Exhibit 10.1
EXPLANATORY NOTE:
“*” INDICATES THE PORTION OF THIS EXHIBIT THAT HAS BEEN
OMITTED AND SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT (this “ Agreement ”) dated as
of the Effective Date by and between (i) SILICON VALLEY
BANK , a California corporation with its principal place of
business at 3003 Tasman Drive, Santa Clara, California 95054 and
with a loan production office located at 380 Interlocken Crescent,
Suite 600, Broomfield, Colorado 80021 (“ Bank
”), and (ii) STEREOTAXIS, INC. , a Delaware
corporation and STEREOTAXIS INTERNATIONAL, INC. , a Delaware
corporation, each with offices located at 4320 Forest Park Avenue,
Suite 100, St. Louis, Missouri 63108 (“ Borrower
”), provides the terms on which Bank shall lend to Borrower
and Borrower shall repay Bank. This Agreement amends and restates
in its entirety that certain Loan and Security Agreement by and
between Borrower and Bank, dated as of April 30, 2004 (the
“ Initial Loan Agreement ”), as amended by a
First Loan Modification Agreement dated as of November 3,
2004, between Borrower and Bank (the “ First Amendment
”), as amended by a Second Loan Modification Agreement dated
as of November 8, 2005, between Borrower and Bank (the “
Second Amendment ”), as amended by a Third Loan
Modification Agreement dated as of March 12, 2007, between
Borrower and Bank (the “ Third Amendment ”), as
further amended by a Fourth Loan Modification Agreement dated as of
December 26, 2007, between Borrower and Bank (the “
Fourth Amendment ”), as further amended by a Fifth
Loan Modification Agreement dated as of February 29, 2008,
between Borrower and Bank (the “ Fifth Amendment
”) and as further amended by a Sixth Loan Modification
Agreement dated as of June 16, 2008, between Borrower and Bank
(the “ Sixth Amendment ”, and together with the
Initial Loan Agreement, the First Amendment, the Second Amendment,
the Third Amendment, the Fourth Amendment and the Fifth Amendment,
the “ Prior Loan Agreement ”). The parties agree
as follows:
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ACCOUNTING AND OTHER TERMS
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Accounting terms not defined in this
Agreement shall be construed following GAAP. Calculations and
determinations must be made following GAAP. Capitalized terms not
otherwise defined in this Agreement shall have the meanings set
forth in Section 13. All other terms contained in this
Agreement, unless otherwise indicated, shall have the meaning
provided by the Code to the extent such terms are defined
therein.
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LOAN AND
TERMS OF PAYMENT
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2.1 Promise to Pay
. Borrower hereby unconditionally,
jointly and severally, promises to pay Bank the outstanding
principal amount of all Credit Extensions and accrued and unpaid
interest thereon as and when due in accordance with this
Agreement.
2.1.1 Revolving
Advances .
(a) Availability . Subject to
the terms and conditions of this Agreement and to deduction of
Reserves, Bank shall make Advances to Borrower up to the
Availability Amount. Amounts borrowed under the Revolving Line may
be repaid, and prior to the Revolving Line Maturity Date,
reborrowed, subject to the applicable terms and conditions
precedent herein.
(b) Termination; Repayment .
The Revolving Line terminates on the Revolving Line Maturity Date,
when the principal amount of all Advances, the unpaid interest
thereon, and all other Obligations relating to the Revolving Line
shall be immediately due and payable.
2.1.2 Letters of Credit
Sublimit .
(a) As part of the Revolving Line
and subject to deduction of Reserves, Bank shall issue or have
issued Letters of Credit for Borrower’s account. The face
amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve)
may not exceed Eight Million Dollars ($8,000,000) inclusive of
Credit Extensions relating to Sections 2.1.3 and 2.1.4. Such
aggregate amounts utilized hereunder shall at all times reduce the
amount otherwise available for Advances under the Revolving Line.
If, on the Revolving Line Maturity Date or after the occurrence and
during the continuance of an Event of
Default there are any outstanding Letters of
Credit, then on such date Borrower shall provide to Bank cash
collateral in an amount equal to 105% of the face amount of all
such Letters of Credit plus all interest, fees, and costs due or to
become due in connection therewith (as estimated by Bank in its
good faith business judgment), to secure all of the Obligations
relating to said Letters of Credit. All Letters of Credit shall be
in form and substance acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank’s
standard Application and Letter of Credit Agreement (the “
Letter of Credit Application ”). Borrower agrees to
execute any further documentation in connection with the Letters of
Credit as Bank may reasonably request. Borrower further agrees to
be bound by the regulations and interpretations of the issuer of
any Letters of Credit guarantied by Bank and opened for
Borrower’s account or by Bank’s interpretations of any
Letter of Credit issued by Bank for Borrower’s account, and
Borrower understands and agrees that Bank shall not be liable for
any error, negligence, or mistake, whether of omission or
commission, in following Borrower’s instructions or those
contained in the Letters of Credit or any modifications,
amendments, or supplements thereto.
(b) The obligation of Borrower to
immediately reimburse Bank for drawings made under Letters of
Credit shall be absolute, unconditional, and irrevocable, and shall
be performed strictly in accordance with the terms of this
Agreement, such Letters of Credit, and the Letter of Credit
Application. Any amounts Bank pays on behalf of Borrower for any
Letters of Credit will be treated as Advances under the Revolving
Line and will accrue interest at the interest rate applicable to
Advances.
(c) Borrower may request that Bank
issue a Letter of Credit payable in a Foreign Currency. If a demand
for payment is made under any such Letter of Credit, Bank shall
treat such demand as an Advance to Borrower of the equivalent of
the amount thereof (plus fees and charges in connection therewith
such as wire, cable, SWIFT or similar charges) in Dollars at the
then-prevailing rate of exchange in San Francisco, California, for
sales of the Foreign Currency for transfer to the country issuing
such Foreign Currency.
