EX-10.11 18 ex10-11.htm EXHIBIT 10.11 ex10-11.htm Exhibit 10.11 LOAN AND SECURITY AGREEMENT THIS LOAN AND SECURITY AGREEMENT (as the same may from time to time be amended, modified, supplemented or restated, this “ Agreement ”) dated as of March 18, 2016 (the “ Effective Date ”) among OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314 (“ Oxford ”), as collateral agent (in such capacity, “ Collateral Agent ”), the Lenders listed on Schedule 1.1 hereof or otherwise a party hereto from time to time including Oxford in its capacity as a Lender and SILICON VALLEY BANK, a California corporation with an office located at 3003 Tasman Drive, Santa Clara, CA 95054 (“ Bank ” or “ SVB ”) (each a “ Lender ” and collectively, the “ Lenders ”), and Nuvectra Corporation , a Delaware corporation (“ Nuvectra ”), ALGOSTIM, LLC, a Delaware limited liability company (“ Algostim ”), PelviStim LLC , a Delaware limited liability company (“ PelviStim ”), and NeuroNexus Technologies, Inc. , a Michigan corporation (“NeuroNexus”), each with offices located at 5830 Granite Parkway, Suite 1100, Plano, TX 75024 (Nuvectra, Algostim, PelviStim and NeuroNexus are individually and collectively, jointly and severally, “ Borrower ”), provides the terms on which the Lenders shall lend to Borrower and Borrower shall repay the Lenders. The parties agree as follows: 1. ACCOUNTING AND OTHER TERMS 1.1 Accounting terms not defined in this Agreement shall be construed in accordance with GAAP. Calculations and determinations must be made in accordance with 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. All references to “ Dollars ” or “ $ ” are United States Dollars, unless otherwise noted. 2. LOANS AND TERMS OF PAYMENT 2.1 Promise to Pay. Borrower hereby unconditionally promises to pay each Lender, the outstanding principal amount of all Term Loans advanced to Borrower by such Lender and accrued and unpaid interest thereon and any other amounts due hereunder as and when due in accordance with this Agreement. 2.2 Term Loans (a) Availability . (i) Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, to make term loans to Borrower on the Effective Date in an aggregate amount of Fifteen Million Dollars ($15,000,000.00) according to each Lender’s Term A Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “ Term A Loan ”, and collectively as the “ Term A Loans ”). After repayment, no Term A Loan may be re-borrowed. (ii) Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, during the Second Draw Period, to make term loans to Borrower in an aggregate amount equal to Twelve Million Five Hundred Thousand Dollars ($12,500,000.00) and disbursed in a single advance according to each Lender’s Term B Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “ Term B Loan ”, and collectively as the “ Term B Loans ”). After repayment, no Term B Loan may be re-borrowed. (iii) Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, during the Third Draw Period, to make term loans to Borrower in an aggregate amount equal to Twelve Million Five Hundred Thousand Dollars ($12,500,000.00) and disbursed in a single advance according to each Lender’s Term C Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “ Term C Loan ”, and collectively as the “ Term C Loans ”; each Term A Loan, Term B Loan or Term C Loan is hereinafter referred to singly as a “ Term Loan ” and the Term A Loans, Term B Loans and Term C Loans are hereinafter referred to collectively as the “ Term Loans ”). After repayment, no Term C Loan may be re-borrowed. 1 (b) Repayment . Borrower shall make monthly payments of interest only commencing on the first (1 st ) Payment Date following the Funding Date of each Term Loan, and continuing on the Payment Date of each successive month thereafter through and including the Payment Date immediately preceding the Amortization Date. Borrower agrees to pay, on the Funding Date of each Term Loan, any initial partial monthly interest payment otherwise due for the period between the Funding Date of such Term Loan and the first Payment Date thereof. Commencing on the Amortization Date, and continuing on the Payment Date of each month thereafter, Borrower shall make consecutive equal monthly payments of principal, together with applicable interest, in arrears, to each Lender, as calculated by Collateral Agent (which calculations shall be deemed correct absent manifest error) based upon: (1) the amount of such Lender’s Term Loan, (2) the effective rate of interest, as determined in Section 2.4(a), and (3) a repayment schedule (i) with respect to the Term A Loans, equal to (A) thirty (30) months, if the Term B Loans are funded prior to the end of the Second Draw Period, or (B) thirty-six (36) months, if the Term B Loans are not funded prior to the end of the Second Draw Period, (ii) with respect to the Term B Loans, equal to thirty (30) months, and (iii) with respect to the Term C Loans, equal to (A) thirty (30) months, if the Term B Loans are funded prior to the end of the Second Draw Period, or (B) if the Term B Loans are not funded prior to the end of the Second Draw Period, the number of months remaining during the period commencing on the second (2 nd ) Payment Date following the Funding Date of the Term C Loans and ending on the Maturity Date. All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on the Maturity Date. Each