Partners for Growth Loan and Security Agreement
EXHIBIT
10.1
Partners
for Growth
| Borrower: |
North
American Scientific, Inc., a Delaware corporation
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| Address: |
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| Borrower: |
NOMOS
Corporation
|
| Address: |
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| Borrower: |
North
American Scientific, Inc., a California
corporation
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| Address: |
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| Date: |
March
28, 2006
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THIS
LOAN AND SECURITY AGREEMENT
is
entered into on the above date between PARTNERS FOR GROWTH II, L.P. (“PFG”),
whose address is ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and the borrower(s)
named above (jointly and severally, the “Borrower”), whose chief executive
office is located at the above address (“Borrower’s Address”). The Schedule to
this Agreement (the “Schedule”) being signed by the parties concurrently, is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)
1. LOANS.
1.1
Loans. PFG
will
make loans to Borrower (the “Loans”) up to the amounts and subject to the
conditions to borrowing (the “Credit Limit”) shown on the Schedule, provided no
Default or Event of Default has occurred and is continuing, and subject to
deduction of Reserves for accrued and unpaid interest and such other Reserves
as
PFG may establish in accordance with the definition thereof.
1.2
Interest.
All
Loans and all other monetary Obligations shall bear interest at the rate shown
on the Schedule, except where expressly set forth to the contrary in this
Agreement. Interest shall be payable monthly, on the first day of each month
for
interest accrued during the prior month. Overdue and unpaid interest may, in
PFG’s discretion, be charged to Borrower’s loan account (i.e., added to the
principal amount then outstanding), and shall thereafter bear interest at the
same rate as the other Loans.
1.3
Overadvances. If,
at
any time or for any reason, the total of all outstanding Loans and all other
monetary Obligations exceeds the Credit Limit (an “Overadvance”), Borrower shall
immediately pay the amount of the excess to PFG, without notice or demand.
Without limiting Borrower's obligation to repay to PFG the amount of any
Overadvance, Borrower agrees to pay PFG interest on the outstanding amount
of
any Overadvance, on demand, at the Default Rate.
1.4
Fees.
Borrower
shall pay PFG the fees shown on the Schedule, which are in addition to all
interest and other sums payable to PFG hereunder and are not
refundable.
1.5
Loan Requests.
To
obtain a Loan, Borrower shall make a request to PFG by facsimile or telephone.
Loan requests may also be made by Borrower by email, but the same shall not
be
deemed made until PFG acknowledges receipt of the same by email or otherwise
in
writing. PFG’s obligation to consider a Loan request shall be subject to its
receipt of such reports, certificates and other information as may be set forth
in the Schedule. Loan requests received after 12:00 Noon Pacific time will
not
be deemed received by PFG until the next Business Day. PFG may rely on any
telephone request for a Loan given by a person whom PFG believes in good faith
is an authorized representative of Borrower, and Borrower will indemnify PFG
for
any loss PFG suffers as a result of that reliance.
1.6
Late Fee.
If any
payment of accrued interest for any month is not made within three business
days
after the date a ▇▇▇▇ therefor is sent by PFG to Borrower, or if any payment
of
principal or any other payment is not made within three Business Days after
the
date due, Borrower shall pay PFG a late payment fee equal to 5% of the amount
of
such late payment. The provisions of this paragraph shall not be construed
as
PFG’s consent to Borrower’s failure to pay any amounts when due, and PFG’s
acceptance of any such late payments shall not restrict PFG’s exercise of any
remedies arising out of any such failure.
2.
SECURITY INTEREST.
2.1
Grant of Security Interest. To
secure
the payment and performance of all of the Obligations when due, Borrower hereby
grants to PFG a security interest in all of the following (collectively, the
“Collateral”): all right, title and interest of Borrower in and to all of the
following, whether now owned or hereafter arising or acquired and wherever
located: all Accounts; all Inventory; all Equipment; all Deposit Accounts;
all
General Intangibles (including without limitation all Intellectual Property);
all Investment Property; all Other Property; and any and all claims, rights
and
interests in any of the above, and all guaranties and security for any of the
above, and all substitutions and replacements for, additions, accessions,
attachments, accessories, and improvements to, and proceeds (including proceeds
of any insurance policies, proceeds of proceeds and claims against third
parties) of, any and all of the above, and all Borrower’s books relating to any
and all of the above.
2.2
Specified Contracts Excluded. Notwithstanding
anything herein to the contrary, the security interest granted under this
Section 2 shall not attach to any of the following (“Specified Contracts”): any
lease, license, contract, property rights or agreement to which Borrower is
a
party or any of its rights or interests thereunder if and for so long as the
grant of such security interest shall constitute or result in any of the
following (other than to the extent that any such term would be ineffective
under the Code or any other applicable law or principles of equity): (i) the
abandonment, invalidation or unenforceability of any right, title or interest
of
Borrower therein, or (ii) in a breach or termination pursuant to the terms
of,
or a default under, any such lease, license, contract property rights or
agreement; provided however that such security interest shall attach immediately
at such time as the condition causing such abandonment, invalidation or
unenforceability shall be remedied and to the extent severable, shall attach
immediately to any portion of such lease, license, contract, property rights
or
agreement that does not result in any of the consequences specified in (i)
or
(ii) above. Except as disclosed on Exhibit A hereto, Borrower represents and
warrants to PFG that there are no Specified Contracts which are material to
Borrower’s business or grant Borrower rights in Intellectual Property which is
licensed by the Borrower to its customers or incorporated in products licensed
or sold by the Borrower to its customers. Borrower shall not, hereafter, without
PFG’s prior written consent, enter into any Specified Contract which is material
to Borrower’s business or grants Borrower rights in Intellectual Property which
is licensed by the Borrower to its customers or incorporated in products
licensed or sold by the Borrower to its customers.
3.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
BORROWER.
In
order
to induce PFG to enter into this Agreement and to make Loans, Borrower
represents and warrants to PFG as follows, and Borrower covenants that the
following representations will continue to be true, and that Borrower will
at
all times comply with all of the following covenants, throughout the term of
this Agreement and until all Obligations have been paid and performed in
full:
3.1
Corporate Existence and Authority.
Borrower
is and will continue to be, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Borrower
is
and will continue to be qualified and licensed to do business in all
jurisdictions in which any failure to do so would result in a Material Adverse
Change. The execution, delivery and performance by Borrower of this Agreement,
and all other documents contemplated hereby (i) have been duly and validly
authorized, (ii) are enforceable against Borrower in accordance with their
terms
(except as enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors’
rights generally), and (iii) do not violate Borrower’s articles or certificate
of incorporation, or Borrower’s by-laws, or any law to which Borrower or its
property is subject, and (iv) do not constitute an event of default under or
grounds for acceleration of any material indebtedness or obligation under any
agreement or instrument which is binding upon Borrower or its
property.
3.2
Name; Trade Names and Styles.
As of
the date hereof, the name of Borrower set forth in the heading to this Agreement
is its correct name, as set forth in its Articles or Certificate of
Incorporation. Listed in the Representations are all prior names of Borrower
and
all of Borrower’s present trade names as of the date hereof and trade names used
during the five-year period preceding the date hereof. Borrower shall give
PFG
30 days prior written notice before changing its name. Borrower has complied,
and will in the future comply, in all material respects, with all laws relating
to the conduct of business under a fictitious business name, if applicable
to
Borrower.
3.3
Place of Business; Location of Collateral. As
of the
date hereof, the address set forth in the heading to this Agreement is
Borrower's chief executive office. In addition, as of the date hereof, Borrower
has places of business and Collateral is located only at the locations set
forth
in the Representations. Borrower will give PFG at least 30 days prior written
notice before changing its chief executive office, or moving more than $100,000
of the Collateral to a location other than Borrower’s Address or one of the
locations set forth in the Representations.
3.4
Title to Collateral; Perfection; Permitted Liens.
(a)
Borrower is now, and will at all times in the future be, the sole owner of
all
the Collateral, except for items of Equipment which are leased to Borrower
and
except for non-exclusive licenses granted to its customers in the ordinary
course of business, and licenses granted to Borrower by third parties with
respect to intellectual property owned by such third parties. The Collateral
now
is and will remain free and clear of any and all liens, charges, security
interests, encumbrances and adverse claims, except for Permitted Liens. PFG
now
has, and will continue to have, a first-priority (subject only to the security
interest of the Senior Lender) perfected and enforceable security interest
in
all of the Collateral, subject only to the Permitted Liens, and Borrower will
at
all times defend PFG and the Collateral against all claims of others, excepting
Permitted Liens.
(b) Borrower
has set forth in the Representations all of Borrower’s Deposit Accounts as of
the date hereof, and Borrower will give PFG five Business Days advance written
notice before establishing any new Deposit Accounts and will cause the
institution where any such new Deposit Account is maintained to execute and
deliver to PFG a control agreement in form sufficient to perfect PFG’s security
interest in the Deposit Account and otherwise satisfactory to PFG in its good
faith business judgment, provided that PFG’s rights under any such control
agreement shall be subject to the rights of the Senior Lender.
