Inseego (INSG) - 2025 Q2 - Quarterly Results

CREDIT AND SECURITY AGREEMENT This agreement outlines the terms and conditions for a credit facility, including commitments, security, and obligations of borrowers and lenders Preliminary Statements This section sets forth the foundational understanding and mutual agreement between the borrowers and the lender regarding the credit facility Credit Facility Request The borrowers have requested a credit facility from the lender to finance their collective business enterprise - The borrowers have requested the lender to provide a credit facility to finance their mutual business enterprise[5] Lender's Willingness The lender agrees to provide the credit facility under the terms and conditions stipulated in this agreement - The lender is willing to provide the credit facility based on the terms and conditions outlined in this agreement[6] ARTICLE I DEFINITIONS AND ACCOUNTING TERMS This article defines key terms and accounting principles governing the agreement, ensuring consistent interpretation and application of financial concepts 1.01 Defined Terms. This section defines key terms related to loan interest rates, collateral eligibility, financial ratios, legal compliance, and party responsibilities, ensuring consistent understanding across the agreement Applicable Margin | Level | Average Availability (as a percentage of Revolving Credit Facility) | SOFR Revolving Loans | Base Rate Revolving Loans | | :---- | :----------------------------------------------------------------- | :------------------- | :----------------------- | | I | > 66.667% | 2.00% | 1.00% | | II | > 33.333% but < 66.667% | 2.25% | 1.25% | | III | < 33.333% | 2.50% | 1.50% | - The Borrowing Base calculation includes 90% of eligible investment-grade accounts receivable, 85% of non-investment-grade accounts receivable, the lower of 85%/75% of net realizable value or cost for eligible inventory, and the lower of 85%/75% of net realizable value or cost or $2 million for eligible in-transit inventory, minus all availability reserves[37] - An Eligible Account must meet several conditions, including not being overdue by more than 90 days, undisputed, arising from the ordinary course of business, free of liens, and with a non-bankrupt account debtor. Accounts where the account debtor is the federal government may be eligible if compliant with the Federal Assignment of Claims Act[81][82] - The maximum aggregate principal amount for the Revolving Credit Facility is $15,000,000, subject to adjustment per agreement terms[194] - A Material Adverse Effect refers to a significant adverse change or impact on the operations, business, assets, liabilities, or financial condition of the borrowers or the company and its subsidiaries as a whole, or a material impairment of any lender's ability to perform its loan document obligations, or a material adverse effect on the legality, validity, binding nature of loan documents, or the lender's ability to collect debt or realize collateral[147] 1.02 Other Interpretive Provisions. This section outlines the rules for interpreting terms within the agreement, covering singular/plural forms, pronoun usage, inclusive phrases, references to documents and laws, and time period calculations to ensure consistent textual interpretation - Term definitions apply to both singular and plural forms, and 'include', 'includes', and 'including' are understood as 'without limitation'[224] - References to any agreement, document, or law are deemed to refer to its version as amended, supplemented, or modified from time to time[224] - In time period calculations, 'from' means 'from and including', 'to' and 'until' mean 'to but excluding', and 'through' means 'to and including'[225] 1.03 Accounting Terms. This section mandates that accounting terms comply with GAAP, addresses the impact of GAAP changes on financial ratio calculations, and specifies special treatment for variable interest entity consolidation and fair value options for debt, ensuring consistency and accuracy in financial reporting - All accounting terms and financial data must comply with GAAP and align with the preparation of audited financial statements[227] - If GAAP changes affect financial ratio calculations, the lender and borrower's agent will negotiate modifications to preserve original intent; until then, ratios are calculated under prior GAAP, with reconciliation statements provided[228] - Even if accounting standards require all leases to be capitalized, only capital leases that complied with GAAP on the agreement date are considered capital leases[231] 1.04 Uniform Commercial Code. This section specifies that definitions for certain terms in the agreement refer to the New York Uniform Commercial Code (UCC), and includes the UCC of other jurisdictions if applicable to the perfection of security interests - Definitions for specific terms in the agreement refer to the New York Uniform Commercial Code (UCC)[232] - If the UCC of other jurisdictions applies to the perfection of security interests, that jurisdiction's UCC is also included[232] 1.05 Rounding. This section specifies that all financial ratios in the agreement are calculated by dividing the appropriate components, retaining one more decimal place than expressed, and then rounding to the nearest number - Financial ratios are calculated by retaining one more decimal place than expressed, then rounding to the nearest number (rounding up if equidistant)[232] 1.06 Times of Day. This section clarifies that, unless otherwise specified, all times in the agreement refer to Central Time (Daylight Saving or Standard Time) - Unless otherwise specified, all times refer to Central Time (Daylight Saving or Standard Time)[233] 1.07 Letter of Credit Amounts. This section defines how letter of credit amounts are determined, either as the stated amount in effect or the maximum stated amount after all automatic increases, ensuring clarity on financial exposure - The letter of credit amount is considered its stated amount in effect at any time[234] - For letters of credit with automatic increases, the amount is the maximum stated amount after all such increases become effective[234] 1.08 Interest Rates. This section clarifies that the lender makes no warranties or assumes no liability regarding the calculation or administration of benchmark rates, and may participate in transactions affecting these rates, using its discretion for information sources without liability for errors - The lender makes no warranties and assumes no liability regarding the calculation, administration, or any other matter related to benchmark rates, their definitions, or alternative rates (including any benchmark replacements)[235] - The lender and its affiliates may engage in transactions that affect benchmark rate calculations, potentially