Term Loan may only be prepaid in accordance with Sections 2.2(c) and 2.2(d). (c) Mandatory Prepayments . If the Term Loans are accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to Lenders, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of: (i) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date, (ii) the Final Payment, (iii) the Prepayment Fee, plus (iv) all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts. Notwithstanding (but without duplication with) the foregoing, on the Maturity Date, if the Final Payment had not previously been paid in full in connection with the prepayment of the Term Loans in full, Borrower shall pay to Collateral Agent, for payment to each Lender in accordance with its respective Pro Rata Share, the Final Payment in respect of the Term Loans. (d) Permitted Prepayment of Term Loans . Borrower shall have the option to prepay all, but not less than all, of the Term Loans advanced by the Lenders under this Agreement, provided Borrower (i) provides written notice to Collateral Agent of its election to prepay the Term Loans at least thirty (30) days prior to such prepayment, and (ii) pays to the Lenders on the date of such prepayment, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of (A) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date, (B) the Final Payment, (C) the Prepayment Fee, plus (D) all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts. 2.3 Revolving Advances . (a) Availability . Subject to the terms and conditions of this Agreement and to deduction of Reserves, Lenders agree, severally and not jointly, to lend to Borrower from time to time prior to the Revolving Line Maturity Date, according to each Lender’s pro rata share of the Revolving Line (based upon the respective Revolving Line Commitment Percentage of each Lender), Revolving Advances not to exceed the Availability Amount. Amounts borrowed under the Revolving Line may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein. (b) Termination; Repayment . The Revolving Line terminates on the Revolving Line Maturity Date, when the principal amount of all Revolving Advances, the unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately due and payable. (c) Overadvances . If, at any time, the outstanding principal amount of any Revolving Advances exceeds the lesser of either the Revolving Line or the Borrowing Base, Borrower shall immediately pay to Collateral Agent, for the ratable benefit of the Lenders, in cash the amount of such excess (such excess, the “ Overadvance ”). Without limiting Borrower’s obligation to repay any Overadvance, Borrower agrees to pay Collateral Agent, for the ratable benefit of the Lenders, interest on the outstanding amount of any Overadvance, on demand, at the Default Rate. 2 2.4 Payment of Interest on the Credit Extensions . (a) Interest Rate. Subject to Section 2.4(b), the principal amount of the outstanding Credit Extensions shall accrue interest at a floating per annum rate equal to the Basic Rate, determined by Collateral Agent on the Funding Date, which interest shall be payable monthly in arrears in accordance with Sections 2.2(b) and 2.4(e). Interest shall accrue on each Credit Extension commencing on, and including, the Funding Date of such Credit Extension, and shall accrue on the principal amount outstanding thereunder through and including the day on which such Credit Extension is paid in full. (b) Default Rate . Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall accrue interest at a floating per annum rate equal to the rate that is otherwise applicable thereto plus five percentage points (5.00%) (the “ Default Rate ”). Payment or acceptance of the increased interest rate provided in this Section 2.4(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 Collateral Agent. (c) 360 - Day Year . Interest shall be computed on the basis of a three hundred sixty (360) day year, and the actual number of days elapsed. (d) Debit of Accounts . Collateral Agent and each Lender may debit (or ACH) any deposit accounts, maintained by Borrower or any of its Subsidiaries, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes the Lenders under the Loan Documents when due. Any such debits (or ACH activity) shall not constitute a set-off. (e) Payments . Except as otherwise expressly provided herein, all payments by Borrower under the Loan Documents shall be made to the respective Lender to which such payments are owed, at such Lender’s office in immediately available funds on the date specified herein. Unless otherwise provided, interest is payable monthly on the Payment Date of each month. Payments of principal and/or interest received after 12:00 noon Eastern Time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest, as applicable, shall continue to accrue until paid. All payments to be made by Borrower hereunder or under any other Loan Document, including payments of principal and interest, and all fees, expenses, indemnities and reimbursements, shall be made without set-off, recoupment or counterclaim, in lawful money of the United States and in immediately available funds. 