SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

THIS SECOND AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into on October 31, 2006, by and between

 

SILICON VALLEY BANK (“Bank”)

 

and the following (collectively, jointly and severally, the "Borrower") whose address is 20200 Sunburst Street, Chatsworth, California 91311:

 

NORTH AMERICAN SCIENTIFIC, INC., a Delaware corporation (“NASI”);

 

NORTH AMERICAN SCIENTIFIC, INC., a California corporation (“NASI-CA”); and

 

NOMOS CORPORATION, a Delaware corporation (“NOMOS”).

 

.

 

 

A. Bank and Borrower have entered into that certain Loan and Security Agreement, with an Effective Date of October 5, 2005 (as the same has been, and may hereafter from time to time be amended, modified, supplemented or restated, the “Loan Agreement”). The Loan Agreement was amended by that certain First Amendment to Loan and Security Agreement dated January 12, 2006 (the “First Amendment”).

 

B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

 

C. The parties desire to amend the Loan Agreement as herein set forth.

 

 

Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

 

1.  Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

 

2.  Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows, effective on October 31, 2006:

 

2.1  Amended and Restated Schedule 2. Schedule 2 to the Loan Agreement is amended and restated to read as set forth in the Amended and Restated Schedule 2 to Loan and Security Agreement, which is being signed by Borrower and Bank concurrently herewith.

 

2.2  Certain Definitions. The following definitions are added to Section 13.1 of the Loan Agreement, in alphabetical order:

 

“‘Quick Ratio Test’. As used herein, the ‘Quick Ratio Test’ will be deemed to be met if Borrower’s Adjusted Quick Ratio at the end of August, 2006 and at the end of each subsequent month is at least 1.00 to 1.00. If at the end of any such subsequent month Borrower’s Adjusted Quick Ratio is not at least 1.00 to 1.00, then Borrower shall not thereafter be deemed to meet the Quick Ratio Test, unless Borrower’s Adjusted Quick Ratio is at least 1.00 to 1.00 for a subsequent continuous period, continuous to the date of determination, and such continuous period is at least three calendar months. As used herein, “Adjusted Quick Ratio” means the ratio of (i) Borrower’s unrestricted cash plus Borrower’s net Accounts to (ii) the total of Borrower’s current liabilities (including all of the Obligations to Bank).”

 

“ ‘Reduced Borrowing Test’. As used herein, the ‘Reduced Borrowing Test’ will be deemed to be met on a day if, on such day, the total of (i) the outstanding Advances, plus the outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit), plus the FX Reserve, plus the outstanding Obligations relating to Cash Management Services, is less than (ii) 50% of the Borrowing Base (without regard to the Revolving Line Credit Amount).”

 

2.3  Audits. Section 6.2(d) of the Loan Agreement, which presently reads as follows

 

“(d)   Allow Bank to audit Borrower's Collateral at Borrower's expense, with the first of such audits to be completed, with results satisfactory to Bank prior to the making of any Advances hereunder (it being understood that Bank has heretofore conducted an audit of Borrower’s Collateral). After the initial audit, such audits will be conducted no more often than every 6 months, unless an Event of Default or Default has occurred and is continuing and in such event there shall be no limitation as to the frequency of audit conducted. Further, upon the effectiveness of the Asset Based Terms, an audit shall be conducted within 90 days of the effectiveness thereof and subsequent audits shall be conducted on a quarterly basis or at such other frequency as the conditions warrant as Bank shall determine in its good faith business judgment (unless there are no Credit Extensions outstanding and Borrower has not requested that Bank extend any Credit Extensions hereunder and in such case audits shall be conducted not more frequently than quarterly, or as Bank shall reasonably determine as conditions warrant). In connection with Bank’s field audits, Borrower shall pay to Bank the sum of $750 per day during such audit, plus Bank’s reasonable out of pocket expenses incurred in connection therewith.”

 

is amended to read as follows:

 

“(d)   Allow Bank to audit Borrower's Collateral at Borrower's expense. Such audits will be conducted no more often than every 6 months, provided that (i) if the Quick Ratio Test is not met, such audits will be conducted no more often than every 3 months, and (ii) if an Event of Default or Default has occurred and is continuing there shall be no limitation as to the frequency of audit conducted. In connection with Bank’s field audits, Borrower shall pay to Bank the sum of $750 per day during such audit, plus Bank’s reasonable out of pocket expenses incurred in connection therewith.”

 

2.4  Collection of Accounts. The portion of Section 2 of Exhibit E to the Loan Agreement, which presently reads as follows:

 

is amended to read as follows:

 

2.5  “Float”. The portion of Section 3 of Exhibit E to the Loan Agreement, which presently reads as follows

 

is amended to read as follows:

 

“(3)   Interest Computation. In computing interest on the Obligations, all checks, wire transfers and other items of payment received by Bank (including proceeds of Accounts) shall be deemed applied by Bank on account of the Obligations on receipt by Bank of immediately available funds, and, for purposes of the foregoing, any such funds received after 12:00 Noon (Pacific Time) on any day shall be deemed received on the next Business Day, provided that if, at any time, the Quick Ratio Test is not met, and the Reduced Borrowing Test is not met, then in computing interest on the Obligations, all checks, wire transfers and other items of payment received by Bank (including proceeds of Accounts) shall be deemed applied by Bank on account of the Obligations two Business Days after receipt by Bank of immediately available funds, and, for purposes of the foregoing, any such funds received after 12:00 Noon (Pacific Time) on any day shall be deemed received on the next Business Day.