to the borrower's detriment[235] - The lender may use its discretion to select information sources or services to determine benchmark rates and is not liable for any errors or calculations[235] 1.09 Limited Condition Acquisitions. This section establishes a special condition testing mechanism for Limited Condition Acquisitions (LCAs), allowing borrowers to test default, representations, warranties, and financial ratios at the time of signing the definitive acquisition agreement, rather than at closing, to accommodate acquisition financing specifics - For LCAs, the no-default or event of default condition can be met at the time of signing the definitive acquisition agreement (LCA Test Date), rather than at acquisition completion[236] - The representations and warranties for LCAs must be true and accurate on the LCA Test Date, and material representations and warranties in the definitive agreement must be true and accurate on the acquisition completion date[236] - Financial ratio tests and loan availability conditions related to LCAs will also be conducted on the LCA Test Date, calculated on a pro forma basis[237] ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS This article details the lender's commitments and the procedures for credit extensions, including loan commitments, borrowing processes, letter of credit facilities, repayment, prepayments, and interest and fee calculations 2.01 Loan Commitments. This section outlines the lender's commitment to provide revolving loans to borrowers, specifying revolving credit facility limits, the lender's right to establish or modify reserves, and the handling of Overadvances - The lender agrees to provide revolving loans to borrowers during the availability period, provided the total outstanding revolving credit does not exceed the maximum borrowing amount[240] - The lender reserves the right to establish, modify, or cancel reserves at any time based on its credit judgment[241] - If total revolving loans exceed the borrowing base (Overadvance), the borrowers must repay the excess upon the lender's request, but all such revolving loans remain obligations secured by collateral[242] 2.02 Borrowings of Loans. This section details the procedures for borrowing revolving loans, including notification requirements, borrowing amount limits, restrictions on SOFR revolving loans during default, and the lender's authorization to pay certain expenses on behalf of borrowers - For each revolving loan borrowing, type conversion, and SOFR revolving loan continuation, borrowers must provide an irrevocable notice to the lender, typically received no later than 11:00 a.m. on the requested borrowing date[243] - Each borrowing's principal amount must be $500,000 or an integral multiple of $100,000, with no minimum borrowing amount for Base Rate Revolving Loans during a Dominion Trigger Period[243] - No SOFR Revolving Loans may be requested while a default exists without the lender's consent[244] - Borrowers irrevocably authorize the lender to advance and debit their loan accounts for due interest, fees, costs, expenses, and other matured obligations[246] 2.03 Letter of Credit Facility. This section specifies the conditions for issuing letters of credit, the borrowers' absolute and irrevocable repayment obligations for letter of credit drawings, cash collateral requirements, and letter of credit expiration dates - The lender agrees to issue letters of credit from time to time up to 30 days before the Revolving Credit Termination Date, subject to letter of credit application and all letter of credit conditions[247] - Borrowers' repayment obligation for each drawing under a letter of credit is absolute, unconditional, and irrevocable, and must be paid strictly according to the agreement's terms[249] - If an event of default occurs, the Revolving Credit Termination Date has arrived, or the Revolving Credit Expiration Date is within 20 Business Days, borrowers must immediately cash collateralize all outstanding letters of credit upon the lender's request[252] - Each letter of credit will expire one year after its issuance date or seven days before the Letter of Credit Expiration Date, whichever is earlier[253] 2.05 Repayment of Loans. This section outlines the borrowers' obligation to repay loans, specifying that principal and accrued unpaid interest on revolving loans are due on the maturity date, while other obligations, such as letter of credit obligations and additional expenses, are payable as stipulated or upon demand - Borrowers must repay the principal of all outstanding revolving loans and all accrued unpaid interest on the maturity date[254] - Other obligations, excluding loan principal and interest, including letter of credit obligations and additional expenses, are payable as stipulated in the loan documents or upon demand[255] 2.06 Prepayments. This section details voluntary and mandatory prepayment provisions for loans, allowing borrowers to optionally prepay revolving loans with prior notice, but requiring mandatory prepayment and/or cash collateralization of letter of credit obligations if total revolving credit outstanding exceeds the maximum borrowing amount - Borrowers may choose to prepay revolving loans in whole or in part at any time without premium or penalty, provided prior notice is given to the lender[256] - If the total outstanding revolving credit exceeds the maximum borrowing amount, borrowers must prepay revolving loans and letter of credit borrowings upon request, and/or cash collateralize letter of credit obligations[257] - Mandatory prepayments will first be applied to outstanding revolving loans, then to cash collateralize remaining letter of credit obligations, with any remaining amount retained by borrowers for ordinary business[258] 2.07 Termination of Revolving Credit Commitments: Incremental Increase. This section specifies conditions for borrowers to terminate revolving credit commitments or letter of credit sub-facilities, and outlines procedures and limitations for borrowers to request increases in revolving credit commitments, including incremental facility caps and approval requirements - Borrowers may notify the lender to terminate revolving credit commitments or letter of credit sub-facilities with five business days' prior notice, provided the total outstanding revolving credit does not exceed the revolving credit facility after termination[259] - Borrowers may request to increase revolving credit commitments up to twice during the availability period, with each incremental facility not exceeding $5,000,000 and a minimum increase of $1,000,000[260] - Approval for incremental facilities is at the lender's sole discretion and requires a definitive agreement[260] 2.08 Interest. This section defines the interest rate calculation for revolving loans, including