(c)
In
the event that Borrower shall at any time after the date hereof have any
commercial tort claims against others, which it is asserting, and in which
the
potential recovery exceeds $100,000, Borrower shall promptly notify PFG thereof
in writing and provide PFG with such information regarding the same as PFG
shall
request (unless providing such information would waive the Borrower’s
attorney-client privilege). Such notification to PFG shall constitute a grant
of
a security interest in the commercial tort claim and all proceeds thereof to
PFG, and Borrower shall execute and deliver all such documents and, subject
to
the rights of the Senior Lender, take all such actions as PFG shall request
in
connection therewith.
(d)
None
of
the Collateral now is or will be affixed to any real property in such a manner,
or with such intent, as to become a fixture. Except as set forth in the
Schedule, without the prior written consent of PFG, which consent may be
conditioned upon PFG securing a landlord waiver in such form as PFG may specify,
Borrower is not and will not become a lessee under any real property lease
pursuant to which the lessor may obtain any rights in Collateral with a value
in
excess of $100,000, and no such lease now prohibits, restrains, impairs or
will
prohibit, restrain or impair Borrower's right to remove any Collateral with
a
value in excess of $100,000 from such leased premises. Whenever Collateral
with
a value in excess of $100,000 is located upon premises in which any third party
has an interest, Borrower shall, whenever requested by PFG, use commercially
reasonable efforts to cause such third party to execute and deliver to PFG,
in
form acceptable to PFG, such waivers and subordinations as PFG shall specify
in
its good faith business judgment. Borrower will notify PFG in advance of
terminating any lease of real property where any of the Collateral now or in
the
future may be located.
3.5
Maintenance of Collateral. Borrower
will maintain the Collateral in good working condition (ordinary wear and tear
excepted), and Borrower will not use the Collateral for any unlawful purpose.
Borrower will immediately advise PFG in writing of any loss or damage to the
Collateral in excess of $100,000.
3.6
Books and Records.
Borrower
maintains and will maintain at Borrowers’ Address complete and accurate books
and records, comprising an accounting system in accordance with
GAAP.
3.7
Financial Condition, Statements and Reports.
All
financial statements now or in the future delivered to PFG have been, and will
be, prepared in conformity with GAAP and now and in the future will fairly
present in all material respects the results of operations and financial
condition of Borrower, in accordance with GAAP, at the times and for the periods
therein stated. Between the last date covered by any such statement provided
to
PFG and the date hereof, there has been no Material Adverse Change.
3.8
Tax Returns and Payments; Pension Contributions.
Borrower
has timely filed, and will timely file, all required tax returns and reports,
and Borrower has timely paid, and will timely pay, all material foreign,
federal, state and local taxes, assessments, deposits and contributions now
or
in the future owed by Borrower, except for any of the foregoing which are
contested by Borrower in good faith, with adequate reserves under GAAP and
which
do not result in any tax lien on any of the Collateral, other than as set forth
in Clause (iii) of the definition of Permitted Liens. Regardless of the
materiality of any of the foregoing, Borrower shall promptly take all actions
necessary, whether through payment, contest or otherwise, to ensure that none
of
the foregoing result in a lien on Collateral with priority over PFG’s liens on
Collateral. Borrower has paid, and shall continue to pay all amounts necessary
to fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit
the
occurrence of any other event with respect to, any such plan which could
reasonably be expected to result in any material liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.
3.9
Compliance with Law.
Borrower
is, to the best of its knowledge, in compliance with, and will continue to
comply, in all material respects, with all provisions of all foreign, federal,
state and local laws and regulations applicable to Borrower, including, but
not
limited to, those relating to Borrower's ownership of real or personal property,
the conduct and licensing of Borrower's business, and all environmental
matters.
3.10
Litigation. Except
as
shown in Exhibit A hereto and except for such modifications thereto as to which
Borrower shall have notified PFG in a manner acceptable to PFG and which
modified information is acceptable to PFG in its sole discretion,
there
is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Borrower’s knowledge) threatened against or affecting Borrower in any court or
before any governmental agency (or any basis therefor known to Borrower) which
could reasonably be expected to result, either separately or in the aggregate,
in any Material Adverse Change. Borrower will promptly inform PFG in writing
of
any claim, proceeding, litigation or investigation in the future threatened
or
instituted against Borrower involving any single claim of $250,000 or more,
or
involving $250,000 or more in the aggregate.
3.11
Use of Proceeds.
All
proceeds of all Loans shall be used solely for lawful business purposes.
Borrower is not purchasing or carrying any "margin stock" (as defined in
Regulation U of the Board of Governors of the Federal Reserve System) and no
part of the proceeds of any Loan will be used to purchase or carry any "margin
stock" or to extend credit to others for the purpose of purchasing or carrying
any "margin stock."
3.12
No Default. At
the
date hereof, no Default or Event of Default has occurred, and no Default or
Event of Default will have occurred after giving effect to any Loans being
made
concurrently herewith.
4.
ACCOUNTS.
4.1
Representations Relating to Accounts. Borrower
represents and warrants to PFG as follows: Each Account with respect to which
Loans are requested by Borrower shall, on the date each Loan is requested and
made, (i) represent an undisputed bona fide existing unconditional obligation
of
the Account Debtor created by the sale, delivery, and acceptance of goods or
the
rendition of services, or the non-exclusive licensing of Intellectual Property,
in the ordinary course of Borrower's business, subject to any such Account
Debtor’s right to return goods that are defective.
4.2
Representations Relating to Documents and Legal Compliance.
Borrower
represents and warrants to PFG as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Accounts are and shall be true and correct in all material respects and
all
such invoices, instruments and other documents and all of Borrower’s books and
records are and shall be genuine and in all respects what they purport to be.
All sales and other transactions underlying or giving rise to each Account
shall
comply in all material respects with all applicable laws and governmental rules
and regulations. To the best of Borrower’s knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Accounts are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their
terms.
4.3
Documents Relating to Accounts. If
requested by PFG, Borrower shall furnish PFG with copies (or, subject to the
rights of the Senior Lender and at PFG'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, and Borrower
warrants the genuineness of all of the foregoing. In addition, subject to the
rights of the Senior Lender, Borrower shall deliver to PFG, 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 indorsements, and copies of all credit
memos.
4.4
Collection of Accounts. Borrower
shall have the right to collect all Accounts, unless and until a Default or
an
Event of Default has occurred and is continuing. Subject to the rights of the
Senior Lender, PFG may, in its good faith business judgment, require that all
proceeds of Collateral be deposited by Borrower into a lockbox account, or
such
other "blocked account" as PFG may specify, pursuant to a blocked account
agreement in such form as PFG may specify in its good faith business judgment.
4.5.
Remittance of Proceeds. Subject
to the rights of the Senior Lender, all proceeds arising from the disposition
of
any Collateral shall be delivered, in kind, by Borrower to PFG 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 in such order as
PFG
shall determine; provided that, if no Default or Event of Default has occurred
and is continuing, Borrower shall not be obligated to remit to PFG (i) the
proceeds of Accounts arising in the ordinary course of business, or (ii) the
proceeds of the sale of worn out or obsolete Equipment disposed of by Borrower
in good faith in an arm’s length transaction for an aggregate purchase price of
$100,000 or less (for all such transactions in any fiscal year). Borrower agrees
that it will not commingle proceeds of Collateral with any of Borrower's other
funds or property, but will hold such proceeds separate and apart from such
other funds and property and in an express trust for PFG, except as set forth
above, and subject to the rights of the Senior Lender. Nothing in this Section
limits the restrictions on disposition of Collateral set forth elsewhere in
this
Agreement.
4.6
Disputes. Borrower
shall notify PFG promptly of all disputes or claims relating to Accounts in
an
amount in excess of $100,000. Borrower shall not forgive (completely or
partially), compromise or settle any Account for less than payment in full,
or
agree to do any of the foregoing, except that Borrower may do so, provided
that:
(i) Borrower does so in good faith, in a commercially reasonable manner, in
the
ordinary course of business, and in arm’s length transactions, and which, if in
excess of $50,000, are reported to PFG on the regular reports provided to PFG;
(ii) no Default or Event of Default has occurred and is continuing; and (iii)
taking into account all such discounts, settlements and forgiveness, the total
outstanding Loans will not exceed the Credit Limit.
4.7
Returns.
Provided
no Event of Default has occurred and is continuing, if any Account Debtor
returns any Inventory to Borrower, Borrower shall promptly determine the reason
for such return and, if appropriate, promptly issue a credit memorandum to
the
Account Debtor in the appropriate amount. In the event any attempted return
occurs after the occurrence and during the continuance of any Event of Default,
Borrower shall hold the returned Inventory in trust for PFG, and promptly
notify PFG of the return of the Inventory.
4.8
Verification.
PFG may,
from time to time, verify directly with the respective Account Debtors the
validity, amount and other matters relating to the Accounts, by means of mail,
telephone or otherwise, either in the name of Borrower or PFG or such other
name
as PFG may choose.
4.9
No Liability. PFG
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 PFG 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 PFG from liability for its own gross negligence
or willful misconduct.
5.
ADDITIONAL DUTIES OF BORROWER.
5.1
Financial and Other Covenants.
