AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Exhibit
10.1
AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT
THIS
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(this
“Agreement”)
dated
as of January 3, 2007, and effective as of December 29, 2006 (the "Effective
Date")
between SILICON
VALLEY BANK,
a
California corporation and with a loan production office located at ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(“Bank”),
and
VOXWARE,
INC.,
a
Delaware corporation (“Borrower”),
provides the terms on which Bank shall lend to Borrower and Borrower shall
repay
Bank. This Agreement amends and restates in its entirety a certain Loan and
Security Agreement dated as of May 24, 2006, between Borrower and Bank. The
parties agree as follows:
Accounting
terms not defined in this Agreement shall be construed following GAAP.
Calculations and determinations must be made following GAAP. Capitalized terms
not otherwise defined in this Agreement shall have the meanings set forth in
Section 13. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein.
2.1
Promise
to Pay.
Borrower hereby unconditionally promises to pay Bank the outstanding principal
amount of all Credit Extensions and accrued and unpaid interest thereon as
and
when due in accordance with this Agreement.
2.1.1
Revolving
Advances.
(a) Availability.
Subject
to the terms and conditions of this Agreement and to the deduction of Reserves,
Bank will make Advances to Borrower up to the Availability Amount. Amounts
borrowed under the Revolving Line may be repaid and, prior to the Revolving
Line
Maturity Date, reborrowed, subject to the applicable terms and conditions
precedent herein.
(b) Termination;
Repayment.
The
Revolving Line terminates on the Revolving Line Maturity Date, when the
principal amount of all Advances, the unpaid interest thereon, and all other
Obligations relating to the Revolving Line shall be immediately due and
payable.
(a) As
part
of the Revolving Line and subject to the deduction of Reserves, Bank shall
issue
or have issued Letters of Credit for Borrower’s account. The face amount of
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) may not exceed One Million
Dollars ($1,000,000.00),
inclusive of Credit Extensions relating to Sections 2.1.3 and 2.1.4. Such
aggregate amounts utilized hereunder shall at all times reduce the amount
otherwise available for Advances under the Revolving Line. If, on the Revolving
Maturity Date, there are any outstanding Letters of Credit, then on such date
Borrower shall provide to Bank cash collateral in an amount equal to 105% of
the
face amount of all such Letters of Credit plus all interest, fees, and costs
due
or to become due in connection therewith (as estimated by Bank in its good
faith
business judgment), to secure all of the Obligations relating to said Letters
of
Credit. All Letters of Credit shall be in form and substance acceptable to
Bank
in its sole discretion and shall be subject to the terms and conditions of
Bank’s standard Application and Letter of Credit Agreement (the “Letter
of Credit Application”).
Borrower agrees to execute any further documentation in connection with the
Letters of Credit as Bank may reasonably request. Borrower
further agrees to be bound by the regulations and interpretations of the issuer
of any Letters of Credit guarantied by Bank and opened for Borrower’s account or
by Bank’s interpretations of any Letter of Credit issued by Bank for Borrower’s
account, and Borrower understands and agrees that Bank shall not be liable
for
any error, negligence, or mistake, whether of omission or commission, in
following Borrower’s instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto.
(b) The
obligation of Borrower to immediately reimburse Bank for drawings made under
Letters of Credit shall be absolute, unconditional, and irrevocable, and shall
be performed strictly in accordance with the terms of this Agreement, such
Letters of Credit, and the Letter of Credit Application.
(c) Borrower
may request that Bank issue a Letter of Credit payable in a Foreign Currency.
If
a demand for payment is made under any such Letter of Credit, Bank shall treat
such demand as an Advance to Borrower of the equivalent of the amount thereof
(plus fees and charges in connection therewith such as wire, cable, SWIFT or
similar charges) in Dollars at the then-prevailing rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.
(d) To
guard
against fluctuations in currency exchange rates, upon the issuance of any Letter
of Credit payable in a Foreign Currency, Bank shall create a reserve (the
“Letter
of Credit Reserve”)
under
the Revolving Line in an amount equal to ten percent (10%) of the face amount
of
such Letter of Credit. The amount of the Letter of Credit Reserve may be
adjusted by Bank from time to time to account for fluctuations in the exchange
rate. The availability of funds under the Revolving Line shall be reduced by
the
amount of such Letter of Credit Reserve for as long as such Letter of Credit
remains outstanding.
2.1.3
Foreign
Exchange Sublimit.
As part
of the Revolving Line and subject to the deduction of Reserves, Borrower
may enter into foreign exchange contracts with Bank under which Borrower commits
to purchase from or sell to Bank a specific amount of Foreign Currency (each,
a
“FX
Forward Contract”)
on a specified date (the “Settlement
Date”).
FX Forward Contracts shall have a Settlement Date of at least one (1) FX
Business Day after the contract date and shall be subject to a reserve of ten
percent (10%) of each outstanding FX Forward Contract in a maximum aggregate
amount equal to One Million Dollars ($1,000,000.00) (the “FX
Reserve”),
inclusive of Credit Extensions relating to Sections 2.1.2 and 2.1.4. The
aggregate amount of FX Forward Contracts at any one time may not exceed ten
(10)
times the amount of the FX Reserve.
2.1.4
Cash
Management Services Sublimit.
Borrower may use up to One Million Dollars ($1,000,000.00) (the “Cash
Management Services Sublimit”),
inclusive of Credit Extensions relating to Sections 2.1.2 and 2.1.3 of the
Revolving Line for Bank’s cash management services which may include merchant
services, direct deposit of payroll, business credit card, and check cashing
services identified in Bank’s various cash management services agreements
(collectively, the “Cash
Management Services”).
Any
amounts Bank pays on behalf of Borrower or any amounts that are not paid by
Borrower for any Cash Management Services will be treated as Advances under
the
Revolving Line and will accrue interest at the interest rate applicable to
Advances.
2.1.5
Term
Loan.
(a) Availability.
Bank
shall make one (1) term loan available to Borrower in an amount up to the Term
Loan on or before March 31, 2007, subject to the satisfaction of the terms
and
conditions of this Agreement.
(b) Interest
Payments.
Commencing on the first Payment Date of the month following the month in which
the Funding Date occurs (or commencing on the Funding Date if the Funding Date
is the first calendar day of the month), Borrower shall make monthly payments
of
interest at the rate set forth in Section 2.3(a)(ii).
(c) Repayment.
Commencing on April 1, 2007, and continuing on the Payment Date of each month
thereafter, Borrower shall repay the Term Loan in (i) thirty-six (36) equal
installments of principal, plus (ii) monthly payments of accrued
interest (the
“Term
Loan Payment”).
Borrower’s final Term Loan Payment, due on the Term Loan Maturity Date, shall
include all outstanding principal and accrued and unpaid interest under the
Term
Loan.
2.2
Overadvances.
If at
any time or for any reason the total of all outstanding Advances and all other
monetary Obligations exceeds the Availability Amount (an “Overadvance”),
Borrower shall immediately pay the amount of the excess to Bank, without notice
or demand. Without limiting Borrower’s obligation to repay to Bank the amount of
any Overadvance, Borrower agrees to pay Bank interest on the outstanding amount
of any Overadvance, on demand, at the Default Rate.
-2-
2.3
Payment
of Interest on the Credit Extensions.
(i) Advances.
Subject
to Section 2.3(b), the principal amount outstanding under the Revolving Line
shall accrue interest at a floating per annum rate equal to the one and
three-quarters of one percentage points (1.75%) above the Prime Rate (which
shall be reduced to one-half of one percentage point (.50%) above the Prime
Rate, beginning on the first Payment Date following the occurrence of the
Profitability Event), which interest shall be payable monthly in accordance
with
Section 2.3(f) below.
(ii) Term
Loan.
Subject
to Section 2.3(b), the principal amount outstanding under the Term Loan shall
accrue interest at a floating per annum rate equal to two and one-quarter of
one
percentage points (2.25%) above the Prime Rate, which interest shall be payable
monthly in accordance with Section 2.3(f) below.
(b) Default
Rate.
Immediately upon the occurrence and during the continuance of an Event of
Default, Obligations shall bear interest at a rate per annum which is five
percentage points above the rate effective immediately before the Event of
Default (the “Default
Rate”).
Payment
or acceptance of the increased interest rate provided in this
Section 2.3(b) is not a permitted alternative to timely payment and shall
not constitute a waiver of any Event of Default or otherwise prejudice or limit
any rights or remedies of Bank.
(c) Adjustment
to Interest Rate.
Changes
to the interest rate of any Credit Extension based on changes to the Prime
Rate
shall be effective on the effective date of any change to the Prime Rate and
to
the extent of any such change.
(d) 360-Day
Year.
Interest shall be computed on the basis of a 360-day year for the actual number
of days elapsed.
(e) Debit
of Accounts.
Bank
may debit any of Borrower’s deposit accounts, including the Designated Deposit
Account, for principal and interest payments or any other amounts Borrower
owes
Bank when due. These debits shall not constitute a set-off.
(f) Payments;
Interest Computation; Float Charge.
Interest is payable monthly on the last calendar day of each month. In computing
interest on the Obligations, all Payments received after 12:00 noon Eastern
time
on any day shall be deemed received on the next Business Day. When a payment
is
due on a day that is not a Business Day, the payment is due the next Business
Day and additional fees or interest, as applicable, shall continue to accrue.
In
addition, Bank shall be entitled to charge Borrower a “float” charge in an
amount equal to three (3) Business Days interest, at the interest rate
applicable to the Advances, on all Payments received by Bank. The float charge
for each month shall be payable on the last day of the month. Bank shall not,
however, be required to credit Borrower's account for the amount of any item
of
payment which is unsatisfactory to Bank in its good faith business judgment,
and
Bank may charge Borrower's Designated Deposit Account for the amount of any
item
of payment which is returned to Bank unpaid.
2.4
Fees.
Borrower shall pay to Bank:
(a) Revolving
Line Commitment Fee.
A fully
earned, non-refundable commitment fee of Seven Thousand Five Hundred Dollars
($7,500.00) is due on the Effective Date.
(b) Unused
Revolving Line Facility Fee.
A fee
(the “Unused
Revolving Line Facility Fee”),
payable monthly, in arrears, on the last day of each month, in an amount equal
to one-quarter of one percent (0.25%) per annum of the average unused portion
of
the Revolving Line, as determined by Bank. Borrower shall not be entitled to
any
credit, rebate or repayment of any Unused Revolving Line Facility Fee previously
earned by Bank pursuant to this Section notwithstanding any termination of
the
within Agreement or the suspension or termination of Bank’s obligation to make
loans and advances hereunder; and
(c) Bank
Expenses.