applicable margins for SOFR and Base Rate revolving loans, the default interest rate in case of an event of default, and the timing and conditions for interest payments - The annual interest rate for SOFR Revolving Loans equals Term SOFR plus the applicable margin; for Base Rate Revolving Loans, it equals the Base Rate plus the applicable margin[261] - If any payment is not made on time, or another event of default occurs, all outstanding loan obligations will accrue interest at the Default Rate, which is the Base Rate plus the applicable margin plus 2% per annum[262][263] - Interest on revolving loans is payable on each interest payment date and at other times specified in the agreement[264] 2.09 Fees. This section details various fees payable by borrowers, including unused fees, letter of credit fees (comprising applicable margin and fronting fees), and other fees specified in the fee letter, emphasizing that all fees are due on time and non-refundable - Borrowers must pay an unused fee of 0.25% on the amount by which the revolving credit facility exceeds the sum of outstanding revolving loans and outstanding letter of credit obligations, payable quarterly[265] - Letter of credit fees include: a fee equivalent to the applicable margin for SOFR Revolving Loans, a fronting fee of 0.125% of each letter of credit amount, and all customary fees related to letter of credit issuance, amendment, negotiation, payment, processing, transfer, and administration[266] - During an event of default, letter of credit fees will increase by 2% per annum[266] 2.10 Computation of Interest and Fees. This section specifies the basis for calculating interest and fees, with Base Rate Revolving Loans and unused facility fees calculated on a 365 or 366-day year, and other fees and interest on a 360-day year, affirming the lender's final binding determination of rates or fees - Base Rate Revolving Loans and unused facility fees are calculated on a 365 or 366-day year; other fees and interest are calculated on a 360-day year[268] - Each determination by the lender of any interest rate or fee is final and binding, absent manifest error[268] - The lender may make conforming changes from time to time to accommodate the use or administration of Term SOFR without the consent of other parties[268] 2.11 Evidence of Debt. This section stipulates that the lender records credit extensions through one or more loan accounts, which are conclusive absent manifest error, and borrowers must execute and deliver revolving loan promissory notes upon the lender's request - The lender records credit extensions through one or more Loan Accounts, which are conclusive absent manifest error[269] - Borrowers must execute and deliver revolving loan promissory notes upon the lender's request to evidence the lender's revolving loans[269] 2.12 Payments Generally. This section mandates that all borrower payments must be unconditional and without deduction, specifying payment methods, timing, and the priority of fund allocation during an ongoing event of default - All borrower payments must be unconditional and without any counterclaim, defense, setoff, or deduction[270] - All payments must be in US Dollars and immediately available funds, paid to the lender no later than 2:00 p.m. on the designated date[270] - During an ongoing event of default, all received funds and realized collateral will be allocated to obligations in amounts and order determined by the lender's sole discretion[271] 2.13 Nature and Extent of Each Borrower's Liability. This section details each borrower's joint and several liability for all obligations, emphasizing the continuous, absolute, and unconditional nature of their guarantee, and outlining waivers, contribution mechanisms, and the lender's rights regarding collateral disposition - Each borrower is jointly and severally liable for all obligations (excluding Swap Obligations), and their guarantee is continuous, absolute, and unconditional[272] - Each borrower waives the right to require the lender to liquidate assets or pursue other collateral or persons before recourse to the borrower, and waives all guarantor defenses except for the full payment of all obligations[273] - Each borrower's liability is limited to the greater of its primary liability amount or its Allocable Amount, with provisions for contribution and indemnification among borrowers[275][276] - Each lender subordinates any claims it has against other lenders (including subrogation rights) to the full payment of all obligations[280] - The company is designated as the borrower's agent, responsible for all matters under loan documents, including credit extension requests, interest rate designations, and report deliveries[281] 2.14 Cash Collateral. This section mandates that borrowers provide cash collateral, not less than the minimum collateral amount, immediately or within specified times upon certain credit support events, such as letter of credit drawings, outstanding letter of credit obligations, or events of default, granting the lender a security interest in such collateral - Upon letter of credit drawings, outstanding letter of credit obligations, or an event of default, borrowers must immediately or within specified times provide cash collateral not less than the Minimum Collateral Amount[282] - Borrowers grant the lender a security interest in all such cash, deposit accounts, their balances, and all proceeds, as collateral for related obligations[283] - Cash collateral for letters of credit will be exclusively used to satisfy specific letter of credit obligations and other related obligations[284] ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY This article addresses tax obligations, mechanisms for protecting the lender's yield from increased costs or illegality, and compensation for losses due to borrower actions, ensuring the lender's financial position is maintained 3.01 Taxes. This section establishes the principle of tax-free payment obligations for lenders, the borrowers' responsibility for withholding and indemnifying specific taxes, the lenders' obligation to refund tax overpayments, and the requirement for lenders to provide tax documentation to reduce withholding taxes - Lender payment obligations should be free of all tax deductions or withholdings, unless required by applicable law. If deductions are necessary, borrowers must increase payments to ensure the lender receives the full amount[286] - Borrowers must timely pay all Other Taxes to relevant government agencies and indemnify the lender for any losses, costs, and expenses arising from Indemnified Taxes[287][288] - If the lender receives a tax refund for taxes already indemnified by the borrower, the refund amount (minus expenses and interest) must be returned to the borrower[290] - Lenders must provide appropriate