    	
 
    	
 
    
	
18.12.
    	
Set Off
    	
29
    
	
 
    	
 
    	
 
    
	
18.13.
    	
Integration
    	
30
    
	
 
    	
 
    	
 
    
	
18.14.
    	
Acknowledgments
    	
30
    
	
 
    	
 
    	
 
    
	
18.15.
    	
Additional Grantors
    	
30
    
	
 
    	
 
    	
 
    
	
18.16.
    	
Releases
    	
30
    
	
 
    	
 
    	
 
    
	
18.17.
    	
Intercompany Debt
    	
31
    

 

iii

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    
	
EXHIBITS
    	
 
    
	
 
    	
 
    	
 
    
	
A
    	
Form of   Copyright Security Agreement
    	
 
    
	
B
    	
Form of   Patent Security Agreement
    	
 
    
	
C
    	
Form of   Trademark Security Agreement
    	
 
    
	
D
    	
Form of   Control Agreement in Respect of Uncertificated Securities
    	
 
    
	
 
    	
 
    	
 
    
	
ANNEXES
    	
 
    
	
 
    	
 
    	
 
    
	
I
    	
Form of   Joinder Agreement
    	
 
    

 

iv

 

SECURITY AGREEMENT, dated as of April 18, 2013, by AVINGER, INC., a Delaware corporation (together with any other entity that may become a party hereto as a grantor as provided herein, each a “Grantor” and collectively, jointly and severally, the “Grantors”) in favor of PDL BIOPHARMA, INC., as Collateral Agent (in such capacity, the “Agent”) under the Credit Agreement, dated as of April 18, 2013 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”) among the Grantor, as borrower (in such capacity, the “Borrower”), and the Agent, as lender (in such capacity, the “Lender”) and agent.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to the Credit Agreement, the Lender has agreed to make certain extensions of credit to the Borrower upon the terms and conditions set forth therein; and

 

WHEREAS, it is a condition precedent to the obligations of the Lender to make its extensions of credit to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Agreement to the Agent;

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

Section 1.                                           DEFINITIONS.

 

1.01.                     Definition of Terms Used Herein Generally.  Except as otherwise provided herein, all capitalized terms used herein (including in the preamble hereto) but not defined herein shall have the meanings set forth in the Credit Agreement.  Except as specifically provided herein, all terms used herein and defined in the NYUCC shall have the same definitions herein as specified therein as of the date hereof; provided, however, that if a term is defined in Article 9 of the NYUCC differently than in another Article of the NYUCC, the term has the meaning specified in Article 9 of the NYUCC as of the date hereof.

 

1.02.                     Definition of Certain Terms Used Herein.  As used herein, the following terms shall have the following meanings:

 

“Additional Grantor” has the meaning set forth in Annex I hereto.

 

“After-Acquired Intellectual Property”: as defined in Section 6.13(d).

 

“Agent”: as defined in the preamble.

 

“Agreement”: this Security Agreement, as the same may be amended, supplemented, replaced or otherwise modified from time to time.

 

“Bankruptcy Code”: the Internal Revenue Code of 1986, as amended.

 

“Borrower”: as defined in the preamble.

 

“Collateral”: as defined in Section 2.

 

 

“Copyright Office”: the United States Copyright Office.

 

“Copyright Security Agreement”: a supplement to this Agreement, executed by one or more Grantors in favor of the Agent, substantially in the form of Exhibit A hereto.

 

“Credit Agreement”: as defined in the preamble.

 

“Event”: as defined in Section 8.03.

 

“General Intangibles”: all “general intangibles” as such term is defined in Section 9-102(42) of the NYUCC as in effect on the date hereof and, in any event, including, without limitation, with respect to any Grantor, all contracts, agreements, instruments and indentures and all licenses and permits issued by Governmental Authorities in any form, and portions thereof, to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property of such Grantor is subject, as the same may from time to time be amended, supplemented, replaced or otherwise modified, including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith; (ii) all rights of such Grantor to receive proceeds of any insurance, indemnity, warranty or guaranty with respect thereto; (iii) all rights of such Grantor to damages arising thereunder; (iv) all rights of such Grantor to receive any tax refunds; and (v) all rights of such Grantor to terminate and to perform, to compel performance and to exercise all remedies thereunder.

 

“Grantor”: as defined in the preamble.

 

“Intellectual Property Security Agreement”: each of a Copyright Security Agreement, a Patent Security Agreement and a Trademark Security Agreement.

 

“Intercompany Debt”: as defined in Section 18.17.

 

“Investment Property”: the collective reference to (i) all “investment property” as such term is defined in Section 9-102(48) of the NYUCC on the date hereof including, without limitation, all certificated securities and uncertificated securities, all security entitlements, all securities accounts, all commodity contracts and all commodity accounts; (ii) security entitlements, in the case of any United States Treasury book-entry securities, as defined in 31 C.F.R. § 357.2, or, in the case of any United States federal agency book-entry securities, as defined in the corresponding United States federal regulations governing such book-entry securities; and (iii) whether or not constituting “investment property” as so defined, all Pledged Notes, all Pledged Stock, all Pledged Security Entitlements and all Pledged Commodity Contracts.

 

“Issuers”: the collective reference to each issuer of a Pledged Security.

 

“Joinder Agreement”: each agreement, in the form of Annex I hereto, executed and delivered by each Person that shall become an Additional Grantor hereunder.

 

“Lease”: any lease of personal property under which any Grantor is the lessee.

 

“NYUCC”: the Uniform Commercial Code as in effect in the State of New York from time to time.

 

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“Patent Security Agreement”: a supplement to this Agreement, executed by one or more Grantors in favor of Agent, substantially in the form of Exhibit B hereto.

 

“Perfection Certificate”: shall mean that certain Perfection Certificate dated as of the date hereof executed by the Borrower in favor of the Agent, as updated by the Borrower or any other Grantor from time to time after the Closing Date, and as supplemented from time to time with Annex I-A to each Joinder Agreement executed and delivered to the Agent by each Person that shall become an Additional Grantor hereunder.

 

“Perfection Supplement”: shall have the meaning assigned to such term in Section 6.17.

 

“Person”: any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

 

“Pledged Commodity Contracts”: all commodity contracts to which any Grantor is party from time to time.

 

“Pledged Debt Securities”: the debt securities listed in Schedule 8 of the Perfection Certificate, together with any other certificates, options, rights or security entitlements of any nature whatsoever in respect of the debt securities of any Person that may be issued or granted to, or held by, any Grantor while this Agreement is in effect.

 

“Pledged Notes”: all promissory notes listed in Schedule 8 of the Perfection Certificate, all intercompany notes at any time issued to any Grantor and all other promissory notes issued to or held by any Grantor.

 

“Pledged Securities”: the collective reference to the Pledged Debt Securities, the Pledged Notes and the Pledged Stock.

 

“Pledged Stock”: the shares of capital stock or other equity interests owned at any time or from time to time by any Grantor, including, without limitation, in the case of the Borrower, all shares of capital stock, or membership interests, as applicable, in all Grantors that are Subsidiaries of the Borrower, together with any other shares, stock certificates, options, rights or security entitlements of any nature whatsoever in respect of the capital stock or other equity interests of any Person that may be issued or granted to, or held by, any Grantor while this Agreement is in effect; provided that “Pledged Stock” shall not include more than 65% of the total outstanding voting stock of any Subsidiary that is a CFC.

 

“Proceeds”: all “proceeds” as such term is defined in Section 9-102(64) of the NYUCC in effect on the date hereof and, in any event, shall include, without limitation, all dividends or other income from the Pledged Securities, collections thereon or distributions or payments with respect thereto.

 

“Property”: any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including capital stock or other equity interests.

 

“PTO”: the United States Patent and Trademark Office.

 

“Receivable”: any right to payment on account of any obligation that could create any right to receive money, whether or not such right is evidenced by an instrument or chattel paper and whether or not it has been earned by performance (including, without limitation, any account or payment intangible).

 

3

 

“Secured Creditors”: the Agent, in both its capacities as administrative agent under the Credit Agreement and collateral agent under the Collateral Documents, and the Lender under the Credit Agreement, and each of their successors and assigns.

 

“Securities Act”: the Securities Act of 1933, as amended.

 

“Security Documents”: this Agreement (as supplemented from time to time by any Joinder Agreement), any Subsidiary Guaranty, the Intellectual Property Security Agreements, all deposit account control agreements and similar agreements, all landlord waivers, bailee letters and similar documents and all other pledge or security agreements, assignments or other similar agreements or instruments executed and delivered by any Grantor pursuant to Section 6.7 or Section 6.8 of the Credit Agreement or otherwise in connection with the transactions contemplated thereby, in each case as amended, modified, restated or supplemented from time to time.

 

“Security Interest”: the security interest granted pursuant to Section 2, as well as all other security interests created or assigned as additional security for the Obligations pursuant to the provisions of this Agreement.

 

“Trademark Security Agreement”: a supplement to this Agreement, executed by the Grantor in favor of Agent, substantially in the form of Exhibit C hereto.

 

“UCC”: the Uniform Commercial Code as in effect in any jurisdiction (except as otherwise contemplated in Section 6.18).  References to particular sections of Article 9 of the UCC shall be, unless otherwise indicated, references to revised Article 9 of the UCC adopted and effective in certain jurisdictions on or after July 1, 2001.

 

1.03.                     Rules of Interpretation.  The rules of interpretation specified in Section 1.2 of Credit Agreement shall be applicable to this Agreement.  References to “Sections,” “Exhibits” and “Schedules” shall be to Sections, Exhibits and Schedules, respectively, of this Agreement unless otherwise specifically provided.  Any of the terms defined in this Section 1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference.  All references to statutes and related regulations shall include (unless otherwise specifically provided herein) any amendments of same and any successor statutes and regulations.

 

Section 2.                                           GRANT OF SECURITY INTEREST.

 

Each Grantor hereby grants to the Agent, for the ratable benefit of the Secured Creditors, a security interest in all of the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has, or at any time in the future may acquire, any right, title or interest (collectively, the “Collateral”), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations:

 

a.                                      all Accounts;

 

b.                                      all Chattel Paper, including tangible chattel paper and electronic chattel paper;

 

c.                                       all Goods;

 

d.                                      all Documents;

 

4

 

e.                                       all Equipment;

 

f.                                        all Fixtures;

 

g.                                       all General Intangibles, including all Payment Intangibles;

 

h.                                      all Instruments;

 

i.                                          all Intellectual Property;

 

j.                                         all Inventory;

 

k.                                      all Investment Property;

 

l.                                          all Leases;

 

m.                                  all Letter-of-Credit Rights;

 

n.                                      all money;

 

o.                                      all Supporting Obligations;

 

p.                                      all tort claims, including Commercial Tort Claims;

 

q.                                      all Deposit Accounts, all claims now or hereafter arising therefrom, all funds now or hereafter held therein, all amounts now or hereafter credited thereto and all certificates and instruments, if any, from time to time representing or evidencing such bank accounts;

 

r.                                         all other property not otherwise described above;

 

s.                                        all books and records pertaining to the Collateral; and

 

t.                                         to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing.

 

Notwithstanding anything herein to the contrary, in no event shall the Collateral include or the security interest granted under this Section 2.1 (A) attach to any lease, license, contract, property rights or agreement to which any Grantor is a party or any of its rights or interests thereunder if and for so long as the grant of such security interest shall constitute or result in (i) the abandonment, invalidation or unenforceability of any right, title or interest of any Grantor therein or (ii) a breach or termination pursuant to the terms of, or a default under, any such lease, license, contract, property rights or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other Applicable Law (including the Bankruptcy Code) or principles of equity), provided however that the Collateral shall include and such security interest shall attach immediately at such time as the condition causing such abandonment, invalidation or unenforceability shall be remedied and to the extent severable, shall attach immediately to any portion of such lease, license, contract, property rights or agreement that does not result in any of the consequences specified in clause (i) or (ii) above, (B) more

 

5

 

than 65% of the total outstanding voting stock of any Subsidiary that is a CFC, (C) any trademark applications filed in the United States Patent and Trademark Office on the basis of such Grantor’s “intent-to-use” such trademark to the extent that granting a security interest in such trademark application prior to such filing would result in the unenforceability, invalidation or voiding of such trademark application, unless and until acceptable evidence of use of the trademark has been filed with and accepted by the United States Patent and Trademark Office pursuant to Section 1(c) or Section 1(d) of the Lanham Act (15 U.S.C. 1051, et seq.), whereupon such trademark application will be deemed automatically included in the Collateral or (D) any equipment financed by a third party and subject to a lien permitted by Section 7.2(c) or 7.2(d) of the Credit Agreement to the extent that the security interest is prohibited by the terms of the agreement governing such financing.