Borrower
shall at all times comply with the financial and other covenants set forth
in
the Schedule.
5.2
Insurance.
Borrower
shall, at all times insure all of the tangible personal property Collateral
and
carry such other business insurance, with insurers reasonably acceptable to
PFG,
in such form and amounts as PFG may reasonably require and as are customary
and
in accordance with standard practices for Borrower’s industry and locations, and
Borrower shall provide evidence of such insurance to PFG. All such insurance
policies shall name PFG as an additional loss payee, and shall contain a lenders
loss payee endorsement in form reasonably acceptable to PFG. Upon receipt of
the
proceeds of any such insurance, subject to the rights of the Senior Lender,
PFG
shall apply such proceeds in reduction of the Obligations as PFG shall determine
in its good faith business judgment, except that, provided no Default or Event
of Default has occurred and is continuing, PFG shall release to Borrower
insurance proceeds with respect to Equipment totaling less than $100,000, which
shall be utilized by Borrower for the replacement of the Equipment with respect
to which the insurance proceeds were paid. PFG may require reasonable assurance
that the insurance proceeds so released will be so used. If Borrower fails
to
provide or pay for any insurance, PFG may, but is not obligated to, obtain
the
same at Borrower's expense.
5.3
Compliance; Reports.
Borrower
will maintain its and all Subsidiaries’ legal existence in its jurisdiction of
formation and maintain its good standing and qualification in each jurisdiction
in which the failure to so qualify would reasonably be expected to cause a
material adverse effect on Borrower’s business or operations. Borrower
will comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower’s business or operations or would reasonably
be expected to cause a Material Adverse Change. Borrower shall at all times
timely comply with its reporting obligations under applicable Securities and
Exchange Commission rules and regulations, provided however, Borrower shall
not
be deemed to have breached such obligation if it has timely notified the
Securities and Exchange Commission (or other relevant regulatory body) of its
inability to timely file a required report, Borrower promptly notifies PFG
of
such inability to timely file, and Borrower uses its best efforts to file such
report as soon as is practicable. Borrower, at its expense, shall provide PFG
with the written reports set forth in the Schedule, and such other written
reports with respect to Borrower (including budgets, projections, operating
plans and other financial documentation), as PFG shall from time to time specify
in its good faith business judgment.
5.4
Access to Collateral, Books and Records.
At
reasonable times, and on three Business Day’s notice, PFG, or its agents, shall
have the right to inspect the Collateral, and the right to audit and copy
Borrower's books and records. The foregoing inspections and audits shall
be at
Borrower’s expense and the charge therefor shall be $750 per person per day (or
such higher amount as shall represent PFG’s then current standard charge for the
same), plus reasonable out-of-pocket expenses. Audits
shall be conducted not more frequently than quarterly if there are no Loans
outstanding and Borrower has not requested that PFG extend any Loans
hereunder. Notwithstanding
the foregoing, Borrower shall not be required to disclose to PFG any document
or
information (i) where disclosure is prohibited by applicable law or any
agreement binding on Borrower, or (ii) is subject to attorney-client or similar
privilege or constitutes attorney work product. If Borrower is withholding
any
information under the preceding sentence, it shall so advise PFG in writing,
giving PFG a general description of the nature of the information
withheld.
5.5
Negative Covenants.
Except
as may be permitted in the Schedule, Borrower shall not, without PFG's prior
written consent (which shall be a matter of its good faith business judgment),
do any of the following:
(i)
merge
or consolidate with another corporation or entity, except
a
Subsidiary may merge or consolidate into another Subsidiary or into Borrower
if
no Default or Event of Default has occurred and is continuing or would result
from such action;
(ii)
make
any Investments other than Permitted Investments;
(iii)
enter into any other transaction, including without limitation, acquisition
of
assets, outside the ordinary course of business, not expressly permitted
hereunder;
(iv)
sell
or transfer any Collateral (including without limitation and sale or transfer
of
Collateral which is then leased back by Borrower), except for (A) the sale
of
Inventory in the ordinary course of Borrower's business, and except for the
sale
of obsolete or unneeded Equipment, (B) the making of Permitted Investments,
(C)
the granting of Permitted Liens, (D) the non-exclusive licensing of Intellectual
Property and similar arrangements for the use of the property of Borrower in
the
ordinary course of business, and (E) other assets of Borrower that in the
aggregate do not exceed $250,000;
(v)
store
any Inventory or other Collateral with any warehouseman or other third party,
unless there is in place a bailee agreement in such form as PFG shall specify
in
its good faith business judgment;
(vi)
make
any loans of any money or other assets, other than Permitted Investments;
(vii)
incur any Indebtedness, other than Permitted Indebtedness;
(viii)
guarantee or otherwise become liable with respect to the obligations of another
party or entity, other than Permitted Indebtedness of another Borrower;
(ix)
pay
or declare any dividends on Borrower's stock (except for dividends payable
solely in stock of Borrower);
(x)
redeem, retire, purchase or otherwise acquire, directly or indirectly, any
of
Borrower's stock, except if
the
consideration for the repurchase is the cancellation of indebtedness owed to
Borrower by former employees, and no cash consideration is paid by Borrower
in
connection with such repurchase;
(xi)
engage, directly or indirectly, in any business other than the businesses
currently engaged in by Borrower or reasonably related thereto;
(xiii)
maintain in excess of US$100,000 in any bank account or US$300,000 in the
aggregate among all bank accounts for which there is not a Deposit Account
control agreement in effect in favor of PFG; or
(xix)
dissolve or elect to dissolve.
Transactions
permitted by the foregoing provisions of this Section are only permitted if
no
Default or Event of Default would occur as a result of such transaction.
5.6
Litigation Cooperation.
Should
any third-party suit or proceeding be instituted by or against PFG with respect
to any Collateral or relating to Borrower, Borrower shall, without expense
to
PFG, make available Borrower and its officers, employees and agents and
Borrower's books and records, to the extent that PFG may deem them reasonably
necessary in order to prosecute or defend any such suit or
proceeding.
5.7
Changes. Borrower
agrees to promptly notify PFG in writing of any changes in the information
set
forth in the Representations, provided that only material changes to the
Representations set forth in Sections 8, 9 and 10 need be notified to
PFG.
5.8
Further Assurances.
Borrower
agrees, at its expense, on request by PFG, to execute all documents and take
all
actions, as PFG, may, in its good faith business judgment, deem necessary or
useful in order to perfect and maintain PFG's perfected first-priority (subject
only to the priority of the Senior Lender) interest security interest in the
Collateral (subject to Permitted Liens), and in order to fully consummate the
transactions contemplated by this Agreement.
6.
TERM.
6.1
Maturity Date.
This
Agreement shall continue in effect until the maturity date set forth on the
Schedule (the "Maturity Date”), subject to Sections 6.2 and 6.3
below.
6.2
Early Termination.
This
Agreement may be terminated prior to the Maturity Date as follows: (i) by
Borrower, effective three Business Days after written notice of termination
is
given to PFG; or (ii) by PFG at any time after the occurrence and during the
continuance of an Event of Default, without notice, effective immediately.
6.3
Payment of Obligations.
On the
Maturity Date or on any earlier effective date of termination, Borrower shall
pay and perform in full all Obligations, whether evidenced by installment notes
or otherwise, and whether or not all or any part of such Obligations are
otherwise then due and payable. Notwithstanding any termination of this
Agreement, all of PFG's security interests in all of the Collateral and all
of
the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that
PFG may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of PFG, nor shall any such termination relieve Borrower of any Obligation
to PFG, until all of the Obligations have been paid and performed in full.
Upon
payment and performance in full of all the Obligations and termination of this
Agreement, PFG shall promptly terminate its financing statements with respect
to
the Borrower and deliver to Borrower such other documents as may be required
to
fully terminate PFG's security interests.
7.
EVENTS OF DEFAULT AND REMEDIES.
7.1
Events of Default.