tax documentation (e.g., IRS Form W-9, W-8BEN-E) to allow for exemption from or reduction of withholding taxes on payments[291] 3.02 Illegality. This section stipulates that if the lender determines that laws or governmental regulations prevent it from legally providing or maintaining SOFR-based revolving loans, or from determining or collecting SOFR-based interest rates, the lender's relevant obligations will be suspended, and borrowers must prepay or convert to Base Rate Revolving Loans upon request - If the lender determines that laws or governmental regulations prevent it from legally providing or maintaining SOFR-based revolving loans, or from determining or collecting SOFR-based interest rates, the lender's relevant obligations will be suspended[292] - Upon notification, borrowers must prepay or convert all SOFR Revolving Loans to Base Rate Revolving Loans as requested[292] 3.03 Inability to Determine Rates; Effect of Benchmark Transition Event. This section outlines the suspension and conversion mechanisms for SOFR revolving loans if Term SOFR cannot be determined or fairly reflects the lender's funding cost, and details the determination of benchmark replacement rates, implementation of conforming changes, and the lender's decision-making and notification obligations during a benchmark transition event - If Term SOFR cannot be determined or fairly reflects the lender's funding cost, the lender's obligation to provide or continue SOFR Revolving Loans will be suspended, and borrowers may revoke SOFR loan requests or convert them to Base Rate Revolving Loans[293] - Upon a Benchmark Transition Event, a benchmark replacement rate will be determined according to a preset order and automatically replace the original benchmark rate, without further action or consent from other parties to the agreement[294] - The lender is authorized to make conforming changes to accommodate the use of the benchmark replacement rate and will promptly notify borrowers; the lender's decision is final and binding[295][296] - During a benchmark unavailability period, borrowers may revoke SOFR Revolving Loan requests or convert them to Base Rate Revolving Loans[298] 3.04 Increased Costs. This section stipulates that if legal changes increase the lender's costs for providing or maintaining SOFR revolving loans, issuing or maintaining letters of credit, or reduce received payments, borrowers must pay additional compensation; similarly, if legal changes affect the lender's capital or liquidity requirements, reducing its return on capital, borrowers must also compensate - If legal changes increase the lender's costs for providing or maintaining SOFR Revolving Loans, issuing or maintaining letters of credit, or reduce received payments, borrowers must pay additional compensation[299] - If legal changes affect the lender's capital or liquidity requirements, leading to a reduced return on capital, borrowers must also pay additional compensation to the lender[300] - The lender's certificate requesting compensation is conclusive absent manifest error, and borrowers must pay within 10 business days of receiving the certificate[301] 3.05 Compensation for Losses. This section mandates that borrowers promptly compensate the lender for losses, costs, or expenses incurred due to early payment of non-Base Rate Revolving Loans, failure to borrow or convert as notified, or the assignment of SOFR Revolving Loans before the end of an interest period - Borrowers must compensate the lender for losses, costs, or expenses incurred due to early payment of non-Base Rate Revolving Loans before the end of an interest period[303] - Borrowers must compensate the lender for losses, costs, or expenses incurred due to failure to borrow, continue, or convert non-Base Rate Revolving Loans as notified[303] - Borrowers must compensate the lender for losses, costs, or expenses incurred due to SOFR Revolving Loans being assigned before the end of an interest period[303] 3.06 Mitigation Obligations; Designation of a Different Lending Office. This section requires the lender to make reasonable efforts to designate a different lending office or transfer its rights and obligations to another branch to reduce future payments or eliminate notification requirements, provided it incurs no un-reimbursed costs or adverse effects, with borrowers agreeing to cover all associated reasonable costs and expenses - If the lender requests compensation or borrowers must pay additional amounts, the lender must make reasonable efforts to designate a different lending office or transfer its rights and obligations[305] - This action aims to reduce future payments or eliminate notification requirements, provided it does not incur un-reimbursed costs or adverse effects for the lender[305] - Borrowers agree to pay all reasonable costs and expenses incurred by the lender due to such designation or transfer[305] 3.07 Survival. This section explicitly states that all borrowers' obligations under this Article III remain in full force and effect after the Facility Termination Date - All borrowers' obligations under this Article III remain in full force and effect after the Facility Termination Date[306] ARTICLE IV SECURITY AND ADMINISTRATION OF COLLATERAL This article details the security interests granted to the lender over various collateral types, outlining the administration requirements for accounts receivable and inventory, and specifying further assurances needed to perfect and maintain the lender's security interests 4.01 Security Interest in Collateral. This section grants the lender a continuing lien on all present and future assets of each loan party to secure timely payment and performance of obligations, covering a broad range of collateral including accounts, goods, instruments, intangibles, and investment property, while explicitly excluding Excluded Assets - Each loan party grants the lender (and its affiliates) a continuing lien on all its present or future assets, acquired or held, to ensure timely payment and performance of obligations[309] - Collateral includes, but is not limited to, all accounts receivable, goods (including equipment, fixtures, and inventory), instruments, intangibles (including intellectual property and licenses), investment property, letter of credit rights, chattel paper, and all proceeds and products[309][310][312] - Collateral does not include any Excluded Assets[311] 4.02 Other Collateral. This section requires loan parties to notify the lender and take action to perfect the lender's security interest upon acquiring other collateral, such as commercial tort claims, letter of credit rights, electronic chattel paper, deposit accounts, or investment property, and details the form of chattel paper, delivery of certificates, issuer agreements, and management of voting rights and