 

Section 3.                                           AUTHORIZATION TO FILE FINANCING STATEMENTS.  Each Grantor hereby irrevocably authorizes the Agent at any time and from time to time to file in any applicable jurisdiction in which the UCC has been adopted any initial financing statements and amendments thereto that (a) indicate the Collateral (i) as “all assets” of such Grantor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the NYUCC or such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any initial financing statement or amendment, including whether such Grantor is an organization, the type of organization and any organization identification number issued to such Grantor.  Each Grantor agrees to furnish any such information to the Agent promptly upon request.  Each Grantor also ratifies its authorization for the Agent to have filed in any UCC jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof.

 

Section 4.                                           RELATION TO INTELLECTUAL PROPERTY SECURITY AGREEMENTS.  Concurrently herewith the Grantor is executing and delivering to the Agent for recording in the PTO the Patent Security Agreement and the Trademark Security Agreement.  As of the Closing Date the Grantors hold no Copyrights or applications in respect thereof that are registered with the Copyright Office.  The provisions of any current or any future Patent Security Agreement, Trademark Security Agreement or Copyright Security Agreement are supplemental to the provisions of this Agreement.  Nothing contained in any current or future Patent Security Agreement, Trademark Security Agreement or Copyright Security Agreement shall derogate from any of the rights or remedies of any Secured Creditor hereunder, nor shall anything contained in any such current or future Patent Security Agreement, Trademark Security Agreement or Copyright Security Agreement be deemed to prevent or extend the time of attachment or perfection of any Security Interest in such Collateral created hereby.

 

Section 5.                                           Representations and Warranties.  To induce the Agent and the Lender to enter into the Credit Agreement and to induce the Lender to make its extensions of credit to the Borrower thereunder, each Grantor hereby represents and warrants to the Secured Creditors that:

 

5.01.                     Grantors’ Legal Status.  (a) Such Grantor is an organization as set forth in the Perfection Certificate; (b) such organization is of the type, and is organized in the jurisdiction, set forth in the Perfection Certificate; and (c) the Perfection Certificate sets forth such Grantor’s correct organizational identification number or accurately states that such Grantor has none.

 

5.02.                     Grantors’ Legal Names.  Such Grantor’s exact legal name is that set forth in the Perfection Certificate and on the signature page hereof.

 

6

 

5.03.                     Grantors’ Locations.  The Perfection Certificate sets forth such Grantor’s place of business or (if it has more than one place of business) its chief executive office, as well as its mailing address if different.  Such Grantor’s place of business or (if it has more than one place of business) its chief executive office is located in a jurisdiction that has adopted the UCC or whose laws generally require that information concerning the existence of nonpossessory security interests be made generally available in a filing, recording or registration system as a condition or result of the security interest obtaining priority over the rights of a lien creditor with respect to the Collateral.

 

5.04.                     Representations in the Credit Agreement.  The representations and warranties set forth in Section 5 of the Credit Agreement and as otherwise made by such Grantor in each other Loan Document to which such Grantor is a party, each of which is hereby incorporated herein by reference, are true and correct in all material respects, and the Secured Creditors shall be entitled to rely on each of them as if they were fully set forth herein.

 

5.05.                     Title to Collateral.  The Collateral of such Grantor is owned by such Grantor free and clear of any Lien, except for Liens expressly permitted pursuant to the Credit Agreement.  Such Grantor has not filed or consented to the filing of (a) any financing statement or analogous document under the UCC or any other Applicable Laws covering any of its Collateral, (b) any assignment in which such Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with the PTO or the Copyright Office or (c) any assignment in which such Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, with respect to Liens expressly permitted pursuant to the Credit Agreement.

 

5.06.                     Nature of Collateral.  None of the Collateral of such Grantor constitutes, or is the proceeds of, farm products and none of the Collateral has been purchased or will be used by such Grantor primarily for personal, family or household purposes, and as of the Closing Date, except as indicated in the Perfection Certificate and as of any date of any Perfection Supplement, except as indicated in such Perfection Supplement or in the Perfection Certificate:

 

(a)                                 none of the account debtors or other persons obligated on any of the Collateral of such Grantor is a Governmental Authority subject to the Federal Assignment of Claims Act or like federal, state or local statute or rule in respect of such Collateral;

 

(b)                                 such Grantor holds no commercial tort claims that it has asserted against any other Person;

 

(c)                                  such Grantor has no deposit accounts or other bank accounts;

 

(d)                                 such Grantor owns no motor vehicles;

 

(e)                                  such Grantor has no securities accounts or securities entitlements or commodities accounts or commodities contracts;

 

(f)                                   such Grantor holds no interest in, title to or power to transfer, any registered Patents, registered Trademarks, registered Copyrights or material inbound licenses (other than off-the-shelf software and open source technology).

 

7

 

5.07.                     Compliance with Laws.  Such Grantor has at all times operated its business in compliance with all applicable federal, state and local laws and regulations, except as could not reasonably be expected to have a Material Adverse Effect.

 

5.08.                     Validity of Security Interest.  (a) The Security Interest granted by each Grantor constitutes, to the extent possible under Applicable Law, a legal and valid security interest in all of the Collateral of such Grantor securing the payment and performance of the Obligations and (b) upon the filing of financing statements describing the Collateral in the offices listed on the Perfection Certificate, the recording in the PTO of the Patent Security Agreement and Trademark Security Agreement, and the taking of all applicable actions in respect of perfection contemplated by Sections 6.06, 6.07, 6.08, 6.10, 6.11 and 6.12 in respect of Collateral, the Security Interest will be valid, enforceable and perfected in all Collateral of such Grantor.  The Security Interest is and shall be prior to any other Lien on the Collateral, other than Liens expressly permitted to be prior to the Security Interest under the Credit Agreement.

 

5.09.                     Perfection Certificate; Intellectual Property Filings.

 

(a)                                 All information set forth on the Perfection Certificate is, and all information set forth on each Perfection Supplement shall be, true, accurate and complete.

 

(b)                                 As of the Closing Date, a fully executed Patent Security Agreement and Trademark Security Agreement containing a description of all Collateral of such Grantor consisting of United States Patents and United States registered Trademarks (and Patents and Trademarks for which United States registration applications are pending) have been delivered to the Agent for recording by the PTO.(1)

 

5.10.                     Investment Property.

 

(a)                                 The shares of Pledged Stock pledged by such Grantor hereunder, if any, constitute all of the issued and outstanding shares of all classes of the capital stock or other equity interests of each Issuer owned by such Grantor, except as otherwise indicated in Schedule 7(b) of the Perfection Certificate.

 

(b)                                 All the shares of the Pledged Stock pledged by such Grantor have been duly and validly issued, and are fully paid and non-assessable.

 

(c)                                  Such Grantor is the record and beneficial owner of, and has good and marketable title to, the Pledged Securities pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except the Security Interest created by this Agreement and the other Liens (other than Permitted Liens) created in favor of the Agent by the Security Documents.

 

5.11.                     Reserved.

 

5.12.                     Accounts.  (i) Each account of such Grantor is genuine and in all material respects what they purport to be, (ii) each account arises out of (A) a bona fide sale of goods sold and delivered by such Grantor (or is in the process of being delivered) or (B) services theretofore actually rendered or to be rendered by such Grantor to the account debtor named therein, and (iii) no surety bond

 

(1)  Borrower to confirm no Copyright Security Agreement needed at closing.

 

8

 

was required or given in connection with any account of such Grantor or the contracts or purchase orders out of which they arose and the right to receive payment under each account is assignable.

 

5.13.                     Equipment and Inventory.  With respect to any material equipment and/or material inventory of such Grantor, each such Grantor has exclusive possession and control of such equipment and inventory of such Grantor except for (i) equipment leased by such Grantor as a lessor permitted by Section 7.1(b) of the Credit Agreement, (ii) equipment or inventory in transit with common or other carriers or (iii) as otherwise permitted by the Credit Agreement.  No material inventory is held by such Grantor pursuant to consignment, sale or return, sale on approval or similar arrangement.

 

Section 6.                                           COVENANTS.  Until such time as the Collateral is released pursuant to Section 18.16 hereof, each Grantor covenants and agrees with the Agent, in each case at such Grantor’s own cost and expense, as follows.

 

6.01.                     Grantors’ Legal Status.  Such Grantor shall not change its type of organization, jurisdiction of organization or other legal structure except upon not less than twenty (20) days’ prior written notice to the Agent.

 

6.02.                     Grantors’ Names.  Such Grantor shall not change its name except upon not less than twenty (20) days’ prior written notice to the Agent.

 

6.03.                     Grantors’ Organizational Numbers.  Without providing at least twenty (20) days’ prior written notice to the Agent, such Grantor shall not change its organizational identification number if it has one.  If such Grantor does not have an organizational identification number and later obtains one, such Grantor shall forthwith notify the Agent of such organizational identification number promptly upon obtaining such identification number.

 

6.04.                     Locations.  Without providing at least twenty (20) days’ prior written notice to the Agent, such Grantor shall not change its place of business or (if it has more than one place of business) its chief executive office and shall promptly notify the Agent of any new location of Collateral owned by the Borrower or a Subsidiary thereof that is not set forth on a Perfection Certificate or Perfection Supplement.

 

6.05.                     Covenants in Credit Agreement.  Each Grantor shall take, or shall refrain from taking, as the case may be, each action that is necessary to be taken or not taken, as the case may be, so that no Default or Event of Default is caused by the failure to take such action or to refrain from taking such action by such Grantor or any of its Subsidiaries under the Credit Agreement.

 

6.06.                     Promissory Notes and Tangible Chattel Paper.  If such Grantor, together with the other Grantors, shall at any time hold or acquire any promissory notes with a face value in excess of $500,000 in the aggregate, such Grantor shall forthwith endorse, assign and deliver the same to the Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Agent may from time to time specify to be held by the Agent as Collateral pursuant to this Agreement.  Upon the request of the Agent, each Grantor shall promptly endorse, assign and deliver to the Agent any tangible chattel paper (or any other instrument (other than checks received in the ordinary course of business) evidencing any account of such Grantor) held by such Grantor, accompanied by such instruments of transfer or assignment duly executed in blank as the Agent may from time to time specify to be held by the Agent as Collateral pursuant to this Agreement.

 

9

 

6.07.                     Deposit Accounts.  For each deposit account that such Grantor at any time opens or maintains, such Grantor shall comply with the provisions of Section 7.12 of the Credit Agreement.

 

6.08.                     Investment Property.

 

(a)                                 If any of the Collateral shall be or become evidenced or represented by an uncertificated security, such Grantor shall cause the Issuer thereof either (i) to register the Agent as the registered owner of such uncertificated security, upon original issue or registration of transfer or (ii) to agree in writing with such Grantor and the Agent that such Issuer will comply with instructions with respect to such uncertificated security originated by the Agent without further consent of such Grantor, such agreement to be in substantially the form of Exhibit D or such other form as the Agent shall approve.

 

(b)                                 If any of the Collateral shall be or become evidenced or represented by a security entitlement, such Grantor shall cause the securities intermediary with respect to such security entitlement either (i) to identify in its records the Agent as having such security entitlement against such securities intermediary or (ii) to agree in writing with such Grantor and the Agent that such securities intermediary will comply with entitlement orders originated by the Agent without further consent of such Grantor, such agreement to be in such form as the Agent shall approve.

 

(c)                                  If any of the Collateral shall be or become evidenced or represented by a commodity contract, such Grantor shall cause the commodity intermediary with respect to such commodity contract to agree in writing with such Grantor and the Agent that such commodity intermediary will apply any value distributed on account of such commodity contract as directed by the Agent without further consent of such Grantor, such agreement to be in such form as the Agent shall approve.

 

(d)                                 If any of the Collateral shall be or become evidenced or represented by or held in a securities account or a commodity account, such Grantor shall, in the case of a securities account, comply with clause (b) of this Section 6.08 with respect to all security entitlements carried in such securities account and, in the case of a commodity account, comply with clause (c) of this Section 6.08 with respect to all commodity contracts carried in such commodity account.