(d) To guard against fluctuations in
currency exchange rates, upon the issuance of any Letter of Credit
payable in a Foreign Currency, Bank shall create a reserve (the
“ Letter of Credit Reserve ”) under the
Revolving Line in an amount equal to ten percent (10%) of the
face amount of such Letter of Credit. The amount of the Letter of
Credit Reserve may be adjusted by Bank from time to time to account
for fluctuations in the exchange rate. The availability of funds
under the Revolving Line shall be reduced by the amount of such
Letter of Credit Reserve for as long as such Letter of Credit
remains outstanding.
2.1.3 Foreign Exchange
Sublimit . As part of the
Revolving Line and subject to the deduction of Reserves, Borrower
may enter into foreign exchange contracts with Bank under which
Borrower commits to purchase from or sell to Bank a specific amount
of Foreign Currency (each, a “ FX Forward Contract
”) on a specified date (the “ Settlement Date
”). FX Forward Contracts shall have a Settlement Date of at
least one (1) FX Business Day after the contract date and
shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract in a maximum aggregate amount equal
to Eight Hundred Thousand Dollars ($800,000) (the “ FX
Reserve ”). The aggregate amount of FX Forward Contracts
at any one time plus Credit Extensions made pursuant to Sections
2.1.2 and 2.1.4 may not exceed ten (10) times the maximum
aggregate amount of the FX Reserve. Any amounts needed to fully
reimburse Bank will be treated as Advances under the Revolving Line
and will accrue interest at the interest rate applicable to
Advances.
2.1.4 Cash Management Services
Sublimit . Borrower may
use up to Eight Million Dollars ($8,000,000) inclusive of Credit
Extensions relating to Sections 2.1.2 and 2.1.3 (the “Cash
Management Services Sublimit”) of the Revolving Line for
Bank’s cash management services which may include merchant
services, direct deposit of payroll, business credit card, and
check cashing services identified in Bank’s various cash
management services agreements (collectively, the “Cash
Management Services”). The dollar amount of any Cash
Management Services provided under this sublimit will reduce the
amount otherwise available under the Revolving Line. Any amounts
used or reserved by Borrower for any Cash Management Services will
reduce the amount otherwise available for Credit Extensions under
the Revolving Line. Any amounts Bank pays on behalf of Borrower for
any Cash Management Services will be treated as Advances under the
Revolving Line and will accrue interest at the interest rate
applicable to Advances.
2.1.5 Equipment Loan
.
(a) Payments . Borrower is
obligated to the Bank for the 2007 Equipment Advance (as defined in
the Third Amendment to the Prior Loan Agreement and defined herein
as the “ Equipment Loan ”), made by Bank to
Borrower pursuant to the Prior Loan
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Agreement. Borrower acknowledges that, as of the
Effective Date, the outstanding principal amount of the Equipment
Loan is $833,300. Borrower acknowledges there is no availability
under the Equipment Loan, and no other 2007 Equipment Advances will
be made hereunder. Borrower shall continue to pay the Equipment
Loan in monthly installments of principal (in accordance with the
existing 36-month amortization schedule), plus accrued interest on
the first day of each month, and with a final payment of all
remaining principal amounts outstanding under the Equipment Loan
and accrued interest thereon on the Equipment Maturity Date. The
Equipment Loan, when repaid, may not be reborrowed.
(b) The Borrower may prepay all, but
not less than all, of the Equipment Loan prior to the Equipment
Maturity Date by Borrower, effective three (3) Business Days
after written notice of termination is given to Bank. On the date
of such prepayment, Borrower shall pay all unpaid principal of and
all accrued and unpaid interest on the Equipment Loan to Bank, in
immediately available funds. Notwithstanding any such termination,
Bank’s lien and security interest in the Collateral shall
continue until Borrower fully satisfies all of its Obligations. If
such termination is at Borrower’s election (regardless of the
existence of any Event of Default), or at Bank’s election due
to the occurrence and continuance of an Event of Default ,
Borrower shall pay to Bank, in addition to the payment of any other
expenses or fees then-owing, a termination fee (the “
Equipment Loan Termination Fee ”) in an amount equal
to one percent (1.00%) of the outstanding principal amount of
the Equipment Loan. Such Equipment Loan Termination Fee shall bear
interest until paid at a rate equal to the highest rate applicable
to any of the Obligations.
2.1.6 Guaranteed
Line.
(a) Availability . Subject to
the terms and conditions of this Agreement and to deduction of
Reserves, Bank shall make Guaranteed Advances to Borrower up to the
Guaranteed Line. Amounts borrowed under the Guaranteed Line may be
repaid, and prior to the Revolving Line Maturity Date, reborrowed,
subject to the applicable terms and conditions precedent
herein.
(b) Termination; Repayment .
The Guaranteed Line terminates on the earlier to occur of
(i) the termination of the Sanderling Guaranty or the Alafi
Guaranty and (ii) Revolving Line Maturity Date, when the
principal amount of all Advances, the unpaid interest thereon, and
all other Credit Extensions shall be immediately due and
payable.
2.2 Overadvances
. If, at any time the sum of
(a) the outstanding amount of any Advances (including any
amounts used for Cash Management Services) plus (b) the
face amount of any outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit and any Letter of Credit
Reserve), plus (c) the FX Reserve plus
(d) the outstanding amount of any Guaranteed Advances
plus (e) the outstanding amount of any Advances (as
such term is defined in the EXIM Loan Agreement) exceeds the lesser
of either the Revolving Line or the Borrowing Base (such excess
amount being an “ Overadvance ”), Borrower shall
immediately pay to Bank in cash such Overadvance. Without limiting
Borrower’s obligation to repay Bank any amount of the
Overadvance, Borrower agrees to pay Bank interest on the
outstanding amount of any Overadvance, on demand, at the Default
Rate.
2.3 Payment of Interest on the
Credit Extensions.
(a) Interest Rate.
(i) Advances . Subject to
Section 2.3(b), the principal amount outstanding under the
Revolving Line (other than Guaranteed Advances) shall accrue
interest at a floating per annum rate equal to the greater of
(X) the aggregate of the Prime Rate plus one and three-fourths
of one percent (1.75%) and (Y) seven percent (7.00%),
which interest shall be payable monthly, in arrears, in accordance
with Section 2.3(f) below.
(ii) Guaranteed Advances .