2.5 Secured Promissory Notes. The Term Loans and Revolving Line shall be evidenced by Secured Promissory Notes in the form attached as Exhibit D hereto (each a “ Secured Promissory Note ”), and shall be repayable as set forth in this Agreement. Borrower irrevocably authorizes each Lender to make or cause to be made, on or about the Funding Date of any Credit Extension or at the time of receipt of any payment of principal on such Lender’s Secured Promissory Note, an appropriate notation on such Lender’s Secured Promissory Note Record reflecting the making of such Term Loan, Revolving Advance or (as the case may be) the receipt of such payment. The outstanding amount of each Term Loan and each Revolving Advance set forth on such Lender’s Secured Promissory Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender’s Secured Promissory Note Record shall not limit or otherwise affect the obligations of Borrower under any Secured Promissory Note or any other Loan Document to make payments of principal of or interest on any Secured Promissory Note when due. Upon receipt of an affidavit of an officer of a Lender as to the loss, theft, destruction, or mutilation of its Secured Promissory Note , Borrower shall issue, in lieu thereof, a replacement Secured Promissory Note in the same principal amount thereof and of like tenor. 3 2.6 Fees . Borrower shall pay to Collateral Agent: (a) Term Loan F acility Fee . A fully earned, non-refundable Term Loan facility fee of Two Hundred Thousand Dollars ($200,000.00) to be shared between the Lenders pursuant to their respective Term Loan Commitment Percentages payable on the Effective Date; (b) Revolving Line F acility Fee . A fully earned, non-refundable Revolving Line facility fee of Twenty-Five Thousand Dollars ($25,000.00) to be shared between the Lenders pursuant to their respective Revolving Line Commitment Percentages payable as follows: (i) Twelve Thousand Five Hundred Dollars ($12,500.00) of such facility fee shall be due and payable on the Effective Date and (ii) the remaining Twelve Thousand Five Hundred Dollars ($12,500.00) of such facility fee shall be due and payable on the first (1 st ) anniversary of the Effective Date; (c) Final Payment . The Final Payment, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares; (d) Prepayment Fee . The Prepayment Fee, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares; (e) Non-Use Fee s . The Non-Use Fees, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares; and (f) Lenders ’ Expenses . All Lenders’ Expenses (including reasonable and invoiced attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due. (g) Good Faith Deposit . Borrower has paid to the Lenders a deposit of Sixty Thousand Dollars ($60,000.00), which will be applied to Lenders’ Expenses, with any remaining amount to be applied to the Term Loan facility fee set forth in Section 2.6(a), on the Effective Date. 2.7 Withholding. Payments received by the Lenders from Borrower hereunder 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 the Lenders, 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, each Lender 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 the Lenders with proof reasonably satisfactory to the Lenders 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. CONDITIONS OF LOANS 3.1 Conditions Precedent to Initial Credit Extension . Each Lender’s obligation to make the initial Credit Extension is subject to the condition precedent that Collateral Agent and each Lender shall consent to or shall have received, in form and substance satisfactory to Collateral Agent and each Lender, such documents, and completion of such other matters, as Collateral Agent and each Lender may reasonably deem necessary or appropriate, including, without limitation: (a) original Loan Documents, each duly executed by Borrower and each Subsidiary, as applicable; 4 (b) duly executed original Control Agreements with respect to any Collateral Accounts maintained by Borrower or any of its Subsidiaries; (c) duly executed original Secured Promissory Notes in favor of each Lender according to its Term A Loan Commitment Percentage and Revolving Line Commitment Percentage; (d) the certificate(s) for the Shares, to the extent certificated, together with Assignment(s) Separate from Certificate, duly executed in blank; (e) the Operating Documents and 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 ; (f) a completed Perfection Certificate for Borrower and each of its Subsidiaries; (g) the Annual Projections, for the current calendar year; (h) duly executed original officer’s certificate for Borrower and each Subsidiary that is a party to the Loan Documents, in a form acceptable to Collateral Agent and the Lenders; (i) certified copies, dated as of date no earlier than thirty (30) days prior to the Effective Date, of financing statement searches, as Collateral Agent shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released; (j) a landlord’s consent executed in favor of Collateral Agent in respect of all of Borrower’s and each Subsidiaries’ leased locations (other than Borrower’s leased location in Denver, Colorado, which lease shall expire in April 2016) where Borrower or any Subsidiary maintains (i) any of Borrower’s Books or (ii) Collateral having a book value in excess of Seven Hundred Fifty Thousand Dollars ($750,000.00); (k) a bailee waiver executed in favor of Collateral Agent in respect of each third party bailee where Borrower or any Subsidiary maintains Collateral having a book value in excess of Seven Hundred Fifty Thousand Dollars ($750,000.00); (l) a duly executed legal opinion of counsel to Borrower dated as of the Effective Date; (m) evidence satisfactory to Collateral Agent and the Lenders that the insurance policies required by Section 6.5 hereof are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements in favor of Collateral Agent, for the ratable benefit of the Lenders; (n) receipt by the Title Company of the fully executed and notarized Mortgage, providing for first priority mortgage lien in respect of the Mortgaged Premises in favor of Collateral Agent and such other documents which are customary in commercial mortgage transactions in Minnesota, each in form and substance satisfactory to Collateral Agent; (o) issuance of a title commitment from the Title Company in respect of the Mortgaged Premises that is acceptable to Collateral Agent and satisfaction of the conditions to effectiveness of such title commitment; (p) the First Tranche Milestone has occurred; and (q) payment of the fees and Lenders’ Expenses then due as specified in Section 2.6 hereof. 5 3.2 Conditions Precedent to all Credit Extensions . The obligation of each Lender to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent: (a) receipt by (i) the Lenders of an executed Disbursement Letter in the form of Exhibit B - 1 attached hereto; and (ii) SVB of an executed Loan Payment/Advance Request Form in the form of Exhibit B - 2 attached hereto; (b) the representations and warranties in Section 5 hereof shall be true, accurate and complete in all material respects on the date of the Disbursement Letter (and the Loan Payment/Advance Request Form and any 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 Section 5 hereof are 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; (c) in such Lender’s sole discretion, there has not been any Material Adverse Change; (d) after giving effect to such Credit Extension, the total outstanding Revolving Advances does not exceed the Availability Amount; (e) with respect to the initial Revolving Advance, (i) the completion of the Initial Audit with results satisfactory to the Lenders in their sole and absolute discretion and (ii) an executed Transaction Report; (f) to the extent not delivered at the Effective Date, duly executed original Secured Promissory Notes and Warrants, in number, form and content acceptable to each Lender, and in favor of each Lender according to its Term Loan Commitment Percentage or Revolving Line Commitment Percentage, as applicable, with respect to each Credit Extension made by such Lender after the Effective Date; and (g) payment of the fees and Lenders’ Expenses then due as specified in Section 2.6 hereof. 3.3 Covenant to Deliver . Borrower agrees to deliver to Collateral Agent and the Lenders each item required to be delivered to Collateral Agent under this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by Collateral Agent or any Lender of any such item shall not constitute a waiver by Collateral Agent or any Lender of Borrower’s obligation to deliver such item, and any such Credit Extension in the absence of a required item shall be made in each Lender’s sole discretion. 3.4 Procedures for Borrowing. (a) Term Loans . Subject to the prior satisfaction of all other applicable conditions to the making of a Term Loan set forth in this Agreement, to obtain a Term Loan, Nuvectra, on behalf of itself and all other Borrowers, shall notify the Lenders (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon Pacific Time five (5) Business Days prior to the date the Term Loan is to be made. Together with any such electronic, facsimile or telephonic notification, Nuvectra, on behalf of itself and all other Borrowers, shall deliver to the Lenders by electronic mail or facsimile a completed Disbursement Letter (and the Loan Payment/Advance Request Form, with respect to SVB) executed by a Responsible Officer or his or her designee. The Lenders may rely on any telephone notice given by a person whom a Lender reasonably believes is a Responsible Officer or designee. On the applicable Funding Date, each Lender shall credit and/or transfer (as applicable) to the Designated Deposit Account, an amount equal to its Term Loan Commitment. 6 (b) Revolving Advances . Subject to the prior satisfaction of all other applicable conditions to the making of a Revolving Advance set forth in this Agreement, to obtain a Revolving Advance, Nuvectra, on behalf of itself and all other Borrowers, shall notify the Lenders (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon Eastern time three (3) Business Days prior to the Funding Date of the Revolving Advance. Together with any such electronic, facsimile or telephonic notification, Nuvectra, on behalf of itself and all other Borrowers, shall deliver to the Lenders by electronic mail or facsimile a completed Borrowing Base Certificate and Transaction Report (provided that a Borrowing Base Certificate and Transaction Report shall not be required if a Borrowing Base Certificate and Transaction Report were delivered during the most recently ended month), together with any schedules related thereto, and a completed Loan Payment/Advance Request executed by a Responsible Officer or his or her designee. The Lenders may rely on any telephone notice given by a person whom a Lender reasonably believes is a Responsible Officer or his or her