 

(e)                                  If such Grantor shall receive any stock or other ownership certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the capital stock or other equity interests of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of or other ownership interests in the Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the same as the agent of the Secured Creditors, hold the same in trust for the Secured Creditors and deliver the same forthwith to the Agent in the exact form received, duly endorsed by such Grantor to the Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Grantor and with, if the Agent so requests, signature guaranteed, to be held by the Agent, subject to the terms hereof, as additional collateral security for the Obligations.

 

(f)                                   Subject to Section 6.08(h) hereof, such Grantor shall be entitled:

 

(i)                                     to exercise, as it shall think fit, but in a manner not inconsistent with the terms hereof and of the Credit Agreement, the voting power with respect to the Pledged Stock of such Grantor, and for that purpose the Agent shall (if any Pledged Stock shall be registered in the name of

 

10

 

the Agent or its nominee) execute or cause to be executed from time to time, at the expense of such Grantor, such proxies or other instruments in favor of such Grantor or its nominee, in such form and for such purposes as shall be reasonably required by such Grantor and shall be specified in a written request therefor, to enable it to exercise such voting power with respect to the Pledged Stock; and

 

(ii)                                  except as otherwise provided in paragraphs (g) and (h) of this Section 6.08, to receive and retain for its own account any and all payments made in respect of the Pledged Securities to the extent such are permitted pursuant to the terms of the Credit Agreement.

 

(g)                                  Any sums paid upon or in respect of the Pledged Securities upon the liquidation or dissolution of any Issuer shall be paid over to the Agent to be held by it hereunder as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of the Pledged Securities or any property shall be distributed upon or with respect to the Pledged Securities pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Agent, be delivered to the Agent to be held by it hereunder as additional collateral security for the Obligations.  If any sums of money or property so paid or distributed in respect of the Pledged Securities shall be received by such Grantor, such Grantor shall, until such money or property is paid or delivered to the Agent, hold such money or property in trust for the Secured Creditors, segregated from other funds of such Grantor, as additional collateral security for the Obligations.

 

(h)                                 Upon the occurrence and during the continuance of any Event of Default, all rights of such Grantor to exercise or refrain from exercising the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 6.08(f)(i) hereof and to receive the payments pursuant to Section 6.08(f)(ii) hereof shall cease, and thereupon the Agent shall be entitled to exercise all voting power with respect to the Pledged Securities and to receive and retain, as additional collateral hereunder, any and all such payments any time declared or paid upon any of the Pledged Securities during such an Event of Default and otherwise to act with respect to the Pledged Securities as outright owner thereof.

 

(i)                                     At any time and from time to time during the continuance of an Event of Default, subject to Applicable Law, the Agent may cause all or any of the Pledged Securities to be transferred to or registered in its name or the name of its nominee or nominees.

 

(j)                                    Without the prior written consent of the Agent, such Grantor will not (i) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, any of the Investment Property or Proceeds thereof or any interest therein (except pursuant to a transaction not prohibited by the Credit Agreement); (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Investment Property or Proceeds thereof, or any interest therein, except for the Security Interests created by this Agreement and except for Permitted Liens; or (iii) enter into any agreement or undertaking expressly restricting the foreclosure of the Agent’s Security Interest in any of the Investment Property or Proceeds thereof or any interest therein.

 

(k)                                 In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Pledged Securities issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Agent promptly in writing of the occurrence of any of the events described in Section 6.08(e) or Section 6.08(g) with respect to the Pledged Securities issued by it, and (iii) the terms of Section 12.04(c) shall apply to it, mutatis

 

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mutandis, with respect to all actions that may be required of it with respect to the Pledged Securities issued by it.  Each Grantor which is an Issuer consents to the grant of a Security Interest in capital stock or other equity interests of such Issuer and the exercise of rights by the Agent in respect of such capital stock or other equity interests, including (to the extent permitted hereunder) the foreclosure thereon, and the Agent, its nominee or transferee becoming a partner or member of any such Issuer that is a partnership or limited liability company.

 

(l)                                     If the organizational documents of any Issuer of Pledged Securities restrict the transfer of such Pledged Securities, each such Issuer shall deliver to the Agent all consents required to authorize the transfer of such Pledged Securities to the Agent or its nominee, or to a third-party transferee upon the exercise by the Agent of it rights and remedies hereunder.

 

6.09.                     Reserved.

 

6.10.                     Electronic Chattel Paper and Transferable Records.  If such Grantor shall at any time hold or acquire interests in any electronic chattel paper or any “transferable record,” as that term is defined in Section 201 of the federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Grantor shall promptly notify the Agent thereof and, at the request of the Agent, shall take such action as the Agent may reasonably request to vest in the Agent control, under Section 9-105 of the UCC, of such electronic chattel paper or control under Section 201 of the federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record.  The Agent agrees with such Grantor that the Agent shall arrange, pursuant to procedures reasonably satisfactory to the Agent and so long as such procedures will not result in the Agent’s loss of control, for such Grantor to make alterations to the electronic chattel paper or transferable record permitted under Section 9-105 of the UCC or, as the case may be, Section 201 of the federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such electronic chattel paper or transferable record.

 

6.11.                     Letter-of-Credit Rights.  If such Grantor shall at any time be beneficiaries under one or more letters of credit, such Grantor shall promptly notify the Agent thereof and, at the request and option of the Agent, such Grantor shall either (a) arrange, for the issuer and any nominated person with respect to such letter of credit to consent, pursuant to an agreement or other authenticated record with and in such form and in substance satisfactory to the Agent, to an assignment to the Agent of the proceeds of any drawing under the letter of credit or (b) arrange for the Agent to become the transferee beneficiary of the letter of credit.

 

6.12.                     Commercial Tort Claims.  If such Grantor shall at any time hold or acquire a commercial tort claim that it has asserted against any other Person, such Grantor shall immediately notify the Agent in a writing signed by such Grantor of the brief details thereof and grant to the Agent for the benefit of the Secured Creditors 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 the Agent.

 

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6.13.                     Intellectual Property.

 

(a)                                 Except in any respect that would not materially impair the right, power, authority and ability of any Grantor to use its intellectual property (taken as a whole) as necessary or convenient for the profitable conduct of their businesses and would not reasonably be expected to have a Material Adverse Effect:

 

(i)                                     Such Grantor (either itself or through licensees) will continue to use each material Trademark on each and every trademark class of goods in the ordinary course of business in order to maintain such Trademark in full force free from any claim of abandonment for non-use in any class of goods for which registration was obtained, maintain in the ordinary course of business the quality of products and services offered under such Trademark and take all necessary steps to ensure that all licensed users of such Trademark maintain as in the past such quality, (C) use such Trademark with the appropriate notice of registration and all other notices and legends required by applicable Requirements of Law, (D) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Agent, for the ratable benefit of the Secured Creditors, shall obtain a perfected security interest in such mark pursuant to this Agreement and the Intellectual Property Security Agreement, and (E) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby such Trademark may become invalidated or impaired in any way.

 

(ii)                                  Such Grantor (either itself or through licensees) will not do any act, or omit to do any act, whereby any material Patent may become forfeited, abandoned or dedicated to the public.

 

(iii)                               Such Grantor (either itself or through licensees) (A) will employ each material Copyright and (B) will not (and will not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any material portion of the Copyrights may become invalidated or otherwise impaired.  Such Grantor will not (either itself or through licensees) do any act whereby any material portion of the Copyrights may fall into the public domain.

 

(iv)                              Such Grantor (either itself or through licensees) will not do any act that knowingly uses any material Intellectual Property to infringe the intellectual property rights of any other Person.

 

(v)                                 Such Grantor (either itself or through licensees) will use proper statutory notice in connection with the use of each material Patent, Trademark and Copyright included in the Intellectual Property.

 

(vi)                              Such Grantor will take all reasonable and necessary steps, including, without limitation, in any proceeding before the PTO, the Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of material Intellectual Property, including, without limitation, the payment of required fees and taxes, the filing of responses to office actions issued by the PTO and the Copyright Office, the filing of applications for renewal or extension, the filing of affidavits of use and affidavits of incontestability, the filing of divisional, continuation, continuation-in-part, reissue, and renewal applications or extensions, the payment of maintenance fees, and the participation in interference, reexamination, opposition, cancellation, infringement and misappropriation proceedings.

 

(vii)                           Such Grantor (either itself or through licensees) will not, without the prior written consent of the Agent, discontinue use of or otherwise abandon any Intellectual Property

 

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or abandon any right to file an application for letters patent, trademark, or copyright, unless such Grantor shall have previously determined that such use or the pursuit or maintenance of such Intellectual Property is no longer desirable in the conduct of such Grantor’s business and that the loss thereof could not reasonably be expected to have a Material Adverse Effect.

 

(viii)                        In the event that any material Intellectual Property is infringed, misappropriated or diluted by a third party, such Grantor shall (A) take such actions as such Grantor shall reasonably deem appropriate under the circumstances to protect such Intellectual Property and (B) if such infringement, misappropriation or dilution has or would reasonably be expected to have a material negative effect on revenue, promptly notify the Agent after it learns thereof and sue for infringement, misappropriation or dilution, seek injunctive relief where appropriate and recover any and all damages for such infringement, misappropriation or dilution.

 

(ix)                              Such Grantor will do all things that are necessary and proper within such Grantor’s power and control to keep each license of Intellectual Property held by such Grantor as licensee or licensor in full force and effect except to the extent that (A) such Grantor has reasonably determined that the failure to keep any such license in full force and effect could not be reasonably expected to have a Material Adverse Effect or (B) any such license would expire by its terms or is terminable at will by a Person other than Grantor.

 

(x)                                 Such Grantor shall not sell, transfer, dispose of, convey or license any of its Intellectual Property other than as permitted by Section 7.4(b) and (c) of the Credit Agreement.

 

(xi)                              Such Grantor shall maintain all of its rights to its domain names in full force and effect, other than any, the loss of which could not reasonably be expected to result in a Material Adverse Effect.

 

(b)                                 Such Grantor will notify the Agent immediately if it knows, or has could reasonably be expected to be forfeited, abandoned or dedicated to the public, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the PTO, the Copyright Office or any court or tribunal in any country) regarding such Grantor’s ownership of, or the validity of, any material Intellectual Property or such Grantor’s right to register the same or to own and maintain the same or (ii) of any, or any claim by any Person of, any default or event of default, or of the termination of any rights, in each case under any material contract or agreement with respect to Intellectual Property, including any IP License, to which such Grantor is a party.

 

(c)                                  Whenever such Grantor, either by itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Intellectual Property with the PTO, the Copyright Office or any similar office or agency in any other country or any political subdivision thereof, such Grantor shall report such filing to the Agent within five Business Days after the last day of the fiscal quarter in which such filing occurs.  Upon request of the Agent, such Grantor shall execute and deliver, and have recorded, any and all agreements, instruments, documents, and papers as the Agent may request to evidence the Secured Creditors’ Security Interest in any Copyright, Patent, Trademark or other Intellectual Property and the goodwill and general intangibles of such Grantor relating thereto or represented thereby.

 

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(d)                                 Such Grantor agrees that, should it obtain an ownership interest in any item of Intellectual Property which is not now a part of the Intellectual Property Collateral (the “After-Acquired Intellectual Property”), (i) the provisions of Section 2 shall automatically apply thereto; (ii) any such After-Acquired Intellectual Property, and in the case of Trademarks, the goodwill of the business connected therewith or symbolized thereby, shall automatically become part of the Collateral; and (iii) within 45 days of the end of the calendar quarter in which such acquisition occurs, it shall provide the Agent with an amended Perfection Certificate and amended schedules to the applicable Intellectual Property Security Agreement reflecting the acquisition of such After-Acquired Intellectual Property.  Such Grantor authorizes the Agent to modify this Agreement by amending the Perfection Certificate and to modify the schedules to the applicable Intellectual Property Security Agreement if such Grantor fails to provide the Agent with satisfactory amended schedules hereto or thereto within the time period required hereunder (and will cooperate with the Agent in effecting any such amendment) to include any After-Acquired Intellectual Property which becomes part of the Intellectual Property Collateral under this Section, and to record any such modified agreement with the PTO, the Copyright Office, or any other applicable Governmental Authority.

 

(e)                                  Such Grantor assumes all responsibility and liability arising from the use of the Intellectual Property and hereby indemnifies and holds the Secured Creditors harmless from and against any claim, suit, loss, damage or expense (including reasonable attorneys’ fees arising out of any alleged defect in any product manufactured, promoted or sold by such Grantor (or any affiliate or subsidiary thereof) in connection with such Intellectual Property or out of the manufacture, promotion, labeling, sale or advertisement of any such product by such Grantor (or any affiliate or subsidiary thereof), except for any claim, suit, loss, damage or expense arising solely from the gross negligence or willful misconduct of a Secured Creditor as finally determined in a non-appealable judgment by a court of competent jurisdiction.