Subject to Section 2.3(b), the principal amount outstanding
the Guaranteed Line shall accrue interest at a floating per annum
rate equal to the greater of (X) the aggregate of the Prime
Rate plus one-half of one percent (0.50%) and (Y) six percent
(6.00%).
(iii) Equipment Loan .
Subject to Section 2.3(b), the principal amount outstanding
under the Equipment Loan shall accrue interest at a floating per
annum rate equal to the greater of (X) the aggregate of the
Prime Rate plus one percent (1.00%) and (Y) seven percent
(7.00%), which interest shall be payable monthly in accordance with
Section 2.3(f) below.
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(b) Default Rate .
Immediately upon the occurrence and during the continuance of an
Event of Default, Obligations shall bear interest at a rate per
annum which is five percentage points (5.00%) above the rate
effective immediately before the occurrence of the Event of Default
(the “ Default Rate ”). Payment or acceptance of
the increased interest rate provided in this Section 2.3(b) is
not a permitted alternative to timely payment and shall not
constitute a waiver of any Event of Default or otherwise prejudice
or limit any rights or remedies of Bank.
(c) Adjustment to Interest
Rate . Changes to the interest rate of any Credit Extension
based on changes to the Prime Rate shall be effective on the
effective date of any change to the Prime Rate and to the extent of
any such change.
(d) 360-Day Year . Interest
shall be computed on the basis of a 360-day year for the actual
number of days elapsed.
(e) Debit of Accounts . Bank
may debit any of Borrower’s deposit accounts, including the
Designated Deposit Account, for principal and interest payments or
any other amounts Borrower owes Bank when due. These debits shall
not constitute a set-off.
(f) Payment; Interest
Computation; Float Charge . Interest is payable monthly in
arrears on the first calendar day of each month. In computing
interest on the Obligations, all Payments received after 12:00 p.m.
Eastern time on any day shall be deemed received on the next
Business Day. In addition, Bank shall be entitled to charge
Borrower a “float” charge in an amount equal to one
(1) Business Day’s interest, at the interest rate
applicable to the Advances, on all Payments received by Bank. The
float charge for each month shall be payable in arrears, on the
first day of the month. Bank shall not, however, be required to
credit Borrower’s account for the amount of any item of
payment which is unsatisfactory to Bank in its good faith business
judgment, and Bank may charge Borrower’s Designated Deposit
Account for the amount of any item of payment which is returned to
Bank unpaid.
2.4 Fees . Borrower shall pay to Bank:
(a) Commitment Fee . A fully
earned, non-refundable commitment fee of Three Hundred Twelve
Thousand Five Hundred Dollars ($312,500), on the Effective
Date;
(b) Letter of Credit Fee .
Bank’s customary fees and expenses for the issuance or
renewal of Letters of Credit, upon the issuance, each anniversary
of the issuance, and the renewal of such Letter of Credit by
Bank;
(c) Termination Fee . Subject
to the terms of Section 12.1, a termination fee;
(d) Unused Revolving Line
Facility Fee . A fee (the “ Unused Revolving Line
Facility Fee ”), which fee shall be paid quarterly in
arrears, on the first day of each quarter, in an amount equal to
one-half of one percent (0.50%) per annum of the average unused
portion of the Revolving Line, as determined by Bank. The unused
portion of the Revolving Line, for the purposes of this
calculation, shall include amounts reserved under the Cash
Management Services Sublimit for products provided, under the
Foreign Exchange Sublimit for FX Forward Contracts. Borrower shall
not be entitled to any credit, rebate or repayment of any Unused
Revolving Line Facility Fee previously earned by Bank pursuant to
this Section 2.4(d), notwithstanding any termination of the
within Agreement, or suspension or termination of Bank’s
obligation to make loans and advances hereunder;
(e) Collateral Monitoring Fee
. A monthly collateral monitoring fee of One Thousand Five Hundred
Dollars ($1,500), payable monthly in arrears, on the first day of
each month (prorated for any partial month at the beginning and
upon termination of this Agreement); and
(f) Bank Expenses . All Bank
Expenses (including reasonable attorneys’ fees and expenses
for documentation and negotiation of this Agreement) incurred
through and after the Effective Date, when due.
3.1 Conditions Precedent to
Initial Credit Extension . Bank’s obligation to make the initial
Credit Extension hereunder on or after the Effective Date is
subject to the condition precedent that Bank shall have received,
in form and substance satisfactory to Bank, such documents, and
completion of such other matters, as Bank may reasonably deem
necessary or appropriate, including, without limitation:
(a) Borrower shall have delivered
duly executed original signatures to the Loan Documents to which it
is a party;
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(b) Borrower shall have delivered
duly executed original signatures to the Control Agreements, if
any;
(c) Borrower shall have delivered
its Operating Documents and a good standing certificate of Borrower
certified by the Secretary of State of the applicable state of
incorporation or organization of Borrower, dated as of a date no
earlier than thirty (30) days prior to the Effective
Date;
(d) Borrower shall have delivered
duly executed original signatures to the completed Borrowing
Resolutions for Borrower;
(e) Borrower shall have delivered
the Subordination Agreement duly executed by any holder of
Subordinated Debt as required by Bank, in favor of Bank;
(f) Bank shall have received
certified copies, dated as of a recent date, of financing statement
searches, as Bank shall request, accompanied by written evidence
(including any UCC termination statements) that the Liens indicated
in any such financing statements either constitute Permitted Liens
or have been or, in connection with the initial Credit Extension,
will be terminated or released;
(g) Borrower shall have delivered
the Perfection Certificate executed by Borrower and each
Guarantor;
(h) Borrower shall have delivered a
landlord’s consent executed by each landlord of Borrower as
required by Bank, in favor of Bank;
(i) Borrower shall have delivered a
bailee’s/warehouseman’s waiver executed by each bailee,
if any, of Borrower as required by Bank, in favor of
Bank;
(j) Borrower shall have delivered a
legal opinion of Borrower’s counsel as to authority and
enforceability, dated as of the Effective Date together with the
duly executed original signatures thereto;
(k) Borrower shall have delivered
the duly executed original signatures to each Guaranty, together
with the completed Borrowing Resolutions for Guarantor;
(l) Borrower shall have delivered
the duly executed Alafi Letter of Credit, naming Bank as
beneficiary thereunder, in form and substance acceptable to Bank,
in its reasonable discretion;
(m) Borrower shall have delivered
evidence satisfactory to Bank that the insurance policies required
by Section 6.7 hereof are in full force and effect, together
with appropriate evidence showing loss payable and/or additional
insured clauses or endorsements in favor of Bank; and
(n) Borrower shall have paid the
fees and Bank Expenses then due as specified in Section 2.4
hereof.