The
occurrence of any of the following events shall constitute an "Event of Default"
under this Agreement, and Borrower shall give PFG immediate written notice
thereof:
(a)
Any
warranty, representation, statement, report or certificate made or delivered
to
PFG by Borrower or any of Borrower's officers, employees or agents, now or
in
the future, in this Agreement or in connection with this Agreement or in any
documents publicly filed by Borrower which satisfies reporting obligations
of
Borrower under this Agreement shall be untrue or misleading in a material
respect when made or deemed to be made; or
(b)
Borrower shall fail to pay any Loan or any interest thereon or any other
monetary Obligation within three Business Days after the date due; or
(c)
the
total Loans and other Obligations outstanding at any time shall exceed the
Credit Limit for more than one Business Day; or
(d)
Borrower shall fail to comply with any of the financial covenants set forth
in
the Schedule, or shall breach any of the provisions of Section 5.5 hereof,
or
shall fail to perform any other non-monetary Obligation which by its nature
cannot be cured, or shall fail to permit PFG to conduct an inspection or audit
as provided in Section 5.4 hereof or shall fail to provide PFG with a borrowing
base report under Section 6 of the Schedule within one Business Day after the
date due; or
(e)
Borrower shall fail to perform any other non-monetary Obligation, which failure
is not cured within five Business Days after the date due; or
(f)
any
levy, assessment, attachment, seizure, lien or encumbrance (other than a
Permitted Lien) is made on all or any part of the Collateral which is not cured
within 10 days after the occurrence of the same; or
(g)
any
default or event of default occurs under any obligation having a value in excess
of $250,000 and secured by a Permitted Lien, which is not cured within any
applicable cure period or waived in writing by the holder of the Permitted
Lien;
or
(h)
Borrower breaches any material contract or obligation, which has resulted or
may
reasonably be expected to result in a Material Adverse Change; or
(i)
Dissolution, termination of existence, insolvency or business failure of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law
or
statute of any jurisdiction, now or in the future in effect, or Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or
(j)
the
commencement of any proceeding against Borrower or any guarantor of any of
the
Obligations under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 45 days after the date commenced; or
(k)
revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations or any attempt to do any of the foregoing, or
commencement of proceedings by any guarantor of any of the Obligations under
any
bankruptcy or insolvency law; or
(l)
revocation or termination of, or limitation or denial of liability upon, any
pledge of any certificate of deposit, securities or other property or asset
of
any kind pledged by any third party to secure any or all of the Obligations,
or
any attempt to do any of the foregoing, or commencement of proceedings by or
against any such third party under any bankruptcy or insolvency law; or
(m)
Borrower makes any payment on account of any indebtedness or obligation which
has been subordinated to the Obligations (other than as permitted in the
applicable subordination agreement), or if any Person who has subordinated
such
indebtedness or obligations terminates or in any way limits his subordination
agreement; or
(n) there
shall be an acquisition by any party or group of affiliated parties, in one
or
more transactions, of more than 51%
amount
of
fully diluted common
stock
and
common stock equivalents of
Borrower,
compared
to the amount
of
outstanding shares of stock of Borrower in effect on the date hereof
(other
than by the sale of Borrower’s equity securities in a public offering or to
venture capital investors so long as Borrower identifies to PFG, in writing,
the
venture capital investors prior to the closing of the investment);
or
(o)
a
Material Adverse Change shall occur.
PFG
may
cease making any Loans hereunder during any of the cure periods provided above,
and thereafter if an Event of Default has occurred and is continuing.
7.2
Remedies.
Upon the
occurrence and during the continuance of any Event of Default, and at any time
thereafter, PFG, at its option, and without notice or demand of any kind (all
of
which are hereby expressly waived by Borrower), may do any one or more of the
following (subject in all instances to the rights of the Senior Lender): (a)
Cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other Loan Document; (b) Accelerate and declare all or any
part
of the Obligations to be immediately due, payable, and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any Obligation; (c) Take possession of any or all
of
the Collateral wherever it may be found, and for that purpose Borrower hereby
authorizes PFG without judicial process to enter onto any of Borrower's premises
without interference to search for, take possession of, keep, store, or remove
any of the Collateral, and remain on the premises or cause a custodian to remain
on the premises in exclusive control thereof, without charge for so long as
PFG
deems it necessary, in its good faith business judgment, in order to complete
the enforcement of its rights under this Agreement or any other agreement;
provided, however, that should PFG seek to take possession of any of the
Collateral by court process, Borrower hereby irrevocably waives: (i) any bond
and any surety or security relating thereto required by any statute, court
rule
or otherwise as an incident to such possession; (ii) any demand for possession
prior to the commencement of any suit or action to recover possession thereof;
and (iii) any requirement that PFG retain possession of, and not dispose of,
any
such Collateral until after trial or final judgment; (d) Require Borrower to
assemble any or all of the Collateral and make it available to PFG at places
designated by PFG which are reasonably convenient to PFG and Borrower, and
to
remove the Collateral to such locations as PFG may deem advisable; (e) Complete
the processing, manufacturing or repair of any Collateral prior to a disposition
thereof and, for such purpose and for the purpose of removal, PFG shall have
the
right to use Borrower's premises, vehicles, hoists, lifts, cranes, and other
Equipment and all other property without charge; (f) Sell, lease or otherwise
dispose of any of the Collateral, in its condition at the time PFG obtains
possession of it or after further manufacturing, processing or repair, at one
or
more public and/or private sales, in lots or in bulk, for cash, exchange or
other property, or on credit, and to adjourn any such sale from time to time
without notice other than oral announcement at the time scheduled for sale.
PFG
shall have the right to conduct such disposition on Borrower's premises without
charge, for such time or times as PFG deems reasonable, or on PFG's premises,
or
elsewhere and the Collateral need not be located at the place of disposition.
PFG may directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and if permissible under applicable
law, at any private disposition. Any sale or other disposition of Collateral
shall not relieve Borrower of any liability Borrower may have if any Collateral
is defective as to title or physical condition or otherwise at the time of
sale;
(g) Demand payment of, and collect any Accounts and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes PFG to endorse or sign Borrower's name on all collections, receipts,
instruments and other documents, to take possession of and open mail addressed
to Borrower and remove therefrom payments made with respect to any item of
the
Collateral or proceeds thereof, and, in PFG's good faith business judgment,
to
grant extensions of time to pay, compromise claims and settle Accounts and
the
like for less than face value; (h) Exercise any and all rights under any present
or future control agreements relating to Deposit Accounts or Investment
Property; and (i) Demand and receive possession of any of Borrower's federal
and
state income tax returns (or copies thereof) and the books and records utilized
in the preparation thereof or referring thereto. All reasonable attorneys'
fees,
expenses, costs, liabilities and obligations incurred by PFG with respect to
the
foregoing shall be added to and become part of the Obligations, shall be due
on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. Without limiting any of PFG's rights
and
remedies, from and after the occurrence and during the continuance of any Event
of Default, the interest rate applicable to the Obligations shall be increased
by an additional four percent per annum (the “Default Rate”).
7.3
Standards for Determining Commercial Reasonableness.
Borrower
and PFG agree that a sale or other disposition (collectively, “sale”) of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least ten days prior to the sale, and, in the case of a public
sale,
notice of the sale is published at least five days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by PFG,
with or without the Collateral being present; (iv) The sale commences at any
time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase price in
cash
or by cashier’s check or wire transfer is required; (vi) With respect to any
sale of any of the Collateral, PFG may (but is not obligated to) direct any
prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Subject to the rights of the Senior Lender,
PFG
shall be free to employ other methods of noticing and selling the Collateral,
in
its discretion, if they are commercially reasonable.
7.4
Power of Attorney.
Upon the
occurrence and during the continuance of any Event of Default, without limiting
PFG’s other rights and remedies, Borrower grants to PFG an irrevocable power of
attorney coupled with an interest, authorizing and permitting PFG (acting
through any of its employees, attorneys or agents) at any time, at its option,
but without obligation, with or without notice to Borrower, and at Borrower's
expense, to do any or all of the following, in Borrower's name or otherwise,
but
PFG agrees that if it exercises any right hereunder, it will do so in good
faith
and in a commercially reasonable manner and in all instances subject to the
rights of the Senior Lender: (a) Execute on behalf of Borrower any documents
that PFG may, in its good faith business judgment, deem advisable in order
to
perfect and maintain PFG's security interest in the Collateral, or in order
to
exercise a right of Borrower or PFG, or in order to fully consummate all the
transactions contemplated under this Agreement, and all other Loan Documents;
(b) Execute on behalf of Borrower, any invoices relating to any Account, any
draft against any Account Debtor and any notice to any Account Debtor, any
proof
of claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's
or other lien, or assignment or satisfaction of mechanic's, materialman's or
other lien; (c) Take control in any manner of any cash or non-cash items of
payment or proceeds of Collateral; endorse the name of Borrower upon any
instruments, or documents, evidence of payment or Collateral that may come
into
PFG's possession; (d) Endorse all checks and other forms of remittances received
by PFG; (e) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment
based
thereon, or otherwise take any action to terminate or discharge the same; (f)
Grant extensions of time to pay, compromise claims and settle Accounts and
General Intangibles for less than face value and execute all releases and other
documents in connection therewith; (g) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (h)
Settle and adjust, and give releases of, any insurance claim that relates to
any
of the Collateral and obtain payment therefor; (i) Instruct any third party
having custody or control of any books or records belonging to, or relating
to,
Borrower to give PFG the same rights of access and other rights with respect
thereto as PFG has under this Agreement; and (j) Take any action or pay any
sum
required of Borrower pursuant to this Agreement and any other Loan Documents.
Any and all reasonable sums paid and any and all reasonable costs, expenses,
liabilities, obligations and attorneys' fees incurred by PFG with respect to
the
foregoing shall be added to and become part of the Obligations, shall be payable
on demand, and shall bear interest at a rate equal to the highest interest
rate
applicable to any of the Obligations. In no event shall PFG's rights under
the
foregoing power of attorney or any of PFG's other rights under this Agreement
be
deemed to indicate that PFG is in control of the business, management or
properties of Borrower.
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7.5
Application of Proceeds.
