Exhibit 10.1
SECOND AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT
THIS SECOND AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of September 21, 2016 (the “Effective
Date”) between SILICON VALLEY BANK, a California corporation (“Bank”), and SENSUS HEALTHCARE,
INC. (f/k/a Sensus Healthcare, LLC), a Delaware corporation (“Borrower”), provides the terms on which Bank
shall lend to Borrower and Borrower shall repay Bank. The parties agree as follows:
Recitals
A. Bank
and Borrower have entered into that certain Amended and Restated Loan and Security Agreement dated as of March 12, 2013 (as amended,
the “Prior Loan Agreement”).
B. Borrower
has requested, and Bank has agreed, to replace, amend and restate the Prior Loan Agreement in its entirety. Bank and Borrower hereby
agree that the Prior Loan Agreement is amended and restated in its entirety as follows:
| 1 | ACCOUNTING AND OTHER TERMS |
Accounting terms not
defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following GAAP; provided
that if at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan
Document, and either Borrower or Bank shall so request, Borrower and Bank shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such change in GAAP; provided, further, that, until so amended,
(a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) Borrower
shall provide Bank financial statements and other documents required under this Agreement or as reasonably requested hereunder
setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change
in GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are
defined therein.
| 2 | LOAN AND TERMS OF PAYMENT |
2.1 Promise to Pay.
Borrower hereby unconditionally promises to pay Bank the outstanding principal amount of all Credit Extensions and accrued
and unpaid interest thereon as and when due in accordance with this Agreement.
2.1.1 Revolving
Advances.
(a) Availability.
Subject to the terms and conditions of this Agreement and to deduction of Reserves, Bank shall make Advances not exceeding
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. Any Obligations outstanding under the Prior Loan Agreement
on the Effective Date shall, as of the Effective Date, be deemed to be Advances hereunder, and shall be subject to the terms and
conditions herein, including, without limitation, the terms of Section 2.2 below.
(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.
2.2 Overadvances.
If, at any time, the outstanding principal amount of the aggregate Advances exceeds the lesser of either the Revolving Line
or the Borrowing Base, Borrower shall immediately pay to Bank in cash the amount of such excess (such excess, the “Overadvance”).
Without limiting Borrower’s obligation to repay Bank any 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) Advances.
Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum
rate equal to (i) during any Streamline Period, three-quarters of one percentage point (0.75%) above the Prime Rate, and (ii) during
any Non-Streamline Period, two and one-half percentage points (2.50%) above the Prime Rate, in either case, which interest shall
be payable monthly in accordance with Section 2.3(d) below.
(b) Default
Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest
at a rate per annum which is five percentage points (5.00%) above the rate that is otherwise applicable thereto (the “Default
Rate”). Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without
limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable
to the Obligations. 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) Payment;
Interest Computation. Interest is payable monthly on the last calendar day of each month and shall be computed on the
basis of a 360-day year for the actual number of days elapsed. In computing interest, (i) all payments received after 12:00 p.m.
Pacific time on any day shall be deemed received at the opening of business on the next Business Day, and (ii) the date of the
making of any Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit
Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension.
| 2.4 | Fees. Borrower shall pay to Bank: |
(a) Commitment
Fee. A fully earned, non-refundable commitment fee of Two Thousand Five Hundred Dollars ($2,500), on the Effective Date;
(b) Termination
Fee. Upon termination of this Agreement for any reason prior to the Revolving Line Maturity Date, in addition to the
payment of any other amounts then-owing, a termination fee in an amount equal to one-half of one percent (0.50%) of the Revolving
Line, provided that no termination fee shall be charged if the credit facility hereunder is replaced with a new facility from Bank;
(c) Unused
Revolving Line Facility Fee. Payable quarterly in arrears, on the last day of each calendar quarter occurring prior
to the Revolving Line Maturity Date, and on the Revolving Line Maturity Date (or upon any earlier termination of this Agreement
in accordance with Section 2.4(b)), a fee (the “Unused Revolving Line Facility Fee”) in an amount equal
to one-quarter of one percent (0.25%) per annum of the average unused portion of the Revolving Line, as determined by Bank.
The unused portion of the Revolving Line, for purposes of this calculation, shall be calculated on a calendar year basis and shall
equal the difference between (i) the Revolving Line, and (ii) the average for the period of the daily closing balance of the Revolving
Line outstanding; and
(d) 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 (or, if no stated due date, upon demand by Bank).
(e) Fees
Fully Earned. Unless otherwise provided in this Agreement or in a separate writing by Bank, Borrower shall not be entitled
to any credit, rebate, or repayment of any fees earned by Bank pursuant to this Agreement notwithstanding any termination of this
Agreement or the suspension or termination of Bank’s obligation to make loans and advances hereunder. Bank may deduct amounts
owing by Borrower under the clauses of this Section 2.4 pursuant to the terms of Section 2.5(c). Bank shall provide Borrower prompt
written notice of deductions made from the Designated Deposit Account pursuant to the terms of the clauses of this Section 2.4.
| 2.5 | Payments; Application of Payments; Debit of Accounts. |
(a) All
payments to be made by Borrower under any Loan Document shall be made in immediately available funds in Dollars, without setoff
or counterclaim, before 12:00 p.m. Pacific time on the date when due. Payments of principal and/or interest received after 12:00
p.m. Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that
is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall continue
to accrue until paid.
(b) Bank
has the exclusive right to determine the order and manner in which all payments with respect to the Obligations may be applied.
Borrower shall have no right to specify the order or the accounts to which Bank shall allocate or apply any payments required to
be made by Borrower to Bank or otherwise received by Bank under this Agreement when any such allocation or application is not specified
elsewhere in this Agreement.
(c) Bank
may debit 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.
| 2.6 | Lockbox; Account Collection Services. |
(a) So
long as Borrower maintains an Adjusted Quick Ratio, tested monthly, of at least 2.00 to 1.00, and so long as no Event of Default
has occurred and is continuing, Borrower shall have the right to collect all Accounts. Upon either (i) the occurrence of an Event
of Default, or (ii) Borrower’s Adjusted Quick Ratio dropping below 2.00 to 1.00 (the occurrence of either (i) or (ii), the
“Lockbox Triggering Event”), Borrower shall direct each Account Debtor (and each depository institution where
proceeds of Accounts are on deposit) to remit payments with respect to the Accounts to a lockbox account established with Bank
or to wire transfer payments to a cash collateral account that Bank controls (collectively, the “Lockbox”).
It will be considered an immediate Event of Default if the Lockbox is not established and operational within thirty (30) days of
the Lockbox Triggering Event and at all times thereafter.
(b) Following
the Lockbox Triggering Event, but prior to the establishment of the Lockbox, the proceeds of the Accounts shall be paid by the
Account Debtors to an address consented to by Bank. Following the Lockbox Triggering Event, upon receipt by Borrower of any proceeds
of Accounts, Borrower shall immediately transfer and deliver same to Bank, along with a detailed cash receipts journal.
(c) Following
the Lockbox Triggering Event, all collections of Accounts (“Collections”) shall be applied within three (3)
days of receipt of such amounts by Bank as follows: (i) during any Non-Streamline Period, all Collections shall be applied to the
outstanding Obligations owed by Borrower under the Revolving Line, and provided no Event of Default exists or an event that with
notice or lapse of time will be an Event of Default, the amount of Collections in excess of the outstanding Obligations owed by
Borrower under the Revolving Line shall be deposited in the Designated Deposit Account, and (ii) during any Streamline Period,
all Collections shall be deposited in the Designated Deposit Account, provided no Event of Default exists or an event that with
notice or lapse of time will be an Event of Default. This Section does not impose any affirmative duty on Bank to perform any act
other than as specifically set forth herein. All Accounts and the proceeds thereof are Collateral and if an Event of Default occurs,
Bank may apply the proceeds of such Accounts to the Obligations in accordance with Section 9.4 hereof. Following the Lockbox Triggering
Event, if Borrower receives any payment on or any proceeds of any Account, whether or not an Event of Default has occurred and
is continuing, Borrower shall hold all such payments and proceeds in trust for Bank, and Borrower shall immediately deliver all
such payments and proceeds to Bank in their original form, duly endorsed, to be applied (i) prior to an Event of Default, pursuant
to the terms of this Section 2.6(c) hereof, and (ii) after the occurrence and during the continuance of an Event of Default, pursuant
to the terms of Section 9.4 hereof.
2.7 Withholding.
Payments received by Bank from Borrower under this Agreement will be made free and clear of and without deduction for
any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed
by any Governmental Authority (including any interest, additions to tax or penalties applicable thereto). Specifically, however,
if at any time any Governmental Authority, applicable law, regulation or international agreement requires Borrower to make any
withholding or deduction from any such payment or other sum payable hereunder to Bank, Borrower hereby covenants and agrees that
the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary
to ensure that, after the making of such required withholding or deduction, Bank receives a net sum equal to the sum which it would
have received had no withholding or deduction been required, and Borrower shall pay the full amount withheld or deducted to the
relevant Governmental Authority. Borrower will, upon request, furnish Bank with proof reasonably satisfactory to Bank indicating
that Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding payment if the
amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which
payment in full is bonded or reserved against by Borrower. The agreements and obligations of Borrower contained in this Section
2.7 shall survive the termination of this Agreement.