All
Bank Expenses (including reasonable attorneys’ fees and expenses, plus expenses,
for documentation and negotiation of this Agreement) incurred through and after
the Effective Date, when due.
-3-
3.1 Conditions
Precedent to Initial Credit Extension.
Bank’s
obligation to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory
to
Bank, such documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate, including, without
limitation:
(a) Duly
executed original signatures to the Loan Documents to which it is a
party;
(b) Duly
executed original signatures to the Control Agreement[s];
(c) Borrower
shall have delivered its Operating Documents and a good standing certificate
of
Borrower certified by the Secretary of State of the State of Delaware as of
a
date no earlier than thirty (30) days prior to the Effective Date;
(d) Duly
executed original signatures to the completed Borrowing Resolutions for
Borrower;
(e) Bank
shall have received certified copies, dated as of a recent date, of financing
statement searches, as Bank shall request, accompanied by written evidence
(including any UCC termination statements) that the Liens indicated in any
such
financing statements either constitute Permitted Liens or have been or, in
connection with the initial Credit Extension, will be terminated or
released;
(f) Borrower
shall have delivered a legal opinion of Borrower’s counsel dated as of the
Effective Date together with the duly executed original signatures
thereto;
(g) Duly
executed original signatures to the guaranty and security agreement (together
with the completed Borrowing Resolution) for Guarantor;
(h) Borrower
shall have delivered evidence satisfactory to Bank that the insurance policies
required by Section 6.5 hereof are in full force and effect, together with
appropriate evidence showing loss payable and/or additional insured clauses
or
endorsements in favor of Bank; and
(i) Borrower
shall have paid the fees and Bank Expenses then due as specified in Section
2.4
hereof.
3.2
Conditions
Precedent to all Credit Extensions.
Bank’s
obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:
(a) timely
receipt of an executed Transaction Report;
(b) the
representations and warranties in Section 5 shall be true in all material
respects on the date of the Transaction Report and on the Funding Date of each
Credit Extension; provided, however, that such materiality qualifier shall
not
be applicable to any representations and warranties that already are qualified
or modified by materiality in the text thereof; and provided, further
that
those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such
date,
and no
Default or Event of Default shall have occurred and be continuing or result
from
the Credit Extension. Each Credit Extension is Borrower’s representation and
warranty on that date that the representations and warranties in Section 5
remain true in all material respects; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that
those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such
date;
and
(c) in
Bank’s
sole discretion, there has not been any material impairment in the general
affairs, management, results of operation, financial condition or the prospect
of repayment of the Obligations, or there has not been any material adverse
deviation by Borrower from the most recent business plan of Borrower presented
to and accepted by Bank.
-4-
3.3
Covenant
to Deliver.
Borrower
agrees to deliver to Bank each item required to be delivered to Bank under
this
Agreement as a condition to any Credit Extension. Borrower expressly agrees
that
the extension of a Credit Extension prior to the receipt by Bank of any such
item shall not constitute a waiver by Bank of Borrower’s obligation to deliver
such item, and any such extension in the absence of a required item shall be
in
Bank’s sole discretion.
3.4
Procedures
for Borrowing. Subject
to the prior satisfaction of all other applicable conditions to the making
of an
Advance set forth in this Agreement, to obtain an Advance (other than Advances
under Sections 2.1.2 or 2.1.4), Borrower shall notify Bank (which notice shall
be irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon
Eastern time on the Funding Date of the Advance. Together with any such
electronic or facsimile notification, Borrower must promptly deliver to Bank
by
electronic mail or facsimile a completed Transaction Report executed by a
Responsible Officer or his or her designee. Bank may rely on any telephone
notice given by a person whom Bank believes is a Responsible Officer or
designee. Bank shall credit Advances to the Designated Deposit Account. Bank
may
make Advances under this Agreement based on instructions from a Responsible
Officer or his or her designee or without instructions if the Advances are
necessary to meet Obligations which have become due.
4.1
Grant
of Security Interest.
Borrower hereby grants Bank, to secure the payment and performance in full
of
all of the Obligations, a continuing security interest in, and pledges to Bank,
the Collateral, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof. Borrower represents, warrants,
and covenants that the security interest granted herein is and shall at all
times continue to be a first priority perfected security interest in the
Collateral (subject only to Permitted Liens that may have superior priority
to
Bank’s Lien under this Agreement). If Borrower shall acquire a commercial tort
claim, Borrower shall promptly notify Bank in a writing signed by Borrower
of
the general details thereof and grant to Bank in such writing a security
interest therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance reasonably satisfactory
to Bank.
If
this
Agreement is terminated, Bank’s Lien in the Collateral shall continue until the
Obligations (other than inchoate indemnity obligations) are repaid in full
in
cash. Upon payment in full in cash of the Obligations and
at
such time as Bank’s obligation to make Credit Extensions has terminated, Bank
shall, at Borrower’s sole cost and expense, release its Liens in the Collateral
and all rights therein shall revert to Borrower.
4.2
Authorization
to File Financing Statements.
Borrower hereby authorizes Bank to file financing statements, without notice
to
Borrower, with all appropriate jurisdictions to perfect or protect Bank’s
interest or rights hereunder, including a notice that any disposition of the
Collateral, by either Borrower or any other Person, shall be deemed to violate
the rights of Bank under the Code.
Borrower
represents and warrants as follows:
5.1
Due
Organization and Authorization.
Borrower and each of its Subsidiaries are duly existing and in good standing,
as
Registered Organizations in their respective jurisdictions of formation and
are
qualified and licensed to do business and are in good standing in any
jurisdiction in which the conduct of their business or their ownership of
property requires that they be qualified except where the failure to do so
could
not reasonably be expected to have a material adverse effect on Borrower’s
business. In connection with this Agreement, Borrower delivered to Bank a
completed certificate signed
by
Borrower dated as of May 24, 2006 (the “Perfection Certificate”). Borrower
represents and warrants to Bank that (a) Borrower’s exact legal name is that
indicated on the Perfection Certificate and on the signature page hereof;
(b) Borrower is an organization of the type and is organized in the
jurisdiction set forth in the Perfection Certificate; (c) the Perfection
Certificate accurately sets forth Borrower’s organizational identification
number or accurately states that Borrower has none; (d) the Perfection
Certificate accurately sets forth Borrower’s place of business, or, if more than
one, its chief executive office as well as Borrower’s mailing address (if
different than its chief executive office); (e) Borrower (and each of its
predecessors) has not, in the past five (5) years, changed its jurisdiction
of
formation, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on the
Perfection Certificate pertaining to Borrower and each of its Subsidiaries
is
accurate and complete. If Borrower is
-5-
not
now a
Registered Organization but later becomes one, Borrower shall promptly notify
Bank of such occurrence and provide Bank with Borrower’s organizational
identification number.
The
execution, delivery and performance of the Loan Documents have been duly
authorized, and do not conflict with Borrower’s organizational documents, nor
constitute an event of default under any material agreement by which Borrower
is
bound. Borrower is not in default under any agreement to which it is a party
or
by which it is bound in which the default could reasonably be expected to have
a
material adverse effect on Borrower’s business.
5.2
Collateral.
Borrower has good title to, has rights in, and the power to transfer each item
of the Collateral upon which it purports to ▇▇▇▇▇ ▇ ▇▇▇▇ hereunder, free and
clear of any and all Liens except Permitted Liens. Borrower has no deposit
accounts other than the deposit accounts with Bank, the deposit accounts, if
any, described in the Perfection Certificate delivered to Bank in connection
herewith. The Accounts are bona fide, existing obligations of the Account
Debtors.
The
Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate. None
of
the components of the Collateral shall be maintained at locations other than
as
provided in the Perfection Certificate. In the event that Borrower, after the
date hereof, intends to store or otherwise deliver any portion of the Collateral
to a bailee, then Borrower will first receive the written consent of Bank and
such bailee must execute and deliver a bailee agreement in form and substance
satisfactory to Bank in its sole discretion.
All
Inventory is in all material respects of good and marketable quality, free
from
material defects.
Borrower
is the sole owner of its intellectual property, except for non-exclusive
licenses granted to its customers in the ordinary course of business. Each
patent is valid and enforceable, and no part of the intellectual property has
been judged invalid or unenforceable, in whole or in part, and to the best
of
Borrower’s knowledge, no claim has been made that any part of the intellectual
property violates the rights of any third party except to the extent such claim
could not reasonably be expected to have a material adverse effect on Borrower’s
business. Except as noted on the Perfection Certificate, Borrower is not a
party
to, nor is bound by, any material license or other agreement with respect to
which Borrower is the licensee that prohibits or otherwise restricts Borrower
from granting a security interest in Borrower’s interest in such license or
agreement or any other property. Borrower shall provide written notice to Bank
within ten (10) days of entering or becoming bound by any such license or
agreement which is reasonably likely to have a material impact on Borrower’s
business or financial condition (other than over-the-counter software that
is
commercially available to the public). Borrower shall take such steps as Bank
requests to obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for all such licenses or contract rights to be deemed
“Collateral” and for Bank to have a security interest in it that might otherwise
be restricted or prohibited by law or by the terms of any such license or
agreement (such consent or authorization may include a licensor’s agreement to a
contingent assignment of the license to Bank if Bank determines that is
necessary in its good faith judgment), whether now existing or entered into
in
the future.
5.3
Accounts
Receivable.
(a) For
each
Account with respect to which Advances are requested, on the date each
Advance
is requested and made, such Account shall meet the Minimum Eligibility
Requirements set forth in Section 13
below.
(b) 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
and all such invoices, instruments and other documents, and all of Borrower’s
Books are 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. Borrower has no knowledge of any actual or imminent Insolvency
Proceeding of any Account Debtor whose accounts are an Eligible Account in
any
Borrowing Base Certificate. To the best of Borrower’s knowledge, all signatures
and endorsements on all documents, instruments, and agreements relating to
all
Accounts are genuine, and all such documents, instruments and agreements are
legally enforceable in accordance with their terms.
5.4 Litigation.
There
are no actions or proceedings pending or, to the knowledge of the Responsible
Officers,
threatened in writing by or against Borrower or any of its Subsidiaries
involving more than Fifty Thousand
Dollars ($50,000.00).
-6-
5.5
No
Material Deviation in Financial Statements.
All
consolidated financial statements for Borrower and any of its Subsidiaries
delivered to Bank fairly present in all material respects Borrower’s
consolidated financial condition and Borrower’s consolidated results of
operations. There has not been any material deterioration in Borrower’s
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.6
Solvency.