 

(f)                                   Such Grantor agrees to execute one or more applicable Intellectual Property Security Agreements with respect to its Intellectual Property in order to record the Security Interest granted herein to the Agent for the ratable benefit of the Secured Creditors with the PTO, the Copyright Office, and any other applicable Governmental Authority within the time period set forth in Section 6.7 of the Credit Agreement.

 

6.14.                     Maintenance of Collateral; Compliance with Laws.  Such Grantor shall keep the Collateral provided by it in good order and repair and shall not use the same in violation of any law to the extent that such violation could reasonably be expected to have a Material Adverse Effect.

 

6.15.                     Dispositions of Collateral.  Such Grantor shall not sell or otherwise dispose, or offer to sell or otherwise dispose, of the Collateral provided by it or any interest therein except for dispositions expressly permitted by the Credit Agreement.

 

6.16.                     Maintenance of Insurance.  Such Grantor, at its sole cost and expense, shall maintain or cause to be maintained insurance covering physical loss or damage to the Collateral provided by it in accordance with the Credit Agreement.

 

6.17.                     Periodic Certification.  Concurrently with the delivery of each Compliance Certificate, such Grantor shall deliver to the Agent a supplemental perfection certificate (each, a “Perfection Supplement”) executed by such Grantor setting forth the information required pursuant to the Perfection Certificate or confirming that there has been no change in such information since the date of such certificate or the date of the most recent certificate delivered pursuant to this Section 6.17.

 

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6.18.                     Other Actions as to any and all Collateral.  Such Grantor further agrees to take any other action reasonably requested by the Agent to insure the attachment, perfection and first priority (subject to Permitted Liens) of, and the ability of the Agent to enforce, the Security Interest in any and all of the Collateral provided by such Grantor including, without limitation, (a) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC, to the extent, if any, that such Grantor’s signature thereon is required therefor; (b) causing the Agent’s name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of the Agent to enforce, the Security Interest in such Collateral; (c) complying with any provision of any statute, regulation or treaty of the United States of America as to any Collateral if compliance with such provision is a condition to the attachment, perfection or priority of, or the ability of the Agent to enforce, the Security Interest in such Collateral; (d) obtaining governmental and other third-party consents and approvals, including without limitation any consent of any licensor, lessor or other person obligated on such Collateral; (e) obtaining waivers from mortgagees, bailees, landlords and any other person who has possession of or any interest in any Collateral or any real property on which any such Collateral may be located, in form and substance satisfactory to the Agent; (f) providing to the Agent “control” over such Collateral, to the extent that perfection can only be achieved under the UCC by control or where obtaining perfection by control provides more protection to the Secured Creditors that perfection by filing a financing statement; and (g) taking all actions required by the UCC or by other law, as applicable in any relevant UCC jurisdiction, or by other law as applicable in any foreign jurisdiction; provided, however, that nothing contained in clause (d) or (e) shall require such Grantor to pay any consideration (other than any governmental application, processing, filing or recording fees) in order to obtain any consent or waiver referred to in such clauses.

 

6.19.                     Treatment of Accounts.  No Grantor shall grant or extend the time for payment of any material account, or compromise or settle any account for less than the full amount thereof, or release any person or property, in whole or in part, from payment thereof, or allow any credit or discount thereon, other than as normal and customary in the ordinary course of a Grantor’s business.

 

Section 7.                                           INSPECTION AND VERIFICATION.  The Agent and such Persons as the Agent may designate shall have the right, at each Grantor’s own cost and expense, to inspect the Collateral of such Grantor, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Collateral of such Grantor is located, to discuss such Grantor’s affairs with the officers of such Grantor (i) in the absence of an Event of Default, upon reasonable prior notice and during regular operating hours for such Grantor and (ii) otherwise, at any time as the Agent shall decide in its sole discretion.

 

Section 8.                                           COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.

 

8.01.                     Expenses Incurred by the Agent.  In its discretion, the Agent may, if the relevant Grantor fails to do so, discharge taxes and other encumbrances at any time levied or placed on any material portion of the Collateral, make repairs thereto and pay any necessary filing fees or insurance premiums.  Each Grantor agrees to reimburse the Agent on demand for any and all expenditures so made, and all sums disbursed by the Agent in connection with this Section 8.01, including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by such Grantor to the Agent shall bear interest at the per annum rate specified in Section 16 and shall constitute additional Obligations.  The Agent shall have no obligation to any Grantor to make any such expenditures, nor shall the making thereof relieve any Grantor of any default.

 

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8.02.                     Agent’s Obligations and Duties.

 

(a)                                 Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each contract or agreement comprised in the Collateral provided by it to be observed or performed by such Grantor thereunder.  Neither the Agent nor any other Secured Creditor shall have any obligation or liability under any such contract or agreement by reason of or arising out of this Agreement or the receipt by the Agent or any other Secured Creditor of any payment relating to any of the Collateral, nor shall the Agent or any other Secured Creditor be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by the Agent or any other Secured Creditor in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract or agreement, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to the Agent or any other Secured Creditor or to which the Agent or any other Secured Creditor may be entitled at any time or times.

 

(b)                                 The Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the NYUCC or otherwise, shall be to deal with such Collateral in the same manner as the Agent deals with similar property for its own account.

 

(c)                                  Neither the Agent, nor any other Secured Creditor nor any of their in-fact or affiliates shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof.  The powers conferred on the Secured Creditors hereunder are solely to protect the Secured Creditors’ interests in the Collateral and shall not impose any duty upon any Secured Creditor to exercise any such powers.  The Secured Creditors shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, partners, employees, agents, attorneys and other advisors, attorneys-in-fact or affiliates shall be responsible to any Grantor for any act or failure to act hereunder, except to the extent that any such act or failure to act is found by a final and non-appealable decision of a court of competent jurisdiction to have resulted from their respective gross negligence or willful misconduct.

 

(d)                                 Each Grantor acknowledges that the rights and responsibilities of the Agent under this Agreement with respect to any action taken by the Agent or the exercise or non-exercise by the Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Agent and the other Secured Creditors, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Agent and the Grantors, the Agent shall be conclusively presumed to be acting as agent for the Secured Creditors with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority.

 

8.03.                     Duties as to Pledged Securities.

 

(a)                                 With respect to any calls, conversions, exchanges, redemptions, offers, tenders or similar matters relating to any such Pledged Securities (herein called “Events”), any duty in connection therewith imposed on the Agent by Applicable Law shall be fully satisfied if:

 

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(i)                                     the Agent exercises reasonable care to ascertain the occurrence and to give reasonable notice to the applicable Grantor of any Events applicable to any Pledged Securities that are registered and held in the name of Agent or its nominee;

 

(ii)                                  the Agent gives the applicable Grantor reasonable notice of the occurrence of any Events of which the Agent has received actual knowledge, which Events are applicable to any securities that are in bearer form or are not registered and held in the name of the Agent or its nominee (each Grantor agreeing to give the Agent reasonable notice of the occurrence of any Events of which such Grantor has knowledge, which Events are applicable to any securities in the possession of the Agent); and

 

(iii)                               the Agent endeavors to take such action with respect to any of the Events as the applicable Grantor may reasonably and specifically request in writing in sufficient time for such action to be evaluated and taken or, if the Agent reasonably believes that the action requested would adversely affect the value of the Pledged Securities as collateral or the collection of the Obligations, or would otherwise prejudice the interests of any Secured Creditor, the Agent gives reasonable notice to such Grantor that any such requested action will not be taken and, if the Agent makes such determination or if such Grantor fails to make such timely request, the Agent takes such other action as it reasonably deems advisable in the circumstances.

 

(b)                                 Except as hereinabove specifically set forth, neither the Agent nor any other Secured Creditor shall have any further obligation to ascertain the occurrence of, or to notify any Grantor with respect to, any Events and shall not be deemed to assume any such further obligation as a result of the establishment by the Agent or any other Secured Creditor of any internal procedures with respect to any securities in its possession, nor shall the Agent or any other Secured Creditor be deemed to assume any other responsibility for, or obligation or duty with respect to, any Pledged Securities or its use of any nature or kind, or any matter or proceedings arising out of or relating thereto, including, without limitation, any obligation or duty to take any action to collect, preserve or protect its or any Grantor’s rights in the Pledged Securities or against any prior parties thereto, but the same shall be at such Grantor’s sole risk and responsibility at all times.

 

(c)                                  Nothing contained in this Section 8.03 shall be deemed to create any obligation in respect of Events on the Agent, the purpose of this Section 8.03 being solely to provide standards, in the event that Applicable Law imposes any obligations on the Agent as to Events.

 

Section 9.                                           SECURITIES AND DEPOSITS.  Without limitation of Section 6.08, but subject to Section 6.08(i), the Agent may at any time at its option, transfer to itself or any nominee any securities constituting Collateral, and, subject to Section 6.08(f)(ii), receive any income thereon and hold such income as additional Collateral or apply it to the Obligations.  The Agent may after the occurrence and during the continuance of an Event of Default demand, sue for, collect, or make any settlement or compromise which it deems desirable with respect to the Collateral.  Regardless of the adequacy of Collateral or any other security for the Obligations, any deposits or other sums at any time credited by or due from the Agent or any other Secured Creditor to any Grantor may at any time be applied to or set off against any of the Obligations whether or not due and owing after the occurrence and during the continuance of an Event of Default.

 

Section 10.                                    NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON COLLATERAL.  If an Event of Default shall have occurred and be continuing, each Grantor shall, at the request of the Agent, notify account debtors and other persons obligated on any of the 

 

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Collateral of such Grantor of the Security Interest in any account, chattel paper, General Intangible, instrument or other claims constituting Collateral that payment thereof is to be made directly to the Agent or to any financial institution designated by the Agent as the Agent’s agent therefor, and the Agent may itself, if an Event of Default shall have occurred and be continuing, without notice to or demand upon any Grantor, so notify account debtors and other persons obligated on Collateral.  After the making of such a request or the giving of any such notification, each Grantor shall hold any proceeds of collection of accounts, chattel paper, General Intangibles, instruments and other claims constituting Collateral received by the Grantor as trustee for the Secured Creditors without commingling the same with other funds of the Grantor and shall turn the same over to the Agent in the identical form received, together with any necessary endorsements or assignments.  The Agent shall have no liability or responsibility to any Grantor for acceptance of a check, draft or other order for payment of money bearing the legend “payment in full” or words of similar import or any other restrictive legend or endorsement or be responsible for determining the correctness of any remittance.  Without limitation of the foregoing, during the continuation of an Event of Default (1) the Agent shall have the right, but not the obligation, to make test verifications of the accounts in any manner and through any medium that it reasonably considers advisable, and the Grantors shall furnish all such assistance and information as the Agent may require in connection with such test verifications, and (2) the Agent in its own name or in the name of others may communicate with account debtors on the accounts to verify with them to the Agent’s satisfaction the existence, amount and terms of any accounts.  The Agent may apply the proceeds of collection of accounts, chattel paper, general intangibles, instruments and other claims constituting Collateral received by the Agent or any other Secured Creditor to the Obligations or hold such proceeds as additional Collateral, at the option of the Agent.  The provisions of Section 9-209 of the NYUCC shall not apply to any account, chattel paper or payment intangible as to which notification of assignment has been sent to the account debtor or other person obligation on the Collateral, whether under this Section 10, Section 11 or Section 12.

 

Section 11.                                    POWER OF ATTORNEY.