3.1 Conditions
Precedent to Initial Advance. Bank’s obligation to make the initial Advance 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) duly
executed original signatures to this Agreement;
(b) the
Operating Documents and long-form good standing certificates of Borrower and its Subsidiaries certified by the Secretary of State
(or equivalent agency) of Borrower’s and such Subsidiaries’ jurisdiction of organization or formation and each jurisdiction
in which Borrower and each Subsidiary is qualified to conduct business, each as of a date no earlier than thirty (30) days prior
to the Effective Date;
(c) duly
executed original signatures to the completed Borrowing Resolutions for Borrower;
(d) certified
copies, dated as of a recent date, of financing statement searches, as Bank may request, accompanied by written evidence (including
any UCC termination statements) that the Liens indicated in any such financing statements constitute Permitted Liens; and
(e) payment
of 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 conditions precedent:
(a) except
as otherwise provided in Section 3.4, timely receipt of an executed Transaction Report;
(b) the
representations and warranties in this Agreement 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 Event of Default shall have occurred and be continuing or result
from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that date that the representations
and warranties in this Agreement 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) Bank
determines to its satisfaction that there has not been a Material Adverse Change.
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 precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made 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 the making of any
Credit Extension in the absence of a required item shall be in Bank’s sole discretion.
3.4 Procedures
for Borrowing. Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set
forth in this Agreement, to obtain an Advance, Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail
by 12:00 p.m. Pacific time on the Funding Date of the Advance. In connection with such notification, Borrower must promptly deliver
to Bank by electronic mail a completed Transaction Report executed by an Authorized Signer together with such other reports and
information, including without limitation, sales journals, cash receipts journals, accounts receivable aging reports, as Bank may
request in its sole discretion. Bank shall credit proceeds of an Advance to the Designated Deposit Account. Bank may make Advances
under this Agreement based on instructions from an Authorized Signer or without instructions if the Advances are necessary to meet
Obligations which have become due.
| 4 | CREATION OF SECURITY INTEREST |
4.1 Grant of Security
Interest. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing
security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising,
and all proceeds and products thereof.
Borrower acknowledges
that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank. Regardless of the terms
of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations
hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security
interest in the Collateral granted herein (subject only to Permitted Liens that may have superior priority to Bank’s Lien
in this Agreement).
If this
Agreement is terminated, Bank’s Lien in the Collateral shall continue until the Obligations (other than inchoate
indemnity obligations) are satisfied in full, and at such time, Bank shall, at Borrower’s sole cost and expense,
terminate its security interest in the Collateral and all rights therein shall revert to Borrower. In the event (x) all
Obligations (other than inchoate indemnity obligations), except for Bank Services, are satisfied in full, and (y) this
Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral
acceptable to Bank in its good faith business judgment for Bank Services, if any. In the event such Bank Services consist of
outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in an amount equal to (x) if such Letters of
Credit are denominated in Dollars, then at least one hundred five percent (105.0%); and (y) if such Letters of Credit are
denominated in a Foreign Currency, then at least one hundred ten percent (110.0%), of the Dollar Equivalent 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 such Letters of
Credit.
4.2 Priority
of Security Interest. 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 are permitted pursuant to the terms of this Agreement to have superior priority to Bank’s Lien under this Agreement).
If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general
details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.
4.3 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. Such financing statements may indicate the Collateral as “all assets of the Debtor except Intellectual Property”
or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Bank’s discretion.
| 5 | REPRESENTATIONS AND WARRANTIES |
Borrower represents and warrants as follows:
5.1 Due Organization,
Authorization; Power and Authority. Borrower is duly existing and in good standing in its jurisdiction of formation
and is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business or
its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have
a material adverse effect on Borrower’s business. In connection with this Agreement, Borrower has delivered to Bank a completed
certificate signed by Borrower, entitled “Perfection Certificate”. Borrower represents and warrants to Bank that (a)
Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower
is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection
Certificate accurately sets forth Borrower’s organizational identification number or accurately states that Borrower has
none; (d) the Perfection Certificate accurately sets forth Borrower’s place of business, or, if more than one, its chief
executive office as well as Borrower’s mailing address (if different than its chief executive office); (e) except as disclosed
in the Perfection Certificate, Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction
of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information
set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being
understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective
Date to the extent permitted by one or more specific provisions in this Agreement). 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) conflict
with, contravene, constitute a default or breach under, or result in or permit the termination or acceleration of, any material
agreement by which Borrower is bound. Borrower is not in default under any agreement to which it is a party or by which it is bound
in which the default could reasonably be expected to have a material adverse effect on Borrower’s business.
5.2 Collateral.
Borrower has good title to, rights in, and the power to transfer each item of the Collateral upon which it purports to grant
a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no Collateral Accounts at or with any
bank or financial institution other than Bank or Bank’s Affiliates except for the Collateral Accounts described in the Perfection
Certificate delivered to Bank in connection herewith and which Borrower has taken such actions as are necessary to give Bank a
perfected security interest therein, pursuant to the terms of Section 6.8(b). 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 or as
permitted pursuant to Section 7.2.
Borrower is the sole
owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers
in the ordinary course of business, (b) over-the-counter software that is commercially available to the public, and (c) material
Intellectual Property licensed to Borrower and noted on the Perfection Certificate. Each Patent which it owns or purports to own
and which is material to Borrower’s business is valid and enforceable, and no part of the Intellectual Property which Borrower
owns or purports to own and which is material to Borrower’s business has been judged invalid or unenforceable, in whole or
in part. 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 except to the extent such claim would not reasonably be expected to have a material adverse effect
on Borrower’s business.
Except as noted on the Perfection Certificate, Borrower is not
a party to, nor is it bound by, any Restricted License.
(a) For
each Account with respect to which Advances are requested, on the date each Advance is requested and made, such Account shall be
an Eligible Account.
(b) All
statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing the Eligible 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 Eligible 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 Eligible Accounts in any Transaction Report.
To the best of Borrower’s knowledge, all signatures and endorsements on all documents, instruments, and agreements relating
to all Eligible 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 any Responsible Officer, threatened in writing by or
against Borrower or any of its Subsidiaries involving more than, individually or in the aggregate, One Hundred Thousand Dollars
($100,000).
5.5 Financial
Statements; 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 consolidated assets (including goodwill minus disposition costs) exceeds the
fair value of Borrower’s 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 X, T and U of the Federal Reserve Board of
Governors). Borrower (a) has complied in all material respects with all Requirements of Law, and
(b) has not violated any Requirements of Law 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 Governmental Authorities that are necessary to continue their
respective businesses as currently conducted.
5.8 Subsidiaries;
Investments. Borrower does not own any stock, partnership, or other ownership interest or other equity securities except
for Permitted Investments.
5.9 Tax
Returns and Payments; Pension Contributions. Borrower has timely filed all required tax returns and reports, and Borrower
has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except (a)
to the extent such taxes are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted,
so long as such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made
therefor, or (b) if such taxes, assessments, deposits and contributions do not, individually or in the aggregate, exceed Ten Thousand
Dollars ($10,000).
To the extent Borrower
defers payment of any contested taxes, Borrower shall (i) notify Bank in writing of the commencement of, and any material development
in, the proceedings, and (ii) post bonds or take 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 in excess of Ten Thousand Dollars ($10,000). Borrower has paid all amounts necessary to fund all present pension,
profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation
in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any
such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
5.10 Use of Proceeds.
Borrower shall use the proceeds of the Credit Extensions solely as working capital and to fund its general business requirements
and not for personal, family, household or agricultural purposes.
5.11 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 Definition
of “Knowledge.” For purposes of the Loan Documents, whenever a representation or warranty is made
to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar qualification,
knowledge or awareness means the actual knowledge, after reasonable investigation, of any Responsible Officer.
Borrower shall do all of the following:
| 6.1 | Government Compliance. |
(a) Maintain
its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of formation and maintain
qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect
on Borrower’s business or operations. Borrower shall comply, and have each Subsidiary comply, in all material respects, with
all laws, ordinances and regulations to which it is subject.
(b) Obtain
all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to which
it is a party and the grant of a security interest to Bank in all of its property. Borrower shall promptly provide copies of any
such obtained Governmental Approvals to Bank.
| 6.2 | Financial Statements, Reports, Certificates. Provide
Bank with the following: |
(a) a
Transaction Report (and any schedules related thereto) (i) with each request for an Advance, and (ii) within thirty (30) days after
the end of each month;
(b) within
thirty (30) days after the end of each month, (i) monthly accounts receivable agings, aged by invoice date, (ii) monthly accounts
payable agings, aged by invoice date, and outstanding or held check registers, if any, and (iii) monthly reconciliations of accounts
receivable agings (aged by invoice date), transaction reports, Deferred Revenue report and general ledger;
(c) as
soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated balance
sheet and income statement covering Borrower’s consolidated operations for such month certified by a Responsible Officer
and in a form acceptable to Bank (the “Monthly Financial Statements”);
(d) within
thirty (30) days after the last day of each month and together with the Monthly Financial Statements, a duly completed 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 may reasonably request;
(e) within
thirty (30) days after the end of each fiscal year of Borrower, and more frequently as updated, (i) annual operating budgets (including
income statements, balance sheets and cash flow statements, by quarter) for the upcoming fiscal year of Borrower, and (ii) 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;
(f) as
soon as available, and in any event within one hundred fifty (150) days following the end of Borrower’s fiscal year, audited
consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm acceptable to Bank in its reasonable discretion.