The
fair salable value of Borrower’s assets (including goodwill minus disposition
costs) exceeds the fair value of its liabilities; Borrower is not left with
unreasonably small capital after the transactions in this Agreement; and
Borrower is able to pay its debts (including trade debts) as they
mature.
5.7
Regulatory
Compliance.
Borrower is not an “investment company” or a company “controlled” by an
“investment company” under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to have a material adverse effect on its business.
None of Borrower’s or any of its Subsidiaries’ properties or assets has been
used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by
previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each of its
Subsidiaries have obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently
conducted.
5.8
Subsidiaries;
Investments.
Borrower does not own any stock, partnership interest or other equity securities
except for Permitted Investments.
5.9
Tax
Returns and Payments; Pension Contributions.
Borrower has timely filed all required tax returns and reports, and Borrower
and
its Subsidiaries, if any, have timely paid all foreign, federal, state and
local
taxes, assessments, deposits and contributions owed by Borrower. Borrower may
defer payment of any contested taxes, provided that Borrower (a) in good faith
contests its obligation to pay the taxes by appropriate proceedings promptly
and
diligently instituted and conducted, (b) notifies Bank in writing of the
commencement of, and any material development in, the proceedings, (c) posts
bonds or takes any other steps required to prevent the governmental authority
levying such contested taxes from obtaining a Lien upon any of the Collateral
that is other than a “Permitted Lien”. Borrower is unaware of any claims or
adjustments proposed for any of Borrower's prior tax years which could result
in
additional taxes becoming due and payable by Borrower. Borrower has paid all
amounts necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, and has not permitted partial or complete
termination of, or permitted the occurrence of any other event with respect
to,
any such plan which could reasonably be expected to result in any liability
of
Borrower, including any liability to the Pension Benefit Guaranty Corporation
or
its successors or any other governmental agency.
5.10
Use
of Proceeds.
Borrower shall use the proceeds of the Credit Extensions solely as working
capital and to fund its general business requirements and not for personal,
family, household or agricultural purposes.
5.11
Full
Disclosure.
No
written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank, as of the date such
representations, warranties, or other statements were made, taken together
with
all such written certificates and written statements given to Bank, contains
any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the certificates or statements not
misleading (it being recognized by Bank that the projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are
not
viewed as facts and that actual results during the period or periods covered
by
such projections and forecasts may differ from the projected or forecasted
results).
Borrower
shall do all of the following:
6.1
Government
Compliance.
Maintain its and all its Subsidiaries’ legal existence and good standing in
their respective jurisdictions of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected
to
have a material adverse effect on Borrower’s business or operations. Borrower
shall comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, the noncompliance with which could have
a
material adverse effect on Borrower’s business.
-7-
(a) Borrower
shall provide Bank with the following:
(i)
weekly,
and upon each request for a Credit Extension, a Transaction Report;
(ii)
within
fifteen (15) days after the end of each month, (A) monthly accounts receivable
agings, aged by invoice date, and (b) monthly accounts payable agings, aged
by
invoice date, and outstanding or held check registers, if any;
(iii)
as
soon as available, and in any event within thirty (30) days after the end of
each month, monthly unaudited financial statements;
(iv)
within
thirty (30) days after the end of each month a monthly Compliance Certificate
signed by a Responsible Officer, certifying that as of the end of such month,
Borrower was in full compliance with all of the terms and conditions of this
Agreement, and setting forth calculations showing compliance with the financial
covenants set forth in this Agreement and such other information as Bank shall
reasonably request, including, without limitation, a statement that at the
end
of such month there were no held checks;
(v)
within
thirty (30) days prior to the end of each fiscal year of Borrower, (A) annual
operating budgets (including income statements, balance sheets and cash flow
statements, by month) for the upcoming fiscal year of Borrower, and (B)
annual
financial projections for the following fiscal year (on a quarterly basis)
as
approved by Borrower’s board of directors, together with any related business
forecasts used in the preparation of such annual financial
projections;
and
(vi) as
soon as available, and in any event within one hundred twenty (120) days
following the end of Borrower's fiscal year, annual financial statements
certified by, and with an unqualified opinion of, independent certified public
accountants acceptable to Bank.
(vii)
within
five (5) days after filing, all reports on Form 10-K, 10-Q and 8-K filed with
the Securities and Exchange Commission or a link thereto on Borrower’s or
another website on the Internet.
Notwithstanding
the foregoing, during any period in which Borrower maintains unrestricted and
unencumbered cash at Bank, plus the Availability Amount, in an amount greater
than $2,500,000, or when there are no Credit Extensions outstanding or requested
under the Revolving Line, Borrower shall only be required to provide the Bank
with reports pursuant to clause (a)(i) above on a monthly basis.
6.3
Accounts
Receivable.
(a) Schedules
and Documents Relating to Accounts.
Borrower
shall deliver to Bank transaction reports and schedules of collections, as
provided in Section 6.2, on Bank’s standard forms; provided, however, that
Borrower’s failure to execute and deliver the same shall not affect or limit
Bank’s Lien and other rights in all of Borrower’s Accounts, nor shall Bank’s
failure to advance or lend against a specific Account affect or limit Bank’s
Lien and other rights therein. If requested by Bank, Borrower shall furnish
Bank
with copies (or, at Bank’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. In addition, Borrower
shall deliver to Bank, 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.
(b) Disputes.
Borrower shall promptly notify Bank of all disputes or claims relating to
Accounts. Borrower may forgive (completely or partially), compromise, or settle
any Account for less than payment in full, or agree to do any of the foregoing
so long as (i) Borrower does so in good faith, in a commercially reasonable
manner, in the ordinary course of business, in arm’s-length transactions, and
reports the same to Bank in the regular reports provided to Bank; (ii) no
Default or Event of Default has occurred and is continuing; and (iii) after
taking into account all such discounts, settlements and forgiveness, the total
outstanding Advances will not exceed the Availability
Amount.
(c) 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. Whether or not
an
Event of Default has occurred and is continuing, Borrower shall hold all
Payments on, and proceeds of, Accounts in trust for Bank, and Borrower shall immediately deliver all such payments
and proceeds to Bank
in their original form, duly endorsed, to be applied to the Obligations pursuant
to the terms of Section 9.4 hereof. Accounts shall be deposited by Borrower
into
a lockbox account, or such other “blocked account” as Bank may specify, pursuant
to a blocked account agreement in such form as Bank may specify in its good
faith business judgment.
-8-
(d) Returns.
Provided no Event of Default has occurred and is continuing, if any Account
Debtor returns any Inventory to Borrower, Borrower shall promptly
(i) determine the reason for such return, (ii) issue a credit
memorandum to the Account Debtor in the appropriate amount, and
(iii) provide a copy of such credit memorandum to Bank, upon request from
Bank. 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 Bank, and immediately notify Bank of the return of
the Inventory.
(e) Verification.
Bank
may, from time to time, verify directly with the respective Account Debtors
the
validity, amount and other matters relating to the Accounts, either in the
name
of Borrower or Bank or such other name as Bank may choose.
(f) No
Liability.
Bank
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 Bank 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 Bank from liability for its own gross negligence
or willful misconduct.
6.4 Remittance
of Proceeds.
Except
as otherwise provided in Section 6.3(c), deliver, in kind, all proceeds arising
from the disposition of any Collateral to Bank 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 pursuant to the terms of Section
9.4
hereof; provided that, if no Default or Event of Default has occurred and is
continuing, Borrower shall not be obligated to remit to Bank 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 $25,000 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 Bank. Nothing in this Section limits the
restrictions on disposition of Collateral set forth elsewhere in this
Agreement.
6.5
Taxes;
Pensions.
Make,
and cause each of its Subsidiaries to make, timely payment of all foreign,
federal, state, and local taxes or assessments (other than taxes and assessments
which Borrower is contesting pursuant to the terms of Section 5.9 hereof) and
shall deliver to Bank, on demand, appropriate certificates attesting to such
payments, and pay
all amounts necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with their terms.
6.6
Access
to Collateral; Books and Records.
At reasonable times, on one (1) Business Day’s notice (provided no notice is
required if an Event of Default has occurred and is continuing), Bank, or its
agents, shall have the right to inspect the Collateral and the right to audit
and copy Borrower’s Books. 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 Bank’s then-current standard charge for
the same), plus reasonable out-of-pocket expenses. In the event Borrower and
Bank schedule an audit more than ten (10) days in advance, and Borrower cancels
or seeks to reschedules the audit with less than ten (10) days written notice
to
Bank, then (without limiting any of Bank’s rights or remedies), Borrower shall
pay Bank a fee of $1,000 plus any out-of-pocket expenses incurred by Bank to
compensate Bank for the anticipated costs and expenses of the cancellation
or
rescheduling.
6.7
Insurance.
Keep
its business and the Collateral insured for risks and in amounts standard for
companies in Borrower’s industry and location and as Bank may reasonably
request. Insurance
policies shall be in a form, with companies, and in amounts that are
satisfactory to Bank. All property policies shall have a lender’s loss payable
endorsement showing Bank as lender loss payee and waive subrogation against
Bank, and all liability policies shall show, or have endorsements showing,
Bank
as an additional insured. All policies (or the loss payable and additional
insured endorsements) shall provide that the insurer must give Bank at least
thirty (30) days notice before canceling, amending, or declining to renew its
policy. At Bank’s request, Borrower shall deliver certified copies of policies
and evidence of all premium payments. Proceeds payable under any policy shall,
at Bank’s
-9-
option,
be payable to Bank on account of the Obligations. Notwithstanding the foregoing,
(a) so long as no Event of Default has occurred and is continuing, Borrower
shall have the option of applying the proceeds of any casualty policy up to
$50,000, in the aggregate, toward the replacement or repair of destroyed or
damaged property; provided that any such replaced or repaired property (i)
shall
be of equal or like value as the replaced or repaired Collateral and
(ii) shall be deemed Collateral in which Bank has been granted a first
priority security interest, and (b) after the occurrence and during the
continuance of an Event of Default, all proceeds payable under such casualty
policy shall, at the option of Bank, be payable to Bank on account of the
Obligations. If Borrower fails to obtain insurance as required under this
Section 6.7 or to pay any amount or furnish any required proof of payment
to third persons and Bank, Bank may make all or part of such payment or obtain
such insurance policies required in this Section 6.7, and take any action under
the policies Bank deems prudent.
6.8
Operating
Accounts.
