Silicon Valley Bank 3003 Tasman Drive Santa Clara, CA 95054-1191 408-654-7400
June 5, 1996
N. Nicoll Snow, CFO
Cardiopulmonary Corp.
200 Cascade Blvd.
Milford, CT 06460
Dear Nick:
We are pleased to inform you that Silicon Valley Bank, a California-chartered
bank ("Lendee') with its principal place of business at 3003 Tasman Drive, Santa
Clara, CA 95054 and with a loan production office located at Wellesley Office
Park, 40 William Street, Suite 350, Wellesley, Massachusetts 02181 doing
business under the name "Silicon Valley East," has approved a Revolving Bridge
Line in the amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00)
(the "Bridge Loan" or sometimes referred to as the "Loan") for use by
Cardiopulmonary Corp., (the "Borrowee') subject to the following terms and to
the Lenders periodic review.
The Loan shall not become effective unless and until an executed copy of this
letter together with all necessary accompanying documentation as well as the
facility fee described below has been returned to the Lender, which must take
place within 30 days from the date of this letter.
Borrowings under the Bridge Loan will be permitted through September 15, 1996
(the "Maturity Date"). Borrower shall pay regular monthly payments of all
accrued interest due as of each payment date, beginning July 15, 1996 and all
subsequent interest payments will be due on the same day of each month
thereafter. The final payment, due September 15, 1996, will be for all
outstanding principal plus all accrued interest not yet paid.
Borrowings under the (a) Bridge Loan shall bear interest at a rate of two and
one-half percentage points (2.500%) over Lendees Prime Rate. Prime Rate means
the rate from time to time announced and made effective by Lender as its Prime
Rate. Borrowers interest rate shall change each time the Prime Rate changes.
Interest will be charged monthly in arrears and shall be calculated on a 360-day
year. Lender shall be authorized to debit Borrowees principal account or any
other account maintained by Borrower with Lender for any principal, interest or
fees associated with Borrowees Loans with or without notice to Borrower.
Borrower shall pay to Lender facility fees in the amount of Five Thousand and
00/100 Dollars ($5,000.00) as well as all out-of-pocket expenses incurred by
Lender in connection with the establishment of the Loan, including all
reasonable legal and documentation costs associated with documenting the credit,
which must be paid at the time the documents are returned to Lender.
Borrowings under the Bridge Loan shall be secured by a first security interest
in the Borrowers present and future accounts receivable, inventory, chattel
paper, accounts, contract rights, copyrights, patents,
(Member FDIC)
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trademarks, other general intangibles and the proceeds thereof, all other
assets, all monies, and all other property in Lender's possession which Lender
may use to pay Borrowers obligations.
Borrower shall issue to Lender a Warrant to purchase 4,000 shares of Borrowees
Common Stock. Such warrant shall be for a minimum period of five years and shall
be on Lenders standard form warrant agreement. The Exercise Price on the warrant
will be (I) equal to the dollar amount represented as the low range as stated in
the S-1 Registration Statement; provided an initial public offering is completed
prior to August 31, 1996 or (ii) the lesser of (a) $5.00 or (b) the next
financing round if completed by September 30, 1996.
Any advances hereunder or renewal hereof will be made only if in the opinion of
the Lender there exists no default under any loan documentation executed by you
with the Lender. A default is as defined in the accompanying Promissory Note of
even date. Furthermore, prior to closing, Borrower shall provide Lender with a
comfort letter, in a form satisfactory to Lender, from Cupertino Ventures
Partnership.
A. Requirements.
1. Affirmative Covenants. So long as the Loan remains outstanding, Borrower
agrees to maintain the following covenants:
a. Provide Lender with duplicate unaudited monthly financial
statements, together with a Compliance Certificate, prepared in
accordance with generally accepted accounting principals and
duplicate audited annual financial statements certified by public
accountants with an unqualified opinion, to be received 30 and 90
days, respectively after the close of the period.
b. File all tax returns and to pay all taxes due.
c. Reimburse the Lender for any reasonable expenses incurred by the
Lender to enforce the terms of this obligation.
d. Maintain fire and liability insurance satisfactory to the Lender,
a copy of which shall be forwarded to the Lender.
e. Notify Lender in writing of any legal action introduced against
the Borrower which may result in damages over $100,000.00.
2. Negative Covenants. Borrower covenants and agrees with Lender that while
this Agreement is in effect, Borrower shall not, without the prior written
consent of Lender:
a. Participate in any merger or consolidation or to pay any dividends.
b. Dispose of any material assets other than in the ordinary course of
business.
c. Be in default of any other loan agreement with any other bank.
d. File for protection under the Bankruptcy Code.
e. Directly or indirectly pledge, grant, create or permit to exist any
security interest, lien or other encumbrance upon any of Borrowers
assets except in favor of the Lender, without the Lender's prior
written consent, which will not be unreasonably withheld.
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f. Invest in any securities other than money market instruments
acceptable to the Lender, without the Lender's prior written consent
which will not be unreasonably withheld.
g. Incur indebtedness for borrowed money, except for either a)
indebtedness to Silicon Valley Bank or b) indebtedness incurred for
the purchase or lease of equipment in an aggregate amount not to
exceed $500,000.00 in indebtedness on any such capital equipment
outstanding at any given point in time; pay cash dividends or
repurchase stock, except as allowed in this Agreement; hypothecate
existing assets; or loan money or guarantee loans to others.
If the Lender waives any rights under this Agreement, it will not affect any
future action the Lender may wish to take. This Agreement shall be binding upon
any of the Borrowees successors in interest. The laws of the Commonwealth of
Massachusetts shall apply to this Agreement. THE BORROWER ACCEPTS FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND,
AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS LETTER AGREEMENT; PROVIDED,
HOWEVER, THAT IF FOR ANY REASON LENDER CANNOT AVAIL ITSELF OF THE COURTS OF THE
COMMONWEALTH OF MASSACHUSETTS, THEN VENUE SHALL LIE IN SANTA CLARA COUNTY,
CALIFORNIA. (INITIAL HERE /s/ NNS) LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO
ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER
LENDER OR BORROWER AGAINST THE OTHER.
It is our understanding that the Borrower will consider the Silicon Valley Bank
to be its primary bank. Among other things, the Borrower agrees to maintain a
reasonable portion of its excess funds in Silicon Valley Bank.
This Agreement shall become effective only when it shall have been executed by
the Borrower and the Lender (provided, however, in no event shall this Agreement
become effective until signed by an officer of the Lender in California).
We are delighted to expand our relationship with Cardiopulmonary Corp. and look
forward to many successful years of working together.
Sincerely,
SILICON VALLEY BANK, doing
business as SILICON VALLEY EAST
By: /s/ Phillip S. Ernst
----------------------------
Name: Phillip S. Ernst
Title: V.P.
SILICON VALLEY BANK
By: /s/ Julie Haga
----------------------------
Name: Julie Haga
Title: V.P.
(Signed at Santa Clara County, CA)
Agreed and Accepted this 25th day of June, 1996.
CARDIOPULMONARY CORP.
By: /s/ N. Nicoll Snow
----------------------------
Name: N. Nicoll Snow
Title: V.P., C.F.O.