(g) in
the event that Borrower becomes subject to the reporting requirements under the Exchange Act, within thirty (30) days after the
last day of each month, copies of all periodic and other reports, proxy statements and other materials filed by Borrower with the
SEC, any Governmental Authority succeeding to any or all of the functions of the SEC or with any national securities exchange,
or distributed to its shareholders, as the case may be. Documents required to be delivered pursuant to the terms hereof (to the
extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered,
shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s
website on the Internet at Borrower’s website address; provided, however, Borrower shall notify Bank in the monthly Compliance
Certificate of the posting of any such documents;
(h) within
five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or
to any holders of Subordinated Debt;
(i) prompt
report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could result in damages
or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, One Hundred Thousand Dollars ($100,000) or
more; and
(j) other
financial information reasonably requested by Bank.
(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 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 lesser of the Revolving Line or the Borrowing Base.
(c) Reserved.
(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 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, and notify any Account
Debtor of Bank’s security interest in such Account.
(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 2.6, 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 (1) prior to an Event of Default, pursuant to the terms of Section 2.5(b) hereof,
and (2) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof; provided
that, if no Event of Default has occurred and is continuing, Borrower shall not be obligated to remit to Bank the proceeds of the
sale of surplus, 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 maintain all proceeds of Collateral in an account maintained with Bank. Nothing in this Section limits the
restrictions on disposition of Collateral set forth elsewhere in this Agreement.
6.5 Taxes;
Pensions. Timely file, and require each of its Subsidiaries to timely file, all required tax returns and reports and
timely pay, and require each of its Subsidiaries to timely pay, all foreign, federal, state and local taxes, assessments, deposits
and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested 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 to inspect the
Collateral and the right to audit and copy Borrower’s Books. The foregoing inspections and audits shall be conducted at
Borrower’s expense and no more often than once every fiscal year (or more frequently as conditions may warrant) unless
an Event of Default has occurred and is continuing in which case such inspections and audits shall occur as often as Bank
shall determine is necessary. 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.
(a) 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 financially sound and reputable insurance companies
that are not Affiliates of Borrower, and in amounts that are satisfactory to Bank. All property policies shall have a lender’s
loss payable endorsement showing Bank as lender loss payee. All liability policies shall show, or have endorsements showing, Bank
as an additional insured. Bank shall be named as lender loss payee and/or additional insured with respect to any such insurance
providing coverage in respect of any Collateral.
(b) Ensure
that proceeds payable under any property policy are, at Bank’s option, payable to Bank on account of the Obligations. Notwithstanding
the foregoing, (i) so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the
proceeds of any casualty policy up to One Hundred Thousand Dollars ($100,000) in the aggregate for all losses under all casualty
policies in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or
repaired property (A) shall be of equal or like value as the replaced or repaired Collateral and (B) shall be deemed Collateral
in which Bank has been granted a first priority security interest, and (ii) 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.
(c) At
Bank’s request, Borrower shall deliver certified copies of insurance policies and evidence of all premium payments. Each
provider of any such insurance required under this Section 6.7 shall agree, by endorsement upon the policy or policies issued by
it or by independent instruments furnished to Bank, that it will give Bank thirty (30) days prior written notice before any such
policy or policies shall be materially altered or canceled. 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.
(a) Maintain
its and its Subsidiaries’ primary operating and other deposit accounts and securities accounts, and all investment management,
letter of credit and foreign exchange activity, with Bank and Bank’s Affiliates, which accounts shall represent at least
seventy-five percent (75%) of the dollar value of Borrower’s and such Subsidiaries cash and investments.
(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 Bank’s Affiliates. 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 which Control Agreement may not be terminated without the
prior written consent of Bank. 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.
6.9 Financial
Covenants. Maintain at all times, subject to periodic reporting as of the last day of each month:
(a) Minimum
Trailing 6-Month Adjusted EBITDA. Maintain, measured as of the end of each month during the following periods, Adjusted
EBITDA, measured on a trailing six (6) month basis, of at least the following:
| |
Minimum Trailing 6-Month | |
| Six Months Ended | |
Adjusted EBITDA | |
| | |
| |
| June 30, 2016 | |
$ | (500,000 | ) |
| | |
| | |
| July 31, 2016 through September 30, 2016 | |
$ | (1,000,000 | ) |
| | |
| | |
| October 31, 2016 and each six-month period thereafter | |
$ | (1,500,000 | ) |
| 6.10 | Protection of Intellectual Property Rights. |
(a) (i)
Protect, defend and maintain the validity and enforceability of its Intellectual Property; (ii) promptly
advise Bank in writing of material infringements or any other event that could reasonably be expected to materially and adversely
affect the value of its Intellectual Property; and (iii) not allow any Intellectual Property material to Borrower’s business
to be abandoned, forfeited or dedicated to the public without Bank’s written consent.
(b) Provide
written notice to Bank within ten (10) days of entering or becoming bound by any Restricted License (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 (i) any Restricted License 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
Restricted License, whether now existing or entered into in the future, and (ii) 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.
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 and records, to the extent that Bank
may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.
6.12 Further Assurances.
Execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank’s
Lien in the Collateral or to effect the purposes of this Agreement. Deliver to Bank, within five (5) days after the same are sent
or received, copies of all correspondence, reports, documents and other filings with any Governmental Authority regarding compliance
with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be expected to have a material effect
on any of the Governmental Approvals or otherwise on the operations of Borrower or any of its Subsidiaries.
Borrower shall not do any of the following without Bank’s
prior written consent:
7.1 Dispositions.
Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “Transfer”), or permit
any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the
ordinary course of business; (b) of worn-out or obsolete Equipment that is, in the reasonable judgment of Borrower, no longer economically
practicable to maintain or useful in the ordinary course of business of Borrower; (c) consisting of Permitted Liens and Permitted
Investments; (d) consisting of the sale or issuance of any stock of Borrower permitted under Section 7.2 of this Agreement; (e)
consisting of Borrower’s use or transfer of money or Cash Equivalents in the ordinary course of its business for the payment
of ordinary course business expenses in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents;
and (f) of non-exclusive licenses for the use of the property of Borrower or its Subsidiaries in the ordinary course of business.
7.2 Changes in Business,
Management, Control, or Business Locations. (a) Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related thereto; (b)
liquidate or dissolve; (c) fail to provide notice to Bank of any Key Person departing from or ceasing to be employed by Borrower
within five (5) days after his or her departure from Borrower; or (d) permit or suffer any Change in Control.
Borrower shall not,
without at least thirty (30) days prior written notice to Bank: (1) add any new offices or business locations, including warehouses
(unless such new offices or business locations contain less than Ten Thousand Dollars ($ 10,000) in Borrower’s assets or
property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Ten Thousand Dollars
($10,000) to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate, (2)
change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change
any organizational number (if any) assigned by its jurisdiction of organization. If Borrower intends to deliver any portion of
the Collateral valued, individually or in the aggregate, in excess of Ten Thousand Dollars ($10,000) to a bailee, and Bank and
such bailee are not already parties to a bailee agreement governing both the Collateral and the location to which Borrower intends
to deliver the Collateral, then Borrower will first notify Bank in writing, and such bailee shall execute and deliver a bailee
agreement in form and substance satisfactory to Bank.
7.3 Mergers
or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person,
or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another
Person (including, without limitation, by the formation of any Subsidiary), except for Permitted Acquisitions. A Subsidiary may
merge or consolidate into another Subsidiary or into Borrower.
7.4 Indebtedness.
Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance.
Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including
the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to
be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement
(except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower
or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s
or any Subsidiary’s Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted
Liens” herein.
7.6 Maintenance
of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.8(b) hereof.
7.7 Distributions;
Investments. (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock;
provided that (i) Borrower may convert any of its convertible securities into other securities pursuant to the terms of such convertible
securities or otherwise in exchange thereof, and (ii) Borrower may pay dividends solely in common stock; or (b) directly or indirectly
make any Investment (including, without limitation, by the formation of any Subsidiary) other than Permitted Investments, or permit
any of its Subsidiaries to do so. Notwithstanding the foregoing, upon the expiration of the Restricted Period (as defined in the
Equity Plan (as defined below)) with respect to any Restricted Stock Award (as defined in the Equity Plan (as defined below)),
Borrower may pay the applicable payroll, employment and other taxes due by reducing the number of shares awarded to the applicable
participant by an amount sufficient to pay such taxes, as set forth in Borrower’s 2016 Equity Incentive Plan (the “Equity
Plan”); provided, however, that (x) the aggregate amount of all such payments may not exceed Seven Hundred Fifty Thousand
Dollars ($750,000) during the term hereof and (y) no such payment may be made if an Event of Default has occurred and is continuing
or would result from such payment.