(a) Maintain
its and its Subsidiaries’ depository,
operating, and securities accounts with Bank and Bank’s affiliates, with the
exception of accounts maintained with: (i) PNC Bank and Barclays Bank, provided
that the maximum aggregate balance of such accounts does not exceed Seventy-Five
Thousand Dollars ($75,000.00) at any time, and (ii) Royal Bank of Scotland,
provided that the maximum balance of such account does not exceed the lesser
of:
(a) Five Hundred Thousand Dollars ($500,000.00), or (b) ten percent (10%) of
the
dollar value of the Borrower's unrestricted consolidated cash (the "RBS Maximum
Amount") (collectively, the "Permitted Accounts"). In addition, the Borrower
shall, within seven (7) business days following any event in which the
balance of the Royal Bank of Scotland exceeds the RBS Maximum Amount, transfer
such excess cash to an account of Borrower maintained with Bank and/or Bank's
affiliates. Any Guarantor shall maintain all depository, operating and
securities accounts with Bank, or SVB Securities.
(b) With
the
exception of the Permitted Accounts, provide Bank five (5) days prior written
notice before establishing any Collateral Account at or with any bank or
financial institution other than Bank or its Affiliates. In addition, with
the
exception of the Permitted Accounts for each Collateral Account that Borrower
or
Guarantor at any time maintains, Borrower shall cause the applicable bank or
financial institution (other than Bank) at or with which any Collateral Account
is maintained to execute and deliver a Control Agreement or other appropriate
instrument with respect to such Collateral Account to perfect Bank’s Lien in
such Collateral Account in accordance with the terms hereunder. The provisions
of the previous sentence shall not apply to deposit accounts exclusively used
for payroll, payroll taxes and other employee wage and benefit payments to
or
for the benefit of Borrower’s employees and identified to Bank by Borrower as
such.
6.9
Financial
Covenants.
Borrower
shall maintain, as of the last day of each month, unless otherwise
noted:
(a) Minimum
Cash Balance.
As of
the Effective Date, and at all times thereafter, Borrower shall maintain: (i)
Two Million Five Hundred Thousand Dollars ($2,500,000.00) in unrestricted and
unencumbered cash in accounts with the Bank or a Bank subsidiary, plus (ii)
the
aggregate of the Availability Amount, plus, prior to the occurrence of an Event
of Default, Five Hundred Thousand Dollars ($500,000.00), which shall be tested
as of the last day of each month.
(b) Minimum
Quarterly Net Loss/Net Income.
Borrower’s quarterly: (i) net losses shall not exceed: (A) Six Hundred Thousand
Dollars ($600,000.00) for the quarter ending March 31, 2007; (B) One Million
Dollars ($1,000,000.00) for the quarter ending June 30, 2007; and (C) Five
Hundred Thousand Dollars ($500,000.00) for the quarter ending September 30,
2007, and (ii) net income shall be at least One Dollar ($1.00) for the
Borrower’s quarter ending December 31, 2007 and as of the last day of each
quarter thereafter.
6.10
Litigation
Cooperation.
From
the date hereof and continuing through the termination of this Agreement,
make
available to Bank, without expense to Bank, Borrower and its officers, employees
and agents and Borrower's books and records, to the extent that Bank may deem
them reasonably necessary to prosecute or defend any third-party suit or
proceeding instituted by or against Bank with respect to any Collateral or
relating to Borrower.
6.11
Lock
Box Agreement. Within
thirty (30) days after a request from Borrower for an Advance and at
all
times thereafter, Borrower
shall direct each account debtor (and each depository institution where proceeds
of
accounts
receivable are on deposit) to make payments with respect to all receivables
to
one or more lockbox accounts established with the Bank (“Lockbox”) or to wire
transfer payments to a cash collateral account that Bank controls, as and when
directed by the Bank from time to time, at its option and at the sole and
exclusive discretion of the Bank
-10-
6.12
Protection
and Registration of Intellectual Property Rights.
Borrower shall: (a) protect, defend and maintain the validity and enforceability
of its intellectual property; (b) promptly advise Bank in writing of material
infringements of its intellectual property; and (c) not allow any intellectual
property material to Borrower’s business to be abandoned, forfeited or dedicated
to the public without Bank’s written consent. If Borrower decides to register
any copyrights or mask works in the United States Copyright Office, Borrower
shall: (x) provide Bank with at least fifteen (15) days prior written notice
of
its intent to register such copyrights or mask works together with a copy of
the
application it intends to file with the United States Copyright Office
(excluding exhibits thereto); (y) execute an intellectual property security
agreement or such other documents as Bank may reasonably request to maintain
the
perfection and priority of Bank’s security interest in the copyrights or mask
works intended to be registered with the United States Copyright Office; and
(z)
record such intellectual property security agreement with the United States
Copyright Office contemporaneously with filing the copyright or mask work
application(s) with the United States Copyright Office. Borrower shall promptly
provide to Bank a copy of the application(s) filed with the United States
Copyright Office together with evidence of the recording of the intellectual
property security agreement necessary for Bank to maintain the perfection and
priority of its security interest in such copyrights or mask works. Borrower
shall provide written notice to Bank of any application filed by Borrower in
the
United States Patent and Trademark Office for a patent or to register a
trademark or service ▇▇▇▇ within 30 days after any such filing.
6.13
Further
Assurances.
Borrower shall execute any further instruments and take further action as Bank
reasonably requests to perfect or continue Bank’s Lien in the Collateral or to
effect the purposes of this Agreement.
6.12
Ratification
of Intellectual Property Security Agreement.
Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms
and conditions of the IP Agreement, and acknowledges, confirms and agrees that
“Loan Agreement” as defined therein includes this Agreement. The IP Agreement
contains an accurate and complete listing of all Intellectual Property
Collateral as defined in said IP Agreement, shall remain in full force and
effect, and secures the Obligations.
Borrower
shall not do any of the following without Bank’s prior written
consent:
7.1
Dispositions.
Convey,
sell, lease, transfer or otherwise dispose of (collectively, “Transfer”),
or
permit any of its Subsidiaries to Transfer, all or any part of its business
or
property, except for Transfers (a) of Inventory in the ordinary course of
business; (b) of worn-out or obsolete Equipment; (c) in connection with
Permitted Liens and Permitted Investments; and (d) of non-exclusive licenses
and
similar arrangements for the use of the property of Borrower or its Subsidiary
in the ordinary course of business. Borrower shall not enter into an agreement
with any Person other than Bank which restricts the subsequent granting of
a
security interest in the Intellectual Property.
7.2
Changes
in Business, Management, Ownership, or Business Locations.
(a) Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower and such Subsidiary,
as applicable, or reasonably related thereto; (b) liquidate or dissolve; or
(c) (i) have a material change in management or
(ii)
enter
into any transaction or series of related transactions in which the stockholders
of Borrower immediately prior to the first such transaction own less than 50%
of
the voting stock of Borrower immediately after giving effect to such transaction
or related series of such transactions
(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 Bank the venture
capital investors prior to the closing of the transaction). Borrower shall
not,
without at least thirty (30) days prior written notice to Bank: (1) add any
new offices or business locations, including warehouses (unless such new offices
or business locations contain less than Ten Thousand Dollars ($10,000) in
Borrower’s assets or property), (2) change its jurisdiction of organization,
(3) change its organizational structure or type, (4) change its legal name,
or (5) change any organizational number (if any) assigned by its
jurisdiction of organization.
-11-
7.3
Mergers
or Acquisitions.
Merge
or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with
any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all
or substantially all of the capital stock or property of another Person. A
Subsidiary may merge or consolidate into another Subsidiary or into
Borrower.
7.4
Indebtedness.
Create,
incur, assume, or be liable for any Indebtedness, or permit any Subsidiary
to do
so, other than Permitted Indebtedness.
7.5
Encumbrance.
Create,
incur, or allow any Lien on any of its property, or assign or convey any right
to receive income, including the sale of any Accounts, or permit any of its
Subsidiaries to do so, except for Permitted Liens, or permit any Collateral
not
to be subject to the first priority security interest granted herein,
or
enter into any agreement, document, instrument or other arrangement (except
with
or in favor of Bank) with any Person which directly or indirectly prohibits
or
has the effect of prohibiting Borrower or any Subsidiary from assigning,
mortgaging, pledging, granting a security interest in or upon, or encumbering
any of Borrower’s or any Subsidiary’s intellectual property, except as is
otherwise permitted in Section 7.1 hereof and the definition of “Permitted Lien”
herein.
The
Collateral may also be subject to Permitted Liens.
7.6
Maintenance
of Collateral Accounts.
Maintain any Collateral Account except pursuant to the terms of Section 6.8.(b)
hereof.
7.7
Distributions;
Investments.
(a)
Directly or indirectly make any Investment other than Permitted Investments,
or
permit any of its Subsidiaries to do so; or (b) pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital
stock.
7.8
Transactions
with Affiliates.
Directly or indirectly enter into or permit to exist any material transaction
with any Affiliate of Borrower, except for: (i) those transactions contemplated
by the guarantee of the Guarantor, and (ii) transactions that are in the
ordinary course of Borrower’s business, upon fair and reasonable terms that are
no less favorable to Borrower than would be obtained in an arm’s length
transaction with a non-affiliated Person.
7.9
Subordinated
Debt.
(a)
Make or permit any payment on any Subordinated Debt, except under the terms
of
the subordination, intercreditor, or other similar agreement to which such
Subordinated Debt is subject, or (b) amend any provision in any document
relating to the Subordinated Debt which would increase the amount thereof or
adversely affect the subordination thereof to Obligations owed to
Bank.
7.10
Compliance.
Become
an “investment company” or a company controlled by an “investment company”,
under the Investment Company Act of 1940 or undertake as one of its important
activities extending credit to purchase or carry margin stock (as defined in
Regulation U of the Board of Governors of the Federal Reserve System), or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal
Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower’s
business, or permit any of its Subsidiaries to do so; withdraw
or permit any Subsidiary to withdraw from participation in, permit partial
or
complete termination of, or permit the occurrence of any other event with
respect to, any present pension, profit sharing and deferred compensation plan
which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.
Any
one
of the following shall constitute an event of default (an “Event
of Default”)
under
this Agreement:
8.1
Payment
Default.
Borrower fails to make any payment of principal or interest on any Credit
Extension on its due date, or pay any other Obligations within three (3)
Business Days after such Obligations are due and payable. During the cure
period, the failure to cure the payment default is not an Event of Default
(but
no Credit Extension will be made during the cure period);
-12-
8.2
Covenant
Default.