All
proceeds realized as the result of any sale of the Collateral shall, subject
to
the rights of the Senior Lender, be applied by PFG first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by PFG
in
the exercise of its rights under this Agreement, second to the interest due
upon
any of the Obligations, and third to the principal of the Obligations, in such
order as PFG shall determine in its sole discretion. Any surplus shall be paid
to Borrower or other persons legally entitled thereto; Borrower shall remain
liable to PFG for any deficiency. If, PFG, in its good faith business judgment,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale of Collateral, PFG shall have the
option, exercisable at any time, in its good faith business judgment, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the Obligations until the actual receipt by PFG of the cash
therefor.
7.6
Remedies Cumulative.
In
addition to the rights and remedies set forth in this Agreement, PFG shall
have
all the other rights and remedies accorded a secured party under the Code and
under all other applicable laws, and under any other instrument or agreement
now
or in the future entered into between PFG and Borrower, and all of such rights
and remedies are cumulative and none is exclusive. Exercise or partial exercise
by PFG of one or more of its rights or remedies shall not be deemed an election,
nor bar PFG from subsequent exercise or partial exercise of any other rights
or
remedies. The failure or delay of PFG to exercise any rights or remedies shall
not operate as a waiver thereof, but all rights and remedies shall continue
in
full force and effect until all of the Obligations have been fully paid and
performed.
8. DEFINITIONS.
As
used
in this Agreement, the following terms have the following meanings:
“Account
Debtor”
means
the obligor on an Account.
“Accounts”
means
all present and future “accounts” as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term
as
may hereafter be made, and includes without limitation all accounts receivable
and other sums owing to Borrower.
“Affiliate”
means
(i) any of Borrower’s officers or directors, and if Borrower is a limited
liability company, Borrower’s managers and members, and if Borrower is a
partnership, Borrower’s general and limited partners; (ii) a Person that,
directly or indirectly, owns or controls, is controlled by or is under common
control with Borrower, and any of such person’s officers or directors, and if
such person is a limited liability company, such person’s managers and members,
and if such person is a partnership, such person’s general and limited
partners.
"Business
Day"
means a
day on which PFG is open for business.
“Code”
means
the Uniform Commercial Code as adopted and in effect in the State of California
from time to time.
“Collateral”
has
the
meaning set forth in Section 2 above.
“continuing”
and
“during
the continuance of”
when
used with reference to a Default or Event of Default means that the Default
or
Event of Default has occurred and has not been either waived in writing by
PFG
or cured within any applicable cure period.
“Default”
means
any event which with notice or passage of time or both, would constitute an
Event of Default.
“Default
Rate”
has
the
meaning set forth in Section 7.2 above.
“Deposit
Accounts”
means
all present and future “deposit accounts” as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term
as
may hereafter be made, and includes without limitation all general and special
bank accounts, demand accounts, checking accounts, savings accounts and
certificates of deposit.
"Event
of Default"
means
any of the events set forth in Section 7.1 of this Agreement.
“GAAP”
means
generally accepted accounting principles consistently applied.
“General
Intangibles”
means
all present and future “general intangibles” as defined in the California
Uniform Commercial 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, payment intangibles, royalties, contract rights, goodwill, franchise
agreements, purchase orders, customer lists, route lists, telephone numbers,
domain names, claims, income tax refunds, security and other deposits, 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.
“good
faith business judgment"
means
honesty in fact and good faith (as defined in Section 1201 of the Code) in
the
exercise of PFG’s business judgment.
“including”
means
including (but not limited to).
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“Indebtedness”
means
(a) indebtedness for borrowed money or the deferred purchase price of property
or services (other than trade payables arising in the ordinary course of
business), (b) obligations evidenced by bonds, notes, debentures or other
similar instruments, (c) reimbursement obligations in connection with letters
of
credit, and (d) capital lease obligations.
“Intellectual
Property”
means
all present and future: (a) copyrights, copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work thereof, whether published or unpublished, (b)
trade secret rights, including all rights to unpatented inventions and know-how,
and confidential information; (c) mask work or similar rights available for
the
protection of semiconductor chips; (d) patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same; (e)
trademarks, servicemarks, trade styles, and trade names, whether or not any
of
the foregoing are registered, and all 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 any such trademarks; (f) computer
software and computer software products; (g) designs and design rights; (h)
technology; (i) all claims for damages by way of past, present and future
infringement of any of the rights included above; and (j) all licenses or other
rights to use any property or rights of a type described above.
“Inventory”
means
all present and future “inventory” as defined in the California Uniform
Commercial 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”
means
any beneficial ownership interest in any Person (including any stock,
partnership interest or other equity or debt securities issued by any Person),
and any loan, advance or capital contribution to any Person.
“Investment
Property”
means
all present and future investment property, securities, stocks, bonds,
debentures, debt securities, partnership interests, limited liability company
interests, options, security entitlements, securities accounts, commodity
contracts, commodity accounts, and all financial assets held in any securities
account or otherwise, and all options and warrants to purchase any of the
foregoing, wherever located, and all other securities of every kind, whether
certificated or uncertificated.
“Loan
Documents”
means,
collectively, this Agreement, the Representations, and all other present and
future documents, instruments and agreements between PFG and Borrower,
including, but not limited to those relating to this Agreement, and all
amendments and modifications thereto and replacements therefor.
"Material
Adverse Change"
means
any of the following: (i) a material adverse change in the business, operations,
or financial or other condition of the Borrower, or (ii) a material impairment
of the prospect of repayment of any portion of the Obligations; or (iii) a
material impairment of the value or priority of PFG’s security interests in the
Collateral.
"Obligations"
means
all present and future Loans, advances, debts, liabilities, obligations,
guaranties, covenants, duties and indebtedness at any time owing by Borrower
to
PFG, whether evidenced by this Agreement or any note or other instrument or
document, or otherwise, whether arising from an extension of credit, opening
of
a letter of credit, banker's acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by PFG in Borrower's debts owing
to
others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney's fees, expert
witness fees, audit fees, collateral monitoring fees, closing fees, facility
fees, termination fees, minimum interest charges and any other sums chargeable
to Borrower under this Agreement or under any other Loan Documents.
“Other
Property”
means
the following as defined in the California Uniform Commercial Code in effect
on
the date hereof with such additions to such term as may hereafter be made,
and
all rights relating thereto: all present and future “commercial tort claims”
(including without limitation any commercial tort claims identified in the
Representations), “documents”, “instruments”, “promissory notes”, “chattel
paper”, “letters of credit”, “letter-of-credit rights”, “fixtures”, “farm
products” and “money”; and all other goods and personal property of every kind,
tangible and intangible, whether or not governed by the California Uniform
Commercial Code.
“Payment”
means
all checks, wire transfers and other items of payment received by PFG for credit
to Borrower’s outstanding Obligations.
“Permitted
Indebtedness”
means
(i)
the
Loans and other Obligations; and
(ii) Indebtedness
existing on the date hereof and shown on Exhibit A hereto;
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(iii)
Subordinated Debt;
(iv)
Indebtedness owing to Senior Lender not to exceed the Senior Debt Limit
specified in the Schedule;
(v)
other
Indebtedness secured by Permitted Liens;
(vi)
reimbursement obligations in respect of letters of credit in an aggregate face
amount outstanding not to exceed $300,000 at any time outstanding, which has
been reported to PFG in writing, and, in the case of reimbursement obligations
to the Senior Lender in respect of letters of credit which do not exceed the
Senior Debt Limit (taking into account all other Indebtedness to Senior Lender);
and
(vii)
extensions,
refinancing and renewals of any items of Permitted Indebtedness, provided
that
the principal amount thereof is not increased or the terms thereof modified
to
impose more burdensome terms on Borrower;
(viii)
intercompany loans among the entities constituting Borrower;
and
(ix)
other Indebtedness in an aggregate not to exceed $100,000.
“Permitted
Investments”
are:
(i) Investments
(if any) shown on the Exhibit A and existing on the date hereof;
(ii)
marketable direct obligations issued or unconditionally guaranteed by the United
States or its agency or any State maturing within 1 year from its
acquisition;
(iii) commercial
paper maturing no more than 1 year after its creation and having the highest
rating from either Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors
Service, Inc;
(iv) bank
certificates of deposit issued maturing no more than 1 year after
issue;
(v)
Investments in (A) foreign subsidiaries of NASI in the ordinary course of
business consistent with past business practices provided that the aggregate
amount thereof in any fiscal year shall not exceed $500,000, provided further,
no such Investments may be made at such time that a Default or an Event of
Default occurring prior to the making thereof or would arise upon the making
thereof unless PFG specifically consents thereto in writing and (B) Theseus
Imaging Corporation, a current domestic subsidiary of NASI which Borrower
represents to PFG will be dissolved no later than October 31, 2006, and prior
to
such dissolution Borrower may make Investments necessary to wind up the business
affairs of such company as long as the aggregate amount thereof does not
exceed
$350,000;
(vi)
Repurchase of Borrower’s stock, if the consideration for the repurchase is the
cancellation of indebtedness owned to Borrower by former employees, and no
cash
consideration is paid by Borrower in connection with such
repurchase;
(vii)
Investments accepted in connection with transfers permitted under Section
5.5(iv) hereof;
(viii)
Investments not to exceed $250,000, in the aggregate outstanding at any time
constituting travel advances and employee relocation loans, and other employee
loans and advances in the ordinary course of business as heretofore conducted
by
Borrower;
(ix)
Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers of Borrower’s, and in
settlement of delinquent obligations of, and other disputes with, customers
and
suppliers arising in the ordinary course of business as heretofore conducted
by
Borrower;
(x)
Investments consisting of notes receivable of, or prepaid royalties and other
credit extensions to, customers and suppliers who are not Affiliates of
Borrower’s, in the ordinary course of business as heretofore conducted by
Borrower, not to exceed in the aggregate outstanding at any time, the sum
of (i)
$1,000,000 and (ii) $950,000 with respect to that certain promissory note
executed in favor of Borrower by Prostate Centers of America on or about
October
2003; and
(xi)
Joint ventures or strategic alliances consisting of the non-exclusive licensing
of technology, the development of technology or the providing of technical
support, provided that any cash Investments by Borrower do not exceed $500,000
in the aggregate in any fiscal year.