3.2 Conditions Precedent to all
Credit Extensions .
Bank’s obligations to make each Credit Extension, including
the initial Credit Extension, is subject to the
following:
(a) timely receipt of an executed
Transaction Report;
(b) the representations and
warranties in Section 5 shall be true, accurate and complete
in all material respects on the date of the Transaction Report and
on the Funding Date of each Credit Extension; provided ,
however , that such materiality qualifier shall not be
applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and
provided , further that those representations and warranties
expressly referring to a specific date shall be true, accurate and
complete in all material respects as of such date, and no Default
or Event of Default shall have occurred and be continuing or result
from the
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Credit Extension. Each Credit Extension is
Borrower’s representation and warranty on that date that the
representations and warranties in Section 5 remain true,
accurate and complete in all material respects; provided ,
however , that such materiality qualifier shall not be
applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and
provided , further that those representations and warranties
expressly referring to a specific date shall be true, accurate and
complete in all material respects as of such date; and
(c) in Bank’s sole discretion,
there has not been any material impairment in the general affairs,
management, results of operation, financial condition or the
prospect of repayment of the Obligations, or any material adverse
deviation by Borrower from the most recent business plan of
Borrower presented to and accepted by Bank.
3.3 Covenant to
Deliver.
Borrower agrees to deliver to Bank
each item required to be delivered to Bank under this Agreement as
a condition to any Credit Extension. Borrower expressly agrees that
the extension of a Credit Extension prior to the receipt by Bank of
any such item shall not constitute a waiver by Bank of
Borrower’s obligation to deliver such item, and any such
extension in the absence of a required item shall be in
Bank’s sole discretion.
3.4 Procedures for
Borrowing . Subject to
the prior satisfaction of all other applicable conditions to the
making of an Advance set forth in this Agreement, to obtain a
Credit Extension (other than Advances under Sections 2.1.2 or
2.1.4), Borrower shall notify Bank (which notice shall be
irrevocable) by electronic mail, facsimile, or telephone by 12:00
p.m. Eastern time on the Funding Date of the Credit Extension.
Together with such notification, Borrower must promptly deliver to
Bank by electronic mail or facsimile a completed Transaction Report
executed by a Responsible Officer or his or her designee. Bank
shall credit such Credit Extensions to the Designated Deposit
Account. Bank may make Credit Extensions under this Agreement based
on instructions from a Responsible Officer or his or her designee
or without instructions if the Credit Extensions are necessary to
meet Obligations which have become due. Bank may rely on any
telephone notice given by a person whom Bank believes is a
Responsible Officer or designee.
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CREATION
OF SECURITY INTEREST
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4.1 Grant of Security
Interest . Borrower
hereby grants Bank, to secure the payment and performance in full
of all of the Obligations, a continuing security interest in, and
pledges to Bank, the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and
products thereof. Borrower represents, warrants, and covenants that
the security interest granted herein is and shall at all times
continue to be a first priority perfected security interest in the
Collateral (subject only to Permitted Liens that may have superior
priority to Bank’s Lien under this Agreement or the EXIM Loan
Agreement). If Borrower shall acquire a commercial tort claim,
Borrower shall promptly notify Bank in a writing signed by Borrower
of the general details thereof and grant to Bank in such writing a
security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and
substance reasonably satisfactory to Bank.
Notwithstanding the foregoing, it is
expressly acknowledged and agreed that the security interest
created in this Agreement only with respect to Export-Related
Accounts Receivable, Export-Related Inventory and Export-Related
General Intangibles (as defined in the EXIM Loan Agreement) is
subject to and subordinate to the security interest granted to Bank
in the EXIM Loan Agreement with respect to such Export-Related
Accounts Receivable, Export-Related Inventory and Export-Related
General Intangibles.
If this Agreement is terminated,
Bank’s Lien in the Collateral shall continue until the
Obligations (other than inchoate indemnity obligations) are repaid
in full in cash. Upon payment in full in cash of the Obligations
and at such time as Bank’s obligation to make Credit
Extensions has terminated, Bank shall, at Borrower’s sole
cost and expense, release its Liens in the Collateral and all
rights therein shall revert to Borrower.
4.2 Authorization to File
Financing Statements .
Borrower hereby authorizes Bank to file financing statements,
without notice to Borrower, with all appropriate jurisdictions to
perfect or protect Bank’s interest or rights hereunder,
including a notice that any disposition of the Collateral, by
either Borrower or any other Person, shall be deemed to violate the
rights of Bank under the Code. Without limiting the foregoing,
Borrower hereby authorizes Bank to file financing statements which
describe the collateral as “all assets” and/or
“all personal property” of Borrower or words of similar
import.
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REPRESENTATIONS AND
WARRANTIES
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Borrower represents and warrants as
follows at all times unless expressly provided below:
5.1 Due Organization;
Authorization; Power and Authority . Borrower and each of its Subsidiaries, if any,
are duly existing and in good standing as Registered Organizations
in their respective jurisdictions of formation and are qualified
and licensed to do business and are in good standing in any
jurisdiction in which the conduct of their business or their
ownership of property requires that they be qualified except where
the failure to do so could not reasonably be expected to have a
material adverse effect on Borrower’s business. In connection
with this Agreement, Borrower has delivered to Bank a completed
certificate substantially in the form provided by Bank to Borrower,
entitled “Perfection Certificate”. Borrower represents
and warrants to Bank that (a) Borrower’s exact legal
name is that indicated on the Perfection Certificate and on the
signature page hereof; (b) Borrower is an organization of the
type and is organized in the jurisdiction set forth in the
Perfection Certificate; (c) the Perfection Certificate
accurately sets forth Borrower’s organizational
identification number or accurately states that Borrower has none;
(d) the Perfection Certificate accurately sets forth
Borrower’s place of business, or, if more than one, its chief
executive office as well as Borrower’s mailing address (if
different than its chief executive office); (e) Borrower (and
each of its predecessors) has not, in the past five (5) years,
changed its jurisdiction of formation, organizational structure or
type, or any organizational number assigned by its jurisdiction;
and (f) all other information set forth on the Perfection
Certificate pertaining to Borrower and each of its Subsidiaries is
accurate and complete. If Borrower is not now a Registered
Organization but later becomes one, Borrower shall promptly notify
Bank of such occurrence and provide Bank with Borrower’s
organizational identification number.