 

11.01.              Appointment and Powers of Agent.  Each Grantor hereby irrevocably constitutes and appoints the Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following:

 

(a)                                 in the name of such Grantor or its own name, or otherwise, take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Agent for the purpose of collecting any and all such moneys due under any Receivable or with respect to any other Collateral whenever payable;

 

(b)                                 in the case of any Intellectual Property, execute and deliver, and record or have recorded, any and all agreements, instruments, documents and papers as the Agent may request to evidence the Security Interest in such Intellectual Property, and the goodwill and General Intangibles of such Grantor relating thereto or represented thereby;

 

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(c)                                  pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or provide any insurance and pay all or any part of the premiums therefor and the costs thereof;

 

(d)                                 execute, in connection with any sale provided for in Section 12, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral;

 

(e)                                  exercise all rights of such Grantor as owner of the Pledged Securities or as party to any partnership, limited liability company or similar agreement, including, without limitation, the right to sign any and all amendments, instruments, certificates, proxies, and other writings and exercise all voting and consent rights with respect to the Pledged Securities;

 

(f)                                   (1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Agent or as the Agent shall direct; (2) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (3) sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral; (6) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Agent may deem appropriate; (7) assign any Copyright, Patent or Trademark (along with the goodwill of the business to which any such Copyright, Patent or Trademark pertains) throughout the world for such term or terms, on such conditions, and in such manner, as the Agent shall in its sole discretion determine; and (8) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Agent were the absolute owner thereof for all purposes, and do, at the Agent’s option and such Grantor’s expense, at any time, or from time to time, all acts and things which the Agent deems necessary to protect, preserve or realize upon the Collateral and the Security Interest therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do; and

 

(g)                                  to the extent that such Grantor’s authorization given in Section 3 is not sufficient, to file such financing statements or similar documents under the laws of any jurisdiction with respect hereto, with or without such Grantor’s signature, or a photocopy of this Agreement in substitution for a financing statement or such other document, as the Agent may deem appropriate and to execute in such Grantor’s name such financing statements, other such documents and amendments thereto and continuation statements which may require such Grantor’s signature.

 

Anything in this Section 11.01 to the contrary notwithstanding, the Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 11.01 (other than under paragraph (g) of this Section 11.01) unless an Event of Default shall have occurred and be continuing.

 

11.02.              Failure of Grantor to Perform.  If any Grantor fails to perform or comply with any of its agreements contained herein, the Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement.

 

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11.03.              Expenses of Attorney-in-Fact.  The expenses of the Agent incurred in connection with actions undertaken as provided in this Section 11, together with interest thereon at a rate per annum equal to the Default Rate, from the date of payment by the Agent to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Agent on demand.

 

11.04.              Ratification by Grantor.  To the extent permitted by law, each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue of this Section 11.  This power of attorney is a power coupled with an interest and is irrevocable.

 

11.05.              No Duty on Agent.  The powers conferred on the Agent, its directors, officers and agents pursuant to this Section 11 are solely to protect the Secured Creditors’ interests in the Collateral and shall not impose any duty upon any of them to exercise any such powers.  Each Secured Creditor shall be accountable only for the amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act, except for such Secured Creditor’s own gross negligence or willful misconduct as determined in a final and non-appealable judgment by a court of competent jurisdiction.

 

Section 12.                                    REMEDIES.

 

12.01.              Default.  Grantors shall be in default under this Agreement (a) whenever any Event of Default has occurred and is continuing (and each of the Grantors shall thereupon be in default hereunder without regard to whether or to what degree any Grantor individually may have caused, participated in, or had any knowledge of the occurrence of such Event of Default) and (b) at all times after any Loan has become due and payable and remains unpaid beyond any applicable grace period, whether at maturity, upon acceleration pursuant to the Credit Agreement or otherwise.

 

12.02.              Remedies Upon Default.  At any time when any Grantor is in default under this Agreement as set forth in Section 12.01, the Agent may exercise and enforce, in any order, (i) each and all of the rights and remedies available to a secured party upon default under the NYUCC or any other applicable UCC or other Applicable Law, (ii) each and all of the rights and remedies available to it under the Credit Agreement or any other Loan Document, and (iii) each and all of the following rights and remedies:

 

(a)                                 Collection Rights.  Without notice to any Grantor or any other Loan Party, the Agent may notify any or all account debtors and obligors on any accounts, instruments, general intangibles or other claims constituting Collateral of the Secured Creditors’ Security Interests therein and may direct, demand and enforce payment thereof directly to the Agent.  The provisions of Section 9-209 of the NYUCC shall not apply to any account, chattel paper or payment intangible as to which notification of assignment has been sent to the account debtor.

 

(b)                                 Taking Possession.  The Agent may (i) enter upon any and all premises owned or leased by any Grantor where Collateral is located (or believed by the Agent to be located), with or (to the fullest extent permitted by law) without judicial process and without any obligation to pay rent; (ii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent the Agent deems appropriate; (iii) take possession of any Grantor’s premises or place custodians in exclusive control thereof, remain on such premises and use the same and any Grantor’s equipment for the purpose of completing any work in process or otherwise preparing the Collateral for sale or selling or otherwise transferring the Collateral;

 

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(iv) take possession of all items of Collateral that are not then in its possession, either upon such premises or by removal from such premises; and (v) require any Grantor or the Person in possession thereof to deliver such Collateral to the Agent at one or more locations designated by the Agent and reasonably convenient to it and each Grantor owning an interest therein.

 

(c)                                  Foreclosure.  The Agent may sell, lease, license or otherwise dispose of or transfer any or all of the Collateral or any part thereof in one or more parcels at public sale or in private sale or transaction, on any exchange or market or at the Agent’s offices or on any Grantor’s premises or at any other location, for cash, on credit or for future delivery, and may enter into all contracts necessary or appropriate in connection therewith, without any notice whatsoever unless required by law.  Where permitted by law, one or more of the Secured Creditors may be the purchasers at any such sale and in such event, the Secured Creditors bidding at such sale may bid part or all of the Obligations owing to them without necessity of any cash payment on account of the purchase price, even though any other purchaser at such sale is required to bid a purchase price payable in cash.  Each Grantor agrees that at least ten (10) calendar days’ written notice to such Grantor of the time and place of any public sale of Collateral owned by it (or, to the extent such Grantor is entitled by law to notice thereof, the public sale of any other Collateral), or the time after which any private sale of Collateral owned by it (or, to the extent such Grantor is entitled by law to notice thereof, the private sale of any other Collateral) is to be made, shall be commercially reasonable.  For purposes of such notice, to the fullest extent permitted by law (i) each Grantor waives notice of any sale of Collateral owned by any other Grantor and (ii) each Grantor agrees that notice given to the Borrower shall constitute notice given to such Grantor.  The giving of notice of any such sale or other disposition shall not obligate the Agent to proceed with the sale or disposition, and any such sale or disposition may be postponed or adjourned from time to time, without further notice.

 

(d)                                 Voting Rights.  The Agent may exercise any and all rights of any Grantor as the owner of any Pledged Securities, including, without limitation, voting rights, rights to give or withhold consent under any agreement under which any Pledged Security is issued and all other rights referred to in Section 11.01(e).

 

(e)                                  Use of Intellectual Property.  The Agent may, on a royalty-free basis, use and license use of any Trademark, Trade Secret, trade name, trade style, Copyright, Patent, technical knowledge or process or other Intellectual Property owned, held or used by any Grantor in respect of any Collateral as to which any right or remedy of the Agent is exercised or enforced.  In addition, the Agent may exercise and enforce such rights and remedies for collection as may be available to it by law or agreement.  Each Grantor grants a license pursuant to Section 12.03 in connection therewith.

 

(f)                                   Use of Collateral.  With respect to any Collateral in the possession of the Agent or any other Secured Creditor, or a bailee or other third party holding on its behalf, the Agent or such other Secured Creditor may use or operate such Collateral in any manner and to the extent determined by the Agent or such Secured Creditor.

 

(g)                                  Appointment of Receiver.  Without limiting any other right or remedy of the Agent in this Agreement, upon the occurrence and during the continuance of any Event of Default, the Agent may by instrument in writing appoint any person as a receiver of all or any part of the Collateral of each applicable Grantor.  The Agent may from time to time remove or replace a receiver, or make application to any court of competent jurisdiction for the appointment of a receiver.  Any receiver appointed by the Agent shall (for purposes relating to responsibility for the receiver’s acts or omissions) be considered to be the agent of each applicable Grantor.  The Agent may from time to time fix the

 

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receiver’s remuneration and the Grantors shall pay the amount of such remuneration to the Agent.  The Agent shall not be liable to any Grantor or any other person in connection with appointing or not appointing a receiver or in connection with the receiver’s actions or omissions.

 

12.03.              Grant of License to Use Intellectual Property.  For the purpose of enabling the Agent to exercise rights and remedies under this Section 12 at such time as the Agent shall be lawfully and otherwise entitled to exercise such rights and remedies, each Grantor hereby grants to the Agent an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Grantor) to use, license or sub-license any of the Collateral consisting of Intellectual Property now owned or hereafter acquired by the Grantor to the extent that such Grantor is not legally or contractually prohibited from doing so (Grantor agreeing to use commercially reasonable efforts not to enter into, after the Closing Date, any such contractual prohibition), and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof.  The use of such license by the Agent shall be exercised, at the Agent’s option, only upon the occurrence and during the continuation of an Event of Default; provided that any license, sub-license or other transaction entered into by the Agent in accordance herewith shall be binding upon each Grantor notwithstanding any subsequent cure, waiver or other termination of an Event of Default.

 

12.04.              Waivers by Grantors.  Each Grantor hereby irrevocably waives (a) all rights of redemption from any foreclosure sale; (b) the benefit of all valuation, appraisal, exemption and moratorium laws; (c) to the fullest extent permitted by law, all rights to notice or a hearing prior to the exercise by the Agent of its right to take possession of any Collateral, whether by self-help or by legal process and any right to object to the Agent taking possession of any Collateral by self-help; and (d) if the Agent seeks to obtain possession of any Collateral by replevin, claim and delivery, attachment, levy or other legal process, (i) any notice or demand for possession prior to the commencement of legal proceedings, (ii) the posting of any bond or security in any such proceedings, and (iii) any requirement that the Agent retain possession and not dispose of any Collateral until after a trial or final judgment in such proceedings.

 

12.05.              Application of Proceeds.  Except as expressly provided elsewhere in this Agreement, all proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Agent, be held by the Agent as Collateral for, or then, or at any other time thereafter, applied in full or in part by the Agent against, the Obligations in the following order of priority:

 

FIRST: to the payment of all reasonable costs and expenses of such sale, collection or other realization, including reasonable compensation to the Agent and its agents and counsel, and all other reasonable expenses, liabilities and advances made or incurred by the Agent in connection therewith, and all amounts for which the Agent is entitled to indemnification hereunder and all reasonable advances made by the Agent hereunder for the account of any Grantor, and to the payment of all reasonable costs and expenses paid or incurred by the Agent in connection with the exercise of any right or remedy hereunder, all in accordance with Section 18.09;

 

SECOND: to the payment of all other Obligations (for the ratable benefit of the holders thereof) then due and payable in the manner and order provided in the Credit Agreement;

 

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THIRD: to any payments required by Section 9-608(a)(1)(C) or 9-615(a)(3) of the NYUCC or in accordance with other Applicable Law; and

 

FOURTH, to the payment to or upon the order of the Grantor entitled thereto, or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.

 

12.06.              Surplus; Deficiency.  Any surplus proceeds of any sale or other disposition by the Agent of any Collateral remaining after discharge of the Credit Agreement and after all Obligations are Paid in Full and in cash and any payments required by Section 9-608(a)(1)(C) or 9-615(a)(3) of the NYUCC are Paid in Full shall be paid over to the Grantor entitled thereto, or to whomever may be lawfully entitled to receive such surplus or as a court of competent jurisdiction may direct, but prior to termination and discharge of the Credit Agreement, such surplus proceeds may be retained by the Agent and held as Collateral until termination and discharge of the Credit Agreement.  The Borrower and each other Grantor shall be and remain liable for any deficiency.

 

12.07.              Information Related to the Collateral.  If, during the continuance of an Event of Default, the Agent determines to sell or otherwise transfer any Collateral, each Grantor shall, and shall cause any Person controlled by it to, furnish to the Agent all information the Agent may request that pertains or could pertain to the value or condition of the Collateral or that would or might facilitate such sale or transfer.  The Agent shall have the right, notwithstanding any confidentiality obligation or agreement otherwise binding upon it, freely (but not in violation of any law, including federal securities laws) to disclose such information, and any and all other information (including confidential information) pertaining in any manner to the Collateral or the assets, liabilities, results of operations, business or prospects of any Secured Creditors, freely to any Person that the Agent in good faith believes to be a potential or prospective purchaser in such sale or transfer, without liability for any disclosure, dissemination or use that may be made as to such information by any such Person.