securities accounts - Loan parties must notify the lender in writing upon acquiring commercial tort claims, letter of credit rights, or electronic chattel paper exceeding the Threshold Amount, and take action as requested by the lender to perfect the security interest[313][314] - Certificates for all chattel paper must be delivered to and held by the lender, accompanied by properly endorsed blank transfer documents[316] - In the absence of an ongoing event of default, loan parties may exercise voting rights for chattel paper; however, during an event of default, the lender may choose to suspend loan parties' voting rights and exercise them itself[319] - Loan parties may not maintain any securities accounts with securities intermediaries not listed in Schedule 6.19 and without a control agreement with the lender[320] 4.03 Collateral Administration. This section details administrative requirements for accounts receivable and inventory, mandating that borrowers maintain accurate records, promptly notify the lender of changes in account eligibility, ensure all payments are deposited directly into a concentration account, and conduct regular inventory counts and reporting, while adhering to inventory acquisition, sale, and maintenance regulations - Borrowers must maintain accurate and complete records of accounts receivable and promptly notify the lender if $5,000,000 or more of accounts receivable cease to be eligible when total outstanding revolving credit is $1,000,000 or more[322] - Borrowers must ensure all payments related to accounts receivable or other collateral are deposited directly into a concentration account; if cash or payment instruments are received, they must be held in trust for the lender and promptly deposited into the concentration account[325] - Borrowers must maintain accurate and complete records of inventory, conduct a physical count at least annually, and provide reports to the lender; during an event of default, the lender may request additional counts[326] - Borrowers may not return inventory to suppliers unless in the ordinary course of business, no event of default exists, and the lender is promptly notified, with received payments promptly remitted to the lender[327] 4.04 Further Assurances. This section requires loan parties to execute control agreements with the lender when opening new deposit, securities, or commodity accounts, and to endeavor to provide lien waivers from lessors before or upon signing or renewing real estate leases, while irrevocably authorizing the lender to file UCC financing statements to perfect security interests - Loan parties must deliver control agreements to the lender when opening new deposit accounts, securities accounts, or commodity accounts (excluding Excluded Deposit Accounts)[330] - Before or upon signing or renewing real estate lease agreements, borrowers must endeavor to provide the lender with a lien waiver agreement signed by the lessor[331] - The lender is irrevocably authorized to sign and file UCC financing statements on behalf of loan parties to perfect the lender's lien in the collateral[333] - Within 120 days after the Closing Date, each loan party must execute control agreements for its securities and commodity accounts, with Wells Fargo accounts exempt during the transition period[334] 4.05 Cash Management. This section mandates that loan parties execute control agreements for their deposit accounts (excluding exempt accounts) and direct all accounts receivable payments to controlled deposit accounts; during a Dominion Trigger Period, controlled account banks must daily transfer all cash receipts to a lender-maintained concentration account, with funds allocated according to specified priorities - Each loan party must execute control agreements for its deposit accounts (excluding Excluded Deposit Accounts), including all lockboxes and related lockbox accounts used for collecting accounts receivable, on or before the Closing Date[335] - All payment requests for accounts receivable must direct payments to controlled deposit accounts opened in the name of the loan party[335] - During a Dominion Trigger Period, controlled account banks must daily transfer all cash receipts and collections via ACH or wire transfer to a concentration account maintained by the lender[336] - Funds in the concentration account will be allocated daily according to the agreement's provisions (Section 2.06(b)(ii))[337] 4.06 Information Regarding Collateral. This section requires each loan party to provide detailed information about its collateral, including the chief executive office address, legal name, jurisdiction of organization, identification numbers, and a list of collateral locations, and mandates prior notification to the lender and necessary actions to maintain the perfection and priority of liens when changing names, jurisdictions, or collateral locations - Each loan party must provide a true and complete list of its chief executive office address, legal name, jurisdiction of organization, identification numbers, and locations of collateral[338] - Loan parties must provide at least thirty days' prior written notice to the lender when changing names, jurisdictions of organization, or collateral locations, and take actions reasonably requested by the lender to perfect or maintain the perfection and priority of the lender's liens[338] ARTICLE V CONDITIONS PRECEDENT TO CREDIT EXTENSIONS This article outlines the prerequisites for credit extensions, distinguishing between initial and subsequent conditions, and specifying post-closing requirements to ensure all legal, financial, and collateral-related obligations are met before funds are disbursed 5.01 Conditions of Initial Credit Extension. This section lists all preconditions for the lender's initial credit extension, including receipt of executed agreements and security documents, corporate charters, legal opinions, solvency certificates, audited financial statements, insurance certificates, initial borrowing base certificates, UCC financing statements, and meeting specific availability requirements - The lender must receive executed copies of this agreement, security documents, revolving loan promissory notes, corporate resolutions, incumbency certificates, organizational documents, legal opinions, solvency certificates, audited financial statements, and financial projections[340][341][342] - Proof of insurance, an initial borrowing base certificate, written notice of initial borrowing, UCC financing statements, and UCC search results are required to ensure the perfection and priority of the lender's security interests[342] - Borrowers must pay all reasonable fees and expenses of the lender's counsel[343] - After the initial credit extension, transaction completion, and payment of all related fees, Availability must be at