(a) Borrower
fails or neglects to perform any obligation in Sections 6.2, 6.3, 6.4, 6.6,
6.8,
6.9, 6.11, or violates any covenant in Section 7; or
(b) Borrower
fails or neglects to perform, keep, or observe any other term, provision,
condition, covenant or agreement contained in this Agreement, any Loan
Documents, and as to any default (other than those specified in this Section
8)
under such other term, provision, condition, covenant or agreement that can
be
cured, has failed to cure the default within ten (10) days after the occurrence
thereof; provided, however, that if the default cannot by its nature be cured
within the ten (10) day period or cannot after diligent attempts by Borrower
be
cured within such ten (10) day period, and such default is likely to be cured
within a reasonable time, then Borrower shall have an additional period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to cure the default shall
not
be deemed an Event of Default (but no Credit Extensions shall be made during
such cure period). Grace periods provided under this section shall not apply,
among other things, to financial covenants or any other covenants set forth
in
subsection (a) above;
8.3
Material
Adverse Change.
A
Material Adverse Change occurs;
8.4
Attachment.
(a) Any
material portion of Borrower’s assets is attached, seized, levied on, or comes
into possession of a trustee or receiver and the attachment, seizure or levy
is
not removed in ten (10) days; (b) the service of process seeking to attach,
by trustee or similar process, any funds of Borrower, or of any entity under
control of Borrower (including a Subsidiary) on deposit with the Bank or Bank's
Affiliate; (c) Borrower is enjoined, restrained, or prevented by court order
from conducting a material part of its business; (d) a judgment or other claim
in excess of One Hundred Thousand Dollars ($100,000.00) becomes a Lien on any
of
Borrower’s assets; or (e) a notice of lien, levy, or assessment is filed against
any of Borrower’s assets by any government agency and not paid within ten (10)
days after Borrower receives notice. These are not Events of Default if stayed
or if a bond is posted pending contest by Borrower (but no Credit Extensions
shall be made during the cure period);
8.5
Insolvency
(a)
Borrower is unable to pay its debts (including trade debts) as they become
due
or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding;
or
(c) an Insolvency Proceeding is begun against Borrower and not dismissed or
stayed within forty-five (45) days (but no Credit Extensions shall be made
while
of any of the conditions described in clause (a) exist and/or until any
Insolvency Proceeding is dismissed);
8.6
Other
Agreements.
There
is a default in any agreement to which Borrower or any Guarantor is a party
with
a third party or parties resulting in a right by such third party or parties,
whether or not exercised, to accelerate the maturity of any Indebtedness in
an
amount in excess of One Hundred Thousand Dollars ($100,000) or that could have
a
material adverse effect on Borrower’s or any Guarantor’s business;
8.7
Judgments.
A
judgment or judgments for the payment of money in an amount, individually or
in
the aggregate, of at least Two Hundred Thousand Dollars ($200,000) (not covered
by independent third-party insurance) shall be rendered against Borrower and
shall remain unsatisfied and unstayed for a period of ten (10) days after the
entry thereof (provided that no Credit Extensions will be made prior to the
satisfaction or stay of such judgment);
8.8
Misrepresentations.
Borrower or any Person acting for Borrower makes any representation, warranty,
or other statement now or later in this Agreement, any Loan Document or in
any
writing delivered to Bank or to induce Bank to enter this Agreement or any
Loan
Document, and such representation, warranty, or other statement is incorrect
in
any material respect when made;
8.9
Subordinated
Debt.
A
default or breach occurs under any agreement between Borrower and any creditor
of Borrower that signed a subordination, intercreditor, or other similar
agreement with Bank, or any creditor that has signed such an agreement with
Bank
breaches any terms of such agreement; or
8.10
Guaranty.
(a) Any
guaranty of any Obligations terminates or ceases for any reason to be in full
force and effect; (b) any Guarantor does not perform any obligation or covenant
under any guaranty of the Obligations; (c) any circumstance described in
Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor;
(d) the liquidation, winding up, or termination of existence of any
Guarantor; or (e) a material adverse change in the general affairs,
management, results of operation, condition (financial or otherwise) or the
prospect of repayment of the Obligations occurs with respect to any
Guarantor.
-13-
8.11
Cross-Default.
An
Event of Default occurs and remains continuing under the Existing Loan and
Security Agreement.
9.1
Rights
and Remedies.
While
an Event of Default occurs and continues Bank may, without notice or demand,
do
any or all of the following:
(a) declare
all Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 occurs all Obligations are immediately due and payable
without any action by Bank);
(b) stop
advancing money or extending credit for Borrower’s benefit under this Agreement
or under any other agreement between Borrower and Bank;
(c) demand
that Borrower (i) deposits cash with Bank in an amount equal to the aggregate
amount of any Letters of Credit remaining undrawn, as collateral security for
the repayment of any future drawings under such Letters of Credit, and Borrower
shall forthwith deposit and pay such amounts, and (ii) pay in advance all Letter
of Credit fees scheduled to be paid or payable over the remaining term of any
Letters of Credit;
(d) terminate
any FX Contracts;
(e) settle
or
adjust disputes and claims directly with Account Debtors for amounts on terms
and in any order that Bank considers advisable, notify any Person owing Borrower
money of Bank’s security interest in such funds, and verify the amount of such
account;
(f) make
any
payments and do any acts it considers necessary or reasonable to protect the
Collateral and/or its security interest in the Collateral. Borrower shall
assemble the Collateral if Bank requests and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank’s rights
or remedies;
(g) apply
to
the Obligations any (i) balances and deposits of Borrower it holds, or (ii)
any
amount held by Bank owing to or for the credit or the account of
Borrower;
(h) ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell the Collateral. Bank is hereby granted a non-exclusive,
royalty-free license or other right to use, without charge, Borrower’s labels,
patents, copyrights, mask works, rights of use of any name, trade secrets,
trade
names, trademarks, service marks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section, Borrower’s rights under all licenses
and all franchise agreements inure to Bank’s benefit;
(i) place
a
“hold” on any account maintained with Bank and/or deliver a notice of exclusive
control, any entitlement order, or other directions or instructions pursuant
to
any Control Agreement or similar agreements providing control of any
Collateral;
(j) demand
and receive possession of Borrower’s Books; and
(k) exercise
all rights and remedies available to Bank under the Loan Documents or at law
or
equity, including all remedies provided under the Code (including disposal
of
the Collateral pursuant to the terms thereof).
-14-
9.2
Power
of Attorney.
Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact,
exercisable upon the occurrence and during the continuance of an Event of
Default, to: (a) endorse Borrower’s name on any checks or other forms of payment
or security; (b) sign Borrower’s name on any invoice or ▇▇▇▇ of lading for any
Account or drafts against Account Debtors; (c) settle and adjust disputes and
claims about the Accounts directly with Account Debtors, for amounts and on
terms Bank determines reasonable; (d) make, settle, and adjust all claims under
Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge,
encumbrance, security interest, and adverse claim in or to the Collateral,
or
any judgment based thereon, or otherwise take any action to terminate or
discharge the same; and (f) transfer the Collateral into the name of Bank or
a
third party as the Code permits. Borrower hereby appoints Bank as its lawful
attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of Bank’s security interest in the Collateral
regardless of whether an Event of Default has occurred until all Obligations
have been satisfied in full and Bank is under no further obligation to make
Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s attorney
in fact, and all of Bank’s rights and powers, coupled with an interest, are
irrevocable until all Obligations have been fully repaid and performed and
Bank’s obligation to provide Credit Extensions terminates.
9.3
Protective
Payments.
If
Borrower fails to obtain the insurance called for by Section 6.5 or fails to
pay
any premium thereon or fails to pay any other amount which Borrower is obligated
to pay under this Agreement or any other Loan Document, Bank may obtain such
insurance or make such payment, and all amounts so paid by Bank are Bank
Expenses and immediately due and payable, bearing interest at the then highest
applicable rate, and secured by the Collateral. Bank will make reasonable
efforts to provide Borrower with notice of Bank obtaining such insurance at
the
time it is obtained or within a reasonable time thereafter. No payments by
Bank
are deemed an agreement to make similar payments in the future or Bank’s waiver
of any Event of Default.
9.4
Application
of Payments and Proceeds.
If an Event of Default has occurred and is continuing, Bank may apply any funds
in its possession, whether from Borrower account balances, payments, proceeds
realized as the result of any collection of Accounts or other disposition of
the
Collateral, or otherwise, to the Obligations in such order as Bank shall
determine in its sole discretion. Any surplus shall be paid to Borrower or
other
Persons legally entitled thereto; Borrower shall remain liable to Bank for
any
deficiency. If Bank, 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, Bank shall have the option, exercisable at any time,
of
either reducing the Obligations by the principal amount of the purchase price
or
deferring the reduction of the Obligations until the actual receipt by Bank
of
cash therefor.
9.5
Bank’s
Liability for Collateral.
So long
as Bank complies with reasonable banking practices regarding the safekeeping
of
the Collateral in the possession or under the control of Bank, Bank shall not
be
liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss
or damage to the Collateral; (c) any diminution in the value of the Collateral;
or (d) any act or default of any carrier, warehouseman, bailee, or other Person.
Borrower bears all risk of loss, damage or destruction of the
Collateral.
9.6
No
Waiver; Remedies Cumulative.
Bank’s
failure, at any time or times, to require strict performance by Borrower of
any
provision of this Agreement or any other Loan Document shall not waive, affect,
or diminish any right of Bank thereafter to demand strict performance and
compliance herewith or therewith. No waiver hereunder shall be effective unless
signed by Bank and then is only effective for the specific instance and purpose
for which it is given. Bank’s rights and remedies under this Agreement and the
other Loan Documents are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank’s exercise of one right or remedy is
not an election, and Bank’s waiver of any Event of Default is not a continuing
waiver. Bank’s delay in exercising any remedy is not a waiver, election, or
acquiescence.
9.7
Demand
Waiver.
Borrower waives demand, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees held by Bank on which Borrower is liable.