designee. Bank, on behalf of Collateral Agent and Lenders, shall credit Revolving Advances to the Designated Deposit Account and such Revolving Advances shall be deemed to be Revolving Advances by each of the Lenders in the amount of their respective Revolving Line Commitment Percentages. Bank, Collateral Agent and the Lenders shall make reasonable efforts to make Revolving Advances on the Funding Date requested by Borrower. The Lenders shall reimburse Bank for Revolving Advances made by Bank. (The Lenders, Collateral Agent and Bank, as among themselves, agree that unless Lenders have already funded their respective Revolving Line Commitment Percentages of a Revolving Advance, Bank shall provide the Lenders with a participation settlement report by 12:00 noon Eastern time on the second Business Day of each week following the week in which a Revolving Advance has been funded by Bank and that such reimbursement shall occur by the third Business Day of such week; the Borrower is not a party to or a beneficiary of this sentence and it may be amended without Borrower’s consent.) Bank, on behalf of the Collateral Agent and the Lenders, may make Revolving Advances under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if the Revolving Advances are necessary to meet Obligations which have become due. 4. CREATION OF SECURITY INTEREST 4.1 Grant of Security Interest . Borrower hereby grants Collateral Agent, for the ratable benefit of the Lenders, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Collateral Agent, for the ratable benefit of the Lenders, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral, subject only to Permitted Liens that are permitted by the terms of this Agreement to have priority to Collateral Agent’s Lien. If Borrower shall acquire a commercial tort claim (as defined in the Code) with a value in excess of One Hundred Thousand Dollars ($100,000.00), Borrower shall promptly notify Collateral Agent in a writing signed by Borrower, as the case may be, of the general details thereof (and further details as may be required by Collateral Agent) and grant to Collateral Agent, for the ratable benefit of the Lenders, 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 Collateral Agent. 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, Collateral Agent’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment in full in cash of the Obligations (other than inchoate indemnity obligations) and at such time as the Lenders’ obligation to make Credit Extensions has terminated, Collateral Agent shall, at the sole cost and expense of Borrower, release its Liens 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, Collateral Agent 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 one hundred three percent (103%); and (y) if such Letters of Credit are denominated in a Foreign Currency, then one hundred five percent (105%), 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. 7 4.2 Authorization to File Financing Statements . Borrower hereby authorizes Collateral Agent to file financing statements or take any other action required to perfect Collateral Agent’s security interests in the Collateral, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Collateral Agent’s interest or rights under the Loan Documents, including a notice that any disposition of the Collateral, except to the extent permitted by the terms of this Agreement, by Borrower, or any other Person, shall be deemed to violate the rights of Collateral Agent under the Code. 4.3 Pledge of Collateral. Borrower hereby pledges, assigns and grants to Collateral Agent, for the ratable benefit of the Lenders, a security interest in all the Shares, together with all proceeds and substitutions thereof, all cash, stock and other moneys and property paid thereon, all rights to subscribe for securities declared or granted in connection therewith, and all other cash and noncash proceeds of the foregoing, as security for the performance of the Obligations. On the Effective Date, or, to the extent not certificated as of the Effective Date, within ten (10) days of the certification of any Shares, the certificate or certificates for the Shares will be delivered to Collateral Agent, accompanied by an instrument of assignment duly executed in blank by Borrower. To the extent required by the terms and conditions governing the Shares, Borrower shall cause the books of each entity whose Shares are part of the Collateral and any transfer agent to reflect the pledge of the Shares. Upon the occurrence and during the continuance of an Event of Default hereunder, Collateral Agent may effect the transfer of any securities included in the Collateral (including but not limited to the Shares) into the name of Collateral Agent and cause new (as applicable) certificates representing such securities to be issued in the name of Collateral Agent or its transferee. Borrower will execute and deliver such documents, and take or cause to be taken such actions, as Collateral Agent may reasonably request to perfect or continue the perfection of Collateral Agent’s security interest in the Shares. Unless an Event of Default shall have occurred and be continuing, Borrower shall be entitled to exercise any voting rights with respect to the Shares and to give consents, waivers and ratifications in respect thereof, provided that no vote shall be cast or consent, waiver or ratification given or action taken which would be inconsistent with any of the terms of this Agreement or which would constitute or create any violation of any of such terms. All such rights to vote and give consents, waivers and ratifications shall terminate upon the occurrence and continuance of an Event of Default. 