least $10,000,000[344] 5.02 Conditions to all Credit Extensions. This section specifies the ongoing preconditions for the lender to honor any credit extension request, requiring all representations and warranties to be true and accurate, no event of default to exist, and the total outstanding revolving credit not to exceed the maximum borrowing amount - All representations and warranties must be true and accurate on the date of credit extension, unless explicitly stated for an earlier date[345] - No event of default must have occurred and be continuing, or result from the proposed credit extension or the application of its proceeds[346] - The lender must have received a compliant credit extension request[347] - After each credit extension becomes effective, the total outstanding revolving credit must not exceed the maximum borrowing amount[347] 5.03 Post-Closing. This section requires borrowers to use commercially reasonable efforts to deliver a satisfactory landlord waiver agreement to the lender within 90 days after the Closing Date, concerning the leased property at 9710 Scranton Road, San Diego, California - Within 90 days after the Closing Date, borrowers must use commercially reasonable efforts to deliver a satisfactory landlord waiver agreement to the lender, concerning the leased property at 9710 Scranton Road, San Diego, California[348] ARTICLE VI REPRESENTATIONS AND WARRANTIES This article contains representations and warranties from the loan parties regarding their legal existence, authorization, financial condition, compliance with laws, property ownership, and absence of defaults, ensuring transparency and accuracy of information provided to the lender 6.01 Existence, Qualification and Power. This section warrants that each loan party and its subsidiaries are duly organized, validly existing, and in good standing under their jurisdiction of organization, possessing all necessary power, authority, and governmental approvals to own assets, conduct business, and execute and perform loan document obligations - Each loan party and its subsidiaries are duly organized, validly existing, and in good standing under the laws of their jurisdiction of organization[350] - Each loan party possesses all necessary power, authority, and governmental approvals to own assets, conduct business, and execute and perform loan document obligations[350] - Each loan party has obtained appropriate qualifications and licenses and maintains good standing in every jurisdiction where it needs to own assets or conduct business, unless failure to do so would not result in a Material Adverse Effect on the whole[350] 6.02 Authorization; No Contravention. This section warrants that all necessary corporate or other organizational actions for each loan party to execute, deliver, and perform loan documents and complete the transactions have been duly authorized, and will not violate its organizational documents, contractual obligations, governmental orders, or applicable laws - All necessary corporate or other organizational actions for each loan party to execute, deliver, and perform loan documents and complete the transactions have been duly authorized[351] - Such actions will not violate its organizational documents, contractual obligations, governmental orders, or applicable laws[351] 6.03 Governmental Authorization; Other Consents. This section warrants that no approval, consent, exemption, authorization, or notice from any governmental authority or other party is required for the execution, delivery, or performance of loan documents, the granting or perfection of liens, or the exercise of rights thereunder - No approval, consent, exemption, authorization, or notice from any governmental authority or other party is required for the execution, delivery, or performance of loan documents, the granting or perfection of liens, or the exercise of rights thereunder[352] 6.04 Binding Effect. This section warrants that the agreement has been duly executed and delivered by each loan party, constituting its legal, valid, and binding obligation, enforceable according to its terms, subject to limitations on indemnification rights and principles of bankruptcy or insolvency laws - This agreement has been duly executed and delivered by each loan party, constituting its legal, valid, and binding obligation[353] - This agreement is enforceable according to its terms, subject to limitations on indemnification rights and principles of bankruptcy or insolvency laws[353] 6.05 Financial Statements; No Material Adverse Effect. This section warrants that both audited and unaudited consolidated financial statements are prepared in accordance with GAAP, fairly presenting the financial condition and operating results of the company and its subsidiaries, and that no event or circumstance since the audited financial statement date has occurred that could result in a Material Adverse Effect; furthermore, each loan party is solvent on a consolidated basis - Audited consolidated financial statements are prepared in accordance with GAAP, fairly presenting the financial condition and operating results of the company and its subsidiaries, and disclosing all material debts and liabilities[354] - Unaudited consolidated financial statements are also prepared in accordance with GAAP, fairly presenting the financial condition and operating results of the company and its subsidiaries, though they may lack footnotes and be subject to year-end audit adjustments[355] - No event or circumstance since the audited financial statement date has occurred that could result in a Material Adverse Effect[356] - On the Closing Date, each loan party is solvent on a consolidated basis[356] 6.06 Litigation. This section warrants that no litigation, claims, or disputes are pending or threatened against any loan party or its subsidiaries that would affect this agreement or loan documents, or individually or in aggregate result in a Material Adverse Effect - No litigation, claims, or disputes are currently pending or threatened against any loan party or its subsidiaries that would affect this agreement or loan documents[357] - Unless otherwise disclosed in Schedule 6.06, such litigation, claims, or disputes would not individually or in aggregate result in a Material Adverse Effect[357] 6.07 No Default. This section warrants that no loan party or its subsidiaries have breached any contractual obligations, and such breaches would not individually or in aggregate result in a Material Adverse Effect; furthermore, the completion of transactions contemplated by this agreement or any other loan document will not cause an event of default - No loan party or its subsidiaries have breached any contractual obligations, and such breaches would not individually or in aggregate result in a Material Adverse Effect[358] - The