"Permitted
Liens"
means
the following:
(i)
purchase money security interests in specific items of Equipment;
(ii)
leases of specific items of Equipment or other property;
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(iii)
liens for taxes not yet payable or
being
contested in good faith and for which Borrower maintains adequate reserves,
if
they have no priority over any of PFG’s security interests;
(iv)
additional security interests and liens consented to in writing by PFG, which
consent may be withheld in its good faith business judgment. PFG will have
the
right to require, as a condition to its consent under this subparagraph (iv),
that the holder of the additional security interest or lien sign an
intercreditor agreement on PFG’s then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of PFG,
and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agrees that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement;
(v)
security interests being terminated substantially concurrently with this
Agreement;
(vi) liens
of materialmen, mechanics, warehousemen, carriers, or other similar liens
arising in the ordinary course of business and securing obligations which are
not delinquent;
(vii) liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by liens of the type described above in clauses (i) or
(ii)
above, provided that any extension, renewal or replacement lien is limited
to
the property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not
increase;
(viii)
liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods;
(ix)
statutory, common law or contractual liens of depository institutions or
institutions holding securities accounts (including rights of set-off) securing
only customary charges and fees in connection with such accounts;
and
(x)
liens
in favor of Senior Lender securing an amount not in excess of the Senior
Debt
Limit; and
(xi)
liens existing on the date hereof and shown on Exhibit A or arising under
this
Agreement or other Loan Documents.
"Person"
means
any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, government, or any agency
or political division thereof, or any other entity.
“Prime
Rate”
means
the rate quoted by the Wall Street Journal (or such other nationally recognized
rate quoting service reasonably acceptable to PFG) as the prime lending rate
on
the date hereof and each business day during the term of this
Agreement.
“Representations”
means
the written Representations and Warranties provided by Borrower to PFG referred
to in the Schedule.
"Reserves"
means,
as of any date of determination, such amounts as PFG may from time to time
establish and revise in its good faith business judgment, reducing the amount
of
Loans, and other financial accommodations which would otherwise be available
to
Borrower under the lending formula(s) provided in the Schedule: (a) to reflect
events, conditions, contingencies or risks which, as determined by PFG 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 PFG in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect PFG's good
faith belief that any collateral report or financial information furnished
by or
on behalf of Borrower or any Guarantor to PFG is or may have been incomplete,
inaccurate or misleading in any material respect; or (c) in respect of any
state
of facts which PFG determines in good faith constitutes a Default or an Event
of
Default.
“Senior
Lender”
has
the
meaning set forth in Section 8 of the Schedule.
“Subordinated
Debt”
means
debt incurred by Borrower subordinated to Borrower’s debt to PFG (pursuant to a
subordination agreement entered into between PFG, Borrower and the subordinated
creditor), on terms acceptable to PFG in its absolute discretion.
“Subsidiary”
means
(a) any corporate entity of which more than 50% of the issued and
outstanding equity securities having ordinary voting power to elect a majority
of the governing body (e.g., Board of Directors) of such corporate entity
is at
the time directly or indirectly owned or controlled by Borrower, (b) any
partnership, joint venture, or other association of which more than 50% of
the equity interest having the power to vote, direct or control the management
of such partnership, joint venture or other association is at the time directly
or indirectly owned and controlled by Borrower, (c) any other entity
included or includable in the financial statements of Borrower on a consolidated
basis.
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Other
Terms.
All
accounting terms used in this Agreement, unless otherwise indicated, shall
have
the meanings given to such terms in accordance with GAAP, consistently applied.
All other terms contained in this Agreement, unless otherwise indicated, shall
have the meanings provided by the Code, to the extent such terms are defined
therein.
9. GENERAL
PROVISIONS.
9.1
Confidentiality.
PFG
agrees to use the same degree of care that it exercises with respect to its
own
proprietary information, to maintain the confidentiality of any and all
proprietary, trade secret or confidential information provided to or received
by
PFG from the Borrower, which indicates that it is confidential, including
business plans and forecasts, non-public financial information, confidential
or
secret processes, formulae, devices and contractual information, customer lists,
and employee relation matters, provided that PFG may disclose such information
(i) to its officers, directors, employees, attorneys, accountants, affiliates,
participants, prospective participants, assignees and prospective assignees,
and
such other Persons to whom PFG shall at any time be required to make such
disclosure in accordance with applicable law or legal process, and (ii) in
its
good faith business judgment in connection with the enforcement of its rights
or
remedies after an Event of Default, or in connection with any dispute with
Borrower or any other Person relating to Borrower. The confidentiality agreement
in this Section supersedes any prior confidentiality agreement of PFG relating
to Borrower.
9.2
Interest Computation. In
computing interest on the Obligations, all Payments received after 12:00 Noon,
Pacific Time, on any day shall be deemed received on the next Business Day.
9.3
Payments.
All
Payments may be applied, and in PFG's good faith business judgment reversed
and
re-applied, to the Obligations, in such order and manner as PFG shall determine
in its good faith business judgment.
9.4
Charges to Accounts. PFG
may,
in its discretion, require that Borrower pay monetary Obligations in cash to
PFG, or charge them to Borrower’s Loan account, in which event they will bear
interest at the same rate applicable to the Loans.
9.5
Monthly Accountings.
PFG
shall provide Borrower monthly with an account of advances, charges, expenses
and payments made pursuant to this Agreement. Such account shall be deemed
correct, accurate and binding on Borrower and an account stated (except for
reverses and reapplications of payments made and corrections of errors
discovered by PFG), unless Borrower notifies PFG in writing to the contrary
within 60 days after such account is rendered, describing the nature of any
alleged errors or omissions.
9.6
Notices.
All
notices to be given under this Agreement shall be in writing and shall be given
either personally, or by reputable private delivery service, or by regular
first-class mail, or certified mail return receipt requested, or by fax to
the
most recent fax number a party has for the other party (and if by fax, sent
concurrently by one of the other methods provided herein), addressed to PFG
or
Borrower at the addresses shown in the heading to this Agreement, or at any
other address designated in writing by one party to the other party. All notices
shall be deemed to have been given upon delivery in the case of notices
personally delivered, or at the expiration of one Business Day following
delivery to the private delivery service, or two Business Days following the
deposit thereof in the United States mail, with postage prepaid, or on the
first
business day of receipt during business hours in the case of notices sent by
fax, as provided herein.
9.7
Severability.
Should
any provision of this Agreement be held by any court of competent jurisdiction
to be void or unenforceable, such defect shall not affect the remainder of
this
Agreement, which shall continue in full force and effect.
9.8
Integration.
This
Agreement and such other written agreements, documents and instruments as may
be
executed in connection herewith are the final, entire and complete agreement
between Borrower and PFG and supersede all prior and contemporaneous
negotiations and oral representations and agreements, all of which are merged
and integrated in this Agreement. There
are no oral understandings, representations or agreements between the parties
which are not set forth in this Agreement or in other written agreements signed
by the parties in connection herewith.
9.9
Waivers; Indemnity.
The
failure of PFG at any time or times to require Borrower to strictly comply
with
any of the provisions of this Agreement or any other Loan Document shall not
waive or diminish any right of PFG later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other Loan Document shall be deemed to
have
been waived by any act or knowledge of PFG or its agents or employees, but
only
by a specific written waiver signed by an authorized officer of PFG and
delivered to Borrower. Borrower waives the benefit of all statutes of
limitations relating to any of the Obligations or this Agreement or any other
Loan Document, and Borrower waives demand, protest, notice of protest and notice
of default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by PFG on which
Borrower is or may in any way be liable, and notice of any action taken by
PFG,
unless expressly required by this Agreement. Borrower
hereby agrees to indemnify PFG and its affiliates, subsidiaries, parent,
directors, officers, employees, agents, and attorneys, and to hold them harmless
from and against any and all claims, debts, liabilities, demands, obligations,
actions, causes of action, penalties, costs and expenses (including reasonable
attorneys' fees), of every kind, which they may sustain or incur based upon
or
arising out of any of the Obligations, or any relationship or agreement between
PFG and Borrower, evidenced by the Loan Documents, relating to Borrower or
the
Obligations; provided that this indemnity shall not extend to damages to the
extent caused by the indemnitee’s own gross negligence or willful misconduct.
Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section shall survive any termination of this
Agreement and shall for all purposes continue in full force and
effect.
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9.10
No Liability for Ordinary Negligence.
Neither
PFG, nor any of its directors, officers, employees, agents, attorneys or any
other Person affiliated with or representing PFG shall be liable for any claims,
demands, losses or damages, of any kind whatsoever, made, claimed, incurred
or
suffered by Borrower or any other party through the ordinary negligence of
PFG,
or any of its directors, officers, employees, agents, attorneys or any other
Person affiliated with or representing PFG, but nothing herein shall relieve
PFG
from liability for its own gross negligence or willful misconduct.
9.11
Amendment.
The
terms and provisions of this Agreement may not be waived or amended, except
in a
writing executed by Borrower and a duly authorized officer of PFG.
9.12
Time of Essence.
Time is
of the essence in the performance by Borrower of each and every obligation
under
this Agreement.
9.13
Attorneys Fees and Costs.
Borrower
shall reimburse PFG for all reasonable attorneys' fees and all filing,
recording, search, title insurance, appraisal, audit, and other reasonable
costs
incurred by PFG, pursuant to, or in connection with, or relating to this
Agreement (whether or not a lawsuit is filed), including, but not limited to,
any reasonable attorneys' fees and costs PFG incurs in order to do the
following: prepare and negotiate this Agreement and all present and future
documents relating to this Agreement; obtain legal advice in connection with
this Agreement or Borrower; enforce, or seek to enforce, any of its rights
under
the Loan Documents; prosecute actions against, or defend actions by, Account
Debtors; commence, intervene in, or defend any action or proceeding; initiate
any complaint to be relieved of the automatic stay in bankruptcy; file or
prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower's books and records; protect, obtain possession of, lease, dispose
of,
or otherwise enforce PFG’s security interest in, the Collateral; and otherwise
represent PFG in any litigation relating to Borrower. If either PFG or Borrower
files any lawsuit against the other predicated on a breach of this Agreement,
the prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including (but not limited to) reasonable attorneys'
fees and costs incurred in the enforcement of, execution upon or defense of
any
order, decree, award or judgment. All attorneys' fees and costs to which PFG
may
be entitled pursuant to this Paragraph shall immediately become part of
Borrower's Obligations, shall be due on demand, and shall bear interest at
a
rate equal to the highest interest rate applicable to any of the
Obligations.
9.14
Benefit of Agreement.
The
provisions of this Agreement shall be binding upon and inure to the benefit
of
the respective successors, assigns, heirs, beneficiaries and representatives
of
Borrower and PFG; provided, however, that Borrower may not assign or transfer
any of its rights under this Agreement without the prior written consent of
PFG,
and any prohibited assignment shall be void. No consent by PFG to any assignment
shall release Borrower from its liability for the Obligations.
9.15
Joint and Several Liability.
If
Borrower consists of more than one Person, their liability shall be joint and
several, and the compromise of any claim with, or the release of, any Borrower
shall not constitute a compromise with, or a release of, any other
Borrower.
9.16
Limitation of Actions. Any
claim
or cause of action by Borrower against PFG, its directors, officers, employees,
agents, accountants or attorneys, based upon, arising from, or relating to
this
Loan Agreement, or any other Loan Document, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by PFG, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement
of an
action or proceeding in a court of competent jurisdiction by the filing of
a
complaint within the earlier to occur of (i) one year after the date Borrower
knew or should have known (with the exercise of customary diligence) of the
first act, occurrence or omission upon which such claim or cause of action,
or
any part thereof, is based, or (ii) one year after the termination of this
Agreement, and the service of a summons and complaint on an officer of PFG,
or
on any other person authorized to accept service on behalf of PFG, within sixty
(60) days thereafter. Borrower agrees that such one-year period is a reasonable
and sufficient time for Borrower to investigate and act upon any such claim
or
cause of action. The one-year period provided herein shall not be waived,
tolled, or extended except by the written consent of PFG in its sole discretion.
This provision shall survive any termination of this Loan Agreement or any
other
Loan Document.
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9.17
Paragraph Headings; Construction.
Paragraph headings are only used in this Agreement for convenience. Borrower
and
PFG acknowledge that the headings may not describe completely the subject matter
of the applicable paragraph, and the headings shall not be used in any manner
to
construe, limit, define or interpret any term or provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and
no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against PFG or Borrower under any rule of construction or
otherwise.
9.18
Governing Law; Jurisdiction; Venue.
This
Agreement and all acts and transactions hereunder and all rights and obligations
of PFG and Borrower shall be governed by the laws of the State of California,
provided, however that Section 9.19 shall be governed by and construed in
accordance with the laws of the State of Delaware. As a material part of the
consideration to PFG to enter into this Agreement, Borrower (i) agrees that
all
actions and proceedings relating directly or indirectly to this Agreement shall,
at PFG's option, be litigated in courts located within California, and that
the
exclusive venue therefor shall be San Francisco County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process
in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights Borrower may have to object to
the
jurisdiction of any such court, or to transfer or change the venue of any such
action or proceeding.
9.19
Mutual Waiver of Jury Trial. BORROWER
AND PFG EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY
OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN PFG AND BORROWER, OR
ANY
CONDUCT, ACTS OR OMISSIONS OF PFG OR BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
PFG
OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR
TORT
OR OTHERWISE.
|
Borrower:
North
American Scientific, Inc., a Delaware corporation
By
/s/L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
or Vice President
By
/s/
▇▇▇▇▇ ▇. ▇▇▇▇
Secretary
or Ass't Secretary
|
PFG:
PARTNERS
FOR GROWTH II, L.P.
By
/s/▇▇▇▇▇▇
▇. ▇▇▇▇
Name:
▇▇▇▇▇▇
▇. ▇▇▇▇
Title:
Manager, Partners for Growth II, LLC
Its
General Partner
|
|
Borrower:
North
American Scientific, Inc., a California corporation
By/s/L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
or Vice President
By
/s/L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Secretary
or Ass't Secretary
|
Borrower:
NOMOS
Corporation
By
/s/L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
or Vice President
By/s/L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Secretary
or Ass't Secretary
|
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Partners
For Growth
Schedule
to
Loan
and Security Agreement
| Borrower: |
North
American Scientific, Inc., a Delaware corporation
|
| Address: |
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇
|
| Borrower: |
NOMOS
Corporation
|
| Address: |
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇
|
| Borrower: |
North
American Scientific, Inc., a California
corporation
|
| Address: |
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇
|
| Date: |
March
28, 2006
|
This
Schedule forms an integral part of the Loan and Security Agreement between
PARTNERS FOR GROWTH II, L.P. and the above-borrower of even date.
| 1. |
CREDIT
LIMIT
|
| (Section 1.1): |
An
amount not to exceed the
lesser of
(a) or (b), below (the “Credit Limit”): (a) $4,000,000
at
any one time outstanding, or (b) at any time, up to
50%
(the “Advance Rate”) of the amount of Borrower’s Current Assets,
less
all principal amounts outstanding (or requested) under the Senior
Loan
Documents (including all facilities and products available under
the
Senior Loan Documents, such as letters of credit and bank cards,
whether
or not designated as sub-limits under the Senior Loan Documents)
and,
without duplication, the amount of any other monetary obligations
under
the Senior Loan Documents either (i) outstanding over 30 days from
the
date incurred or charged or (ii) otherwise past due (in the case
of
obligations maturing or otherwise due before 30 days) (such other
monetary
obligations referred to as “Other Past-Due Senior Monetary
Obligations”).
|
“Current
Assets”
means
the aggregate of Borrower’s balance
sheet
items
which equals the sum of cash
and
cash
equivalents,
Accounts, Inventory
and
Investment Property that can be converted to cash in less than 1 year, prepaid
expenses, and other assets
that can
reasonably be expected to be converted to cash in less than one year.
Notwithstanding, the foregoing definition, Borrower’s proposed Current Assets
would have to qualify as current assets under GAAP.
