Exhibit 10.59
LOAN AND SECURITY
AGREEMENT
THIS LOAN AND SECURITY AGREEMENT
, dated as of October 14, 2008 (as
amended, restated, supplemented or otherwise modified from time to
time, this “ Agreement ”) is among GENERAL
ELECTRIC CAPITAL CORPORATION (“ GECC ”), in
its capacity as agent for Lenders (as defined below) (together with
its successors and assigns in such capacity, “ Agent
”), the financial institutions who are or hereafter become
parties to this Agreement as lenders (together with GECC,
collectively the “ Lenders ”, and each
individually, a “ Lender ”), CYTORI
THERAPEUTICS, INC., a Delaware corporation (“ Borrower
”), and the other entities or persons, if any, who are or
hereafter become parties to this Agreement as guarantors (each a
“ Guarantor ” and collectively, the “
Guarantors ”, and together with Borrower, each a
“ Loan Party ” and collectively, “ Loan
Parties ”).
RECITALS
Borrower wishes
to borrow funds from time to time from Lenders, and Lenders desire
to make loans, advances and other extensions of credit, severally
and not jointly, to Borrower from time to time pursuant to the
terms and conditions of this Agreement.
AGREEMENT
Loan Parties,
Agent and Lenders agree as follows:
As used in this Agreement, all capitalized terms
shall have the definitions as provided herein. Any
accounting term used but not defined herein shall be construed in
accordance with generally accepted accounting principles in the
United States of America, as in effect from time to
time (“ GAAP ”) and all calculations shall
be made in accordance with GAAP. The term
“financial statements” shall include the accompanying
notes and schedules. All other terms used but not
defined herein shall have the meaning given to such terms in the
Uniform Commercial Code as adopted in the State of New York, as
amended and supplemented from time to time (the “ UCC
”).
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2.
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LOANS AND
TERMS OF PAYMENT.
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2.1. Promise to
Pay. Borrower promises to pay Agent, for the
ratable accounts of Lenders, when due pursuant to the terms hereof,
the aggregate unpaid principal amount of all loans, advances and
other extensions of credit made severally by the Lenders to
Borrower under this Agreement, together with interest on the unpaid
principal amount of such loans, advances and other extensions of
credit at the interest rates set forth herein.
(a) Commitment
. Subject to the terms and conditions hereof, each
Lender, severally, but not jointly, agrees to make term loans (each
a “ Term Loan ” and collectively, the “
Term Loans ”) to Borrower from time to time on any
Business Day (as defined below) during the period from the Closing
Date (as defined below) until December 12, 2008 (the “
Commitment Termination Date ”) in an aggregate
principal amount not to exceed such Lender’s commitment as
identified on Schedule A hereto (such commitment of each
Lender as it may be amended to
reflect
assignments made in accordance with this Agreement or terminated or
reduced in accordance with this Agreement, its “
Commitment ”, and the aggregate of all such
commitments, the “ Commitments
”). Notwithstanding the foregoing, the aggregate
principal amount of the Term Loans made hereunder shall not exceed
$15,000,000 (the “ Total Commitment
”). Each Lender’s obligation to fund a Term
Loan shall be limited to such Lender’s Pro Rata Share (as
defined below) of such Term Loan. Subject to the terms
and conditions hereof, the initial Term Loan shall be made on the
Closing Date in an aggregate principal amount equal to $7,500,000
(the “ Initial Term Loan
”). After the Initial Term Loan, Borrower
may request one (1) additional Term Loan, and such subsequent Term
Loan (the “ Subsequent Term Loan ”) must be in
an amount equal to $7,500,000.
(b) Method of
Borrowing . When Borrower desires a Term Loan,
Borrower will notify Agent (which notice shall be irrevocable) by
facsimile (or by telephone, provided that such telephonic notice
shall be promptly confirmed in writing, but in any event on or
before the following Business Day) on the date that is ten (10)
Business Days prior to the day the Term Loan (other than the
Initial Term Loan) is to be made (or such shorter period of time as
Agent may agree). Agent and Lenders may act without liability upon
the basis of such written or telephonic notice believed by Agent to
be from any authorized officer of Borrower. Agent and
Lenders shall have no duty to verify the authenticity of the
signature appearing on any such written notice.
(c) Funding of Term
Loans . Promptly after receiving a request for a
Term Loan, Agent shall notify each Lender of the contents of such
request and such Lender’s Pro Rata Share of the requested
Term Loan. Upon the terms and subject to the conditions
set forth herein, each Lender, severally and not jointly, shall
make available to Agent its Pro Rata Share of the requested Term
Loan, in lawful money of the United States of America in
immediately available funds, to the Collection Account (as defined
below) prior to 11:00 a.m. (New York time) on the specified
date. Agent shall, unless it shall have determined that
one of the conditions set forth in Section 4.1 or 4.2, as
applicable, has not been satisfied, by 4:00 p.m. (New York time) on
such day, credit the amounts received by it in like funds to
Borrower by wire transfer to, unless otherwise specified in a
Disbursement Letter (as defined below), the following deposit
account of Borrower (or such other deposit account as specified in
writing by an authorized officer of Borrower and acceptable to
Agent) (the “ Designated Deposit Account
”):
Bank
Name: U.S. Bank N.A.
(d) Notes
. If requested by a Lender, the Term Loans of such
Lender shall be evidenced by a promissory note substantially in the
form of Exhibit A hereto (each a “ Note ”
and, collectively, the “ Notes ”), and Borrower
shall execute and deliver a Note to such Lender. Each
Note shall represent the obligation of Borrower to pay to such
Lender the lesser of (a) the aggregate unpaid principal amount of
all Term Loans made by such Lender to or on behalf of Borrower
under this Agreement or (b) the amount of such Lender’s
Commitment, in each case together with interest thereon as
prescribed in Section 2.3(a).
(e) Agent May
Assume Funding . Unless Agent shall have received
notice from a Lender prior to the date of any particular Term Loan
that such Lender will not make available to
Agent such
Lender’s Pro Rata Share of such Term Loan, Agent may assume
that such Lender has made such amount available to it on the date
of such Term Loan in accordance with subsection (c) of this Section
2.2, and may (but shall not be obligated to), in reliance upon such
assumption, make available a corresponding amount for the account
of Borrower on such date. If and to the extent that such
Lender shall not have so made such amount available to Agent, such
Lender and Borrower severally agree to repay to Agent forthwith on
demand such corresponding amount together with interest thereon,
for each day from the day such amount is made available to Borrower
until the day such amount is repaid to Agent, at (i) in the case of
Borrower, a rate per annum equal to the interest rate applicable
thereto pursuant to Section 2.3(a), and (ii) in the case of such
Lender, a floating rate per annum equal to, for each day from the
day such amount is made available to Borrower until such amount is
reimbursed to Agent, the weighted average of the rates on overnight
federal funds transactions among members of the Federal Reserve
System, as determined by Agent in its sole discretion (the “
Federal Funds Rate ”) for the first Business Day and
thereafter, at the interest rate applicable to such Term
Loan. If such Lender shall repay such corresponding
amount to Agent, the amount so repaid shall constitute such
Lender’s loan included in such Term Loan for purposes of this
Agreement.