 

2.6  Other Reporting Requirements. The following is hereby added to Exhibit E to the Loan Agreement at the end of Section (7) thereof, following subparagraph 8:

 

“9. Annual financial projections for each fiscal year, approved by Borrower’s Board of Directors (including income statement, balance sheet and cash flow) no later than 30 days after the beginning of such fiscal year and interim updates thereto as requested by Bank.

 

2.7  Transaction Reports. The following is hereby added at the end of Exhibit E to the Loan Agreement:

 

“(8) Transaction Reports. Notwithstanding the foregoing, Transaction Reports will not be required weekly, if, at the time, the Quick Ratio Test is met or the Reduced Borrowing Test is met. Even if weekly Transaction Reports are not required, a Transaction Report will be required at the time of a request for an Advance.”

 

2.8  Exhibit E Continues Effective. As provided in the First Amendment, Exhibit E to the Loan Agreement (as modified by this Amendment) continues to be effective and operative.

 

2.9  Exhibit D. Exhibit D to the Loan Agreement, the form of Compliance Certificate, is hereby replaced by Exhibit D hereto.

 

2.10  Subsidiary. The portion of the definition of “Permitted Investments” in Section 13.1 of the Loan Agreement, which presently reads: “Theseus Imaging Corporation, a current domestic subsidiary of NASI which Borrower represents to Bank will be dissolved no later than October 31, 2006,” is amended to read:

 

“Theseus Imaging Corporation, a current domestic subsidiary of NASI which Borrower represents to Bank will be dissolved no later than July 31, 2007,”

 

3.  Limitation of Amendments.

 

3.1  The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

 

3.2  This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

 

4.  Representations and Warranties. To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

 

4.1  Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

 

4.2  Borrower has the corporate power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

 

4.3  The organizational documents of Borrower delivered to Bank on the Effective Date remain accurate and complete and have not been amended, supplemented or restated since the Effective Date and are, and continue to be, in full force and effect;

 

4.4  The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

 

4.5  The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any material agreement by which Borrower or its property is bound, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

 

4.6  The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on either Borrower, except as already has been obtained or made; and

 

4.7  This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

 

4.8  The written report as to the status of certain litigation, which was provided by Borrower to Bank in connection with this Amendment, shall be deemed part of the Perfection Certificate dated September 25, 2006 provided by Borrower to Bank.

 

5.  Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

 

6.  Effectiveness. This Amendment shall be deemed effective upon the due execution and delivery of this Amendment by each party hereto.

 

 

[Signature page follows.]

 

In Witness Whereof, the parties hereto have caused this First Amendment to be duly executed and delivered as of the date first written above.

“Borrower”:   NORTH AMERICAN SCIENTIFIC, INC. A Delaware corporation     By       /s/L.Michael Cutrer              President or Vice President	“Bank”:   SILICON VALLEY BANK       By       /s/Kurt Miklinski                        Title     Vice President
“Borrower”:   NORTH AMERICAN SCIENTIFIC, INC. A California corporation     By  /s/L.Michael Cutrer      President or Vice President
“Borrower”:   NOMOS CORPORATION     By       /s/L.Michael Cutrer               President or Vice President

TO:	SILICON VALLEY BANK

38 Technology Drive, Suite 150

Irvine, CA 92618

FROM:

North American Scientific, Inc., a Delaware corporation

North American Scientific, Inc., a California corporation; and

NOMOS Corporation, a Delaware corporation

The undersigned authorized officers of each of North American Scientific, Inc., a Delaware corporation, North American Scientific, Inc., a California corporation, and NOMOS Corporation (collectively “Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”), (i) Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below and (ii) all representations and warranties in the Agreement are true and correct in all material respects on this date, provided that any representations and warranties expressly referring to another date are true and correct in all material respects as of such other date. In addition, the undersigned certifies that (1) Borrower has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP and (2) no liens have been levied or claims made against Borrower relating to unpaid employee payroll or benefits which Borrower has not previously notified in writing to Bank. Attached are the required documents supporting the certification. The Officer certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The Officer acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered.

Reporting Covenant		Required		Complies
Monthly financial statements + CC		Monthly within 30 days		Yes	No	N/A
Quarterly Reports on Form 10-Q		Within 5 days of filing to the SEC		Yes	No	N/A
Annual Report on Form 10-K (Audited)		FYE within 5 days of filing with the SEC		Yes	No	N/A
A/R & A/P Agings		Monthly w/in 15 days		Yes	No	N/A
Weekly transactions reports and schedules of collections (when required under Loan Agreement)		Weekly		Yes	No	N/A
Monthly reconciliations of A/R agings, Transaction Reports and general ledger		Monthly within 30 days		Yes	No	N/A
Financial Covenant		Required	Actual	Complies
Maintain at all times and measured on a monthly basis: Minimum Tangible Net Worth		$5,000,000	$______________	Yes	No	N/A

Borrower only has deposit accounts located at the following institutions: ___________________. 

Has Borrower filed any new Trademark, Patent or Copyright applications? Yes / No

(If “yes”, please list below and complete the attached Addendum to Intellectual Property Security Agreement)

Trademarks: ___________________________________________________

Patents: _______________________________________________________

Copyrights: ______________________________________________________

Comments Regarding Exceptions: See Attached.

 

		BANK USE ONLY
North American Scientific, Inc.		Received by:
A Delaware corporation		AUTHORIZED SIGNER
By:		Date:
Authorized Signer
		Verified:
North American Scientific, Inc.		AUTHORIZED SIGNER
A California corporation
		Date:
By:		Compliance Status:    Yes          No
Authorized Signer

 

 

 

 

By:     

Authorized Signer

 

 

Date