 

12.08.              Sale Exempt from Registration.  The Agent shall be entitled at any such sale or other transfer, if it deems it advisable to do so, to restrict the prospective bidders or purchasers to Persons who will provide assurances satisfactory to the Agent that the Collateral may be offered and sold to them without registration under the Securities Act, and without registration or qualification under any other applicable state or federal law.  Upon the consummation of any such sale, the Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold.  The Agent may solicit offers to buy the Collateral, or any part of it, from a limited number of investors deemed by the Agent, in its good faith judgment or in good faith reliance upon advice of its counsel, to meet the requirements to purchase securities under Regulation D promulgated under the Securities Act (or any other regulation of similar import).  If the Agent solicits such offers from such investors, then the acceptance by the Agent of the highest offer obtained from any of them shall be deemed to be a commercially reasonable method of disposition of the Collateral.  Each Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, Agent may be compelled, with respect to any sale of all or any part of the Pledged Securities conducted without prior registration or qualification of such Pledged Securities under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Pledged Securities for their own account, for investment and not with a view to the distribution or resale thereof.  Each Grantor acknowledges that any such private placement may be at prices and on terms less favorable than those obtainable through a sale without such restrictions (including an offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances and the registration rights granted to Agent by such Grantor pursuant hereto, each Grantor agrees that any such

 

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private placement shall not be deemed, in and of itself, to be commercially unreasonable solely because it is a private placement and that Agent shall have no obligation to delay the sale of any Pledged Securities for the period of time necessary to permit the issuer thereof to register it for a form of sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it.  If Agent determines to exercise its right to sell any or all of the Pledged Securities, upon written request, each Grantor shall and shall cause each issuer of any Pledged Securities to be sold hereunder from time to time to furnish to Agent all such information as Agent may request in order to determine the amount of Pledged Securities which may be sold by Agent in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect.

 

12.09.              Rights and Remedies Cumulative.  The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers or privileges or remedies provided by law or in equity, or under any other instrument, document or agreement.  The Agent may exercise and enforce each right and remedy available to it either before or concurrently with or after, and independently of, any exercise or enforcement of any other right or remedy of the Agent or any other Secured Creditor against any Person or property.  All such rights and remedies shall be cumulative, and no one of them shall exclude or preclude any other.

 

12.10.              No Direct Enforcement by Secured Creditors.  The Agent may freely exercise and enforce any and all of its rights and remedies hereunder, for the benefit of the Secured Creditors.  Except to the extent the Agent may consent in writing, no Secured Creditor, other than the Agent, shall have any independent right to collect, take possession of, foreclose against or otherwise enforce the Security Interests granted hereby.

 

Section 13.                                    STANDARDS FOR EXERCISING REMEDIES.

 

13.01.              Commercially Reasonable Manner.  To the extent that Applicable Law imposes duties on the Agent to exercise remedies in a commercially reasonable manner, each Grantor acknowledges and agrees that it is not commercially unreasonable for the Agent (a) to fail to incur expenses reasonably deemed significant by the Agent to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition or to postpone any such disposition pending any such preparation or processing; (b) to fail to obtain third-party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third-party consents for the collection or disposition of Collateral to be collected or disposed of; (c) to fail to exercise collection remedies against account debtors or other persons obligated on Collateral or to remove any Lien on or any adverse claims against Collateral; (d) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists; (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature; (f) to contact other persons, whether or not in the same business as such Grantor, for expressions of interest in acquiring all or any portion of the Collateral; (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature; (h) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets; (i) to dispose of assets in wholesale rather than retail markets; (j) to disclaim disposition warranties; (k) to purchase insurance or credit enhancements to insure the Agent against risks of loss, collection or disposition of Collateral or to provide to the Agent a guaranteed return from the collection or disposition of Collateral; or (l) to the extent deemed appropriate by the Agent, to

 

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obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Agent in the collection or disposition of any of the Collateral.  Each Grantor acknowledges that the purpose of this Section 13 is to provide non-exhaustive indications of what actions or omissions by the Agent would not be commercially unreasonable in the Agent’s exercise of remedies against the Collateral and that other actions or omissions by the Agent shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 13.  Without limiting the foregoing, nothing contained in this Section 13 shall be construed to grant any rights to any Grantor or to impose any duties on the Agent that would not have been granted or imposed by this Agreement or by Applicable Law in the absence of this Section 13.

 

13.02.              Standard of Care.  The powers conferred on the Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers.  Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or to protect, preserve, vote or exercise any rights pertaining to any Collateral.  The Agent shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Agent accords its own property or if it selects, with reasonable care, a custodian to hold such Collateral on its behalf.

 

Section 14.                                    WAIVERS BY GRANTOR; OBLIGATIONS ABSOLUTE.

 

14.01.              Specific Waivers.  Each Grantor waives demand, notice, protest, notice of acceptance of this Agreement, notice of loans made, credit extended, Collateral received or delivered or other action taken in reliance hereon and all other demands and notices of any description other than those required pursuant to the Credit Agreement or any other Loan Documents to which such Grantor is a party.

 

14.02.              Obligations Absolute.  All rights of the Agent hereunder, the Security Interest and all obligations of the Grantors hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document, or any other agreement or instrument; (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from or any acceptance of partial payment thereon and or settlement, compromise or adjustment of any Secured Obligation or of any guarantee, securing or guaranteeing all or any of the Obligations; or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement other than the prompt and complete performance and payment in full of the Obligations.

 

Section 15.                                    MARSHALLING.  The Agent shall not be required to marshal any present or future collateral security (including but not limited to this Agreement and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of its rights hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising.  To the extent that it lawfully may, each Grantor hereby agrees that it shall not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of the Agent’s rights under this Agreement or under any other instrument creating or

 

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evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each Grantor hereby irrevocably waives the benefits of all such laws.

 

Section 16.                                    INTEREST.  Until paid, all amounts due and payable by each Grantor hereunder shall be a debt secured by the Collateral and shall bear, whether before or after judgment, interest at a rate per annum equal to the Default Rate, from the date of payment by the Agent to the date reimbursed by such Grantor, and such interest shall be payable by such Grantor to the Agent on demand.

 

Section 17.                                    REINSTATEMENT.  The obligations of each Grantor pursuant to this Agreement shall continue to be effective or automatically be reinstated, as the case may be, if at any time payment of any of the Obligations is rescinded or otherwise must be restored or returned by the Agent or any other Secured Creditor upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of such Grantor or any other obligor or otherwise, all as though such payment had not been made.

 

Section 18.                                    MISCELLANEOUS.

 

18.01.              Notices.  All notices, requests and demands to or upon the Agent or any Grantor hereunder shall be effected in the manner provided for in Section 10.2 of the Credit Agreement.

 

18.02.              GOVERNING LAW; CONSENT TO JURISDICTION; SERVICE OF PROCESS.  THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).  ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  EACH PARTY HERETO HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE.  EACH PARTY HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK.  EACH PARTY HERETO HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  Each Grantor hereby appoints CT Corporation as such Grantor’s agent where notices and demands to or upon such Grantor in respect of this Agreement or any other Loan Document may be served (without prejudice to the right of Agent or Lender to serve process in any other manner permitted by law).  If for any reason such process agent is unable to act as such, such Grantor will within 30 days appoint a substitute process agent located in the State of New York and give notice of such appointment to Agent.

 

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18.03.              WAIVER OF JURY TRIAL, ETC.  EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

18.04.              Counterparts.  This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.

 

18.05.              Headings.  The headings of each section of this Agreement are for convenience only and shall not define or limit the provisions thereof.

 

18.06.              No Strict Construction.  The parties hereto have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

18.07.              Severability.  The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.

 

18.08.              Survival of Agreement.  All representations, warranties and agreements made by or on behalf of any Grantor or any other Loan Party in this Agreement and in the other Loan Documents shall survive the execution and delivery hereof or thereof and the making and repayment of the Loans.  In addition, notwithstanding anything herein or under Applicable Law to the contrary, the provisions of this Agreement and the other Loan Documents relating to indemnification or payment of costs and expenses, including, without limitation, the provisions of Sections 3.1, 3.2, 3.3, 3.4 and 10.4 of the Credit Agreement, shall survive the Payment in Full of the Loans, the termination of the Commitments and any termination of this Agreement or any of the other Loan Documents.

 

18.09.              Fees and Expenses; Indemnification.

 

(a)                                 The Grantors, jointly and severally, agree to pay upon demand the amount of any and all reasonable expenses, including the fees, disbursements and other charges of counsel and of any experts or agents, which (i) any Secured Creditor may incur in connection with (x) enforcing or preserving any rights under this Agreement and the other Loan Documents, (y) the exercise, enforcement or protection of any of the rights of such Secured Creditor hereunder or (z) the failure of any Grantor to perform or observe any of the provisions hereof, and (ii) the Agent may incur in connection with (x) the administration of this Agreement (including the customary fees and charges of such Secured Creditor for any audits conducted by it or on its behalf with respect to the accounts receivable or inventory) or (y) the custody or preservation of, or the sale of, collection from or other realization upon any of the Creditor at any time and from time to time while an Event of Default shall have occurred and be

 

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Collateral.

 

(b)                                 Each Grantor agrees to pay, and to save the Secured Creditors harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement to the extent the Borrower would be required to do so pursuant to Section 10.4 of the Credit Agreement.

 

(c)                                  The agreements in this Section shall survive repayment of the Obligations and all other amounts payable under the Credit Agreement and the other Loan Documents.

 

(d)                                 Each Grantor agrees that the provisions of Section 3.1 of the Credit Agreement are hereby incorporated herein by reference, mutatis mutandis, and each Secured Creditor shall be entitled to rely on each of them as if they were fully set forth herein.

 

18.10.              Binding Effect; Several Agreement.  This Agreement is binding upon each Grantor and the Secured Creditors and their respective successors and permitted assigns, and shall inure to the benefit of the Grantors, the Secured Creditors and their respective successors and permitted assigns, except that no Grantor shall have any right to assign or transfer its rights or obligations hereunder or any interest herein, except as specifically permitted by the Credit Agreement, without the prior written consent of the Agent (and any such assignment or transfer shall be void).

 

18.11.              Waivers; Amendment.

 

(a)                                 No failure or delay of the Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power.  The rights and remedies of the Secured Creditors hereunder and of the Secured Creditors under the Credit Agreement and other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have.  No waiver of any provisions of this Agreement or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  No notice to or demand on any Grantor in any case shall entitle such or any other Grantor to any other or further notice or demand in similar or other circumstances.

 

(b)                                 Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Agent and each affected Grantor; provided that any provision of this Agreement imposing obligations on any Grantor may be waived by the Agent in a written instrument executed by the Agent in accordance with Section 10.1 of the Credit Agreement.

 

18.12.              Set Off.  Each Grantor hereby irrevocably authorizes each Secured continuing, without notice to such Grantor or any other Grantor, any such notice being expressly waived by each Grantor, to set off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Secured Creditor to or for the credit or the account of such Grantor, or any part thereof in such amounts as such Secured Creditor may elect, against and on account of the obligations and liabilities

 

29

 

of such Grantor to such Secured Creditor hereunder and claims of every nature and description of such Secured Creditor against such Grantor, in any currency, whether arising hereunder, under the Credit Agreement, any other Loan Document or otherwise, as such Secured Creditor may elect, whether or not any Secured Creditor has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured.  Each Secured Creditor shall notify such Grantor promptly of any such set-off and the application made by such Secured Creditor of the proceeds thereof; provided that the failure to give such notice shall not affect the validity of such set-off and application.  The rights of each Secured Creditor under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Secured Creditor may have.

 

18.13.              Integration.  This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.

 

18.14.              Acknowledgments.  Each Grantor hereby acknowledges that:

 

(a)                                 it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party;

 

(b)                                 no Secured Creditor has any fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Grantors, on the one hand, and the Secured Creditors, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

 

(c)                                  no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Secured Creditors or among the Grantors and the Secured Creditors.

 

18.15.              Additional Grantors.  Each Subsidiary of the Borrower that is required to become a party to this Agreement pursuant to Section 6.7 of the Credit Agreement shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Joinder Agreement in the form of Annex I hereto and shall concurrently therewith deliver to the Agent a Subsidiary Guaranty as required by the Credit Agreement.