completion of transactions contemplated by this agreement or any other loan document will not cause an event of default[358] 6.08 Ownership of Property; Liens. This section warrants that each loan party and its subsidiaries possess good record and marketable fee simple title or valid leasehold interests in all real property necessary for their business operations, and good marketable title, valid leasehold interests, or valid licenses to use all personal property and assets, all free of liens except for Permitted Liens - Each loan party and its subsidiaries possess good record and marketable fee simple title or valid leasehold interests in all real property necessary for their business operations[359] - Each loan party and its subsidiaries possess good marketable title, valid leasehold interests, or valid licenses to use all personal property and assets[359] - Schedule 6.08(b)(1) lists all real property addresses owned by loan parties, and Schedule 6.08(b)(2) lists all material operating lease addresses, all of which are valid[360] - All real property is free of any liens except for Permitted Liens[360] 6.09 Environmental Compliance. This section warrants that each loan party and its subsidiaries comply with all Environmental Laws, obtain and maintain required environmental permits, and have not incurred or been threatened with environmental liabilities that could result in a Material Adverse Effect; it also states that their properties are not on the National Priorities List, do not handle or store hazardous substances, and have reviewed the impact of environmental laws - Each loan party and its subsidiaries comply with all Environmental Laws, obtain and maintain required environmental permits, and have not incurred or been threatened with environmental liabilities that could result in a Material Adverse Effect[361] - Properties currently owned or operated are not on the National Priorities List (NPL), do not handle or store hazardous substances, and are free of asbestos or asbestos-containing materials[362] - Each loan party has reviewed existing Environmental Laws and their impact on its business, operations, and properties, and reasonably concluded that, unless otherwise specified in Schedule 6.09, these laws and claims would not individually or in aggregate result in a Material Adverse Effect[364] 6.10 Insurance. This section warrants that the property of each loan party and its subsidiaries is insured by financially sound and reputable insurance companies, with coverage amounts, deductibles, and insured risks consistent with customary practices for similar businesses and regions - The property of each loan party and its subsidiaries is insured by financially sound and reputable insurance companies, with coverage amounts, deductibles, and insured risks consistent with customary practices for similar businesses and regions[365] 6.11 Taxes. This section warrants that each loan party and its subsidiaries have filed all required federal, state, and other tax returns and reports, and have paid all due federal, state, and other taxes, assessments, and governmental charges, unless properly disputed or failure to pay would not result in a Material Adverse Effect - Each loan party and its subsidiaries have filed all required federal, state, and other tax returns and reports, and have paid all due federal, state, and other taxes[366] - This is unless such taxes are being properly disputed or failure to pay would not result in a Material Adverse Effect[366] 6.12 ERISA Compliance. This section warrants that all Plans comply with ERISA, tax laws, and other applicable laws, and that Plans intended to be qualified have received favorable tax determinations; it also states that no pending claims or governmental actions could result in a Material Adverse Effect, nor have prohibited transactions or breaches of fiduciary duty occurred, further guaranteeing the funding status of pension plans and compliance of foreign plans - All Plans comply in all material respects with applicable provisions of ERISA, tax laws, and federal or state laws, and Plans intended to be qualified have received favorable tax determinations[367] - No claims, litigation, or governmental actions are pending or threatened, nor have prohibited transactions or breaches of fiduciary duty occurred, which would result in a Material Adverse Effect[368] - Each loan party and its ERISA Affiliates have met all applicable requirements under pension funding rules, and the funding target attainment percentage for pension plans is not less than 60%[369] - For foreign governmental plans or arrangements and foreign plans, all employer or employee contributions have been made according to normal accounting practices, and asset values are sufficient to cover accrued benefit obligations[371] 6.13 Subsidiaries; Equity Interests. This section warrants that each loan party has no subsidiaries or equity investments other than those disclosed in Schedule 6.13 or created/acquired under the agreement; all issued equity interests of subsidiaries and loan parties are validly issued, fully paid, and non-assessable, owned by the loan party (or its subsidiary), and free of liens except as provided in security documents and intercreditor agreements - Each loan party has no subsidiaries or equity investments other than those disclosed in Schedule 6.13 or created/acquired under the agreement[372] - All issued equity interests of subsidiaries and loan parties are validly issued, fully paid, and non-assessable, and owned by the loan party (or its subsidiary)[372] - These equity interests are free of liens except as provided in security documents and intercreditor agreements[372] 6.14 Margin Regulations; Investment Company Act. This section warrants that no loan party engages in the business of purchasing or carrying margin stock or extending credit for such purpose, and that no loan party, controlling person, or subsidiary is or is required to be registered as an 'investment company' under the Investment Company Act of 1940 - No loan party engages in the business of purchasing or carrying margin stock or extending credit for such purpose[373] - No loan party, controlling person, or subsidiary is or is required to be registered as an 'investment company' under the Investment Company Act of 1940[373] 6.15 Disclosure. This section warrants that each loan party has disclosed all agreements, documents, corporate or other restrictions, and other known matters that could result in a Material Adverse Effect to the lender; it also guarantees that all provided reports, financial statements, certificates, or other information contain no material misstatements or omissions of fact, and that financial projections are prepared in good faith based on reasonable assumptions - Each loan party has disclosed all