The execution, delivery and
performance by Borrower of the Loan Documents to which it is a
party have been duly authorized, and do not (i) conflict with
any of Borrower’s organizational documents,
(ii) contravene, conflict with, constitute a default under or
violate any material Requirement of Law, (iii) contravene,
conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental
Authority by which Borrower or any of its Subsidiaries or any of
their property or assets may be bound or affected,
(iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental
Authority (except such Governmental Approvals which have already
been obtained and are in full force and effect or
(v) constitute an event of default under any material
agreement by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which Borrower or
any of its Subsidiaries may be bound in which the default could
reasonably be expected to have a material adverse effect on
Borrower’s business.
5.2 Collateral
. Borrower has good title to, has
rights in, and the power to transfer each item of Collateral upon
which it purports to grant a Lien hereunder, free and clear of any
and all Liens except Permitted Liens. Borrower has no deposit
accounts other than the deposit accounts with Bank and deposit
accounts described in the Perfection Certificate delivered to Bank
in connection herewith or of which Borrower has given Bank notice
and taken such actions as are necessary to give Bank a perfected
security interest therein. The Accounts are bona fide, existing
obligations of the Account Debtors.
The Collateral is not in the
possession of any third party bailee (such as a warehouse) except
as otherwise provided in the Perfection Certificate. None of the
components of the Collateral shall be maintained at locations other
than as provided in the Perfection Certificate. In the event that
Borrower, after the date hereof, intends to store or otherwise
deliver any portion of the Collateral to a bailee, then Borrower
will first receive the written consent of Bank (which consent shall
not be unreasonably withheld) and such bailee must execute and
deliver a bailee agreement in form and substance satisfactory to
Bank in its sole discretion.
All Inventory is in all material
respects of good and marketable quality, free from material
defects.
To Borrower’s knowledge,
Borrower is the sole owner of its intellectual property, except for
non-exclusive licenses granted to its customers in the ordinary
course of business. To Borrower’s knowledge, each patent is
valid and enforceable and no part of the intellectual property has
been judged invalid or unenforceable, in whole or in part, and to
the best of Borrower’s knowledge, no claim has been made that
any part of the Intellectual Property violates the rights of any
third party.
Borrower is not a party to, nor is
bound by, any license or other agreement with respect to which
Borrower is the licensee (a) that prohibits or otherwise
restricts Borrower from granting a security interest in
Borrower’s interest in such license or agreement or any other
property, or (b) for which a default under or termination of
could interfere with the Bank’s right to sell any
Collateral.
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Borrower shall provide written notice to Bank
within ten (10) days of entering or becoming bound by any such
license or agreement (other than over-the-counter software that is
commercially available to the public). Borrower shall take such
steps as Bank requests to obtain the consent of, or waiver by, any
person whose consent or waiver is necessary for (x) all such
licenses or contract rights to be deemed “Collateral”
and for Bank to have a security interest in it that might otherwise
be restricted or prohibited by law or by the terms of any such
license or agreement (such consent or authorization may include a
licensor’s agreement to a contingent assignment of the
license to Bank if Bank determines that is necessary in its good
faith judgment), whether now existing or entered into in the
future, and (y) Bank to have the ability in the event of a
liquidation of any Collateral to dispose of such Collateral in
accordance with Bank’s rights and remedies under this
Agreement and the other Loan Documents.
5.3 Accounts
Receivable.
(a) For each Account with respect to
which Advances are requested, on the date each Advance is requested
and made, such Account shall meet the Minimum Eligibility
Requirements set forth in Section 13 below.
(b) All statements made and all
unpaid balances appearing in all invoices, instruments and other
documents evidencing the Accounts are and shall be true and correct
and all such invoices, instruments and other documents, and all of
Borrower’s Books are genuine and in all respects what they
purport to be. All sales and other transactions underlying or
giving rise to each Account shall comply in all material respects
with all applicable laws and governmental rules and regulations.
Borrower has no knowledge of any actual or imminent Insolvency
Proceeding of any Account Debtor whose accounts are an Eligible
Account in any Borrowing Base Certificate. To the best of
Borrower’s knowledge, all signatures and endorsements on all
documents, instruments, and agreements relating to all Accounts are
genuine, and all such documents, instruments and agreements are
legally enforceable in accordance with their terms.
5.4 Litigation
. There are no actions or
proceedings pending or, to the knowledge of the Responsible
Officers, threatened in writing by or against Borrower or any of
its Subsidiaries involving more than Fifty Thousand Dollars
($50,000).
5.5 No Material
Deviation/Deterioration in Financial Condition
. All consolidated financial
statements for Borrower and any of its Subsidiaries delivered to
Bank fairly present in all material respects Borrower’s
consolidated financial condition and Borrower’s consolidated
results of operations. There has not been any material
deterioration in Borrower’s consolidated financial condition
since the date of the most recent financial statements submitted to
Bank.
5.6 Solvency
. The fair salable value of
Borrower’s assets (including goodwill minus disposition
costs) exceeds the fair value of its liabilities; Borrower is not
left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade
debts) as they mature.
5.7 Regulatory
Compliance . Borrower is
not an “investment company” or a company
“controlled” by an “investment company”
under the Investment Company Act of 1940, as amended. Borrower is
not engaged as one of its important activities in extending credit
for margin stock (under Regulations T and U of the Federal Reserve
Board of Governors). Neither Borrower nor any of its Subsidiaries
is a “holding company” or an “affiliate” of
a “holding company” or a “subsidiary
company” of a “holding company” as each term is
defined and used in the Public Utility Holding Company Act of 2005.