7.8 Transactions
with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of
Borrower, except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms
that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.
7.9 Subordinated
Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor,
or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the
Subordinated Debt which would increase the amount thereof, provide for earlier or greater principal, interest, or other payments
thereon, or adversely affect the subordination thereof to Obligations owed to Bank.
7.10 Compliance.
Become an “investment company” or a company controlled by an “investment company”, under the Investment
Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock
(as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension
for that purpose; fail to (a) meet the minimum funding requirements of ERISA, (b) prevent a Reportable Event or Prohibited Transaction,
as defined in ERISA, from occurring, or (c) comply with the Federal Fair Labor Standards Act, the failure of any of the conditions
described in clauses (a) through (c) which could reasonably be expected to have a material adverse effect on Borrower’s business;
or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s
business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing
and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability
to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
Any one of the following shall constitute
an event of default (an “Event of Default”) under this Agreement:
8.1 Payment
Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension when due, or (b) pay
any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day cure
period shall not apply to payments due on the Revolving Line Maturity Date). During the cure period, the failure to make or pay
any payment specified under clause (b) hereunder is not an Event of Default (but no Credit Extension will be made during the cure
period);
(a) Borrower
fails or neglects to perform any obligation in Sections 2.2, 2.6, 6.2, 6.5, 6.6, 6.7, 6.8, 6.9, or 6.10(b) or violates any covenant
in Section 7; or
(b) Borrower
fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement
or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within
such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall
be made during such cure period). Cure periods provided under this section shall not apply, among other things, to financial covenants
or any other covenants set forth in clause (a) above;
| 8.3 | Material Adverse Change. A Material Adverse Change
occurs; |
| 8.4 | Attachment; Levy; Restraint on Business. |
(a) (i)
The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the control
of Borrower (including a Subsidiary) in excess of Fifty Thousand Dollars ($50,000), or (ii) a notice of lien or levy is filed against
any of Borrower’s assets by any Governmental Authority, and the same under subclauses (i) and (ii) hereof are not, within
ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided,
however, no Credit Extensions shall be made during any ten (10) day cure period; or
(b) (i)
any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver,
or (ii) any court order enjoins, restrains, or prevents Borrower from conducting all or any material part of its business;
8.5 Insolvency.
(a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower
begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within forty-five
(45) days (but no Credit Extensions shall be made while any of the conditions described in clause (a) exist and/or until any Insolvency
Proceeding is dismissed);
8.6 Other
Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties,
(a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount individually or in the aggregate in excess of One Hundred Thousand Dollars ($100,000); or (b) any breach
or default by Borrower or Guarantor, the result of which could have a material adverse effect on Borrower’s or any Guarantor’s
business;
8.7 Judgments;
Penalties. One or more fines, penalties or final judgments, orders or decrees for the payment of money in an amount,
individually or in the aggregate, of at least One Hundred Thousand Dollars ($100,000) (not covered by independent third-party insurance
as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower by any Governmental Authority,
and the same are not, within ten (10) days after the entry, assessment or issuance thereof, discharged, satisfied, or paid, or
after execution thereof, stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such
stay (provided that no Credit Extensions will be made prior to the satisfaction, payment, discharge, stay, or bonding of such fine,
penalty, judgment, order or decree);
8.8 Misrepresentations.
Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now or later in this Agreement,
any Loan Document or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document, and such
representation, warranty, or other statement is incorrect in any material respect when made;
8.9 Subordinated
Debt. Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated
or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity
or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall for any
reason be subordinated or shall not have the priority contemplated by this Agreement or the applicable subordination or intercreditor
agreement; or
8.10 Governmental
Approvals. Any material Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in an adverse
manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority that designates
a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result in the Governmental
Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission, suspension,
modification or non-renewal (i) causes, or could reasonably be expected to cause, a Material Adverse Change, or (ii) adversely
affects the legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction
and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to affect the status of or
legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction.
| 9 | BANK’S RIGHTS AND REMEDIES |
9.1 Rights and Remedies.
Upon the occurrence and during the continuance of an Event of Default, Bank may, without notice or demand, do any or all
of the following:
(a) declare
all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
(b) stop
advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower
and Bank;
(c) for
any Letters of Credit, demand that Borrower (i) deposit cash with Bank in an amount equal to (x) if such Letters of Credit are
denominated in Dollars, then at least one hundred five percent (105.0%); and (y) if such Letters of Credit are denominated in a
Foreign Currency, then at least one hundred ten percent (110.0%), of the Dollar Equivalent of the aggregate face amount of all
Letters of Credit remaining undrawn (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 such Letters of Credit, as collateral
security for the repayment of any future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such
amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid or payable over the remaining term of any Letters
of Credit;
(d) terminate
any FX Contracts;
(e) verify
the amount of, demand payment of and performance under, and collect any Accounts and General Intangibles, settle or adjust disputes
and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable, and notify any Person
owing Borrower money of Bank’s security interest in such funds;
(f) make
any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the
Collateral. Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates. Bank may enter premises
where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise
any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license
to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies;
(g) apply
to the Obligations (i) any balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit
or the account of Borrower;
(h) ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby
granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, Patents, Copyrights,
mask works, rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any similar property
as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection
with Bank’s exercise of its rights under this Section, Borrower’s rights under all licenses and all franchise agreements
inure to Bank’s benefit;
(i) place
a “hold” on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or
other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;
(j) demand
and receive possession of Borrower’s Books; and
(k) exercise
all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided under the
Code (including disposal of the Collateral pursuant to the terms thereof).
9.2 Power
of Attorney. Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, exercisable upon the occurrence
and during the continuance of an Event of Default, to: (a) endorse Borrower’s name on any checks or other forms of payment
or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors;
(c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Bank determines
reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien,
charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise
take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Bank or a third party as the
Code permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary
to perfect or continue the perfection of Bank’s security interest in the Collateral regardless of whether an Event of Default
has occurred until all Obligations have been satisfied in full and Bank is under no further obligation to make Credit Extensions
hereunder. Bank’s foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Bank’s obligation
to provide Credit Extensions terminates.
9.3 Protective
Payments. If Borrower fails to obtain the insurance called for by Section 6.7 or fails to pay any premium thereon or
fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document or which may be
required to preserve the Collateral, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are Bank
Expenses and immediately due and payable, bearing interest at the then highest rate applicable to the Obligations, and secured
by the Collateral. Bank will make reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the time
it is obtained or within a reasonable time thereafter. No payments by Bank are deemed an agreement to make similar payments in
the future or Bank’s waiver of any Event of Default.
9.4 Application
of Payments and Proceeds. If an Event of Default has occurred and is continuing, Bank shall have the right to apply
in any order any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of
any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations. Bank shall pay any surplus
to Borrower by credit to the Designated Deposit Account or to other Persons legally entitled thereto; Borrower shall remain liable
to Bank for any deficiency. If Bank, directly or indirectly, enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by
the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash
therefor.
9.5 Bank’s
Liability for Collateral. So long as Bank complies with reasonable banking practices regarding the safekeeping of the
Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping of
the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral.
9.6 No
Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to require strict performance by Borrower of
any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Bank thereafter to
demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by the party
granting the waiver and then is only effective for the specific instance and purpose for which it is given. Bank’s rights
and remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and remedies provided under
the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an election and shall not preclude Bank from
exercising any other remedy under this Agreement or other remedy available at law or in equity, and Bank’s waiver of any
Event of Default is not a continuing waiver. Bank’s delay in exercising any remedy is not a waiver, election, or acquiescence.
9.7 Demand Waiver.
Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment
at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees
held by Bank on which Borrower is liable.
All notices, consents,
requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing
and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business
Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid;
(b) upon transmission, when sent by electronic mail; (c) one (1) Business Day after deposit with a reputable overnight courier
with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to
be notified and sent to the address or email address indicated below. Bank or Borrower may change its mailing or electronic mail
address by giving the other party written notice thereof in accordance with the terms of this Section 10.
| If to Borrower: |
Sensus Healthcare, Inc. |
| |
851 Broken Sound Parkway NW, Suite 215 |
| |
Boca Raton, FL 33487 |
| |
Attn: _______________________________ |
| |
Email: _____________________________ |
| |
Website URL:________________________ |
| |
|
| If to Bank: |
Silicon Valley Bank |
| |
275 Grove Street, Suite 2-200 |
| |
Newton, MA 02466 |
| |
Attn: Sam Subilia |
| |
Email: ssubilia@svb.com |
| 11 | CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL
REFERENCE |
Except as otherwise
expressly provided in any of the Loan Documents, Virginia law governs the Loan Documents without regard to principles of conflicts
of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Virginia; provided, however,
that if for any reason Bank cannot avail itself of such courts in the Commonwealth of Virginia, Borrower accepts jurisdiction of
the courts and venue in Santa Clara County, California. NOTWITHSTANDING THE FOREGOING, BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION
OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS NECESSARY OR APPROPRIATE
TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE BANK’S RIGHTS AGAINST BORROWER OR ITS PROPERTY. Borrower expressly submits
and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any
objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents
to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service
of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints,
and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently
provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the
earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.
TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT
OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND
ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS
WAIVER WITH ITS COUNSEL.
This Section 11 shall survive the termination of this Agreement.
12.1 Termination
Prior to Revolving Line Maturity Date; Survival. All covenants, representations and warranties made in this Agreement
continue in full force until this Agreement has terminated pursuant to its terms and all Obligations have been satisfied. So long
as Borrower has satisfied the Obligations (other than inchoate indemnity obligations, any other obligations which, by their terms,
are to survive the termination of this Agreement, and any Obligations under Bank Services Agreements that are cash collateralized
in accordance with Section 4.1 of this Agreement), this Agreement may be terminated prior to the Revolving Line Maturity Date by
Borrower, effective three (3) Business Days after written notice of termination is given to Bank, in accordance with Section 2.4(b).
Those obligations that are expressly specified in this Agreement as surviving this Agreement’s termination shall continue
to survive notwithstanding this Agreement’s termination.
12.2 Successors
and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower
may not assign this Agreement or any rights or obligations under it without Bank’s prior written consent (which may be granted
or withheld in Bank’s discretion). Bank has the right, without the consent of or notice to Borrower, to sell, transfer, assign,
negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights, and benefits under
this Agreement and the other Loan Documents.
12.3 Indemnification.
Borrower agrees to indemnify, defend and hold Bank and its directors, officers, employees, agents, attorneys, or any other
Person affiliated with or representing Bank (each, an “Indemnified Person”) harmless against: (i) all
obligations, demands, claims, and liabilities (collectively, “Claims”) claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents; and (ii) all losses or expenses (including Bank Expenses)
in any way suffered, incurred, or paid by such Indemnified Person as a result of, following from, consequential to, or arising
from transactions between Bank and Borrower contemplated by the Loan Documents (including reasonable attorneys’ fees and
expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct.
This Section 12.3 shall survive until all
statutes of limitation with respect to the Claims, losses, and expenses for which indemnity is given shall have run.
12.4 Time of Essence. Time is of
the essence for the performance of all Obligations in this Agreement.
12.5 Severability
of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability
of any provision.
12.6 Correction
of Loan Documents. Bank may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement
of the parties so long as Bank provides Borrower with written notice of such correction and allows Borrower at least ten (10) days
to object to such correction. In the event of such objection, such correction shall not be made except by an amendment signed by
both Bank and Borrower.
12.7 Amendments
in Writing; Waiver; Integration. No purported amendment or modification of any Loan Document, or waiver, discharge or
termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly
set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting the generality of
the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct
shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document. Any waiver granted
shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance,
whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver. The Loan
Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents
merge into the Loan Documents.
12.8 Counterparts.
This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, is an original, and all taken together, constitute one Agreement.
12.9 Confidentiality.
In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank’s Subsidiaries or Affiliates (such Subsidiaries and Affiliates,
together with Bank, collectively, “Bank Entities”); (b) to prospective transferees or purchasers of any interest
in the Credit Extensions (provided, however, Bank shall use its best efforts to obtain any prospective transferee’s or purchaser’s
agreement to the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s regulators
or as otherwise required in connection with Bank’s examination or audit; (e) as Bank considers appropriate in exercising
remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed
a confidentiality agreement with Bank with terms no less restrictive than those contained herein. Confidential information does
not include information that is either: (i) in the public domain or in Bank’s possession when disclosed to Bank, or becomes
part of the public domain (other than as a result of its disclosure by Bank in violation of this Agreement) after disclosure to
Bank; or (ii) disclosed to Bank by a third party if Bank does not know that the third party is prohibited from disclosing the information.
Bank Entities may use
anonymous forms of confidential information for aggregate datasets, for analyses or reporting, and for any other uses not expressly
prohibited in writing by Borrower. The provisions of the immediately preceding sentence shall survive termination of this Agreement.
12.10 Attorneys’
Fees, Costs and Expenses. In any action or proceeding between Borrower and Bank arising out of or relating to the Loan
Documents, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other costs and expenses
incurred, in addition to any other relief to which it may be entitled.
12.11 Electronic
Execution of Documents. The words “execution,” “signed,” “signature” and words of
like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form,
each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based
recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation,
any state law based on the Uniform Electronic Transactions Act.
12.12 Captions.
The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.
12.13 Construction
of Agreement. The parties mutually acknowledge that they and their attorneys have participated in the preparation and
negotiation of this Agreement. In cases of uncertainty this Agreement shall be construed without regard to which of the parties
caused the uncertainty to exist.
12.14 Relationship.
The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement. The parties
do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents
different from those of parties to an arm’s-length contract.
12.15 Third
Parties. Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies
under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors
and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement; or (c)
give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.
12.16 No
Novation. Nothing contained herein shall in any way impair the Prior Loan Agreement and other Loan Documents now held
for the Obligations, nor affect or impair any rights, powers, or remedies under the Prior Loan Agreement or any Loan Document,
it being the intent of the parties hereto that this Agreement shall not constitute a novation of the Prior Loan Agreement or an
accord and satisfaction of the Obligations. Borrower hereby ratifies and reaffirms the validity and enforceability of all of the
liens and security interests heretofore granted pursuant to the Loan Documents, as collateral security for the Obligations, and
acknowledges that all of such liens and security interests, and all Collateral heretofore pledged as security for the Obligations,
continues to be and remains Collateral for the Obligations from and after the date hereof.
13.1 Definitions.
As used in the Loan Documents, the word “shall” is mandatory, the word “may” is permissive, the
word “or” is not exclusive, the words “includes” and “including” are not limiting, the singular
includes the plural, and numbers denoting amounts that are set off in brackets are negative. As used in this Agreement, the following
capitalized terms have the following meanings:
“Account”
is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without
limitation, all accounts receivable and other sums owing to Borrower.
“Account Debtor”
is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.
“Adjusted
EBITDA” shall mean (a) Net Income, plus (b) Interest Expense, plus (c) to the extent deducted in the calculation
of Net Income, depreciation expense and amortization expense, plus (d) income tax expense, plus (e) non-cash stock based
compensation, plus (f) litigation expenses (provided such litigation expenses shall not exceed Five Hundred Thousand Dollars
($500,000)), minus (g) unfunded capital expenditures.
“Adjusted
Quick Ratio” is the ratio of Borrower’s Quick Assets to its Current Liabilities minus the current portion of its
Deferred Revenue.
“Advance”
or “Advances” means a revolving credit loan (or revolving credit loans) under the Revolving Line.
“Affiliate”
is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls
or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors,
partners and, for any Person that is a limited liability company, that Person’s managers and members.
“Agreement” is defined in the preamble hereof.
“Authorized
Signer ” is any individual listed in Borrower’s Borrowing Resolution who is authorized to execute the Loan Documents,
including any Advance request, on behalf of Borrower.
“Availability
Amount” is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the Borrowing Base minus (b) the
outstanding principal balance of any Advances.
“Bank” is defined in the preamble hereof.
“Bank Entities” is defined in Section 12.9.
“Bank Expenses”
are all audit fees and expenses (subject to the limitations set forth in Section 6.6), costs, and expenses (including reasonable
attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents
(including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with
respect to Borrower.
“Bank Services”
are any products, credit services, and/or financial accommodations previously, now, or hereafter provided to Borrower or any of
its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management services
(including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services),
interest rate swap arrangements, and foreign exchange services as any such products or services may be identified in Bank’s
various agreements related thereto (each, a “Bank Services Agreement”).
“Borrower” is defined in the preamble hereof
“Borrower’s
Books” are all Borrower’s books and records including ledgers, federal and state tax returns, records regarding
Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or
storage or any equipment containing such information.
“Borrowing
Base” is eighty percent (80%) of Eligible Accounts, as determined by Bank from Borrower’s most recent Transaction
Report; provided, however, that Bank has the right to decrease the foregoing percentage in its good faith business judgment to
mitigate the impact of events, conditions, contingencies, or risks which may adversely affect the Collateral or its value.
“Borrowing
Resolutions” are, with respect to any Person, those resolutions substantially in the form attached hereto as Exhibit
D.
“Business Day” is any day that is
not a Saturday, Sunday or a day on which Bank is closed.
“Cash Equivalents”
means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof
having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1)
year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors
Service, Inc.; and (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue.
“Change
in Control” means (a) at any time, any “person” or “group” (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act) shall become, or obtain rights (whether by means of warrants, options or otherwise) to become,
the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of
fifty percent (50%) or more of the ordinary voting power for the election of directors of Borrower (determined on a fully diluted
basis) other than by the sale of Borrower’s equity securities in a public offering or to venture capital or private equity
investors so long as Borrower identifies to Bank the venture capital or private equity investors at least seven (7) Business Days
prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction; (b) during
any period of 12 consecutive months, a majority of the members of the Board of Directors or other equivalent governing body of
Borrower cease to be composed of individuals (i) who were members of that Board or equivalent governing body on the first day of
such period, (ii) whose election or nomination to that Board or equivalent governing body was approved by individuals referred
to in clause (i) above constituting at the time of such election or nomination at least a majority of that Board or equivalent
governing body or (iii) whose election or nomination to that Board or other equivalent governing body was approved by individuals
referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that Board
or equivalent governing body; or (c) at any time, Borrower shall cease to own and control, of record and beneficially, directly
or indirectly, one hundred percent (100%) of each class of outstanding capital stock of each Subsidiary of Borrower free and clear
of all Liens (except Liens created by this Agreement).