10
NOTICES
All
notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”),
other
than Advance requests made pursuant to Section 3.4, by any party to this
Agreement or any other Loan Document must be in writing and be delivered or
sent
by facsimile at the addresses or facsimile numbers listed below. Bank or
Borrower may change its notice address by giving the other party written notice
thereof. Each such Communication shall be deemed to have been validly served,
given, or delivered: (a) upon the
-15-
earlier
of actual receipt and three (3) Business Days after deposit in the U.S. mail,
registered or certified mail, return receipt requested, with proper postage
prepaid; (b) upon transmission, when sent by facsimile transmission (with such
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States mail as otherwise provided in this Section 10); (c) one (1)
Business Day after deposit with a reputable overnight courier with all charges
prepaid; or (d) when delivered, if hand-delivered by messenger, all of which
shall be addressed to the party to be notified and sent to the address or
facsimile number indicated below. Advance requests made pursuant to Section
3.4
must be in writing and may be in the form of electronic mail, delivered to
Bank
by Borrower at the e-mail address of Bank provided below and shall be deemed
to
have been validly served, given, or delivered when sent (with such electronic
mail promptly confirmed by delivery of a copy by personal delivery or United
States mail as otherwise provided in this Section 10). Bank or Borrower may
change its address, facsimile number, or electronic mail address by giving
the
other party written notice thereof in accordance with the terms of this
Section 10.
|
If
to Borrower:
|
Voxware,
Inc.
|
|
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
|
|
|
▇▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
|
|
|
Attn:
Chief Executive Officer
|
|
|
Fax:
▇▇▇ ▇▇▇ ▇▇▇▇
|
|
|
Email:
▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
|
|
|
If
to Bank:
|
Silicon
Valley Bank
|
|
▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
|
|
|
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|
|
Attn:
Mr. ▇▇▇▇ ▇▇▇▇▇▇
|
|
|
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
|
|
|
Email:
▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
|
|
|
|
|
|
with
a copy to:
|
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇▇▇ LLP
|
|
|
▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
|
|
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|
|
Attn:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
|
|
|
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
|
|
|
Email:
▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
|
Massachusetts
law governs the Loan Documents without regard to principles of conflicts of
law.
Borrower and Bank each submit to the exclusive jurisdiction of the State and
Federal courts in Massachusetts; provided, however, that nothing in this
Agreement shall be deemed to operate to preclude Bank from bringing suit or
taking other legal action in any other jurisdiction to realize on the Collateral
or any other security for the Obligations, or to enforce a judgment or other
court order in favor of Bank. Borrower expressly submits and consents in advance
to such jurisdiction in any action or suit commenced in any such court, and
Borrower hereby waives any objection that it may have based upon lack of
personal jurisdiction, improper venue, or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth
in
Section 10 of this Agreement and that service so made shall be deemed completed
upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days
after deposit in the U.S. mails, proper postage prepaid.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREINABOVE, BANK SHALL
SPECIFICALLY HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER
OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS
NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE
ENFORCE BANK’S RIGHTS AGAINST BORROWER OR ITS PROPERTY.
-16-
TO
THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR
RIGHT
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON
THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING
CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL
INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS
REVIEWED THIS WAIVER WITH ITS COUNSEL.
12.1 Successors
and Assigns.
This
Agreement binds and is for the benefit of the successors and permitted assigns
of each party. Borrower may not assign this Agreement or any rights or
obligations under it without Bank’s prior written consent (which may be granted
or withheld in Bank’s discretion). Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in
all
or any part of, or any interest in, Bank’s obligations, rights, and benefits
under this Agreement and the other Loan Documents.
12.2
Indemnification.
Borrower agrees to indemnify, defend and hold Bank and its directors, officers,
employees, agents, attorneys, or any other Person affiliated with or
representing Bank harmless against: (a) all obligations, demands, claims,
and liabilities (collectively, “Claims”) asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b)
all
losses or Bank Expenses incurred, or paid by Bank from, following, or arising
from transactions between Bank and Borrower (including reasonable attorneys’
fees and expenses), except for Claims and/or losses directly caused by Bank’s
gross negligence or willful misconduct.
12.3
Limitation
of Actions. Any
claim or cause of action by Borrower against Bank, its directors, officers,
employees, agents, accountants, attorneys, or any other Person affiliated with
or representing Bank 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 Bank, 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 (a) the filing of a complaint
within one year from the earlier of (i) the date any of Borrower’s officer or
directors had knowledge of the first act, the occurrence or omission upon which
such claim or cause of action, or any part thereof, is based, or (ii) the date
this Agreement is terminated, and (b) the service of a summons and complaint
on
an officer of Bank, or on any other person authorized to accept service on
behalf of Bank, within thirty (30) 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
Bank in its sole discretion. This provision shall survive any termination of
this Loan Agreement or any other Loan Document.
12.4 Time
of Essence.
Time is
of the essence for the performance of all Obligations in this
Agreement.
12.5 Severability
of Provisions.
Each
provision of this Agreement is severable from every other provision in
determining the enforceability of any provision.
12.6 Amendments
in Writing; Integration.
All
amendments to this Agreement must be in writing signed by both Bank and
Borrower. This Agreement and the Loan Documents represent the entire agreement
about this subject matter and supersede prior negotiations or agreements. All
prior agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement and the Loan
Documents merge into this Agreement and the Loan Documents.
12.7
Counterparts.
This
Agreement may be executed in any number of counterparts and by different parties
on separate counterparts, each of which, when executed and delivered, are an
original, and all taken together, constitute one Agreement.
12.8
Survival.
All
covenants, representations and warranties made in this Agreement continue in
full force until this Agreement has terminated pursuant to its terms and all
Obligations (other than inchoate indemnity obligations and any other obligations
which, by their terms, are to survive the termination of this Agreement) have
been satisfied. The obligation of Borrower in Section 12.2 to indemnify Bank
shall survive until the statute of limitations with respect to such claim or
cause of action shall have run.
-17-
12.9
Confidentiality.
In
handling any confidential information, Bank shall exercise the same degree
of
care that it exercises for its own proprietary information, but disclosure
of
information may be made: (a) to Bank’s Subsidiaries or Affiliates; (b) to
prospective transferees or purchasers of any interest in the Credit Extensions
(provided, however, Bank shall use commercially reasonable efforts to obtain
such prospective transferee’s or purchaser’s agreement to the terms of this
provision); (c) as required by law, regulation, subpoena, or other order;
(d) to Bank’s regulators or as otherwise required in connection with Bank’s
examination or audit; and (e) as Bank considers appropriate in exercising
remedies under this Agreement. Confidential information does not include
information that either: (i) is in the public domain or in Bank’s possession
when disclosed to Bank, or becomes part of the public domain after disclosure
to
Bank; or (ii) is disclosed to Bank by a third party, if Bank does not know
that
the third party is prohibited from disclosing the information.
12.10
Right
of Set Off.
Borrower hereby grants to Bank, a lien, security interest and right of set
off
as security for all Obligations to Bank, whether now existing or hereafter
arising upon and against all deposits, credits, collateral and property, now
or
hereafter in the possession, custody, safekeeping or control of Bank or any
entity under the control of Bank (including a Bank subsidiary) or in transit
to
any of them. At any time after the occurrence and during the continuance of
an
Event of Default, without demand or notice, Bank may set off the same or any
part thereof and apply the same to any liability or obligation of Borrower
even
though unmatured and regardless of the adequacy of any other collateral securing
the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS
OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS,
PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.
13
DEFINITIONS
13.1
Definitions.
As used
in this Agreement, the following terms have the following meanings:
“Account”
is
any
“account” as defined in the Code with such additions to such term as may
hereafter be made, and includes, without limitation, all accounts receivable
and
other sums owing to Borrower.
“Account
Debtor”
is any “account debtor” as defined in the Code with such additions to such term
as may hereafter be made.
“Advance”
or
“Advances”
means
an advance (or advances) under the Revolving Line.
"Adjusted
Quick Ratio"
means a
ratio of Quick Assets to Quick Liabilities.
“Affiliate”
of
any
Person is a Person that owns or controls directly or indirectly the Person,
any
Person that controls or is controlled by or is under common control with the
Person, and each of that Person’s senior executive officers, directors, partners
and, for any Person that is a limited liability company, that Person’s managers
and members.
“Agreement”
is
defined in the preamble hereof.
“Availability
Amount”
is
(a)
the lesser of (i) the Revolving Line or (ii) the Borrowing Base minus
(b) the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) plus an amount equal to the Letter of Credit
Reserves, minus (c) the FX Reserve, and minus (d) the outstanding principal
balance of any Advances (including any amounts used for Cash Management
Services).
“Bank”
is
defined in the preamble hereof.
“Bank
Expenses”
are
all
audit fees and expenses, costs, and expenses (including reasonable attorneys’
fees and expenses) for preparing, negotiating, administering, defending and
enforcing the Loan Documents (including, without limitation, those incurred
in
connection with appeals or Insolvency Proceedings) or otherwise incurred with
respect to Borrower.
"Board"
means
Borrower's Board of Directors.
-18-
“Borrower”
is
defined in the preamble hereof.
“Borrower’s
Books”
are
all
Borrower’s books and records including ledgers, federal and state tax returns,
records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition, and all computer programs or storage or
any
equipment containing such information.
“Borrowing
Base”
is
seventy-five percent (75.0%) of
Eligible Accounts, as determined by Bank from Borrower’s most recent Borrowing
Base Certificate (provided however, if Borrower is unable, at any time, to
either: (i) maintain an Adjusted Quick Ratio of at least 1.50 to 1.0, or (ii)
(a) maintain an Adjusted Quick Ratio of at least 1.15 to 1.0, and (b) at all
times maintain unrestricted and unencumbered cash, in accounts with the Bank
in
amount of at least Two Million Dollars ($2,000,000.00), then the Borrowing
Base
will be seventy-five percent (75.0%) of
Eligible Accounts, net of any offsets related to each specific Account Debtor,
including, without limitation, Deferred Revenue), minus if Borrower's Adjusted
Quick Ratio is less than 1.25 to 1.0, at any time, the outstanding Obligations
under the Term Loan; provided, however, that Bank may decrease the foregoing
percentages in its good faith business judgment, based on events, conditions,
contingencies, or risks which, as determined by Bank, may adversely affect
Collateral.
“Borrowing
Base Certificate”
is
that
certain certificate included within each Transaction Report.
“Borrowing
Resolutions”
are,
with respect to any Person, those resolutions adopted by such Person’s Board of
Directors or other appropriate body and delivered by such Person to Bank
approving the Loan Documents to which such Person is a party and the
transactions contemplated thereby, together with a certificate executed by
its
secretary on behalf of such Person certifying that (a) such Person has the
authority to execute, deliver, and perform its obligations under each of the
Loan Documents to which it is a party, (b) that attached as Exhibit A to
such certificate is a true, correct, and complete copy of the resolutions then
in full force and effect authorizing and ratifying the execution, delivery,
and
performance by such Person of the Loan Documents to which it is a party, (c)
the
name(s) of the Person(s) authorized to execute the Loan Documents on behalf
of
such Person, together with a sample of the true signature(s) of such Person(s),
and (d) that Bank may conclusively rely on such certificate unless and
until such Person shall have delivered to Bank a further certificate canceling
or amending such prior certificate.