2.3.
Interest and
Repayment.
(a) Interest
. Each Term Loan shall accrue interest in arrears
from the date made until such Term Loan is fully
repaid at a fixed per annum rate of interest equal to
10.58%. All computations of interest and fees calculated
on a per annum basis shall be made by Agent on the basis of a
360-day year, in each case for the actual number of days occurring
in the period for which such interest and fees are
payable. Each determination of an interest rate or the
amount of a fee hereunder shall be made by Agent and shall be
conclusive, binding and final for all purposes, absent manifest
error. As used herein, the term “Treasury
Rate” means a per annum rate of interest equal to the rate
published by the Board of Governors of the Federal Reserve System
in Federal Reserve Statistical Release H.15 entitled
“Selected Interest Rates” under the heading “U.S.
Government Securities/Treasury Constant Maturities” as the
three year treasuries constant maturities rate. In the
event Release H.15 is no longer published, Agent shall select a
comparable publication to determine the U.S. Treasury note yield to
maturity.
(b) Payments of
Principal and Interest . For the Initial Term Loan,
Borrower shall pay to the Agent, for the ratable benefit of the
Lenders, (i) one payment of interest only (payable in arrears) for
the period from the Closing Date to and including October 31, 2008
at the rate of interest determined in accordance with Section
2.3(a), to be paid on November 1, 2008, (ii) three
(3) consecutive payments of interest only (payable in
arrears) at the rate of interest determined in accordance with
Section 2.3(a) on the first day of each calendar month (a “
Scheduled Payment Date ”) commencing on December 1,
2008 and (iii) thirty-three (33) equal consecutive payments of
principal and interest (payable in arrears) at the rate of interest
determined in accordance with Section 2.3(a) on each Scheduled
Payment Date commencing on March 1, 2009. For the
Subsequent Term Loan, Borrower shall pay to the Agent, for the
ratable benefit of the Lenders, (i) one payment of interest only
(payable in arrears) for the period from date of funding such
Subsequent Term Loan to and including the last day of the month in
which the Subsequent Term Loan was made at the rate of interest
determined in accordance with Section 2.3(a), to be paid on the
first day of the calendar month occurring after the month in which
the Subsequent Term Loan was made, and (ii) thirty-six (36) equal
consecutive payments of principal and interest (payable in arrears)
at the rate of interest determined in accordance with Section
2.3(a) on each Scheduled Payment Date commencing on the first day
of the second calendar month occurring after the month during which
the Subsequent Term Loan was made. The amount of each
such payment of principal and interest with respect to each of the
Initial Term Loan and the Subsequent Term
Loan shall be
calculated by the Agent and shall be sufficient to fully amortize
the principal and interest due with respect to the applicable Term
Loan over such repayment period. Each scheduled payment
of interest only or interest and principal hereunder is referred to
herein as a “ Scheduled Payment
.” Notwithstanding the foregoing, all unpaid
principal and accrued interest with respect to a Term Loan is due
and payable in full to Agent, for the ratable benefit of Lenders,
on the earlier of (A) the first day of the thirty-seventh month
following the date such Term Loan was made or (B) the date that
such Term Loan otherwise becomes due and payable hereunder, whether
by acceleration of the Obligations (as defined below) pursuant to
Section 8.2 or otherwise (the earlier of (A) or (B), the “
Applicable Term Loan Maturity Date ”). Each Scheduled
Payment, when paid, shall be applied first to the payment of
accrued and unpaid interest on the applicable Term Loan and then to
unpaid principal balance of such Term Loan. Without
limiting the foregoing, all Obligations shall be due and payable on
the Applicable Term Loan Maturity Date for the last Term Loan
made.
(c) No
Reborrowing . Once a Term Loan is repaid or prepaid,
it cannot be reborrowed.
(d) Payments
. All payments (including prepayments) to be made by any
Loan Party under any Debt Document shall be made in immediately
available funds in U.S. dollars, without setoff or counterclaim to
the Collection Account (as defined below) before 11:00 a.m. (New
York time) on the date when due. All payments received
by Agent after 11:00 a.m. (New York time) on any Business Day
or at any time on a day that is not a Business Day shall be deemed
to be received on the next Business Day. Whenever any
payment required under this Agreement would otherwise be due on a
date that is not a Business Day, such payment shall instead be due
on the next Business Day, and additional fees or interest, as the
case may be, shall accrue and be payable for the period of such
extension. The payment of any Scheduled Payment prior to
its due date shall be deemed to have been received on such due date
for purposes of calculating interest hereunder. All
Scheduled Payments due to Agent and Lenders under Section 2.3(b)
shall be effected by automatic debit of the appropriate funds from
Borrower’s operating account specified on the EPS Setup Form
(as defined below). As used herein, the term “
Collection Account ” means the following account of
Agent (or such other account as Agent shall identify to Borrower in
writing):
Account Name:
GECC HH Cash Flow Collections
(e) Withholdings
and Increased Costs . All payments shall be made
free and clear of any taxes, withholdings, duties, impositions or
other charges (other than taxes on the overall net income of any
Lender and comparable taxes), such that Agent and Lenders will
receive the entire amount of any Obligations, regardless of source
of payment. If Agent or any Lender shall have reasonably
determined that the introduction of or any change in, after the
date hereof, any law, treaty, governmental (or quasi-governmental)
rule, regulation, guideline or order reduces the rate of return on
Agent or such Lender’s capital as a consequence of its
obligations hereunder or increases the cost to Agent or such Lender
of agreeing to make or making, funding or maintaining any Term
Loan, then Borrower shall from time to time upon demand by Agent or
such Lender (with a copy of such demand to Agent) promptly pay to
Agent for its own account or for the account of such Lender, as the
case may be, additional amounts sufficient to compensate Agent or
such Lender for such reduction or for such increased
cost. A certificate as to the amount of such
reduction or
such increased cost submitted by Agent or such Lender (with a copy
to Agent) to Borrower shall be conclusive and binding on Borrower,
absent manifest error, provided that, neither Agent nor any Lender
shall be entitled to payment of any amounts under this Section
2.3(e) unless it has delivered such certificate to Borrower within
180 days after the occurrence of the changes or events giving rise
to the increased costs to, or reduction in the amounts received by,
Agent or such Lender. This provision shall survive the
termination of this Agreement. Any Lender claiming any additional
amounts payable pursuant to this Section 2.3(e) shall
use its reasonable efforts (consistent with its internal policies
and requirements of law) to change the jurisdiction of its lending
office if such a change would reduce any such additional amounts
(or any similar amount that may thereafter accrue) and would not,
in the sole determination of such Lender, be otherwise
disadvantageous to such Lender. Each Lender organized under the
laws of a jurisdiction outside the United States as to which
payments to be made under this Agreement or under the Notes are
exempt from United States withholding tax under an applicable
statute or tax treaty shall provide to Borrower and Agent a
properly completed and executed IRS Form W 8ECI or Form W 8BEN or
other applicable form, certificate or document prescribed by the
IRS or the United States.