agreements, documents, corporate or other restrictions, and other known matters that could result in a Material Adverse Effect to the lender[374] - All provided reports, financial statements, certificates, or other information contain no material misstatements or omissions of fact[374] - Financial projections are prepared in good faith based on assumptions believed to be reasonable at the time[374] 6.16 Compliance with Laws. This section warrants that each loan party and its subsidiaries comply in all material respects with all applicable laws, orders, injunctions, judgments, and decrees, unless such requirements are being disputed in good faith or non-compliance would not result in a Material Adverse Effect - Each loan party and its subsidiaries comply in all material respects with all applicable laws, orders, injunctions, judgments, and decrees[375] - This is unless such requirements are being disputed in good faith or non-compliance would not result in a Material Adverse Effect[375] 6.17 Intellectual Property; Licenses, Etc. This section warrants that each loan party and its subsidiaries own or have the right to use all Intellectual Property (including IP Rights) reasonably necessary for their respective business operations, and do not have any known conflicts with any other party's IP Rights, unless failure to own or use would not result in a Material Adverse Effect; it also states that their business operations do not infringe any other party's IP Rights - Each loan party and its subsidiaries own or have the right to use all Intellectual Property (including IP Rights) reasonably necessary for their respective business operations, and have no known conflicts with any other party's IP Rights[376] - This is unless failure to own or use would not result in a Material Adverse Effect[376] - The business operations of each loan party and its subsidiaries do not infringe any other party's IP Rights[376] 6.18 Labor Matters. This section warrants that, except as disclosed in Schedule 6.18 or situations not resulting in a Material Adverse Effect, no strikes, lockouts, or other significant labor disputes are pending or threatened against any loan party or its subsidiaries; each loan party complies with FLSA and other applicable labor laws, has paid or properly accrued all due wages and employee benefits, and has no pending labor relations board proceedings or union recognition requests - Except as disclosed in Schedule 6.18 or situations not resulting in a Material Adverse Effect, no strikes, lockouts, or other significant labor disputes are pending or threatened against any loan party or its subsidiaries[377] - Each loan party complies with FLSA and other applicable labor laws, and has paid or properly accrued all due wages and employee benefits[377] - No pending labor relations board proceedings or union recognition requests exist, nor are there labor complaints or claims against any loan party or its subsidiaries[377] 6.19 Deposit Accounts and Securities Accounts. This section warrants that Schedule 6.19 lists detailed information for all deposit accounts, securities accounts, and commodity accounts maintained by each loan party, including the name of the depository institution, address, account number, and contact person - Schedule 6.19(a) lists the name, address, account number, and contact person for all deposit accounts maintained by each loan party[378] - Schedule 6.19(b) lists the name, address, account number, and contact person for all securities accounts and commodity accounts maintained by each loan party[379] 6.20 Accounts. This section warrants that each account receivable listed as an Eligible Account in the borrowing base certificate is true and valid, arises from the ordinary course of business for goods sold and services rendered, is for a definite amount, free of setoffs, liens, disputes, or other adverse conditions, and the account debtor is capable of performance, creditworthy, and not bankrupt - Each Eligible Account receivable is true and valid, arises from the ordinary course of business for goods sold and services rendered, and is for a definite amount[380] - Accounts receivable are free of any setoffs, liens (except for lender's liens and those under intercreditor agreements), deductions, defenses, disputes, or other adverse conditions[380] - The account debtor is capable of performance, meets the borrower's customary credit standards, is creditworthy, not considering or subject to any debtor relief law proceedings, and has not ceased or suspended operations[381] 6.21 Anti-Terrorism Laws and Foreign Asset Control Regulations. This section warrants that each loan party and its controlled entities are not OFAC-listed or sanctioned entities, do not engage in activities violating U.S. economic sanctions, and that credit extension proceeds will not fund sanctioned persons or violate U.S. economic sanctions; it also guarantees that each loan party has established procedures and controls to ensure compliance with all applicable anti-money laundering and anti-corruption laws - Each loan party and its controlled entities are not OFAC-listed persons or sanctioned entities, and do not engage in activities violating U.S. economic sanctions[382] - Credit extension proceeds will not be used to fund any blocked persons or otherwise violate U.S. economic sanctions[383] - Each loan party has established procedures and controls to ensure compliance with all applicable anti-money laundering and anti-corruption laws, and has not been accused, investigated, or penalized for related violations[384][385][387] 6.22 Brokers. This section warrants that no broker or intermediary facilitated the revolving loans or transactions contemplated by the loan documents, and that no loan party or its affiliates have any obligations for any intermediary or brokerage fees - No broker or intermediary facilitated the revolving loans or transactions contemplated by the loan documents[388] - No loan party or its affiliates have any obligations for any intermediary or brokerage fees[388] 6.23 Customer and Trade Relations. This section warrants that no termination, cancellation, or material modification of business relationships between any loan party and its customers or suppliers is pending or threatened, to any loan party's knowledge, and such actions would not individually or in aggregate result in a Material Adverse Effect on the loan parties' operations - No termination, cancellation, or material modification of business relationships between any loan party and its customers or suppliers is pending or threatened, to any loan party's knowledge[389] - Such termination, cancellation, or modification would not individually or in aggregate result in a Material Adverse Effect on the loan parties' operations[389] [6.26 Senior Indebtedness.](index=59&type=section&id=6