 

18.16.              Releases.

 

(a)                                 Notwithstanding anything to the contrary contained in the Credit Agreement, herein or in any other Loan Document, upon request of the Borrower in connection with any disposition of Property permitted by the Loan Documents, the Agent shall (without notice to or vote or consent of any other Secured Creditor) take such actions as shall be required to release the Security Interest in any Collateral being disposed of in such disposition, to the extent necessary to permit consummation of such disposition in accordance with the Loan Documents; provided that the Borrower shall have delivered to the Agent, at least five (5) Business Days prior to the date of the proposed release, a written request for release identifying the relevant Collateral being disposed of in such disposition and the terms of such disposition in reasonable detail, including the date thereof, the price thereof and any estimated expenses in connection therewith, together with a certification by the Borrower stating that such transaction is in compliance with the Credit Agreement and the other Loan Documents and that the proceeds of such disposition will be applied in accordance with the Credit Agreement and the other Loan Documents.

 

30

 

(b)                                 At the request and sole expense of the Borrower, a Grantor (other than the Borrower) shall be released from its obligations hereunder in the event that all the capital stock or other equity interests of such Grantor shall be disposed of in a transaction permitted by the Credit Agreement; provided that such the Borrower shall have delivered to the Agent, at least five (5) Business Days prior to the date of the proposed release, a written request for release identifying the relevant Grantor and the terms of the disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Borrower stating that such transaction is in compliance with the Credit Agreement and the other Loan Documents and that the Proceeds of such disposition will be applied in accordance therewith.

 

(c)                                  Upon the occurrence of the Prepayment Date, subject to compliance with Section 7.4(a) of the Credit Agreement, the Collateral shall be released from the Lien created hereby and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors.  At the request of any Grantor following any such termination, Agent shall deliver to such Grantor any Collateral of such Grantor held by Agent hereunder and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination, all at the sole expense of such Grantor.

 

18.17.              Intercompany Debt.

 

(a)                                 Each Grantor hereby agrees that any intercompany Debt or other intercompany payables or receivables directly or indirectly made by or owed to such Grantor by any other Grantor (collectively, “Intercompany Debt”), of whatever nature at any time outstanding shall be subordinate and subject in right of payment to the prior payment in full in cash of the Obligations.  Each Grantor hereby agrees that following a single written notice to the Borrower from Agent, such Grantor will not, while any Event of Default is continuing, accept any payment, including by offset, on any Intercompany Debt until all Obligations have been Paid in Full and the Commitments have been terminated, in each case, except with the prior written consent of the Agent.

 

(b)                                 In the event that any payment on any Intercompany Debt shall be received by a Grantor other than as permitted by this Section 18.17 before all Obligations have been Paid in Full and the Commitments have been terminated pursuant to the Credit Agreement, such Grantor shall receive such payments and hold the same in trust for, segregate the same from its own assets and shall immediately pay over to, the Agent for the benefit of the Agent and the other Secured Creditors all such sums to the extent necessary so that the Agent and the other Secured Creditors shall have been Paid in Full, in cash, all Obligations owed or which may become owing.

 

(c)                                  Upon any payment or distribution of any assets of any Grantor of any kind or character, whether in cash, property or securities by set-off, recoupment or otherwise, to creditors in any liquidation or other winding-up of such Grantor or in the event of any case, proceeding or other action described in Section 8.1.3 of the Credit Agreement, the Agent and the other Secured Creditors shall first be entitled to receive payment in full in cash, in accordance with the terms of the Obligations and of this Agreement, of all amounts payable under or in respect of such Obligations, before any payment or distribution is made on, or in respect of, any Intercompany Debt, in any such case, proceeding or other action, any distribution or payment, to which the Agent or any other Secured Creditor would be entitled except for the provisions hereof shall be paid by such Grantor, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution directly to the Agent (for the benefit of the Agent and the other Secured Creditors) to the extent necessary to pay all such

 

31

 

Obligations in full in cash, after giving effect to any concurrent payment or distribution to the Agent and other Secured Creditors (or to the Agent for the benefit of the Agent and the other Secured Creditors).

 

[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

 

32

 

IN WITNESS WHEREOF, each of the undersigned has caused this Security Agreement to be duly executed and delivered as of the date first above written.

 

GRANTOR:

 

AVINGER, INC.

 

 

	
By:
    	
/s/   Matthew Ferguson
    	
 
    
	
Name:   
    	
Matthew   Ferguson
    	
 
    
	
Title:
    	
Co-President   and Chief Financial Officer
    	
 
    

 

[Security Agreement — Signature Page]

 

 

PDL BIOPHARMA, INC.,

as Agent

 

 

	
By:
    	
/s/   John P. McLaughlin
    	
 
    
	
Name:   
    	
John   P. McLaughlin
    	
 
    
	
Title:
    	
President   and Chief Executive Officer
    	
 
    

 

[Security Agreement — Signature Page]

 

 

Exhibit A to Security Agreement

 

COPYRIGHT SECURITY AGREEMENT

 

WHEREAS, [                              ], a [                      ] (herein referred to as “Grantor”), having an address at [                                  ], has adopted, used and is using the copyrights listed on the annexed Schedule 1-A, which copyrights are registered in the United States Copyright Office (the “Copyrights”);

 

WHEREAS, the Grantor has entered into a Security Agreement, dated as of April 18, 2013 (said Security Agreement, as it may hereafter be amended or otherwise modified from time to time being the “Security Agreement”, the terms defined therein and not otherwise defined herein being used herein as therein defined) in favor of the Agent, for itself and the Lender party to the Credit Agreement (in such capacity, the “Secured Party”); and

 

WHEREAS, pursuant to the Security Agreement, the Grantor has granted to Secured Party a security interest in all right, title and interest of the Grantor in and to the Copyrights, and the registrations and recordings thereof in the United States Copyright Office or any other country or any political subdivision thereof, all whether now or hereafter owned or licensable by the Grantor and all extensions or renewals thereof and all Copyright licenses, and all proceeds of all of the foregoing, including, without limitation, any claims by the Grantor against third parties for infringement thereof, to secure the payment and performance of the Obligations.

 

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, the Grantor does hereby further confirm, and put on the public record:

 

Section 1.                                           Grant of Security Interest in Copyright Collateral.  Each Grantor, as collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Obligations of such Grantor, hereby mortgages, pledges and hypothecates to the Agent for the benefit of the Secured Creditors, and grants to the Agent for the benefit of the Secured Creditors a Lien on and security interest in, all of its right, title and interest in, to and under the following Collateral of such Grantor (the “Copyright Collateral”):

 

(i)                                     all of its Copyrights, including, without limitation, those referred to on Schedule 1-A hereto;

 

(ii)                                  all renewals, reversions and extensions of the foregoing; and

 

(iii)                               all income, royalties, proceeds and liabilities at any time due or payable or asserted under and with respect to any of the foregoing, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.

 

Section 2.                                           Security Agreement.  The security interest granted pursuant to this Copyright Security Agreement is granted in conjunction with the security interest granted to the Agent pursuant to the Security Agreement and each Grantor hereby acknowledges and agrees that the rights and remedies of the Agent with respect to the security interest in the Copyright Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.  In the event of any irreconcilable conflict between the terms

 

 

of this Copyright Security Agreement and the terms of the Security Agreement, the terms of the Security Agreement shall control.

 

SECTION 3.                            Grantor Remains Liable.  Each Grantor hereby agrees that, anything herein to the contrary notwithstanding, such Grantor shall assume responsibility for the prosecution, defense, enforcement or any other necessary or desirable actions in such Grantor’s reasonable business judgment in connection with their Copyrights subject to a security interest hereunder.

 

SECTION 4.                            GOVERNING LAW.  THIS COPYRIGHT SECURITY AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

Section 5.                                           Counterparts.  This Copyright Security Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Signature pages may be detached from multiple separate counterparts and attached to a single counterpart.  Delivery of a signature page of this Copyright Security Agreement by telecopy or other electronic means shall be effective as delivery of a manually executed counterpart of such Copyright Security Agreement.

 

[SIGNATURE PAGES FOLLOW]

 

 

IN WITNESS WHEREOF, the undersigned Grantor has duly executed or caused this Copyright Security Agreement to be duly executed as of the date first set forth above.

 

	
 
    	
[                      ]
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

Schedule 1-A to the COPYRIGHT SECURITY AGREEMENT

 

	
Copyright
    	
 
    	
Registration Date
    	
 
    	
Registration No.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

Exhibit B to Security Agreement

 

PATENT SECURITY AGREEMENT

 

WHEREAS, [                                 ], a [               ] (herein referred to as “Grantor”), having an address at [                                  ], owns the letters patent and/or applications for letters patent of the United States of America more particularly described on Schedule 1-A annexed hereto as part hereof (the “Patents”);

 

WHEREAS, the Grantor has entered into a Security Agreement, dated as of April 18, 2013 (said Security Agreement, as it may hereafter be amended or otherwise modified from time to time being the “Security Agreement”, the terms defined therein and not otherwise defined herein being used herein as therein defined) in favor of the Agent, for itself and the Lender party to the Credit Agreement (in such capacity, the “Secured Party”); and

 

WHEREAS, pursuant to the Security Agreement, the Grantor has granted to Secured Party a security interest in all right, title and interest of Grantor in and to the Patents, together with all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, all whether now or hereafter owned or licensable by Grantor, and all reissues, divisions, continuations, continuations-in-part, term restorations or extensions thereof, all Patent licenses and all proceeds of all of the foregoing, including, without limitation, any claims by Grantor against third parties for infringement thereof for the full term of the Patents, to secure the prompt payment and performance of the Obligations.

 

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, the Grantor does hereby further confirm, and put on the public record, its grant to Secured Party of a security interest in and mortgage on the Collateral to secure the prompt payment and performance of the Obligations.

 

Section 1.                                           Grant of Security Interest in Patents

 

Each Grantor hereby grants to the Agent a security interest and continuing lien on all of such Grantor’s right, title and interest in, to and under the following, in each case whether owned or existing or hereafter acquired or arising and wherever located (collectively, the “Patent Collateral”): all United States and foreign patents and certificates of invention, or similar industrial property rights, including, but not limited to each patent referred to in Schedule 1-A hereto (as such schedule may be amended or supplemented from time to time), and with respect to any and all of the foregoing, (i) all applications therefor including the patent applications referred to in Schedule 1-A hereto (as such schedule may be amended or supplemented from time to time), (ii) all reissues, divisions, continuations, continuations-in-part, extensions, renewals, and reexaminations thereof, (iii) all rights corresponding thereto throughout the world, (iv) all inventions and improvements described therein, (v) all rights to sue for past, present and future infringements thereof, (vi) all licenses, claims, damages, and proceeds of suit arising therefrom, and (vii) all proceeds, payments and rights to payments arising out of the sale, lease, license, assignment, or other disposition thereof.

 

Section 2.                                           Security Agreement

 

The security interests granted pursuant to this Patent Security Agreement are granted in conjunction with the security interests granted to the Agent pursuant to the Security Agreement and each

 

 

Grantor hereby acknowledges and affirms that the rights and remedies of the Agent with respect to the security interest in the Patent Collateral made and granted hereby are supplemental of, and more fully set forth in, the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.  In the event of any irreconcilable conflict between the terms of this Patent Security Agreement and the terms of the Security Agreement, the terms of the Security Agreement shall control.

 

Section 3.                                           Grantor Remains Liable.  Each Grantor hereby agrees that, anything herein to the contrary notwithstanding, such Grantor shall assume responsibility for the prosecution, defense, enforcement or any other necessary or desirable actions in such Grantor’s reasonable business judgment in connection with their Patents subject to a security interest hereunder.

 

Section 4.                                           GOVERNING LAW

 

THIS PATENT SECURITY AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

Section 5.                                           Counterparts.

 

This Patent Security Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Patent Security Agreement shall become effective when the Agent has received counterparts bearing the signatures of all parties hereto.  Delivery of a signature page of this Patent Security Agreement by telecopy or other electronic means shall be effective as delivery of a manually executed counterpart of such Patent Security Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS WHEREOF, the undersigned Grantor has duly executed or caused this Patent Security Agreement to be duly executed as of the date first set forth above.