“Claims” is defined in Section 12.3.
“Code”
is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the Commonwealth of Virginia; provided,
that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently
in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided
further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority
of, or remedies with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a
jurisdiction other than the Commonwealth of Virginia, the term “Code” shall mean the Uniform Commercial Code as enacted
and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection,
priority, or remedies and for purposes of definitions relating to such provisions.
“Collateral” is any and all properties,
rights and assets of Borrower described on Exhibit A.
“Collateral Account” is any Deposit
Account, Securities Account, or Commodity Account.
“Collections” is defined in Section
2.6(c).
“Commodity
Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter
be made.
“Compliance Certificate” is that
certain certificate in the form attached hereto as Exhibit B.
“Contingent
Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness,
lease, dividend, letter of credit or other obligation of another such as an obligation, in each case, directly or indirectly guaranteed,
endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable;
(b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate,
currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect
a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation”
does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined
amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated
liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any
guarantee or other support arrangement.
“Control
Agreement” is any control agreement entered into among the depository institution at which Borrower maintains a Deposit
Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity
Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.
“Copyrights”
are any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship
and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.
“Credit
Extension” is any Advance, Overadvance, or any other extension of credit by Bank for Borrower’s benefit under this
Agreement.
“Current
Liabilities” are all obligations and liabilities of Borrower to Bank, plus, without duplication, the aggregate amount
of Borrower’s Total Liabilities that mature within one (1) year.
“Default Rate” is defined in Section
2.3(b).
“Deferred
Revenue” is all amounts received or invoiced in advance of performance under contracts and not yet recognized as revenue.
“Deposit
Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter
be made.
“Designated
Deposit Account” is the multicurrency account, denominated in Dollars, account number xxxxxxx___, maintained by
Borrower with Bank.
“Dollars,”
“dollars” or use of the sign “$” means only lawful money of the United States and not any
other currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily converted
into lawful money of the United States.
“Dollar
Equivalent” is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect
to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on
the basis of 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.
“Effective Date” is defined in the
preamble hereof.
“Eligible
Accounts” means Accounts which arise in the ordinary course of Borrower’s business that meet all Borrower’s
representations and warranties in Section 5.3. Bank reserves the right at any time after the Effective Date to adjust any of the
criteria set forth below and to establish new criteria in its good faith business judgment. Unless Bank otherwise agrees in writing,
Eligible Accounts shall not include:
(a) Accounts
for which the Account Debtor is Borrower’s Affiliate, officer, employee, or agent;
(b) Accounts
that the Account Debtor has not paid within ninety (90) days (one hundred eighty (180) days for Accounts of Chindex and DYN Medical
Equipment Ltd.) of invoice date regardless of invoice payment period terms;
(c) Accounts
with credit balances over ninety (90) days (one hundred eighty (180) days for Accounts of Chindex and DYN Medical Equipment Ltd.)
from invoice date;
(d) Accounts
owing from an Account Debtor, if fifty percent (50%) or more of the Accounts owing from such Account Debtor have not been paid
within ninety (90) days (one hundred eighty (180) days for Accounts of Chindex and DYN Medical Equipment Ltd.) of invoice date;
(e) Accounts
owing from an Account Debtor which does not have its principal place of business in the United States other than Accounts owing
from (i) Eckert & Ziegler, Chindex and DYN Medical Equipment Ltd., and (ii) other Account Debtors approved in writing by Bank
on a case-by-case basis in its sole discretion;
(f) Accounts
billed from and/or payable to Borrower outside of the United States (sometimes called foreign invoiced accounts);
(g) Accounts
owing from an Account Debtor to the extent that Borrower is indebted or obligated in any manner to the Account Debtor (as creditor,
lessor, supplier or otherwise - sometimes called “contra” accounts, accounts payable, customer deposits or credit accounts).
(h) Accounts
owing from an Account Debtor which is a United States government entity or any department, agency, or instrumentality thereof unless
Borrower has assigned its payment rights to Bank and the assignment has been acknowledged under the Federal Assignment of Claims
Act of 1940, as amended;
(i) Accounts
for demonstration or promotional equipment, or in which goods are consigned, or sold on a “sale guaranteed”, “sale
or return”, “sale on approval”, or other terms if Account Debtor’s payment may be conditional;
(j) Accounts
owing from an Account Debtor where goods or services have not yet been rendered to the Account Debtor (sometimes called memo billings
or pre-billings);
(k) Accounts
subject to contractual arrangements between Borrower and an Account Debtor where payments shall be scheduled or due according to
completion or fulfillment requirements where the Account Debtor has a right of offset for damages suffered as a result of Borrower’s
failure to perform in accordance with the contract (sometimes called contracts accounts receivable, progress billings, milestone
billings, or fulfillment contracts);
(l) Accounts
owing from an Account Debtor the amount of which may be subject to withholding based on the Account Debtor’s satisfaction
of Borrower’s complete performance (but only to the extent of the amount withheld; sometimes called retainage billings);
(m) Accounts
subject to trust provisions, subrogation rights of a bonding company, or a statutory trust;
(n) Accounts
owing from an Account Debtor that has been invoiced for goods that have not been shipped to the Account Debtor unless Bank, Borrower,
and the Account Debtor have entered into an agreement acceptable to Bank wherein the Account Debtor acknowledges that (i) it has
title to and has ownership of the goods wherever located, (ii) a bona fide sale of the goods has occurred, and (iii) it owes payment
for such goods in accordance with invoices from Borrower (sometimes called “bill and hold” accounts);
(o) Accounts
for which the Account Debtor has not been invoiced;
(p) Accounts
that represent non-trade receivables or that are derived by means other than in the ordinary course of Borrower’s business;
(q) Accounts
for which Borrower has permitted Account Debtor’s payment to extend beyond ninety (90) days (one hundred eighty (180) days
for Accounts of Chindex and DYN Medical Equipment Ltd.);
(r) Accounts
arising from chargebacks, debit memos or other payment deductions taken by an Account Debtor;
(s) Accounts
arising from product returns and/or exchanges (sometimes called “warranty” or “RMA” accounts);
(t) Accounts
in which the Account Debtor disputes liability or makes any claim (but only up to the disputed or claimed amount), or if the Account
Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business;
(u) Accounts
owing from an Account Debtor with respect to which Borrower has received Deferred Revenue (but only to the extent of such Deferred
Revenue), except for Accounts for annual maintenance;
(v) Accounts
owing from an Account Debtor, whose total obligations to Borrower exceed twenty-five percent (25%) of all Accounts (except for
Chindex and DYN Medical Equipment Ltd., for which such percentage is thirty-three percent (33%)), for the amounts that exceed that
percentage, unless Bank approves in writing; and
(w) Accounts
for which Bank in its good faith business judgment determines collection to be doubtful, including, without limitation, accounts
represented by “refreshed” or “recycled” invoices.
“Equipment”
is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without
limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
“ERISA” is the Employee Retirement
Income Security Act of 1974, and its regulations.
“Event of Default” is defined in
Section 8.
“Exchange Act” is the Securities
Exchange Act of 1934, as amended.
“Foreign Currency” means lawful money
of a country other than the United States.
“Funding
Date” is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business Day.
“FX
Contract” is any foreign exchange contract by and between Borrower and Bank under which Borrower commits to purchase
from or sell to Bank a specific amount of Foreign Currency on a specified date.
“GAAP”
is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of the date of determination.
“General
Intangibles” is all “general intangibles” as defined in the Code in effect on the date hereof with such additions
to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax
refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property,
rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including
without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment
of any kind.
“Governmental
Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration,
filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
“Governmental
Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative
functions of or pertaining to government, any securities exchange and any self-regulatory organization.
“Guarantor” is any Person providing
a Guaranty in favor of Bank.
“Guaranty”
is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise
supplemented.
“Indebtedness”
is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations
for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital
lease obligations, and (d) Contingent Obligations.
“Indemnified Person” is defined in
Section 12.3.
“Insolvency
Proceeding ” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy
or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.
“Intellectual
Property” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following:
(a) its
Copyright, Trademarks and Patents;
(b) any
and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating
manuals;
(c) any
and all source code;
(d) any
and all design rights which may be available to such Person;
(e) any
and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above;
and
(f) all
amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.
“Interest
Expense” means for any fiscal period, interest expense (whether cash or non-cash) determined in accordance with GAAP
for the relevant period ending on such date, including, in any event, interest expense with respect to any Credit Extension and
other Indebtedness of Borrower, including, without limitation or duplication, all commissions, discounts, or related amortization
and other fees and charges with respect to letters of credit and bankers’ acceptance financing and the net costs associated
with interest rate swap, cap, and similar arrangements, and the interest portion of any deferred payment obligation (including
leases of all types).