(f) Loan
Records . Each Lender shall maintain in accordance
with its usual practice accounts evidencing the Obligations of
Borrower to such Lender resulting from such Lender’s Pro Rata
Share of each Term Loan, including the amounts of principal and
interest payable and paid to such Lender from time to time under
this Agreement. Agent shall maintain in accordance with
its usual practice a loan account on its books to record the Term
Loans and any other extensions of credit made by Lenders hereunder,
and all payments thereon made by Borrower. The entries
made in such accounts shall, to the extent permitted by applicable
law, be prima facie evidence of the existence and amounts of the
Obligations recorded therein absent manifest error; provided
, however , that no error in such account and no failure of
any Lender or Agent to maintain any such account shall affect the
obligations of Borrower to repay the Obligations in accordance with
their terms.
(g) Payment of
Expenses . Agent is authorized to, and at its sole
election may, debit funds from Borrower’s operating account
specified on the EPS Setup Form (as defined below) to pay all fees,
expenses, costs and interest owing by Borrower under this Agreement
or any of the other Debt Documents if and to the extent Borrower
fails to pay any such amounts within three (3) Business Days of the
date when due.
2.4.
Prepayments. Borrower can voluntarily prepay,
upon five (5) Business Days’ prior written notice to Agent,
any Term Loan in full, but not in part. Upon the date of
(a) any voluntary prepayment of a Term Loan in accordance with the
immediately preceding sentence or (b) any mandatory prepayment of a
Term Loan required under this Agreement (whether by acceleration of
the Obligations pursuant to Section 8.2 or otherwise, except to the
extent that the sole basis for such acceleration is the occurrence
of an Event of Default under Section 8.1(h)), Borrower shall pay to
Agent, for the ratable benefit of the Lenders, a sum equal to (i)
all outstanding principal plus accrued interest with respect to
such Term Loan, (ii) the Final Payment Fee (as such term is
defined in Section 2.7(d)) for such Term Loan, and (iii) a
prepayment premium (as yield maintenance for the loss of a bargain
and not as a penalty) equal to: (i) 4% of such prepayment amount,
if such prepayment is made on or before the one year anniversary of
such Term Loan, (ii) 3% of such prepayment amount, if such
prepayment is made after the one year anniversary of such Term Loan
but on or before the two year anniversary of such Term Loan, and
(iii) 2% of such prepayment amount, if such prepayment is made
after the two year anniversary of such Term Loan but before the
first day of the thirty-seventh month following the date such Term
Loan was made.
2.5. Late Fees.
If Agent does not receive any Scheduled Payment or
other payment under any Debt Document from any Loan Party within 5
days after its due date, then, at Agent’s election or upon
the request of the Requisite Lenders (as defined below), such Loan
Party agrees to pay to Agent for the ratable benefit of all
Lenders, a late fee equal to (a) 5% of the amount of such unpaid
payment or (b) such lesser amount that, if paid, would not
cause the interest and fees paid by such Loan Party under this
Agreement to exceed the Maximum Lawful Rate (as defined below) (the
“ Late Fee ”).
2.6. Default
Rate. All Term Loans and other Obligations shall
bear interest, at the option of Agent or upon the request of the
Requisite Lenders, from and after the occurrence and during the
continuation of an Event of Default (as defined below), at a rate
equal to the lesser of (a) 5% above the rate of interest applicable
to such Obligations as set forth in Section 2.3(a) immediately
prior to the occurrence of the Event of Default and (b) the Maximum
Lawful Rate (the “ Default Rate
”). The application of the Default Rate shall not
be interpreted or deemed to extend any cure period or waive any
Default or Event of Default or otherwise limit the Agent’s or
any Lender’s right or remedies hereunder. All
interest payable at the Default Rate shall be payable on
demand.
(a) Agency Fee
. On the Closing Date, Borrower shall pay to Agent, for
its own account, a non-refundable agency fee in an amount equal to
$175,000, which fee shall be fully earned when paid.
(b) Closing Fee
. On the Closing Date, Borrower shall pay to Agent, for
the benefit of Lenders in accordance with their Pro Rata Shares, a
non-refundable closing fee in an amount equal to $300,000, which
fee shall be fully earned when paid.
(c) Unused Line
Fee . On the Commitment Termination Date,
Borrower shall pay to Agent, for the benefit of Lenders in
accordance with their Pro Rata Shares, a non-refundable unused line
fee equal to 1.0% of the undrawn amount of the Total Commitment as
of such date, which fee shall be fully earned on the Commitment
Termination Date, regardless of whether the Subsequent Term Loan is
advanced.
(d) Final Payment
Fee. On the date upon which the outstanding
principal amount of any Term Loan is repaid in full, or if earlier,
is required to be repaid in full (whether by scheduled payment,
voluntary prepayment, acceleration of the Obligations pursuant to
Section 8.2 or otherwise), Borrower shall pay to Agent, for the
ratable accounts of Lenders, a fee equal to 5.0% of the original
principal amount of such Term Loan (the “ Final Payment
Fee ”), which Final Payment Fee shall be deemed to be
fully-earned on the Closing Date.
2.8. Maximum Lawful
Rate. Anything herein, any Note or any other Debt
Document (as defined below) to the contrary notwithstanding, the
obligations of Loan Parties hereunder and thereunder shall be
subject to the limitation that payments of interest shall not be
required, for any period for which interest is computed hereunder,
to the extent (but only to the extent) that contracting for or
receiving such payment by Agent and Lenders would be contrary to
the provisions of any law applicable to Agent
and Lenders limiting the highest rate of interest which
may be lawfully contracted for, charged or received
by Agent and Lenders, and in such event Loan Parties
shall pay Agent and Lenders interest at the highest rate permitted
by applicable law (“ Maximum Lawful Rate ”);
provided , however , that if at any time thereafter
the rate of interest payable hereunder or thereunder is less than
the Maximum Lawful Rate, Loan Parties shall continue to pay
interest hereunder at the Maximum Lawful Rate until such time as
the total interest received by Agent and Lenders is equal to the
total interest that would have been received had the interest
payable hereunder been (but for the operation of this paragraph)
the interest rate payable
since the
making of the Initial Term Loan as otherwise provided in this
Agreement, any Note or any other Debt Document.
2.9. Authorization
and Issuance of the Warrants. Borrower has duly
authorized the issuance to Lenders (or their respective affiliates
or designees) of stock purchase warrants substantially in the form
of the warrant attached hereto as Exhibit F (collectively,
the “ Warrants ”) evidencing Lenders’ (or
their respective affiliates or designees) right to acquire their
respective Pro Rata Share of up to 178,148 shares of common stock
of Borrower at an exercise price of $4.21 per
share. Subject to the terms and conditions of the
Warrants, the exercise period shall expire ten (10) years from the
date such Warrants are issued.
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3.
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CREATION OF
SECURITY INTEREST.