Borrower has complied in all material respects with the Federal
Fair Labor Standards Act. Borrower has not violated any laws,
ordinances or rules, the violation of which could reasonably be
expected to have a material adverse effect on its business. None of
Borrower’s or any of its Subsidiaries’ properties or
assets has been used by Borrower or any Subsidiary or, to the best
of Borrower’s knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous
substance other than legally. Borrower and each of its Subsidiaries
have obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all
Government Authorities including, without limitation, the U.S. Food
and Drug Administration, that are necessary to continue its
business as currently conducted.
5.8 Subsidiaries;
Investments . Borrower
does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.9 Tax Returns and Payments;
Pension Contributions .
Borrower and its Subsidiaries have timely filed all required tax
returns and reports, and Borrower and its Subsidiaries, if any,
have timely paid all foreign, federal, state and local taxes,
assessments,
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deposits and contributions owed by Borrower.
Borrower may defer payment of any contested taxes, provided that
Borrower (a) in good faith contests its obligation to pay the
taxes by appropriate proceedings promptly and diligently instituted
and conducted, (b) notifies Bank in writing of the
commencement of, and any material development in, the proceedings,
(c) posts bonds or takes any other steps required to prevent
the governmental authority levying such contested taxes from
obtaining a Lien upon any of the Collateral that is other than a
“Permitted Lien”. Borrower is unaware of any claims or
adjustments proposed for any of Borrower’s prior tax years
which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid all amounts necessary to fund all
present pension, profit sharing and deferred compensation plans in
accordance with their terms, and Borrower has not withdrawn from
participation in, and has not permitted partial or complete
termination of, or permitted the occurrence of any other event with
respect to, any such plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other
governmental agency.
5.10 Use of Proceeds
. Borrower shall use the proceeds of
the Credit Extensions as working capital to fund its general
business requirements and not for personal, family, household or
agricultural purposes.
5.11 Full Disclosure
. No written representation,
warranty or other statement of Borrower in any certificate or
written statement given to Bank, as of the date such
representation, warranty, or other statement was made, taken
together with all such written certificates and written statements
given to Bank, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements
contained in the certificates or statements not misleading (it
being recognized by Bank that the projections and forecasts
provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during
the period or periods covered by such projections and forecasts may
differ from the projected or forecasted results).
5.12 Designation of Indebtedness
under this Agreement as Senior Indebtedness . All principal of, interest (including all
interest accruing after the commencement of any bankruptcy or
similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding), and all
fees, costs, expenses and other amounts accrued or due under this
Agreement shall constitute “senior indebtedness” under
the terms of the any indenture, convertible debt offering,
debenture offering or other similar debt instrument of the
Borrower, whether now existing or herein after issued (in each case
only with the prior-written consent of the Bank).
Borrower shall do all of the
following:
6.1 Government
Compliance . Maintain its
and all its Subsidiaries’ legal existence and good standing
in their respective jurisdictions of formation and maintain
qualification in each jurisdiction in which the failure to so
qualify would reasonably be expected to have a material adverse
effect on Borrower’s business or operations. Borrower shall
comply, and have each Subsidiary comply, with all laws, ordinances
and regulations to which it is subject, the noncompliance with
which could have a material adverse effect on Borrower’s
business. Borrower shall comply, and shall have each Subsidiary
comply, with all laws, ordinances and regulations to which it is
subject, including, without limitation, the U.S. Food and Drug
Administration, the noncompliance with which could result in a
Material Adverse Change on Borrower’s business.
6.2 Financial Statements,
Reports, Certificates .
(a) Borrower shall provide Bank with
the following:
(i) (A) weekly, within five
(5) days after the end of each week, and (B) upon each
request for a Credit Extension, a Transaction Report;
(ii) within thirty
(30) days after the end of each month, (A) monthly
accounts receivable agings, aged by invoice date, (B) monthly
accounts payable agings, aged by invoice date, and outstanding or
held check registers, if any, (C) monthly reconciliations of
accounts receivable agings (aged by invoice date), transaction
reports, Deferred Revenue report and general ledger, and
(D) monthly perpetual inventory reports for Inventory valued
on a first-in, first-out basis at the lower of cost or market (in
accordance with GAAP) or such other inventory reports as are
requested by Bank in its good faith business judgment;
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(iii) as soon as available, and
in any event within thirty (30) days after the end of each
month, monthly unaudited financial statements;
(iv) within thirty
(30) days after the end of each month a monthly Compliance
Certificate signed by a Responsible Officer, certifying that as of
the end of such month, Borrower was in full compliance with all of
the terms and conditions of this Agreement, and setting forth
calculations showing compliance with the financial covenants set
forth in this Agreement and such other information as Bank shall
reasonably request, including, without limitation, a statement that
at the end of such month there were no held checks;
(v) within thirty (30) days
prior to the end of each fiscal year of Borrower, (A) annual
operating budgets (including income statements, balance sheets and
cash flow statements, by month) for the upcoming fiscal year of
Borrower, and (B) annual financial projections for the
following fiscal year (on a quarterly basis) as approved by
Borrower’s board of directors, together with any related
business forecasts used in the preparation of such annual financial
projections; and
(vii) as soon as available, and
in any event within one hundred twenty (120) days following
the end of Borrower’s fiscal year, annual financial
statements certified by, and with an unqualified opinion of,
independent certified public accountants acceptable to
Bank.
Notwithstanding the foregoing,
during a Streamline Period, provided no Event of Default has
occurred and is continuing, Borrower shall be required to provide
Bank with the reports and schedules required pursuant to clause
(a)(i)(A) above on a monthly basis, within five (5) days after
the end of each month.
(b) In the event that Borrower is or
becomes subject to the reporting requirements under the Securities
Exchange Act of 1934, as amended, within five (5) days after
filing, all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission or a link thereto on
Borrower’s or another website on the Internet.
(c) Prompt written notice of
(i) any material change in the composition of the intellectual
property, (ii) the registration of any copyright (including
any subsequent ownership right of Borrower in or to any copyright),
patent or trademark not previously disclosed to Bank, or
(iii) Borrower’s knowledge of an event that materially
adversely affects the value of the intellectual
property.