“Inventory”
is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work
in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody
or possession or in transit and including any returned goods and any documents of title representing any of the above.
“Investment”
is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance
or capital contribution to any Person.
“Key
Person” is each of Borrower’s (a) Chief Executive Officer, who is Joseph C. Sardano as of the Effective Date, and
(b) Chief Financial Officer, who is Arthur Levine as of the Effective Date.
“Letter
of Credit” is a standby or commercial letter of credit issued by Bank upon request of Borrower based upon an application,
guarantee, indemnity, or similar agreement.
“Lien”
is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily
incurred or arising by operation of law or otherwise against any property.
“Loan
Documents” are, collectively, this Agreement and any schedules, exhibits, certificates, notices, and any other documents
related to this Agreement, any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed
by Borrower or any Guarantor, and any other present or future agreement by Borrower and/or any Guarantor with or for the benefit
of Bank in connection with this Agreement or Bank Services, all as amended, restated, or otherwise modified.
“Lockbox” is defined in Section 2.6(a).
“Lockbox Triggering Event” is defined
in Section 2.6(a).
“Material
Adverse Change” is (a) a material impairment in the perfection or priority of Bank’s Lien in the Collateral or
in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise)
of Borrower; (c) a material impairment of the prospect of repayment of any portion of the Obligations; or (d) Bank determines,
based upon information available to it and in its reasonable judgment, that there is a reasonable likelihood that Borrower shall
fail to comply with one or more of the financial covenants in Section 6 during the next succeeding financial reporting period.
“Monthly Financial Statements” is
defined in Section 6.2(c).
“Net
Income” means, as calculated on a consolidated basis for Borrower and its Subsidiaries for any period as at any date
of determination, the net profit (or loss), after provision for taxes, of Borrower and its Subsidiaries for such period taken as
a single accounting period.
“Non-Streamline Period” is any period
that is not a Streamline Period.
“Obligations”
are Borrower’s obligation to pay when due any debts, principal, interest, fees, Bank Expenses, and other amounts Borrower
owes Bank now or later, whether under this Agreement, the other Loan Documents, or otherwise, including, without limitation, any
interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and the
performance of Borrower’s duties under the Loan Documents.
“Operating
Documents” are, for any Person, such Person’s formation documents, as certified by the Secretary of State
(or equivalent agency) of such Person’s jurisdiction of organization on a date that is no earlier than thirty (30) days
prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is
a limited liability company, its limited liability company agreement (or similar agreement), and
(c) if such Person is a partnership, its partnership agreement (or
similar agreement), each of the foregoing with all current amendments or modifications thereto.
“Overadvance” is defined in Section
2.2.
“Patents”
means all patents, patent applications and like protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
“Perfection Certificate” is defined
in Section 5.1.
“Permitted
Acquisitions” means any merger or consolidation with any other Person, or the acquisition of all or substantially all
of the capital stock or property of another Person that meets the following requirements: (a) the total consideration including
cash and the value of any non-cash consideration, for all such transactions does not in the aggregate exceed Two Million Dollars
($2,000,000) during the term hereof; (b) no Event of Default has occurred and is continuing or would exist after giving effect
to such Permitted Acquisition; (c) Borrower is the surviving legal entity; (d) the credit risk to Bank, in its sole discretion,
shall not be increased as a result of the Permitted Acquisition; (e) Bank shall receive at least thirty (30) days’ prior
written notice of such Permitted Acquisition, which notice shall include a reasonably detailed description of such Permitted Acquisition,
and such other financial information, financial analysis, documentation or other information relating to such Permitted Acquisition
as Bank shall reasonably request; (f) such Permitted Acquisition shall only involve assets located in the United States and comprising
a business, or those assets of a business, of the type engaged in by Borrower and its Subsidiaries as of the date hereof (or any
business reasonably related or ancillary thereto or a reasonable extension thereof, as determined in good faith by Borrower’s
board of directors); (g) such Permitted Acquisition shall be consensual and shall have been approved by the target’s board
of directors; (h) Borrower shall demonstrate compliance, both before and after (on a pro forma basis) giving effect to such transaction,
with the terms of this Agreement; (i) the transaction and the target is accretive with respect to Borrower’s earnings; (j)
no additional Indebtedness or liabilities shall be incurred, assumed or otherwise be reflected on a consolidated balance sheet
of Borrower and the target after giving effect to such transaction; and (k) if the target is not merged with and into Borrower
then, simultaneously with the closing of the Permitted Acquisition, the target must become a “Borrower” under this
Agreement and the other Loan Documents and become subject to all rights and obligations of this Agreement and the other Loan Documents,
and must execute and deliver to Bank a joinder agreement acceptable to Bank as well as such other documents and agreements as required
by Bank in connection with the target becoming a Borrower and granting a Lien in favor of Bank on the Collateral.
“Permitted Indebtedness” is:
(a) Borrower’s
Indebtedness to Bank under this Agreement and the other Loan Documents;
(b) Indebtedness
existing on the Effective Date and shown on the Perfection Certificate;
(c) Subordinated
Debt;
(d) unsecured
Indebtedness to trade creditors incurred in the ordinary course of business;
(e) Indebtedness
incurred as a result of endorsing negotiable instruments received in the ordinary course of business;
(f) Indebtedness
secured by Liens permitted under clauses (a) and (c) of the definition of “Permitted Liens” hereunder;
(g) Indebtedness
under corporate credit cards not exceeding One Hundred Thousand Dollars ($100,000) in the aggregate at any time; and
(h) extensions,
refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (g) above, provided
that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower
or its Subsidiary, as the case may be.
“Permitted Investments” are:
(a) Investments
(including, without limitation, Subsidiaries) existing on the Effective Date and shown on the Perfection Certificate (but specifically
excluding any future Investments in any Subsidiaries unless otherwise permitted hereunder);
(b) Investments
consisting of Cash Equivalents;
(c) Investments
consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course
of Borrower;
(d) Investments
consisting of deposit accounts in which Bank has a first priority perfected security interest;
(e) Investments
accepted in connection with Transfers permitted by Section 7.1;
(f) Investments
consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries
pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors;
(g) Investments
(including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement
of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; and
(h) Investments
consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates,
in the ordinary course of business; provided that this paragraph (h) shall not apply to Investments of Borrower in any Subsidiary.
“Permitted Liens” are:
(a) Liens
existing on the Effective Date and shown on the Perfection Certificate or arising under this Agreement and the other Loan Documents;
(b) Liens
for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good
faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been
filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;
(c) purchase
money Liens (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more
than One Hundred Thousand Dollars ($100,000) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired,
if the Lien is confined to the property and improvements and the proceeds of the Equipment;
(d) Liens
of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business
so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed One Hundred Thousand
Dollars ($100,000) and which are not delinquent or remain payable without penalty or which are being contested in good faith and
by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;
(e) Liens
to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations
incurred in the ordinary course of business (other than Liens imposed by ERISA);
(f) Liens
incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but
any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount
of the indebtedness may not increase;
(g) leases
or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person,
in the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal
property (other than Intellectual Property) granted in the ordinary course of Borrower’s business (or, if referring to another
Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not
prohibit granting Bank a security interest therein;
(h) non-exclusive
licenses of Intellectual Property granted to third parties in the ordinary course of business;
(i) Liens
arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections
8.4 and 8.7; and
(j) Liens
in favor of other financial institutions arising in connection with Borrower’s deposit and/or securities accounts held at
such institutions, provided that Bank has a perfected security interest in the amounts held in such deposit and/or securities accounts.
“Person”
is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.
“Prime
Rate” is the rate of interest per annum from time to time published in the money rates section of The Wall Street
Journal or any successor publication thereto as the “prime rate” then in effect; provided that, in the event
such rate of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement; provided further
that if such rate of interest, as set forth from time to time in the money rates section of The Wall Street Journal,
becomes unavailable for any reason as determined by Bank, the “Prime Rate” shall mean the rate of interest per
annum announced by Bank as its prime rate in effect at its principal office in the State of California (such Bank announced Prime
Rate not being intended to be the lowest rate of interest charged by Bank in connection with extensions of credit to debtors).
“Prior Loan Agreement” is defined
in the recitals hereto.
“Quick
Assets” is, on any date, Borrower’s unrestricted cash and Cash Equivalents maintained with Bank plus net accounts
receivable.
“Registered
Organization” is any “registered organization” as defined in the Code with such additions to such term as
may hereafter be made.
“Requirement
of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common),
treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Reserves ”
means, as of any date of determination, such amounts as Bank may from time to time establish and revise in its good faith
business judgment, reducing the amount of Advances and other financial accommodations which would otherwise be available to
Borrower (a) to reflect events, conditions, contingencies or risks which, as determined by Bank in its good faith
business judgment, do or may adversely affect (i) the Collateral or any other property which is security for the Obligations
or its value (including without limitation any increase in delinquencies of Accounts), (ii) the assets, business or prospects
of Borrower or any Guarantor, or (iii) the security interests and other rights of Bank in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect Bank's reasonable belief that any collateral report or
financial information furnished by or on behalf of Borrower or any Guarantor to Bank is or may have been incomplete,
inaccurate or misleading in any material respect; or (c) in respect of any state of facts which Bank determines constitutes
an Event of Default or may, with notice or passage of time or both, constitute an Event of Default.