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3.1. Grant of
Security Interest. As security for the prompt
payment and performance, whether at the stated maturity, by
acceleration or otherwise, of all Term Loans and other debt,
obligations and liabilities of any kind whatsoever of Borrower to
Agent and Lenders under the Debt Documents whether for principal,
interest, fees, expenses, prepayment premiums, indemnities,
reimbursements or other sums, and whether or not such amounts
accrue after the filing of any petition in bankruptcy or after the
commencement of any insolvency, reorganization or similar
proceeding, and whether or not allowed in such case or proceeding),
absolute or contingent, now existing or arising in the future,
including but not limited to the payment and performance of any
outstanding Notes, and any renewals, extensions and modifications
of such Term Loans (such indebtedness under the Notes, Term Loans
and other debt, obligations and liabilities in connection with the
Debt Documents are collectively called the “
Obligations ”), and as security for the prompt payment
and performance by each Guarantor of the Guaranteed Obligations as
defined in the Guaranty (as defined below), each Loan Party does
hereby grant to Agent, for the benefit of Agent and Lenders, a
security interest in the property listed below (all hereinafter
collectively called the “ Collateral
”):
All of such
Loan Party’s personal property of every kind and nature
whether now owned or hereafter acquired by, or arising in favor of,
such Loan Party, and regardless of where located, including,
without limitation, all accounts, chattel paper (whether tangible
or electronic), commercial tort claims, deposit accounts,
documents, equipment, financial assets, fixtures, goods,
instruments, investment property (including, without limitation,
all securities accounts), inventory, letter-of-credit rights,
letters of credit, securities, supporting obligations, cash, cash
equivalents, any other contract rights (including, without
limitation, rights under any license agreements), or rights to the
payment of money, and general intangibles (including Intellectual
Property, as defined in Section 3.3 below), and all books and
records of such Loan Party relating thereto, and in and against all
additions, attachments, accessories and accessions to such
property, all substitutions, replacements or exchanges therefor,
all proceeds, insurance claims, products, profits and other rights
to payments not otherwise included in the foregoing (with each of
the foregoing terms that are defined in the UCC having the meaning
set forth in the UCC).
Notwithstanding the provisions of this Section
3.1 or Section 3.3 below, the grant of security interest herein
shall not extend to and the term “Collateral” shall not
include: (i) to the extent that Borrower would incur adverse tax
consequences resulting from a pledge of 100% of the shares of the
outstanding capital stock of any Subsidiary of Borrower that is
incorporated or organized in a jurisdiction other than the United
States or any state or territory thereof (each, a “
Foreign Subsidiary ”), more than 65% of the issued and
outstanding voting capital stock of such Foreign Subsidiary or
Foreign Subsidiaries, as applicable (but the Collateral shall still
include 100% of the shares of the outstanding non-voting capital
stock of such Foreign Subsidiary or Foreign Subsidiaries, as
applicable), (ii) any license or contract (in each case to the
extent such license or contract is not prohibited by this
Agreement), and the property
subject to such
license or contract, to the extent and only to the extent that (A)
the granting of such security interest is prohibited by any
applicable statute, law or regulation, or would constitute a
default under the license or contract, as applicable, and (B) such
prohibition or default is enforceable under applicable law
(including without limitation Sections 9-406, 9-407 and 9-408 of
the UCC); provided that upon the termination or expiration
of any such prohibition, such license, contract and/or property, as
applicable, shall automatically be subject to the security interest
granted in favor of the Agent hereunder and become part of the
“Collateral” or (iii) Borrower’s stock in
Olympus-Cytori, Inc., a Delaware corporation (such entity, “
Olympus-Cytori ” and such stock, the “
Olympus-Cytori Stock ”); provided that upon the
termination or expiration of all provisions in the Olympus
Agreements (as defined below) prohibiting the granting of a Lien in
the Olympus-Cytori Stock, the Olympus-Cytori Stock shall
automatically be subject to the security interest granted in favor
of the Agent hereunder and become part of the
“Collateral.”
Each Loan Party hereby represents and covenants
that such security interest constitutes a valid, first priority
security interest (subject only to Permitted Liens) in the
presently existing Collateral, and will constitute a valid, first
priority security interest (subject only to Permitted Liens) in
Collateral acquired after the date hereof. Each Loan
Party hereby covenants that it shall give written notice to Agent
promptly upon the acquisition by such Loan Party or creation in
favor of such Loan Party of any commercial tort claim after the
Closing Date.
3.2. Financing
Statements. Each Loan Party hereby authorizes Agent
to file UCC financing statements with all appropriate jurisdictions
to perfect Agent’s security interest (for the benefit of
itself and the Lenders) granted hereby.
3.3. Grant of
Intellectual Property Security Interest. The
Collateral shall include all intellectual property of each Loan
Party, which shall be defined as any and all copyright, trademark,
servicemark, patent, design right, software, license, trade secret
and intangible rights of a Loan Party and any applications,
registrations, claims, products, awards, judgments, amendments,
renewals, extensions, improvements and insurance claims related
thereto (collectively, “ Intellectual Property
”) now or hereafter owned or licensed by a Loan Party,
together with all accessions and additions thereto, proceeds and
products thereof (including, without limitation, any proceeds
resulting under insurance policies). In order to perfect
or protect Agent’s security interest and other rights in Loan
Party’s Intellectual Property, each Loan Party hereby
authorizes Agent to file one or more intellectual property security
agreements, substantially in the form executed and delivered to
Agent on the Closing Date (each an “ Intellectual Property
Security Agreement ” and collectively, the “
Intellectual Property Security Agreements ”) with the
United States Patent and Trademark Office and/or United States
Copyright Office, as each are applicable and required by
Agent.
3.4. Termination of
Security Interest . Upon the date on which all of
the Obligations (other than contingent indemnity obligations that
survive the termination of this Agreement and for which no claim
has been asserted) are indefeasibly repaid in full in cash, all of
the Commitments hereunder are terminated, and this Agreement shall
have been terminated (the “ Termination Date ”),
and upon receipt of a payoff letter or termination agreement
executed by the Loan Parties in form and substance acceptable to
Agent, Agent shall, at Loan Parties’ sole cost and expense
and without any recourse, representation or warranty, release its
Liens in the Collateral.
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4.