6.3 Accounts
Receivable.
(a) Schedules and Documents
Relating to Accounts. Borrower shall deliver to Bank
transaction reports and schedules of collections, as provided in
Section 6.2, on Bank’s standard forms; provided ,
however , that Borrower’s failure to execute and
deliver the same shall not affect or limit Bank’s Lien and
other rights in all of Borrower’s Accounts, nor shall
Bank’s failure to advance or lend against a specific Account
affect or limit Bank’s Lien and other rights therein. If
requested by Bank, Borrower shall furnish Bank with copies (or, at
Bank’s request, originals) of all contracts, orders,
invoices, and other similar documents, and all shipping
instructions, delivery receipts, bills of lading, and other
evidence of delivery, for any goods the sale or disposition of
which gave rise to such Accounts. In addition, Borrower shall
deliver to Bank, on its request, the originals of all instruments,
chattel paper, security agreements, guarantees and other documents
and property evidencing or securing any Accounts, in the same form
as received, with all necessary endorsements, and copies of all
credit memos.
(b) Disputes . Borrower shall
promptly notify Bank of all disputes or claims relating to
Accounts. Borrower may forgive (completely or partially),
compromise, or settle any Account for less than payment in full, or
agree to do any of the foregoing so long as (i) Borrower does
so in good faith, in a commercially reasonable manner, in the
ordinary course of business, in arm’s-length transactions,
and reports the same to Bank in the regular reports provided to
Bank; (ii) no Default or Event of Default has occurred and is
continuing; and (iii) after taking into account all such
discounts, settlements and forgiveness, the total outstanding
Advances will not exceed the Availability Amount.
(c) Collection of Accounts .
Borrower shall have the right to collect all Accounts, unless and
until a Default or an Event of Default has occurred and is
continuing. All payments on, and proceeds of, Accounts shall be
deposited directly by the applicable Account Debtor into a lockbox
account, or such other “blocked account” as Bank may
specify, pursuant to a blocked account agreement in form and
substance satisfactory to Bank in its sole discretion. Whether or
not an Event of Default has occurred and is continuing, Borrower
shall hold all payments on, and proceeds of, Accounts in trust for
Bank, and Borrower shall promptly deliver all
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such payments and proceeds to Bank in their
original form, duly endorsed, to be applied to the Obligations
pursuant to the terms of Section 9.4 hereof; provided ,
that during a Streamline Period, such proceeds shall
promptly be transferred to Borrower’s Designated Deposit
Account.
(d) Returns. Provided no
Event of Default has occurred and is continuing, if any Account
Debtor returns any Inventory to Borrower, Borrower shall promptly
(i) determine the reason for such return, (ii) issue a
credit memorandum to the Account Debtor in the appropriate amount,
and (iii) provide a copy of such credit memorandum to Bank,
upon request from Bank. In the event any attempted return occurs
after the occurrence and during the continuance of any Event of
Default, Borrower shall hold the returned Inventory in trust for
Bank, and immediately notify Bank of the return of the
Inventory.
(e) Verification. Bank may,
from time to time, verify directly with the respective Account
Debtors the validity, amount and other matters relating to the
Accounts, either in the name of Borrower or Bank or such other name
as Bank may choose.
(f) No Liability. Bank shall
not be responsible or liable for any shortage or discrepancy in,
damage to, or loss or destruction of, any goods, the sale or other
disposition of which gives rise to an Account, or for any error,
act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Account, or
for settling any Account in good faith for less than the full
amount thereof, nor shall Bank be deemed to be responsible for any
of Borrower’s obligations under any contract or agreement
giving rise to an Account. Nothing herein shall, however, relieve
Bank from liability for its own gross negligence or willful
misconduct.
6.4 Remittance of
Proceeds . Except as
otherwise provided in Section 6.3(c), deliver, in kind, all
proceeds arising from the disposition of any Collateral to Bank in
the original form in which received by Borrower not later than the
following Business Day after receipt by Borrower, to be applied to
the Obligations pursuant to the terms of Section 9.4 hereof;
provided that, if no Default or Event of Default has
occurred and is continuing, Borrower shall not be obligated to
remit to Bank the proceeds of the sale of worn out or obsolete
Equipment disposed of by Borrower in good faith in an arm’s
length transaction for an aggregate purchase price of Twenty Five
Thousand Dollars ($25,000) or less (for all such transactions in
any fiscal year). Borrower agrees that it will not commingle
proceeds of Collateral with any of Borrower’s other funds or
property, but will hold such proceeds separate and apart from such
other funds and property and in an express trust for Bank. Nothing
in this Section 6.4 limits the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
6.5 Taxes; Pensions
. Make, and cause each of its
Subsidiaries, if any, to make, timely payment of all foreign,
federal, state and local taxes or assessments (other than taxes and
assessment which Borrower is contesting pursuant to the terms of
Section 5.9 hereof), and shall deliver to Bank, on demand,
appropriate certificates attesting to such payments, and pay all
amounts necessary to fund all present pension, profit sharing and
deferred compensation plans in accordance with their
terms.
6.6 Access to Collateral; Books
and Records . At
reasonable times, on one (1) Business Day’s notice
(provided no notice is required if an Event of Default has occurred
and is continuing), Bank, or its agents, shall have the right, on a
semi-annual basis (or more frequently as Bank shall determine
necessary), to inspect the Collateral and the right to audit and
copy Borrower’s Books. The foregoing inspections and audits
shall be at Borrower’s expense, and the charge therefor shall
be $1,000 per person per day (or such higher amount as shall
represent Bank’s then-current standard charge for the same),
plus reasonable out-of-pocket expenses. In the event Borrower and
Bank schedule an audit more than ten (10) days in advance, and
Borrower cancels or seeks to reschedules the audit with less than
ten (10) days written notice to Bank, then (without limiting
any of Bank’s rights or remedies), Borrower shall pay Bank a
fee of $1,000 plus any out-of-pocket expenses incurred by Bank to
compensate Bank for the anticipated costs and expenses of the
cancellation or rescheduling.