 

	
 
    	
[                      ]
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

Schedule 1-A to the PATENT SECURITY AGREEMENT

 

	
Title
    	
 
    	
Date Filed 
   or Granted
    	
 
    	
Serial No. or 
   Patent No.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

Exhibit C to Security Agreement

 

TRADEMARK SECURITY AGREEMENT

 

WHEREAS, [                                  ], a [                      ] (herein referred to as “Grantor”), having an address at [                                  ], (1) has adopted, used and is using, or (2) has intended to use and filed an application indicating that intention, but has not yet filed an allegation of use under Section l(c) or l(d) of the Trademark Act, or (3) has filed an application based on an intention to use and has since used and has filed an allegation of use under Section l(c) or l(d) of the Trademark Act, the trademarks, trade names, trade styles and service marks listed on the annexed Schedule 1-A, which trademarks, trade names, trade styles and service marks are registered, or for which applications for registration have been filed in the United States Patent and Trademark Office (the “Trademarks”); and

 

WHEREAS, the Grantor has entered into a Security Agreement, dated as of April 18, 2013 (said Security Agreement, as it may hereafter be amended or otherwise modified from time to time being the “Security Agreement”, the terms defined therein and not otherwise defined herein being used herein as therein defined) in favor of the Agent, for itself and the Lender party to the Credit Agreement (in such capacity, the “Secured Party”); and

 

WHEREAS, pursuant to the Security Agreement, the Grantor has granted to Secured Party a security interest in all right, title and interest of the Grantor in and to the Trademarks, together with all prints and labels on which said Trademarks have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, and the goodwill of the business symbolized by the Trademarks and the applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States of America, any State thereof, or any other country or any political subdivision thereof, all whether now or hereafter owned or licensable by Grantor, and all reissues, extensions or renewals thereof, all Trademark licenses and all proceeds of all of the foregoing, including, without limitation, any claims by Grantor against third parties for infringement thereof, to secure the payment and performance of the Obligations.

 

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, the Grantor does hereby further confirm, and put on the public record:

 

Section 1.                                           Grant of Security Interest in Trademarks.

 

Each Grantor hereby grants to the Agent a security interest and continuing lien on all of such Grantor’s right, title and interest in, to and under the following, in each case whether owned or existing or hereafter acquired or arising and wherever located (collectively, the “Trademark Collateral”):

 

(i)                                     all United States, State and foreign trademarks, service marks, certification marks, collective marks, trade names, corporate names, d/b/as, business names, fictitious business names, Internet domain names, trade styles, logos, other source or business identifiers, designs and general intangibles of a like nature and, with respect to any and all of the foregoing: (i) all registrations and applications therefor including, but not limited to, the registrations and applications referred to in Schedule 1-A hereto (as such schedule may be amended or supplemented from time to time),

 

(ii)                                  the goodwill of the business symbolized thereby,

 

(iii)                               all rights corresponding thereto throughout the world,

 

 

(iv)                              all rights to sue for past, present and future infringement or dilution thereof or for any injury to goodwill,

 

(v)                                 all licenses, claims, damages, and proceeds of suit arising therefrom, and

 

(vi)                              all payments and rights to payments arising out of the sale, lease, license assignment or other disposition thereof;

 

provided that the security interest granted under Section 2 hereof shall not attach to, and the term “Trademark Collateral” shall not include any applications for trademark filed in the United States Patent and Trademark Office pursuant to 15 U.S.C. § 1051 Section 1(b), only to the extent that the grant of a security interest therein would result in the abandonment, invalidation or unenforceability of the trademarks matured from such application or rights hereunder and only until evidence of the use of such trademarks in commerce, as defined in 15 U.S.C. Section 1127, is submitted to, and accepted by, the United States Patent and Trademark Office pursuant to 15 U.S.C. § 1051 Section 1(c) or 1(d), following which filing all such applications shall automatically become Trademark Collateral.

 

Section 2.                                           Security Agreement

 

The security interests granted pursuant to this Trademark Security Agreement are granted in conjunction with the security interests granted to the Agent pursuant to the Security Agreement and each Grantor hereby acknowledges and affirms that the rights and remedies of the Agent with respect to the security interest in the Trademark Collateral made and granted hereby are supplemental of, and more fully set forth in, the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.  In the event of any irreconcilable conflict between the terms of this Trademark Security Agreement and the terms of the Security Agreement, the terms of the Security Agreement shall control.

 

Section 3.                                           Grantor Remains Liable.  Each Grantor hereby agrees that, anything herein to the contrary notwithstanding, such Grantor shall assume responsibility for the prosecution, defense, enforcement or any other necessary or desirable actions in such Grantor’s reasonable business judgment in connection with their Trademarks subject to a security interest hereunder.

 

Section 4.                                           GOVERNING LAW

 

THIS TRADEMARK SECURITY AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

Section 5.                                           Counterparts.

 

This Trademark Security Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Trademark Security Agreement shall become effective when the Agent has received counterparts bearing the signatures of all parties hereto.  Delivery of a signature page of this Trademark Security Agreement by telecopy or other electronic means shall be effective as delivery of a manually executed counterpart of such Trademark Security Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS WHEREOF, the undersigned Grantor has duly executed or caused this Trademark Security Agreement to be duly executed as of the date first set forth above.

	
 
    	
 
    
	
 
    	
[                      ]
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

Schedule 1-A to the TRADEMARK SECURITY AGREEMENT

 

	
Trademark
    	
 
    	
Application or 
   Registration Date
    	
 
    	
Application Serial No. 
   or Registration No.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

Exhibit D to Security Agreement

 

FORM OF CONTROL AGREEMENT

 

This CONTROL AGREEMENT (as amended, supplemented or otherwise modified from time to time, this “Control Agreement”) dated as of                                  , 20    is made by and among                                             , a                   (the “Grantor”), [          ], as Agent (in such capacity, the “Agent”) for the Secured Creditors (as defined in the Security Agreement referred to below), and                                           , a                                            corporation (the “Issuer”).

 

WHEREAS, the Grantor has granted to the Agent for the benefit of the Secured Creditors a security interest in the uncertificated securities of the Issuer owned by the Grantor from time to time (collectively, the “Pledged Securities”), and all additions thereto and substitutions and Proceeds thereof (collectively, with the Pledged Securities, the “Collateral”) pursuant to a Security Agreement, dated as of April 18, 2013 (as amended, supplemented, replaced or otherwise modified from time to time, the “Security Agreement”), by the Grantor and the other persons party thereto as grantors in favor of the Agent.

 

WHEREAS, the following terms which are defined in Articles 8 and 9 of the Uniform Commercial Code in effect in the State of New York on the date hereof (the “UCC”) are used herein as so defined (whether or not such terms are capitalized in the UCC): Adverse Claim, Control, Instruction, Issuer’s Jurisdiction, Proceeds and Uncertificated Security.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

SECTION 1.                            Notice of Security Interest.  The Grantor, the Agent and the Issuer are entering into this Control Agreement to perfect, and to confirm the priority of, the Agent’s security interest in the Collateral.  The Issuer acknowledges that this Control Agreement constitutes written notification to the Issuer of the Agent’s security interest in the Collateral.  The Issuer agrees to promptly make all necessary entries or notations in its books and records to reflect the Agent’s security interest in the Collateral and, upon request by the Agent, to register the Agent as the registered owner of any or all of the Pledged Securities.  The Issuer acknowledges that the Agent has control over the Collateral.

 

SECTION 2.                            Collateral.  The Issuer hereby represents and warrants to, and agrees with the Grantor and the Agent that (i) the terms of any limited liability company interests or partnership interests, in any limited liability company or partnership organized under the laws of the United States or any state thereof, included in the Collateral from time to time shall expressly provide that they are securities governed by Article 8 of the Uniform Commercial Code in effect from time to time in the State of [                     ], (ii) the Pledged Securities are Uncertificated Securities, (iii) the Issuer’s Jurisdiction is, and during the term of this Control Agreement shall remain, the State of [                     ], (iv) Schedule 1 contains a true and complete description of the Pledged Securities as of the date hereof and (v) except for the claims and interests of the Agent and the Grantor in the Collateral, the Issuer does not know of any claim to or security interest or other interest in the Collateral.

 

SECTION 3.                            Control.  The Issuer hereby agrees, upon written direction from the Agent and without further consent from the Grantor, (a) to comply with all Instructions and directions of every kind originated by the Agent concerning the Collateral, to liquidate or otherwise dispose of the Collateral as and to the extent directed by the Agent and to pay over to the Agent all Proceeds of the Collateral without any setoff or deduction, and (b) except as otherwise directed by the Agent, not to comply with the

 

 

Instructions or directions of any kind originated by the Grantor or any other person with respect to the Collateral.

 

SECTION 4.                            Other Agreements.  The Issuer shall notify promptly the Agent and the Grantor if any other person asserts any lien, encumbrance, claim (including any adverse claim) or security interest in or against any of the Collateral.  In the event of any conflict between the provisions of this Control Agreement and any other agreement governing the Pledged Securities or the Collateral, the provisions of this Control Agreement shall control.

 

SECTION 5.                            Protection of Issuer.  The Issuer may rely and shall be protected in acting upon any notice, instruction or other communication that it reasonably believes to be genuine and authorized.

 

SECTION 6.                            Termination.  This Control Agreement shall terminate automatically upon receipt by the Issuer of written notice executed by the Agent terminating this Agreement.

 

SECTION 7.                            Notices.  All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, to the Grantor’s and the Agent’s addresses as set forth in the Security Agreement, and to the Issuer’s address as set forth below, or to such other address as any party may give to the others in writing for such purpose:

 

[Name of Issuer]

[Address of Issuer]

Attention:

Telephone: (   )

Telecopy: (   )

 

SECTION 8.                            Amendments in Writing.  None of the terms or provisions of this Control Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the parties hereto.

 

SECTION 9.                            Entire Agreement.  This Control Agreement and the Security Agreement constitute the entire agreement and supersede all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.

 

SECTION 10.                     Execution in Counterparts.  This Control Agreement may be executed in any number of counterparts (including by telecopy or other electronic commission), each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

SECTION 11.                     Successors and Assigns.  This Control Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Grantor may not assign, transfer or delegate any of its rights or obligations under this Control Agreement without the prior written consent of the Agent.

 

SECTION 12.                     Governing Law and Jurisdiction.  This Control Agreement has been delivered to and accepted by the Agent and will be deemed to be made in the State of New York.  THIS CONTROL AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.  Each of the parties hereto submits for itself and its property in any legal action or proceeding relating to this Control Agreement, or

 

 

for recognition and enforcement of any judgment in respect thereof, to the exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof.

 

SECTION 13.                     WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS CONTROL AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

 

IN WITNESS WHEREOF, each of the undersigned has caused this Control Agreement to be duly executed and delivered as of the date first above written.

 

	
 
    	
[NAME   OF GRANTOR]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
[          ],   as
    
	
 
    	
Agent
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[NAME   OF ISSUER]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

Annex I to Security Agreement

 

JOINDER AGREEMENT, dated as of                            , 20     , made by                                     , a                                      (the “Additional Grantor”), in favor of [       ], as Agent (in such capacity, the “Agent”) for (i) the lender (the “Lender”) party to the Credit Agreement referred to below and (ii) the other Secured Creditors (as defined in the Security Agreement (as hereinafter defined)).  All capitalized terms not defined herein shall have the meaning ascribed to them in such Credit Agreement.

 

W I T N E S S E T H:

 

WHEREAS, Avinger, Inc. (the “Borrower”), the Lender and the Agent have entered into the Credit Agreement, dated as of April 18, 2013 (as amended, supplemented, replaced or otherwise modified from time to time, the “Credit Agreement”);

 

WHEREAS, in connection with the Credit Agreement, the Borrower has entered into a Security Agreement, dated as of April 18, 2013 (as amended, supplemented or otherwise modified from time to time, the “Security Agreement”) in favor of the Agent for the benefit of the Secured Creditors;

 

WHEREAS, the Credit Agreement requires the Additional Grantor to become a party to the Security Agreement; and

 

WHEREAS, the Additional Grantor has agreed to execute and deliver this Joinder Agreement in order to become a party to the Security Agreement;

 

NOW, THEREFORE, IT IS AGREED:

 

1.                                      Security Agreement.  By executing and delivering this Joinder Agreement, the Additional Grantor, as provided in Section 18.15 of the Security Agreement, hereby becomes a party to the Security Agreement as a Grantor thereunder with the same force and effect as if originally named therein as a Grantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Grantor thereunder.  The information set forth in Annex I-A hereto is hereby added to the information set forth in the Perfection Certificate or Perfection Supplement most recently delivered pursuant to the terms of the Security Agreement.  The Additional Grantor hereby represents and warrants that each of the representations and warranties as to the Additional Grantor contained in Section 5 of the Security Agreement is true and correct in all material respects on and as the date hereof (after giving effect to this Joinder Agreement) as if made on and as of such date.

 

2.                                      GOVERNING LAW.  THIS JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

IN WITNESS WHEREOF, the undersigned has caused this Joinder Agreement to be duly executed and delivered as of the date first above written.

 

	
 
    	
[ADDITIONAL   GRANTOR]
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:

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