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CONDITIONS
OF CREDIT EXTENSIONS
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4.1. Conditions
Precedent to Initial Term Loan. No Lender shall be
obligated to make the Initial Term Loan, or to take, fulfill, or
perform any other action hereunder, until the following have been
delivered to the Agent and each Lender (the date on which the
Lenders make the Initial Term Loan after
all such
conditions shall have been satisfied in a manner satisfactory to
Agent or waived in accordance with this Agreement, the “
Closing Date ”):
(a) a counterpart of
this Agreement duly executed by each Loan Party;
(b) a certificate
executed by the Secretary of each Loan Party, the form of which is
attached hereto as Exhibit B (the “
Secretary’s Certificate ”), providing
verification of incumbency and attaching (i) such Loan
Party’s board resolutions approving the transactions
contemplated by this Agreement and the other Debt Documents and
(ii) such Loan Party’s governing documents;
(c) Notes duly
executed by Borrower in favor of each applicable Lender (if
requested by such Lender);
(d) filed copies of
UCC financing statements, collateral assignments, and terminations
statements, with respect to the Collateral, as Agent shall
request;
(e) certificates of
insurance evidencing the insurance coverage, and satisfactory
additional insured and lender loss payable endorsements, in each
case as required pursuant to Section 6.4 herein;
(f) current UCC lien,
judgment, bankruptcy and tax lien search results demonstrating that
there are no other security interests or other Liens on the
Collateral, other than Permitted Liens (as defined
below);
(g) a Warrant in favor
of each Lender (or its affiliate or designee);
(h) the Intellectual
Property Security Agreement required by Section 3.3 above, duly
executed by each Loan Party;
(i) a certificate of
good standing of each Loan Party from the jurisdiction of such Loan
Party’s organization and a certificate of foreign
qualification from each jurisdiction where such Loan Party’s
failure to be so qualified could reasonably be expected to have a
Material Adverse Effect (as defined below), in each case as of a
recent date acceptable to Agent;
(j) a landlord consent
and/or bailee letter in favor of Agent executed by the landlord or
bailee, as applicable, for any third party location (other than a
Permitted Location as defined below) where (a) any Loan
Party’s principal place of business is located, (b) any Loan
Party’s books or records are located or (c) Collateral with
an aggregate value in excess of $50,000 is located (each of the
locations described in the immediately preceding clauses (a), (b)
and (c), a “ Collateral Location ”), a form of
which is attached hereto as Exhibit C-1 and Exhibit
C-2 , as applicable (each an “ Access Agreement
”);
(k) a legal opinion of
Loan Parties’ counsel, in form and substance satisfactory to
Agent;
(l) a completed EPS
set-up form, a form of which is attached hereto as Exhibit E
(the “ EPS Setup Form ”);
(m) a completed
perfection certificate, duly executed by each Loan Party (the
“ Perfection Certificate ”), a form of which
Agent previously delivered to Borrower;
(n) one or more
Account Control Agreements (as defined below), in form and
substance reasonably acceptable to Agent, duly executed by the
applicable Loan Parties and the applicable depository or financial
institution, for each deposit and securities account listed on the
Perfection Certificate, to the extent required pursuant to the
terms and conditions of Section 7.10 ;
(o) a pledge
agreement, in form and substance satisfactory to Agent, executed by
each Loan Party and pledging to Agent, for the benefit of itself
and the Lenders, a security interest in (a) 100% of the shares of
the outstanding capital stock, of any class, of each Subsidiary (as
defined below) of each Loan Party that is not a Foreign Subsidiary,
(b) to the extent that Borrower would incur adverse tax
consequences resulting from a pledge of 100% of the shares of the
outstanding capital stock of any Foreign Subsidiary, 65% of the
shares of the outstanding voting capital stock and 100% of the
shares of the outstanding non-voting capital stock of each such
Foreign Subsidiary and (c) any and all Indebtedness (as defined in
Section 7.2 below) owing to Loan Parties (the “ Pledge
Agreement ”);
(p) a guaranty
agreement (together with any other guaranty that purports to
provide for a guaranty of the Obligation, the “
Guaranty ”), in form and substance satisfactory to
Agent, executed by each Guarantor;
(q) a disbursement
instruction letter, in form and substance satisfactory to Agent,
executed by each Loan Party, Agent and each Lender (the “
Disbursement Letter ”);
(r) Borrower shall
have unrestricted balance sheet cash and Cash Equivalents (as
defined below) in one or more deposit accounts or securities
accounts over which Agent has obtained control under Section 7.10
of not less than the product of (i) negative three (-3) times (ii)
the Cash Burn Amount (as defined below) at such time;
(s) evidence of the
payment of all loans and other indebtedness, obligations and
liabilities of any kind whatsoever of Borrower to GECC in
connection with (i) those two certain promissory notes in the
original principal amounts of $600,000 and $1,380,467.48,
respectively, made by Borrower in favor of GECC and (ii) that
certain Master Security Agreement dated as of October 1, 2001 by
and between Borrower and GECC (as amended, restated, supplemented
or otherwise modified from time to time, and together with all
schedules attached thereto) (such loans, indebtedness, obligations
and liabilities, collectively, the (“ GE Equipment
Indebtedness ”);
(t) all other
documents and instruments as Agent or the Lenders may reasonably
deem necessary or appropriate to effectuate the intent and purpose
of this Agreement (together with the Agreement, Note, Warrants,
Intellectual Property Security Agreements, the Perfection
Certificate, the Pledge Agreement, the Guaranty, if any, the
Secretary’s Certificate and the Disbursement Letter, and all
other agreements, instruments, documents and certificates executed
and/or delivered to or in favor of Agent and/or the Lenders from
time to time in connection with this Agreement or the transactions
contemplated hereby, the “ Debt Documents ”);
and
(u) Agent and Lenders
shall have received the fees required to be paid by Borrower, if
any, in the respective amounts specified in Section 2.7, and
Borrower shall have reimbursed Agent and Lenders for all reasonable
fees, costs and expenses of closing presented as of the date of
this Agreement.