“Responsible
Officer” is any of the Chief Executive Officer, President, Chief Financial Officer, Controller or Director of Account
and Reporting of Borrower.
“Restricted
License” is any material 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 Bank’s right to sell any Collateral.
“Revolving Line” is an aggregate
principal amount equal to Two Million Dollars ($2,000,000).
“Revolving Line Maturity Date” is
the date three hundred sixty-four (364) days after the Effective Date.
“SEC”
shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.
“Securities
Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter
be made.
“Streamline
Period” is any Subject Month for which Borrower maintained an Adjusted Quick Ratio of not less than 1.50 to 1.00 at all
times during the applicable Testing Month.
“Subject Month” is the month which
is two (2) calendar months after any Testing Month.
“Subordinated
Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now or hereafter indebtedness to Bank
(pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into
between Bank and the other creditor), on terms acceptable to Bank.
“Subsidiary”
is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of
the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership
or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or
more intermediaries, or both, by such Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall
be a reference to a Subsidiary of Borrower.
“Testing
Month ” is any month with respect to which Bank has tested Borrower’s Adjusted Quick Ratio to determine if a Streamline
Period is in effect.
“Total
Liabilities” is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower’s consolidated
balance sheet, including all Indebtedness and current portion of Subordinated Debt.
“Trademarks”
means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.
“Transaction
Report” is that certain report of transactions and schedule of collections in the form attached hereto as Exhibit
C.
“Transfer” is defined in Section
7.1.
“Unused Revolving Line Facility Fee”
is defined in Section 2.4(c).
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the Effective Date.
| BORROWR: |
|
| |
|
|
| SENSUS HEALTHCARE, INC |
|
| |
|
|
| By |
/s/ Arthur Levine |
|
| |
|
|
| Name: |
Arthur Levine |
|
| |
|
|
| Title: |
CFO |
|
| BANK: |
|
| |
|
|
| SILICON VALLEY BANK |
|
| |
|
|
| By: |
/s/ Shane D Ballew |
|
| |
|
|
| Name: |
Shane D Ballew |
|
| |
|
|
| Title: |
Vice President |
|
[Signature Page to Second Amended and Restated
Loan and Security Agreement]
EXHIBIT A
The Collateral consists of all of Borrower’s
right, title and interest in and to the following personal property:
All goods,
Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license
agreements, franchise agreements, General Intangibles, commercial tort claims, documents, instruments (including any promissory
notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or
not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and
all Borrower’s
Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or
all of the foregoing.
Notwithstanding
the foregoing, the Collateral does not include any Intellectual Property; provided, however, the Collateral shall include all Accounts
and all proceeds of Intellectual Property. If a judicial authority (including a U.S. Bankruptcy Court) would hold that a security
interest in the underlying Intellectual Property is necessary to have a security interest in such Accounts and such property that
are proceeds of Intellectual Property, then the Collateral shall automatically, and effective as of the Effective Date, include
the Intellectual Property to the extent necessary to permit perfection of Bank’s security interest in such Accounts and such
other property of Borrower that are proceeds of the Intellectual Property.
EXHIBIT B
COMPLIANCE CERTIFICATE
| TO: SILICON VALLEY BANK |
Date: |
FROM: SENSUS HEALTHCARE, INC.
The undersigned authorized
officer of SENSUS HEALTHCARE, INC. (“Borrower”) certifies that under the terms and conditions of the Second Amended
and Restated Loan and Security Agreement between Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance
for the period ending _______________ with all required covenants except as noted below, (2) there are no Events of Default, (3)
all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted
below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already
are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly
referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each
of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal,
state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms
of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating
to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank. Attached are
the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges
that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms
of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used
but not otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling
Yes/No under “Complies” column.
| Reporting
Covenant |
|
Required |
|
Complies |
| |
|
|
|
|
| Monthly financial statements with |
|
Monthly within 30 days |
|
Yes No |
| Compliance Certificate |
|
|
|
|
| Annual financial statement (CPA Audited) +CC |
|
FYE within 150 days |
|
Yes No |
| 10-Q, 10-K and 8-K |
|
Monthly within 30 days |
|
Yes No |
| Transaction Report |
|
With each Advance request (during any |
|
Yes No |
| |
|
Non-Streamline Period) and monthly |
|
|
| |
|
within 30 days |
|
|
| A/R & A/P Agings, Deferred Revenue report |
|
Monthly within 30 days |
|
Yes No |
| Annual Financial Projections |
|
FYE within 30 days and as updated |
|
Yes No |
| Financial Covenant | |
Required | | |
Actual | | |
Complies |
| | |
| | |
| | |
|
| Maintain on a Monthly Basis: | |
| | | |
| | | |
|
| Minimum Trailing 6-Month Adjusted EBITDA: | |
| | | |
| | | |
|
| 6/30/16 | |
$ | (500,000 | ) | |
$ | _______ | | |
Yes No |
| 7/31/16 – 9/30/16 | |
$ | (1,000,000 | ) | |
$ | _______ | | |
Yes No |
| 10/31/16 and thereafter | |
$ | (1,500,000 | ) | |
$ | _______ | | |
Yes No |
| Lockbox;
Streamline Period |
|
Applies |
| AQR ≥ 2.00:1.00* |
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No Lockbox Required; Streamline Period |
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Yes No |
| 2.00:1.00 > AQR ≥ 1.50:1.00* |
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Lockbox Required; Streamline Period |
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Yes No |
| AQR < 1.50:1.00 |
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Lockbox Required; Non-Streamline Period |
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Yes No |
* At all times during the applicable Testing Month
The following financial covenant
analysis and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.
The following are the exceptions
with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)
| Sensus Healthcare, Inc. |
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BANK USE ONLY |
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| By: |
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Received by: |
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| Name: |
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AUTHORIZED SIGNER |
| Title: |
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Date: |
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Verified: |
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AUTHORIZED SIGNER |
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Date: |
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Compliance Status: |
Yes No |
Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
In the event of a conflict between
this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.
Dated: ____________________
I. Adjusted
EBITDA (Section 6.9(a))
Required:
| Six Months Ended | |
Minimum Trailing 6-Month | |
| | |
Adjusted EBITDA | |
| | |
| |
| June 30, 2016 | |
$ | (500,000 | ) |
| July 31, 2016 through September 30, 2016 | |
$ | (1,000,000 | ) |
| October 31, 2016 and each six-month period thereafter | |
$ | (1,500,000 | ) |
| A. |
Net Income of Borrower for the trailing
6-month period most recently ended |
$ |
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| B. |
To the extent included in the determination
of Net Income |
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1. |
The provision for income
taxes |
$ |
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2. |
Depreciation expense |
$ |
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3. |
Amortization expense |
$ |
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4. |
Interest Expense |
$ |
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5. |
Non-cash stock based compensation |
$ |
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6. |
Litigation expenses (provided such litigation
expenses shall not exceed $500,000) |
$ |
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7. |
Unfunded capital expenditures |
$ |
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8. |
The sum of lines 1 through 6 minus line 7 |
$ |
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| C. |
Adjusted EBITDA (line A plus line
B.8) |
$ |
|
Is line C equal to or greater than the appropriate amount set
forth above?
| |
No, not in compliance |
|
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Yes, in compliance |
| II. | Adjusted Quick Ratio (This is not a financial covenant
but is used to determine Lockbox requirements and Streamline Period eligibility.) |
| Required: | 2.00:1.00 (For Lockbox to not be required) |
1.50:1.00 (For Streamline Period eligibility (at all
times during the applicable Testing Month))
| Actual: |
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| A. |
Aggregate value of the unrestricted cash and Cash Equivalents of Borrower maintained with Bank |
$ |
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| B. |
Aggregate value of the net billed accounts receivable of Borrower |
$ |
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| C. |
Quick Assets (the sum of lines A and B) |
$ |
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| D. |
Aggregate value of Obligations to Bank |
$ |
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| E. |
Aggregate value of liabilities that should, under GAAP, be classified as liabilities on Borrower’s consolidated balance sheet, including all Indebtedness and the current portion of Subordinated Debt, and not otherwise reflected in line D above that matures within one (1) year |
$ |
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| F. |
Current Liabilities (the sum of lines D and E) |
$ |
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| G. |
Aggregate value of all amounts received or invoiced by Borrower in advance of performance under contracts and not yet recognized as revenue |
$ |
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| H. |
Line F minus line G |
$ |
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| I. |
Adjusted Quick Ratio (line C divided by line H) |
|
____:1.00 |
Has line I been equal to or greater than 2.00:1.00
at all times during the term of this Agreement?
| |
No: Lockbox is required |
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Yes: Lockbox is not required |
Was line I equal to or greater than 1.50:1.00 at all
times during the applicable Testing Month?
| |
No: Non-Streamline Period |
|
Yes: Streamline Period |
EXHIBIT C
Transaction Report
[EXCEL spreadsheet to be provided separately
from lending officer.]
EXHIBIT D
Borrowing Resolutions
[see attached]