5. REPRESENTATIONS AND WARRANTIES Borrower represents and warrants to Collateral Agent and the Lenders as follows: 5.1 Due Organization, Authorization: Power and Authority . Borrower and each of its Subsidiaries is duly existing and in good standing as a Registered Organization in its jurisdictions of organization or formation and Borrower and each of its Subsidiaries is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its businesses 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 Change. In connection with this Agreement, Borrower and each of its Subsidiaries has delivered to Collateral Agent a completed perfection certificate signed by an officer of Borrower or such Subsidiary (each a “ Perfection Certificate ” and collectively, the “ Perfection Certificates ”). Borrower represents and warrants that (a) Borrower and each of its Subsidiaries’ exact legal name is that which is indicated on its respective Perfection Certificate and on the signature page of each Loan Document to which it is a party; (b) Borrower and each of its Subsidiaries is an organization of the type and is organized in the jurisdiction set forth on its respective Perfection Certificate; (c) each Perfection Certificate accurately sets forth each of Borrower’s and its Subsidiaries’ organizational identification number or accurately states that Borrower or such Subsidiary has none; (d) each Perfection Certificate accurately sets forth Borrower’s and each of its Subsidiaries’ place of business, or, if more than one, its chief executive office as well as Borrower’s and each of its Subsidiaries’ mailing address (if different than its chief executive office); (e) Borrower and each of its Subsidiaries (and each of its respective predecessors) have not, in the past five (5) years, changed its jurisdiction of organization, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificates pertaining to Borrower and each of its Subsidiaries, is accurate and complete in all material respects (it being understood and agreed that Borrower and each of its Subsidiaries may from time to time update certain information in the Perfection Certificates (including the information set forth in clause (d) above) after the Effective Date to the extent permitted by one or more specific provisions in this Agreement); such updated Perfection Certificates subject to the review and approval of Collateral Agent. If Borrower or any of its Subsidiaries is not now a Registered Organization but later becomes one, Borrower shall notify Collateral Agent of such occurrence and provide Collateral Agent with such Person’s organizational identification number within five (5) Business Days of receiving such organizational identification number. 8 The execution, delivery and performance by Borrower and each of its Subsidiaries of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s or such Subsidiaries’ organizational documents, including its respective Operating Documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law applicable thereto, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or such Subsidiary, 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 are being obtained pursuant to Section 6.1(b), or (v) constitute an event of default under any material agreement by which Borrower or any of such Subsidiaries, or their respective properties, is bound. Neither Borrower nor any of its Subsidiaries is in default under any agreement to which it is a party or by which it or any of its assets is bound in which such default could reasonably be expected to have a Material Adverse Change. 5.2 Collateral . (a) Borrower and each of its Subsidiaries have good title to, have rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien under the Loan Documents, free and clear of any and all Liens except Permitted Liens, and neither Borrower nor any of its Subsidiaries have any Deposit Accounts, Securities Accounts, Commodity Accounts or other investment accounts other than the Collateral Accounts or the other investment accounts, if any, described in the Perfection Certificates delivered to Collateral Agent in connection herewith with respect of which Borrower or such Subsidiary has given Collateral Agent notice and taken such actions as are necessary to give Collateral Agent a perfected security interest therein. The Accounts are bona fide, existing obligations of the Account Debtors. (b) On the Effective Date, and except as disclosed on the Perfection Certificate (i) the Collateral is not in the possession of any third party bailee (such as a warehouse), and (ii) no such third party bailee possesses components of the Collateral in excess of Seven Hundred Fifty Thousand Dollars ($750,000.00). None of the components of the Collateral shall be maintained at locations other than as disclosed in the Perfection Certificates on the Effective Date or as permitted pursuant to Section 6.11. (c) All Inventory is in all material respects of good and marketable quality, free from material defects. (d) B