4.2. Conditions
Precedent to All Term Loans. No Lender shall be
obligated to make any Term Loan, including the Initial Term Loan,
unless the following additional conditions have been
satisfied:
(a) (i) all
representations and warranties in Section 5 below shall be true as
of the date of such Term Loan, except to the extent such
representations and warranties expressly refer to an earlier date,
in which case such representations and warranties shall be true and
correct as of such earlier date; (ii) no Event of Default or any
other event, which with the giving of notice or the passage of
time, or both, would constitute an Event of Default (such event, a
“ Default ”) has occurred and is continuing or
will result from the making of any Term Loan, and (iii) Agent shall
have received a certificate from an authorized officer of each Loan
Party confirming each of the foregoing;
(b) Agent shall have
received the redelivery or supplemental delivery of the items set
forth in the following sections to the extent circumstances have
changed since the Initial Term Loan: Sections 4.1(b),
(e), (f), (g), (i), (j), (k), (m) and (q);
(c) with respect to
the Subsequent Term Loan only, Agent shall have received evidence
satisfactory to Agent and the Lenders that Borrower has, at the
time of and after giving effect to such Term Loan, satisfied each
of the following conditions precedent:
(i)
(A) If the Subsequent Term Loan is to be made on or
prior to October 31, 2008, the aggregate gross income from the sale
of inventory of Borrower and its consolidated Subsidiaries for the
period of 3 consecutive months ending as of September 30, 2008
shall not be less than $2,300,000; (B) if the Subsequent Term Loan
is to be made after October 31, 2008 but prior to November 30,
2008, the aggregate gross income from the sale of inventory of
Borrower and its consolidated Subsidiaries for the period of 3
consecutive months ending as of October 31, 2008 shall not be less
than $3,100,000, and (C) if the Subsequent Term Loan is to be made
on or after November 30, 2008 but prior to the Commitment
Termination Date, the aggregate gross income from the sale of
inventory of Borrower and its consolidated Subsidiaries for the
period of 3 consecutive months ending as of November 30, 2008 shall
not be less than $4,000,000;
(ii)
(A) If the Subsequent Term Loan is to be made on or
prior to October 31, 2008, the aggregate expenses (excluding
non-cash expenses relating to the granting of stock options) and
non-financed capital expenditures of Borrower and its consolidated
Subsidiaries for the period of 3 consecutive months ending as of
September 30, 2008 shall not be greater than $9,100,000; (B) if the
Subsequent Term Loan is to be made after October 31, 2008 but prior
to November 30, 2008, the aggregate expenses (excluding non-cash
expenses relating to the granting of stock options) and
non-financed capital expenditures of Borrower and its consolidated
Subsidiaries for the period of 3 consecutive months ending as of
October 31, 2008 shall not be greater than $8,800,000, and (C) if
the Subsequent Term Loan is to be made on or after November 30,
2008 but prior to the Commitment Termination Date, the aggregate
expenses (excluding non-cash expenses relating to the granting of
stock options) and non-financed capital expenditures of Borrower
and its consolidated Subsidiaries for the period of 3 consecutive
months ending as of November 30, 2008 shall not be greater than
$8,600,000;
(iii)
Borrower shall have received at least $10,000,000 in unrestricted
net cash proceeds from the sale and issuance of Borrower’s
equity securities after the Closing Date, which equity issuance
shall be on terms and conditions not otherwise prohibited by any
provision of this Agreement or the other Debt Documents;
(iv)
The market capitalization of Borrower is not less than $100,000,000
based on the 10-day trailing average of Borrower’s common
stock price, as determined as of the close of business on the
Business Day (as defined below) immediately prior to the proposed
date of the Subsequent Term Loan;
(v)
Borrower shall have unrestricted balance sheet cash and Cash
Equivalents (as defined below) in one or more deposit accounts or
securities accounts over which Agent has obtained control under
Section 7.10 of not less than the product of (i) negative six (-6)
times (ii) the Cash Burn Amount (as such term is defined in
Section 7.12 below) at such time; and
(vi)
Evidence that all obligations set forth in that certain
Post-Closing Obligations Letter dated October 14, 2008 by and
between Borrower and Agent have been satisfied; and
(d) Agent and Lenders
shall have received such other documents, agreements, instruments
or information as Agent or such Lender shall reasonably
request.
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5.
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REPRESENTATIONS AND WARRANTIES OF LOAN
PARTIES.
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Each Loan Party, jointly and severally,
represents, warrants and covenants to Agent and each Lender
that:
5.1. Due
Organization and Authorization. Each Loan
Party’s exact legal name is as set forth in the Perfection
Certificate (or as disclosed to and consented to by Agent pursuant
to Section 7.4) and each Loan Party is, and will remain, duly
organized, existing and in good standing under the laws of the
State of its organization as specified in the Perfection
Certificate, has its chief executive office at the location
specified in the Perfection Certificate, and is, and will remain,
duly qualified and licensed in every jurisdiction wherever
necessary to carry on its business and operations, except where the
failure to be so qualified and licensed could not reasonably be
expected to have a Material Adverse Effect. This
Agreement and the other Debt Documents have been duly authorized,
executed and delivered by each Loan Party and constitute legal,
valid and binding agreements enforceable in accordance with their
terms, subject only to bankruptcy, moratorium, insolvency and other
laws of general application affecting secured creditors and general
principles of equity. The execution, delivery and
performance by each Loan Party of each Debt Document executed or to
be executed by it is in each case within such Loan Party’s
powers.
5.2. Required
Consents. No filing, registration, qualification
with, or approval, consent or withholding of objections from, any
governmental authority or instrumentality or any other entity or
person is required with respect to the entry into, or performance
by any Loan Party of, any of the Debt Documents, except any already
obtained.
5.3. No
Conflicts. Except as described in the note to Item
8 in Section D on Schedule B hereto, the entry into, and
performance by each Loan Party of, the Debt Documents will not (a)
violate any of the organizational documents of such Loan Party, (b)
violate any law, rule, regulation, order, award or judgment
applicable to such Loan Party, or (c) result in any breach of or
constitute a default under, or result in the creation of any Lien
on any of such Loan Party’s property (except for Liens in
favor of Agent, on behalf of itself and Lenders) pursuant to, any
indenture, mortgage, deed of trust, bank loan, credit agreement, or
other Material Agreement (as defined below) to which such Loan
Party is a party. As used herein, “ Material
Agreement ” means (i) any agreement or contract required
to be filed by a Loan
Party with the
Securities and Exchange Commission (“ SEC ”)
pursuant to Item 601(b)(10) of Regulation S-K (other than (x)
employment or compensation related agreements, including agreements
relating to stock option grants to employees, consultants and
directors, and (y) agreements that have been filed with the SEC but
that have been assigned or terminated or as to which no Loan Party
has any continuing obligations and is owed no further consideration
or performance by the other parties thereto, in each case, prior to
the date of this Agreement) and (ii) the Olympus Agreements (as
defined below). A list of all Material Agreements as of
the Closing Date is set forth on Schedule B
hereto. As used herein, the “ Olympus
Agreements ” means each of (1) that certain Joint Venture
Agreement, dated as of November 4, 2005 (the “ Joint
Venture Agreement ”), between Borrower and Olympus
Corporation, a Japanese corporation (“ Olympus
”), (2) that certain Shareholders Agreement, dated as of
November 4, 2005 (the “ Shareholders Agreement
”), between Borrower and Olympus, and (3) all other
agreements, documents and instruments executed or delivered in
connection with the Joint Venture Agreement or the Shareholders
Agreement, in each case as the Joint Venture Agreement, the
Shareholders Agreement and such other agreements, documents and
instruments are amended, modified, restated or replaced from time
to time in accordance with the terms and conditions of this
Agreement.
5.4. Litigation.
Except as disclosed in the Perfection Certificate or as
disclosed to Agent pursuant to Section 6.2(d), there are no
actions, suits, proceedings or investigations pending against or
affecting any Loan Party before any court, federal, state,
provincial, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or
any basis thereof, the outcome of which could reasonably be
expected to have a Material Adverse Effect, or which questions the
validity of the Debt Documents, or the other documents required
thereby or any action to be taken pursuant to any of the foregoing,
nor have any such actions, suits, proceedings or investigations
been threatened in writing. As used in this Agreement,
the term “ Material Adverse Effect ” means a
material adverse effect on any of (a) the operations, business,
assets, properties, or condition (financial or otherwise) of
Borrower, individually, or the Loan Parties, collectively, (b) the
ability of a Loan Party to perform any of its obligations under any
Debt Document to which it is a party, (c) the legality, validity or
enforceability of any Debt Document, (d) the rights and remedies of
Agent or Lenders under any Debt Document or (e) the validity,
perfection or priority of any Lien in favor of Agent, on behalf of
itself and Lenders, on any of the Collateral.