“Business
Day”
is
any
day that is not a Saturday, Sunday or a day on which Bank is
closed.
“Cash
Equivalents” means
(a) marketable
direct obligations issued or unconditionally guaranteed by the United States
or
any agency or any State thereof having maturities of not more than one (1)
year
from the date of acquisition; (b) commercial paper maturing no more than
one (1) year after its creation and having the highest rating from either
Standard & Poor’s Ratings Group or ▇▇▇▇▇’▇ Investors Service, Inc., and (c)
Bank’s certificates of deposit issued maturing no more than one (1) year after
issue.
“Cash
Management Services” is
defined in Section 2.1.4.
“Cash
Management Services Sublimit”
is
defined in Section 2.1.4.
“Code”
is
the
Uniform Commercial Code, as the same may, from time to time, be enacted and
in
effect in the Commonwealth of Massachusetts; provided, that, to the extent
that
the Code is used to define any term herein or in any Loan Document and such
term
is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions
of
law, any or all of the attachment, perfection, or priority of, or remedies
with
respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial
Code in effect in a jurisdiction other than the Commonwealth of Massachusetts,
the term “Code”
shall
mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes on the provisions thereof relating to such
attachment, perfection, priority, or remedies and for purposes of definitions
relating to such provisions.
“Collateral”
is
any
and all properties, rights and assets of Borrower described on Exhibit
A.
“Collateral
Account”
is
any
Deposit Account, Securities Account, or Commodity Account.
“Commodity
Account”
is
any “commodity account” as defined in the Code with such additions to such term
as may hereafter be made.
-19-
“Communication”
is defined in Section 10.
“Compliance
Certificate”
is
that
certain certificate in the form attached hereto as Exhibit
D.
“Contingent
Obligation”
is,
for
any Person, any direct or indirect liability, contingent or not, of that Person
for (a) any indebtedness, lease, dividend, letter of credit or other obligation
of another such as an obligation directly or indirectly guaranteed, endorsed,
co-made, discounted or sold with recourse by that Person, or for which that
Person is directly or indirectly liable; (b) any obligations for undrawn letters
of credit for the account of that Person; and (c) all obligations from any
interest rate, currency or commodity swap agreement, interest rate cap or collar
agreement, or other agreement or arrangement designated to protect a Person
against fluctuation in interest rates, currency exchange rates or commodity
prices; but “Contingent Obligation” does not include endorsements in the
ordinary course of business. The amount of a Contingent Obligation is the stated
or determined amount of the primary obligation for which the Contingent
Obligation is made or, if not determinable, the maximum reasonably anticipated
liability for it determined by the Person in good faith; but the amount may
not
exceed the maximum of the obligations under any guarantee or other support
arrangement.
“Control
Agreement”
is
any
control agreement entered into among the depository institution at which
Borrower maintains a Deposit Account or the securities intermediary or commodity
intermediary at which Borrower maintains a Securities Account or a Commodity
Account, Borrower, and Bank pursuant to which Bank obtains control (within
the
meaning of the Code) over such Deposit Account, Securities Account, or Commodity
Account.
“Credit
Extension”
is
any
Advance, Letter of Credit, Term Loan, FX Forward Contract, amount utilized
for
Cash Management Services, or any other extension of credit by Bank for
Borrower’s benefit.
“Current
Liabilities”
are
all
obligations and liabilities of Borrower to Bank, plus, without duplication,
the
aggregate amount of Borrower’s Total Liabilities that mature within one (1)
year.
“Default”
means any event which with notice or passage of time or both, would constitute
an Event of Default.
“Default
Rate”
is
defined in Section 2.3(b).
“Deferred
Revenue”
is
all
amounts received or invoiced in advance of performance under contracts and
not
yet recognized as revenue.
“Deposit
Account”
is any “deposit account” as defined in the Code with such additions to such term
as may hereafter be made.
“Designated
Deposit Account”
is Borrower’s deposit account, account number 3300055128 maintained with
Bank.
“Dollars,” “dollars”
and “$”
each mean lawful money of the United States.
“Effective
Date”
is
defined in the preamble of this Agreement.
“Eligible
Accounts”
are
Accounts which arise in the ordinary course of Borrower’s business that meet all
Borrower’s representations and warranties in Section 5.3. Bank reserves the
right, at any time and from time to time after the Effective Date, to adjust
any
of the criteria set forth below and to establish new criteria in its good faith
business judgment. Without limiting the fact that the determination of which
Accounts are eligible for borrowing is a matter of Bank’s good faith judgment,
the following (“Minimum Eligibility Requirements”) are the minimum requirements
for an Account to be an Eligible Account. Unless Bank agrees otherwise in
writing, Eligible Accounts shall not include:
(a) Accounts
for which the Account Debtor has not been invoiced;
(b) Accounts
that the Account Debtor has not paid within ninety (90) days of invoice
date;
-20-
(c) Accounts
owing
from an Account Debtor, fifty percent (50%) or more of whose Accounts have
not
been paid within ninety (90) days of invoice date;
(d) Credit
balances over ninety (90) days from invoice date;
(e) Accounts
owing from an Account Debtor, including Affiliates, whose total obligations
to
Borrower exceed fifty percent (50.0%) of all Accounts, for the amounts that
exceed that percentage, unless Bank approves in writing;
(f)
Accounts
owing from an Account Debtor which does not have its principal place of business
in the United States, except for Eligible Foreign Accounts;
(g) Accounts
owing from an Account Debtor which is a federal, state or local government
entity or any department, agency, or instrumentality thereof except for Accounts
of the United States or state or local government if Borrower has assigned
its
payment rights to Bank and the assignment has been acknowledged under the
Federal Assignment of Claims Act of 1940, as amended or corresponding state
or
local laws or regulations;
(h) Accounts
owing from an Account Debtor to the extent that Borrower is indebted or
obligated in any manner to the Account Debtor (as creditor, lessor, supplier
or
otherwise - sometimes called “contra” accounts, accounts payable, customer
deposits or credit accounts), with the exception of customary credits,
adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;
(i) Accounts
for demonstration or promotional equipment, or in which goods are consigned,
or
sold on a “sale guaranteed”, “sale or return”, “sale on approval”, “▇▇▇▇ and
hold”, or other terms if Account Debtor’s payment may be
conditional;
(j)
Accounts
for which the Account Debtor is Borrower’s Affiliate, officer, employee, or
agent;
(k) Accounts
in which the Account Debtor disputes liability or makes any claim (but only
up
to the disputed or claimed amount), or if the Account Debtor is subject to
an
Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(l)
Accounts
owing from an Account Debtor with respect to which Borrower has received
deferred revenue (but only to the extent of such deferred revenue);
(m) Accounts
for which Bank in its good faith business judgment determines collection to
be
doubtful; and
(n) other
Accounts Bank deems ineligible in the exercise of its good faith business
judgment.
“Eligible
Foreign Accounts”
are
Accounts for which the Account Debtor does not have its principal place of
business in the United States but are otherwise Eligible Accounts, and
that
Bank approves in writing in its sole and absolute discretion, on a case by
case
basis. Eligible Foreign Accounts shall include Waitrose, Somerfield, Argos,
and
Intermarche.
“Equipment”
is
all
“equipment” as defined in the Code with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures,
goods, vehicles (including motor vehicles and trailers), and any interest in
any
of the foregoing.
“ERISA”
is
the
Employment Retirement Income Security Act of 1974, and its
regulations.
“Event
of Default”
is defined in Section 8.
"Existing
Loan Agreement"
means that certain Loan and Security Agreement dated as of December 29, 2003,
as
amended and in effect, by and between the Borrower and the Bank.
“Foreign
Currency”
means
lawful money of a country other than the United States.
-21-
“Funding
Date”
is
any
date on which a Credit Extension is made to or on account of Borrower which
shall be a Business Day.
“FX
Business Day”
is
any day
when (a) Bank’s Foreign Exchange Department is conducting its normal business
and (b) the Foreign Currency being purchased or sold by Borrower is available
to
Bank from the entity from which Bank shall buy or sell such Foreign
Currency.
“FX
Forward Contract” is
defined in Section 2.1.3.
“FX
Reserve” is
defined in Section 2.1.3.
“GAAP”
is
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute
of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person
as
may be approved by a significant segment of the accounting profession, which
are
applicable to the circumstances as of the date of determination.
“General
Intangibles”
is
all
“general intangibles” as defined in the Code in effect on the date hereof with
such additions to such term as may hereafter be made, and includes without
limitation, all copyright
rights, copyright applications, copyright registrations and like protections
in
each work of authorship and derivative work, whether published or unpublished,
any patents, trademarks, service marks and, to the extent permitted under
applicable law, any applications therefor, whether registered or not, any trade
secret rights, including any rights to unpatented inventions,
payment intangibles, royalties, contract rights, goodwill, franchise agreements,
purchase orders, customer lists, route lists, telephone numbers, domain names,
claims, income and other 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.
“Guarantor” is
any
present or future guarantor of the Obligations, including Verbex Acquisition
Corporation.
“Indebtedness”
is
(a)
indebtedness for borrowed money or the deferred price of property or services,
such as reimbursement and other obligations for surety bonds and letters of
credit, (b) obligations evidenced by notes, bonds, debentures or similar
instruments, (c) capital lease obligations, and (d) Contingent
Obligations.
“Insolvency
Proceeding”
is
any
proceeding by or against any Person under the United States Bankruptcy Code,
or
any other bankruptcy or insolvency law, including assignments for the benefit
of
creditors, compositions, extensions generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
“Inventory”
is
all
“inventory” as defined in the 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”
is
any
beneficial ownership interest in any Person (including stock, partnership
interest or other securities), and any loan, advance or capital contribution
to
any Person.
"IP
Agreement"
is that
certain Intellectual Property Security Agreement dated as of December 29, 2003,
by and between the Borrower and the Bank.
“Letter
of Credit”
means a
standby letter of credit issued by Bank or another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Bank
as
set forth in Section 2.1.2.
“Letter
of Credit Application”
is
defined in Section 2.1.2(a).
“Letter
of Credit Reserve”
has
the
meaning set forth in Section 2.1.2(d).
-22-
“Lien”
is
a
mortgage, lien, deed of trust, charge, pledge, security interest or other
encumbrance.
“Loan
Documents”
are,
collectively, this Agreement, the Perfection Certificate, any note, or notes
or
guaranties executed by Borrower or any Guarantor, and any other present or
future agreement between Borrower any Guarantor and/or for the benefit of
Bank
in connection with this Agreement, all as amended, restated, or otherwise
modified.