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For
example only, if Borrower has $14.0 million in Current Assets on March 1, 2006,
and has $3.0 million requested and outstanding in Senior Debt, Borrower could
request up to $4 million under this Agreement [($14.0 million x 0.50) - $3.0
million = $4 million].
| 2. |
INTEREST.
|
Interest
Rate (Section
1.2):
A
rate
equal to the Prime Rate per annum, measured monthly and applied to the average
daily aggregate amount outstanding under this Agreement each month. Interest
shall be calculated on the basis of a 360-day year and a year of twelve months
of 30 days each for the actual number of days elapsed. Accrued interest for
each
month shall be payable monthly, on the first day of each month for interest
accrued during the prior month. PFG shall have the right to adjust the rate
applicable to amounts outstanding hereunder as and when the Prime Rate changes,
but may elect in its sole discretion to reflect any such changes on a monthly
basis.
| 3. |
FEES
(Section 1.4):
|
| Loan Fee: |
$80,000,
payable concurrently herewith.
|
| 4. |
MATURITY
DATE
|
| (Section 6.1): |
September
28, 2007.
|
| 5. |
FINANCIAL
COVENANTS
|
| (Section 5.1): |
[INTENTIONALLY
LEFT BLANK]
|
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| 6. |
REPORTING.
|
(Section
5.3):
Borrower
shall provide PFG with the following:
|
(a)
|
Monthly
borrowing base report, in such form as PFG shall specify, within
ten days
after the end of each month, and borrowing base reports at such
other
times as PFG shall from time to time request in its good faith
business
judgment.
|
|
(b)
|
Monthly
accounts receivable agings, aged by invoice date, within 20 days
after the
end of each month.
|
|
(c)
|
Monthly
accounts payable agings, aged by invoice date, and outstanding
or held
check registers, if any, within 20 days after the end of each month.
|
|
(d)
|
Monthly
reconciliations of accounts receivable agings (aged by invoice
date), and
general ledger, within 20 days after the end of each month.
|
|
(e)
|
A
quarterly information update certificate, on PFG’s standard form, within
30 days after the end of each fiscal quarter of
Borrower.
|
|
(f)
|
Annual
financial statements, as soon as available, and in any event within
120
days following the end of Borrower's fiscal year, certified by,
and with
an unqualified opinion of, independent certified public accountants
acceptable to PFG.
|
|
(g)
|
Copies
of all reports and statements provided by Borrower to the Senior
Lender at
the same time the same are provided to the Senior
Lender.
|
| 7. |
BORROWER
INFORMATION:
|
Borrower
represents and warrants that the information set forth in the Representations
and Warranties of the Borrower dated February 15, 2006, previously submitted
to
PFG (the “Representations”) is true and correct as of the date
hereof.
| 8. |
ADDITIONAL
PROVISIONS
|
|
(a)
|
Senior
Lender.
|
| (1) |
Senior
Lender.
As used herein, “Senior Lender” means Silicon Valley Bank, and “Senior
Loan Documents” means all present and future documents instruments and
agreements entered into between Borrower and Senior Lender or by
third
parties relating to Borrower and Senior
Lender.
|
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| (2) |
Senior
Debt Limit.
Borrower shall not permit the total Indebtedness of Borrower
outstanding
at any time to Senior Lender to exceed $5,000,000, including
but not
limited to monies borrowed by Borrower,
sums
due from Borrower in connection with issuance of commercial letters
of
credit, issuance of forward contracts for foreign exchange reserve,
and
any other direct or indirect financial accommodation Senior Lender
may
provide to Borrower,
plus interest on loans due from Borrower and fees and expenses
for which
Borrower is obligated to Senior Lender (the “Senior Debt
Limit”).
|
| (3) |
Senior
Loan Documents.
Borrower represents and warrants that it has provided PFG with
true and
complete copies of all existing Senior Loan Documents, and Borrower
covenants that it will, in the future, provide PFG with true and
complete
copies of any future Senior Loan Documents, including without limitation
any amendments to any existing Senior Loan
Documents.
|
|
(b)
|
Deposit
Accounts.
Concurrently, Borrower shall cause the banks and other institutions
where
its Deposit Accounts are maintained to enter into control agreements
with
PFG, in form and substance satisfactory to PFG in its good faith
business
judgment and sufficient to perfect PFG’ security interest in said Deposit
Accounts, subject to the security interest of the Senior Lender.
Said
control agreements shall permit PFG, in its discretion, to withdraw
from
said Deposit Accounts accrued interest on the Obligations monthly
(subject
to the rights of the Senior Lender). Notwithstanding the foregoing,
with
respect to any Deposit Accounts that are held with non-U.S. institutions,
Borrower (which term, for the avoidance of doubt, shall include
all
Subsidiaries) shall not be required to procure Deposit Account
control
agreements so long as the balance in each foreign Deposit Account
does not
exceed US$100,000.
|
|
(c)
|
Subordination
of Inside Debt.
All present and future indebtedness of Borrower to its officers,
directors
and shareholders (“Inside Debt”) shall, at all times, be subordinated to
the Obligations pursuant to a subordination agreement on PFG’s standard
form. Borrower represents and warrants that there is no Inside
Debt
presently outstanding, except as set forth in Exhibit A and except
for
travel advances, employee relocation loans and other employee loans
and
advances made in the ordinary course of business as heretofore
conducted
by Borrower which in the aggregate do not exceed $250,000. Prior
to
incurring any Inside Debt in the future, other than Inside Debt
not to
exceed $250,000 in the aggregate outstanding at any time constituting
travel advances, employee relocation loans and other employee loans
and
advances in the ordinary course of business as heretofore conducted
by
Borrower, Borrower shall cause the person to whom such Inside Debt
will be
owed to execute and deliver to PFG a subordination agreement on
PFG’s
standard form.
|
-
20 -
|
Partners
for
Growth
|
Loan
and Security
Agreement
|
|
(d)
|
Landlord
Waivers.
Borrower shall use its best efforts to secure landlord waivers
in
customary form for its leased facilities in (i) Hollywood, California,
(ii) Chatsworth, California and (iii) Cranberry Township, Pennsylvania,
all within 30 days from the date hereof. No such waiver shall be
required
on the date hereof in respect of Borrower’s facility in Seattle,
Washington and PFG shall provide Borrower not less than 30 days
notice of
any future requirement for such a
waiver.
|
[Signature
Page Follows]
-
21 -
|
Partners
for
Growth
|
Loan
and Security
Agreement
|
|
Borrower:
North
American Scientific, Inc., a Delaware corporation
By
/s/L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
or Vice President
By
/s/▇▇▇▇▇
▇. ▇▇▇▇
Secretary
or Ass't Secretary
|
PFG:
PARTNERS
FOR GROWTH II, L.P.
By
/s/▇▇▇▇▇▇
▇. ▇▇▇▇
Name:
▇▇▇▇▇▇
▇. ▇▇▇▇
Title:
Manager, Partners for Growth II, LLC
Its
General Partner
|
|
Borrower:
North
American Scientific, Inc., a California corporation
By
/s/L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
or Vice President
By
/s/L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Secretary
or Ass't Secretary
|
Borrower:
NOMOS
Corporation
By
/s/L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
or Vice President
By
/s/L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Secretary
or Ass't Secretary
|
-
22 -
Exhibit
A
to Loan and Security Agreement
Section
2.2—Specified Contracts which, to the extent provided in Section 2.2, are
excluded from the security interest granted to PFG and which are material to
Borrower’s business or grant Borrower rights in Intellectual Property which is
licensed by the Borrower to its customers or incorporated in products licensed
or sold by the Borrower to its customers:
Section
3.10 - “Litigation”
In
December, 2004, an individual plaintiff, ▇▇▇▇▇▇ ▇▇▇▇▇, filed a complaint in
the
Coos ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ against Bay Area Health
District, North American Scientific, Inc., NOMOS Corporation and ▇▇▇▇ ▇▇▇▇▇▇,
M.D., alleging the defendants caused Mr. Weeks to receive excessive radiation
during the course of his IMRT treatment, as a result of a manufacturing and/or
design defect(s) in our CORVUS and BAT products. In September, 2005, prior
to
the case going to trial, the Company was party to a settlement agreement and
the
lawsuit is no longer an ongoing matter. Under the settlement agreement, the
parties mutually agreed to dismiss all claims and counterclaims against each
other without admitting any wrongdoing.
In
November, 2005, the Company was served with a complaint filed in U.S. District
Court in Hartford, Connecticut by World Wide Medical Technologies (WWMT). WWMT's
six count complaint alleges breach of a confidentiality agreement, fraud, patent
infringement, wrongful interference with contractual relations, violation of
the
Connecticut Uniform Trade Secrets Act, and violation of the Connecticut Unfair
Practices Act. WWMT alleges that the Company fraudulently obtained WWMT's
confidential information during negotiations to purchase WWMT in 2004 and that
once the Company acquired that information, it allegedly learned that ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, (our current Vice President of New Product Development) owned
certain patent rights and that we began trying to inappropriately gain property
rights by hiring him away from WWMT. We were served with this matter at
approximately the same time ▇▇. ▇▇▇▇▇▇▇▇▇▇▇ was served with a state court claim
seeking, among other things, a preliminary injunction preventing ▇▇▇▇▇▇▇▇▇▇▇
from engaging in certain conduct in connection with him employment with us.
The
Company has agreed to defend ▇▇. ▇▇▇▇▇▇▇▇▇▇▇. ▇▇. ▇▇▇▇▇▇▇▇▇▇▇ and a company
of
which he is a part-owner, IdeaMatrix, Inc., have removed the state court claim
to federal court and the case is pending before the same court as the case
against us. We have also the complaint in the action against us. The schedule
and scope of the preliminary injunction proceedings in the ▇▇▇▇▇▇▇▇▇▇▇ action
have not been established by the court. The Company denies liability and intends
to vigorously defend this case as it progresses.
We
are
subject to other legal proceedings, claims and litigation arising in the
ordinary course of business. While the outcome of these matters is currently
not
determinable, management does not expect that the ultimate costs to resolve
these matters will have a material adverse effect on our consolidated financial
position, results of operations, or cash flows.
Section
8(c) - “Inside Debt”