5.5. Financial
Statements. All financial statements delivered to
Agent and Lenders pursuant to Section 6.3 have been prepared in
accordance with GAAP (subject, in the case of unaudited financial
statements, to the absence of footnotes and normal year end audit
adjustments), and since the date of the most recent audited
financial statement, no event has occurred which has had or could
reasonably be expected to have a Material Adverse
Effect. There has been no material adverse deviation
from the most recent annual operating plan of Borrower delivered to
Agent and Lenders in accordance with Section 6.3.
5.6. Use of
Proceeds. The proceeds of the Term Loans shall be
used to repay in full the GE Equipment Indebtedness and for working
capital, capital expenditures and other general corporate
purposes.
5.7. Collateral.
Each Loan Party is, and will remain, the sole and
lawful owner, and in possession of, the Collateral, and has the
sole right and lawful authority to grant the security interest
described in this Agreement. The Collateral is, and will
remain, free and clear of all liens, security interests, claims and
encumbrances of any kind whatsoever (each, a “ Lien
”), except for (a) Liens in favor of Agent, on behalf of
itself and Lenders, to secure the Obligations, (b) Liens (i) with
respect to the payment of taxes, assessments or other governmental
charges or (ii) of suppliers, carriers, materialmen, warehousemen,
workmen or mechanics and other similar Liens, in each case imposed
by law and arising in the ordinary course of business, and securing
amounts that are not yet delinquent (in the case of taxes) or not
yet due (with respect to all cases described in the immediately
preceding clauses (i) and (ii) other
than taxes) or
that in any case are being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate
reserves or other appropriate provisions are maintained on the
books of the applicable Loan Party in accordance with GAAP and
which do not involve, in the judgment of Agent, any risk of the
sale, forfeiture or loss of any of the Collateral (a “
Permitted Contest ”), (c) Liens existing on the date
hereof and set forth on Schedule B hereto, (d) Liens
securing Indebtedness (as defined in Section 7.2 below) permitted
under Section 7.2(c) below, provided that (i) such Liens exist
prior to the acquisition of, or attach substantially simultaneous
with, or within 20 days after the, acquisition, repair, improvement
or construction of, such property financed by such Indebtedness and
(ii) such Liens do not extend to any property of a Loan Party other
than the property (and any attachments, additions, accessions
thereto and proceeds thereof) acquired or built, or the
improvements or repairs, financed by such Indebtedness, (e)
licenses described in Section 7.3(c), (d) and (e) below and the
rights and interests of licensors under licenses where a Loan Party
is the licensee (to the extent such licenses are permitted under
this Agreement), (f) zoning restrictions, easements, rights of way,
encroachments or other restrictions on the use of, and other minor
defects or irregularities in title with respect to, any real
property of Borrower or its Subsidiaries so long as the same do not
materially impair the use of such real property by Borrower or such
Subsidiary, (g) purported Liens evidenced by the filing of
precautionary UCC financing statements relating solely to operating
leases of personal property entered into in the ordinary course of
business, (h) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods, (i) pledges or cash
deposits made in the ordinary course of business in connection with
workers’ compensation, unemployment insurance or other types
of social security benefits (other than any Lien imposed by ERISA)
that secure amounts that are not past due, (j) bankers’ Liens
or other set-off rights in favor of other financial institutions
arising in connection with the Loan Parties’ deposit and
securities accounts held at such institutions, to the extent the
same are permitted under the Account Control Agreement with respect
to such deposit or securities accounts, (k) Liens arising from
judgments, decrees or attachments that do not constitute an Event
of Default hereunder, (l) Liens of Silicon Valley Bank on a
Certificate of Deposit in an aggregate amount not to exceed
$250,000 (the “ SVB Certificate of
Deposit ”) issued by Silicon Valley Bank to Borrower to
secure Borrower’s reimbursement obligations with respect to
(i) credit card, payroll and foreign exchange services
provided by Silicon Valley Bank to Borrower and (ii) standby
letters of credit issued by Silicon Valley Bank on behalf of
Borrower, in each case to the extent permitted under Section 7.2(g)
(such reimbursement obligations collectively hereinafter referred
to as the “ SVB Cash Management Obligations ”),
and (m) Liens of landlords (i) arising by statute or under any
lease or related contractual obligation entered into in the
ordinary course of business, (ii) on fixtures and movable tangible
property located on the real property leased or subleased from such
landlord, (iii) for amounts not yet due or that are being contested
in good faith by appropriate proceedings diligently conducted, (iv)
for which adequate reserves or other appropriate provisions are
maintained on the books of such Loan Party in accordance with GAAP
and (v) which Liens are subordinated to the security interests
granted under Section 3.1 pursuant to an Access Agreement (all of
such Liens described in the foregoing clauses (a) through (m) are
called “ Permitted Liens
”).
5.8. Compliance with
Laws.
(a) Each Loan Party is
and will remain in compliance in all respects with all laws,
statutes, ordinances, rules and regulations applicable to it,
except to the extent that any such non-compliance, individually or
in the aggregate, could not reasonably be expected to result in a
Material Adverse Effect.
(b) Without limiting
the generality of the immediately preceding clause (a), each Loan
Party further agrees that it 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 the USA Patriot Act and all regulations issued
pursuant to it. No Loan Party nor any of its
subsidiaries, affiliates or joint ventures (A) is a person or
entity 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 or entity cannot
deal with or otherwise engage in business transactions, (B) is a
person or entity who is otherwise the target of U.S. economic
sanctions laws such that a U.S. person or entity cannot deal or
otherwise engage in business transactions with such person or
entity; or (C) 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 Debt
Document would be prohibited under U.S. law. The SDN
List is maintained by OFAC and is available at:
http://www.ustreas.gov/offices/enforcement/ofac/sdn/.
(c) Each Loan Party
has met the minimum funding requirements of the United States
Employee Retirement Income Security Act of 1974 (as amended,
“ ERISA ”) with respect to any employee benefit
plans subject to ERISA. No Loan Party is an
“investment company” or a company
“controlled” by an “investment company”
within the meaning of the Investment Company Act of
1940. No Loan Party is engaged principally, or as one of
the important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the
meaning of Regulations T, U and X of the Board of Governors of the
Federal Reserve System (the “ Federal Reserve Board
”).
5.9. Intellectual
Property. The Intellectual Property is and will
remain free and clear of all Liens, except for Permitted Liens
described in clauses (b)(i), (d) (to the extent consisting of
software financed in connection with the acquisition of related
equipment) and (e) of Section 5.7. No Loan Party has nor
will it enter into any other agreement or financing arrangement in
which such Loan Party has agreed that it will not grant a security
interest in such Loan Party’s Intellectual Property to any
other party (other than agreements with licensors that prohibit
such Loan Party from encumbering or assigning the license from such
licensor or the Intellectual Property licensed from such licensor,
but only to the extent that such prohibition is not enforceable
under applicable law, including, without limitation, Sections
9-406, 9-407 and 9-408 of the UCC). Except as disclosed
in the Perfection Certificate and except as disclosed to the Agent
in writing after the Closing Date, as of the Closing Date and each
date a Term Loan is advanced to Borrower, no Loan Party has any
interest in, or title to any Intellectual Property that is (i) a
registered trademark, or a trademark for which an application has
been filed, (ii) a registered copyright, or a copyright for which
an application has been filed, or (iii) a registered patent or a
patent application. Upon filing of the Intellectual
Property Security Agreements with the United States Patent and
Trademark Office and the United States Copyright Office, as
applicable, and the filing of appropriate financing statements, all
action necessary or desirable to protect and perfect Agent’s
Lien on each Loan Party’s Intellectual Property that is
registered or for which an application has been filed shall have
been duly taken. Each Loan Party owns or has
rights to use all Intellectual Property material to the conduct of
its business as now conducted by it or proposed to be conducted by
it, without any actual or claimed infringement upon the rights of
third parties.