6.7 Insurance
. Keep its business and the
Collateral insured for risks and in amounts standard for companies
in Borrower’s industry and location and as Bank may
reasonably request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to Bank. All
property policies shall have a lender’s loss payable
endorsement showing Bank as the sole lender loss payee and waive
subrogation against Bank, and all liability policies shall show, or
have endorsements showing, Bank as an additional insured. All
policies (or the loss payable and additional insured endorsements)
shall provide that the insurer must give Bank at least thirty
(30) days notice before canceling, amending, or declining to
renew its policy. At Bank’s request, Borrower shall deliver
certified copies of policies and evidence of all premium payments.
Proceeds payable under any policy shall, at Bank’s option, be
payable to Bank on account of the Obligations. Notwithstanding the
foregoing, (a) so long as no Event of Default has occurred and
is
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continuing, Borrower shall have the option of
applying the proceeds of any casualty policy up to Fifty Thousand
Dollars ($50,000), in the aggregate, toward the replacement or
repair of destroyed or damaged property; provided that any such
replaced or repaired property (i) shall be of equal or like
value as the replaced or repaired Collateral and (ii) shall be
deemed Collateral in which Bank has been granted a first priority
security interest, and (b) after the occurrence and during the
continuance of an Event of Default, all proceeds payable under such
casualty policy shall, at the option of Bank, be payable to Bank on
account of the Obligations. If Borrower fails to obtain insurance
as required under this Section 6.7 or to pay any amount or
furnish any required proof of payment to third persons and Bank,
Bank may make all or part of such payment or obtain such insurance
policies required in this Section 6.7, and take any action
under the policies Bank deems prudent.
6.8 Operating Accounts
.
(a) Maintain its and its
Subsidiaries’, if any, primary depository, operating accounts
and securities accounts with Bank and Bank’s affiliates and a
majority of Borrower’s and its Subsidiaries’ excess
funds maintained at or invested through Bank or an Affiliate of
Bank.
(b) Provide Bank five (5) days
prior-written notice before establishing any Collateral Account at
or with any bank or financial institution other than Bank or its
Affiliates. In addition, for each Collateral Account that Borrower
at any time maintains, Borrower shall cause the applicable bank or
financial institution (other than Bank) at or with which any
Collateral Account is maintained to execute and deliver a Control
Agreement or other appropriate instrument with respect to such
Collateral Account to perfect Bank’s Lien in such Collateral
Account in accordance with the terms hereunder. The provisions of
the previous sentence shall not apply to deposit accounts
exclusively used for payroll, payroll taxes and other employee wage
and benefit payments to or for the benefit of Borrower’s
employees and identified to Bank by Borrower as such.
(c) Borrower shall, within fifteen
(15) days after the aggregate book value (calculated in
accordance with GAAP) of all foreign accounts of Borrower and its
Subsidiaries, exceeds Five Hundred Thousand Dollars ($500,000)
(such excess being an “ Excess Foreign Account Balance
”), transfer such Excess Foreign Account Balance to an
account of Borrower maintained with Bank or an Affiliate of
Bank.
6.9 Financial Covenant
.
Borrower shall maintain at all
times, to be tested as of the last day of each month:
(a) Tangible Net Worth .
Borrower shall maintain a minimum Tangible Net Worth of no less
than (i) $* for the * periods ending *; (ii) ($*) for the
* periods ending *; (iii) ($*) for the * periods ending *;
(iv) ($*) for the * period ending *; (v) ($*) for the *
periods ending *; (vi) ($*) for the * period ending *;
(vii) ($*) for the * periods ending *; and (viii) ($*)
for the * ending *.
6.10 Protection of Intellectual
Property Rights .
Borrower shall: (a) protect, defend and maintain the validity
and enforceability of its intellectual property; (b) promptly
advise Bank in writing of material infringements of its
intellectual property; and (c) not allow any intellectual
property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without Bank’s written
consent.
6.11 Litigation
Cooperation . From the
date hereof and continuing through the termination of this
Agreement, make available to Bank, without expense to Bank,
Borrower and its officers, employees and agents and
Borrower’s Books, to the extent that Bank may deem them
reasonably necessary to prosecute or defend any third-party suit or
proceeding instituted by or against Bank with respect to any
Collateral or relating to Borrower.
6.12 Further
Assurances . Borrower
shall execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank’s Lien
in the Collateral or to effect the purposes of this
Agreement.
6.13 Sanderling
Liquidity . Sanderling
shall maintain at all times (i) a minimum remaining Callable
Capital ratio of not less than 2:00:1.00; and (ii) Callable
Capital tested quarterly, as of the last day of each fiscal quarter
of the Borrower (or more frequently as Bank shall determine
necessary), of at least two (2) times the sum of
(i) Sanderling’s Guaranty Obligations (as defined in the
Sanderling Guaranty) plus (ii) all other Contingent
Obligations of Sanderling.
-12-
6.14 Alafi Letter of
Credit . Alafi shall not
cancel or allow the Alafi Letter of Credit to expire (unless a
renewal letter of credit, in form and substance acceptable to Bank,
in its reasonable discretion, is executed prior to such
cancellation or expiration).
6.15 Designated Senior
Indebtedness . Borrower
shall designate all principal of, interest (including all interest
accruing after the commencement of any bankruptcy or similar
proceeding, whether or not a claim for post-petition interest is
allowable as a claim in any such proceeding), and all fees, costs,
expenses and other amounts accrued or due under this Agreement as
“senior indebtedness”, or such similar term, in any
future Subordinated Debt incurred by Borrower after the date
hereof, if such Subordinated Debt contains such term or any similar
term.
6.16 Creation/Acquisition of
Subsidiaries . Without limiting the restrictions set
forth in Section 7.3 below, Borrower shall promptly notify
Bank of the creation of any direct or indirect Subsidiary of
Borrower and, at Bank’s request, in its sole discretion,
Borrower shall take all such action as may be reasonably required
by Bank to cause each such Subsidiary to become a co-Borrower or
Guarantor under the Loan Documents and grant a continuing pledge
and security interest in and to the assets of such Subsidiary
(substantially as described on Exhibit A hereto); and Borrower
shall grant and pledge to