5.10. Solvency.
Both before and after giving effect to each Term Loan,
the transactions contemplated herein, and the payment and accrual
of all transaction costs in connection with the foregoing, each
Loan Party is and will be Solvent. As used herein,
“ Solvent ” means, with respect to a Loan Party
on a particular date, that on such date (a) the fair value of the
property of such Loan Party (including intangible assets and
goodwill) is greater than the total amount of liabilities,
including contingent liabilities, of such Loan Party; (b) the
present fair salable value of the assets of such Loan Party is not
less than the amount that will be required to pay the probable
liability of such Loan Party on
its debts as
they become absolute and matured; (c) such Loan Party does not
intend to, and does not believe that it will, incur debts or
liabilities beyond such Loan Party’s ability to pay as such
debts and liabilities mature; (d) such Loan Party is not engaged in
a business or transaction, and is not about to engage in a business
or transaction, for which such Loan Party’s property would
constitute an unreasonably small capital; and (e) such Loan Party
is not “insolvent” within the meaning of Section
101(32) of the United States Bankruptcy Code (11 U.S.C. § 101,
et. seq), as amended from time to time. The amount of
contingent liabilities (such as litigation, guaranties and pension
plan liabilities) at any time shall be computed as the amount that,
in light of all the facts and circumstances existing at the time,
represents the amount that can be reasonably be expected to become
an actual or matured liability.
5.11. Taxes;
Pension. All federal (and all material state and
local) tax returns, reports and statements, including information
returns, required by any governmental authority to be filed by each
Loan Party and its Subsidiaries have been filed with the
appropriate governmental authority and all federal (and all
material state and local) taxes, levies, assessments and similar
charges have been paid prior to the date on which any fine,
penalty, interest or late charge may be added thereto for
nonpayment thereof (or any such fine, penalty, interest, late
charge or loss has been paid), excluding taxes, levies, assessments
and similar charges or other amounts which are the subject of a
Permitted Contest. Proper and accurate amounts have been
withheld by each Loan Party from its respective employees for all
periods in compliance with applicable laws and such withholdings
have been timely paid to the respective governmental
authorities. Each Loan Party has paid all amounts
necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with their terms, and no Loan
Party has withdrawn from participation in, or has 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 a Loan Party, including
any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental authority.
5.12. Full Disclosure.
Loan Parties hereby confirm that all of the information
disclosed on the Perfection Certificate is true, correct and
complete as of the date of this Agreement and as of the date of
each Term Loan. No representation, warranty or other
statement made by or on behalf of a Loan Party in any Debt Document
or any document delivered by any Loan Party in connection therewith
contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements contained therein,
in light of the circumstances under which they were made, not
misleading, it being recognized by Agent and Lenders that the
projections and forecasts provided by Loan Parties in good faith
and based upon reasonable and stated assumptions are not to be
viewed as facts and that actual results during the period or
periods covered by any such projections and forecasts may differ
from the projected or forecasted results.
6.1. Good
Standing. Each Loan Party shall maintain its and
each of its Subsidiaries’ existence and good standing in its
jurisdiction of organization and maintain qualification in each
jurisdiction in which the failure to so qualify could reasonably be
expected to have a Material Adverse Effect. Each Loan
Party shall maintain, and shall cause each of its Subsidiaries to
maintain, in full force all licenses, approvals and agreements, the
loss of which could reasonably be expected to have a Material
Adverse Effect. “ Subsidiary ” means,
with respect to a Loan Party, any entity the management of which
is, directly or indirectly controlled by, or of which an aggregate
of more than 50% of the outstanding voting capital stock (or other
voting equity interest) is, at the time, owned or controlled,
directly or indirectly by, such Loan Party or one or more
Subsidiaries of such Loan Party, and, unless the contest otherwise
requires each reference to a Subsidiary herein shall be a reference
to a Subsidiary of Borrower. For avoidance of doubt,
Olympus-Cytori shall not be deemed to be a Subsidiary of Borrower
for so long as Borrower does
not own or
control, directly or indirectly, more than 50% of the outstanding
voting capital stock of Olympus-Cytori.
6.2. Notice to Agent
and Lenders. Loan Parties shall provide Agent and
Lenders with (a) notice of any change in the accuracy of the
Perfection Certificate or any of the representations and warranties
provided in Section 5 above, immediately upon the occurrence of any
such change, (b) notice of the occurrence of any Default or Event
of Default, promptly (but in any event within 3 Business Days)
after the date on which any executive officer of a Loan Party
obtains knowledge of the occurrence of any such event, (c) copies
of all statements, reports and notices made available generally by
Borrower to its security holders and notice of all filings on forms
10K, 10Q and 8K filed with the SEC or any securities exchange or
governmental authority exercising a similar function, promptly, but
in any event within 5 Business Days of delivering or receiving such
information to or from such persons, (d) a report of any legal
actions pending or threatened against Borrower or any Subsidiary
that could reasonably be expected to result in damages or costs to
Borrower or any Subsidiary of $250,000 or more promptly, but in any
event within 5 Business Days, upon receipt of notice thereof, (e)
notice of any new applications or registrations that any Loan Party
has made or filed in respect of any Intellectual Property or any
material adverse change in status of any outstanding application or
registration within 20 Business Days of such receipt of
confirmation of the filing of such application or filing or receipt
of notice of such change in status, and (f) notices of all material
statements, reports and notices delivered to or by a Loan Party in
connection with any Material Agreement promptly (but in any event
within 5 Business Days) upon receipt thereof, and copies of the
same upon Agent’s request.
6.3. Financial
Statements. If Borrower is a private company, it
shall deliver to Agent and Lenders (a) unaudited consolidated and,
if available, consolidating balance sheets, statements of
operations and cash flow statements within 30 days of each month
end, in a form acceptable to Agent and Lenders and certified by
Borrower’s president, chief executive officer or chief
financial officer, and (b) its complete annual audited consolidated
and, if available, consolidating financial statements prepared
under GAAP and certified by an independent certified public
accountant selected by Borrower and satisfactory to Agent and
Lenders within 120 days of the fiscal year end or, if sooner, at
such time as Borrower’s Board of Directors receives the
certified audit. If Borrower is a publicly held company,
it shall deliver to Agent and Lenders quarterly unaudited
consolidated and, if available, consolidating balance sheets,
statements of operations and cash flow statements and annual
audited consolidated and, if available, consolidating balance
sheets, statements of operations and cash flow state
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