"LockBox"
is
defined in Section 6.9.
“Material
Adverse Change”
is (a) a
material impairment in the perfection or priority of Bank’s Lien in the
Collateral or in the value of such Collateral; (b) a material adverse change
in
the business, operations, or condition (financial or otherwise) of Borrower;
(c)
a material impairment of the prospect of repayment of any portion of the
Obligations; or (d)
Bank
determines, based upon information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrower shall fail to
comply with one or more of the financial covenants in Section 6 during the
next
succeeding financial reporting period.
"Minimum
Eligibility Requirements"
is
defined in the defined term "Eligible Accounts".
“Obligations”
are
Borrower’s obligation to pay when due any debts, principal, interest, Bank
Expenses and other amounts Borrower owes Bank now or later, whether under this
Agreement, the Existing Loan Agreement, the Loan Documents, or otherwise,
including, without limitation, all obligations relating to letters of credit,
cash management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities,
or
obligations of Borrower assigned to Bank, and the performance of Borrower’s
duties under the Loan Documents.
“Operating
Documents”
are, for
any Person, such Person’s formation documents, as certified with the Secretary
of State of such Person’s state of formation on a date that is no earlier than
30 days prior to the Effective Date, and its bylaws in current form, each of
the
foregoing with all current amendments or modifications thereto.
“Payment” means
all
checks, wire transfers and other items of payment received by Bank (including
proceeds of Accounts and payment of all the Obligations in full) for credit
to
Borrower’s outstanding Credit Extensions or, if the balance of the Credit
Extensions has been reduced to zero, for credit to its Deposit
Accounts.
“Payment
Date”
is
the
first day of each calendar month.
“Perfection
Certificate”
is
defined in Section 5.1.
"Permitted
Accounts"
is
defined in Section 6.6(a).
“Permitted
Indebtedness”
is:
(a) Borrower’s
Indebtedness to Bank under this Agreement and the other Loan
Documents;
(b) Indebtedness
existing on the Effective Date and shown on the Perfection
Certificate;
(d) unsecured
Indebtedness to trade
creditors incurred
in
the ordinary course of business;
(e) Indebtedness
secured by Permitted Liens; and
(f) extensions,
refinancings, modifications, amendments and restatements of any items of
Permitted Indebtedness (a) through (e) above, provided that the principal amount
thereof is not increased or the terms thereof are not modified to impose more
burdensome terms upon Borrower or its Subsidiary, as the case may
be.
-23-
“Permitted
Investments”
are:
(a) Investments
shown on the Perfection Certificate and existing on the Effective Date;
and
(b) Cash
Equivalents.
“Permitted
Liens”
are:
(a) Liens
existing on the Effective Date and shown on the Perfection Certificate or
arising under this Agreement and the other Loan Documents;
(b) Liens
for
taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Borrower maintains
adequate reserves on its Books, if
they
have no priority over any of Bank’s Liens;
(c) purchase
money Liens and capital leases (i) on Equipment acquired or held by Borrower
incurred for financing the acquisition of the Equipment securing no more than
Five Hundred Thousand Dollars ($500,000.00) in the aggregate amount outstanding,
or (ii) existing on Equipment when acquired, if
the Lien
is confined to the property and improvements and the proceeds of the Equipment;
(d) Liens
incurred in the extension, renewal or refinancing of the indebtedness secured
by
Liens described in (a) through (c), but
any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
may
not increase;
(e) carrier's,
warehousemen's, mechanics', materialmen's, repairmen's, landlord's liens or
other like Liens arising in the ordinary course of business which are not
overdue for a period of more than thirty (30) days or which are being contested
in good faith by appropriate proceedings and for which appropriate reserves
have
been made therefor;
(f) pledges
or deposits in connection with workers' compensation, unemployment insurance
and
other social security legislation and deposits securing liability to insurance
carriers under insurance or self-insurance arrangements; and
(g) deposits
to secure the performance of tenders, bids or leases, trade contracts (other
than for borrowed money), statutory obligations, surety, customs, stay and
appeal bonds, performance and return of money bonds, government contracts and
other obligations of a like nature in an amount not to exceed Fifty Thousand
Dollars ($50,000.00), in the aggregate.
“Person”
is
any
individual, sole proprietorship, partnership, limited liability company, joint
venture, company, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate,
entity or government agency.
“Prime
Rate”
is
Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest
rate.
"Profitability
Event" is
the
confirmation by the Bank that Borrower has maintained, after the Effective
Date,
a net profit of at least One Dollar ($1.00), for two (2) consecutive fiscal
quarters.
“Quick
Assets”
is,
on
any date, Borrower’s, unrestricted cash, plus net billed accounts
receivable.
"Quick
Liabilities"
are
Current Liabilities, less (i) the current portion of Subordinated Debt and
Deferred Revenue, and less (ii) accrued bonuses due to employees.
“Registered
Organization”
is
any
“registered organization” as defined in the Code with such additions to such
term as may hereafter be made.
“Reserves”
means,
as of any date of determination, such amounts as Bank may from time to time
establish and revise in good faith reducing the amount of Advances, Letters
of
Credit and other financial accommodations which would otherwise be available
to
Borrower under the lending formulas: (a) to reflect events, conditions,
contingencies or risks which, as determined by Bank in good faith, do or may
affect (i) the Collateral or any other
-24-
property
which is security for the Obligations or its value (including without limitation
any increase in delinquencies of Accounts), (ii) the assets or business of
Borrower or any guarantor, or (iii) the security interests and other rights
of
Bank in the Collateral (including the enforceability, perfection and priority
thereof); or (b) to reflect Bank’s good faith belief that any collateral report
or financial information furnished by or on behalf of Borrower or any guarantor
to Bank is or may have been incomplete, inaccurate or misleading in any material
respect; or (c) in respect of any state of facts which Bank determines in good
faith constitutes an Event of Default or may, with notice or passage of time
or
both, constitute an Event of Default.
“Responsible
Officer”
is
any
of the Borrower's: (i) Chief Financial Officer, who is currently ▇▇▇▇ Commons,
(ii) President, who is currently ▇▇▇▇▇ ▇▇▇▇▇▇, and (iii) Controller, who is
currently ▇▇▇ ▇▇▇▇▇.
“Revolving
Line”
is
an
Advance or Advances in an aggregate amount of up to One Million Five Hundred
Thousand Dollars ($1,500,000.00) outstanding at any time.
“Revolving
Line Maturity Date” is
December ___, 2007 (364 days from the Effective Date).
“Securities
Account”
is
any “securities account” as defined in the Code with such additions to such term
as may hereafter be made.
“Subordinated
Debt”
is
indebtedness incurred by Borrower subordinated to all of Borrower’s now or
hereafter indebtedness to Bank (pursuant to a subordination, intercreditor,
or
other similar agreement in form and substance satisfactory to Bank entered
into
between Bank and the other creditor), on terms acceptable to Bank.
“Subsidiary”
means,
with respect to any Person, any Person of which more than 50% of the voting
stock or other equity interests is owned or controlled, directly or indirectly,
by such Person or one or more Affiliates of such Person.
“Term
Loan”
is a
loan made by Bank pursuant to the terms of Section 2.1.5 hereof.
“Term
Loan” is
an
aggregate amount equal to One Million Five Hundred Thousand Dollars
($1,500,000.00) outstanding at any time.
“Term
Loan Maturity Date”
is
March 1, 2010.
“Term
Loan Payment”
is
defined in Section 2.1.5(b).
“Total
Liabilities”
is
on
any day, obligations that should, under GAAP, be classified as liabilities
on
Borrower’s consolidated balance sheet, including all Indebtedness, and current
portion of Subordinated Debt permitted by Bank to be paid by Borrower, but
excluding all other Subordinated Debt.
“Transfer”
is
defined in Section 7.1.
“Transaction
Report”
is that
certain form attached hereto as Exhibit
B.
“Unused
Revolving Line Facility Fee”
is
defined in Section 2.4(b).
Signature
page follows.
-25-
IN
WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be executed as a sealed instrument
under the laws of the Commonwealth of Massachusetts as of the Effective
Date.
BORROWER:
VOXWARE,
INC.
By
/s/
▇▇▇▇
Commons
Name:
▇▇▇▇
Commons
Title:
Vice President and Chief Financial Officer
BANK:
SILICON
VALLEY BANK
By
/s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
Name:
▇▇▇▇▇▇▇
▇▇▇▇▇
Title:
Relationship
Manager
EXHIBIT
A
The
Collateral consists of all of Borrower’s right, title and interest in and to the
following personal property:
All
goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles, commercial tort claims, documents,
instruments (including any promissory notes), chattel paper (whether tangible
or
electronic), cash, deposit accounts, certificates of deposit, fixtures, letters
of credit rights (whether or not the letter of credit is evidenced by a
writing), securities, and all other investment property, supporting obligations,
and financial assets, whether now owned or hereafter acquired, wherever located;
and
all
Borrower’s Books relating to the foregoing, and any and all claims, rights and
interests in any of the above and all substitutions for, additions, attachments,
accessories, accessions and improvements to and replacements, products, proceeds
and insurance proceeds of any or all of the foregoing.
1
[EXCEL
spreadsheet to be provided separately from lending officer.]
1
COMPLIANCE
CERTIFICATE
|
TO:
|
SILICON
VALLEY BANK
|
Date:
_______________________________
|
|
FROM:
|
VOXWARE,
INC.
|
The
undersigned authorized officer of Voxware, Inc. (“Borrower”) certifies that
under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for
the period ending _______________ with all required covenants except as noted
below, (2) there are no Events of Default, (3) all representations and
warranties in the Agreement are true and correct in all material respects on
this date except as noted below; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that
those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such
date,
(4)
Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower
has timely paid all foreign, federal, state and local taxes, assessments,
deposits and contributions owed by Borrower
except
as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement,
and (5) no Liens have been levied or claims made against Borrower or any of
its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Bank. Attached are the
required documents supporting the certification. The undersigned certifies
that
these are prepared in accordance with generally GAAP consistently applied from
one period to the next except as explained in an accompanying letter or
footnotes. The undersigned 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. Capitalized terms used but not otherwise
defined herein shall have the meanings given them in the Agreement.
|
Please
indicate compliance status by circling Yes/No under “Complies”
column.
|
||
|
Required
|
||
|
Monthly
financial statements with
Compliance
Certificate
|
Monthly
within 30 days
|
Yes
No
|
|
Annual
financial statement (CPA Audited) + ▇▇
|
▇▇▇
within 120 days
|
Yes
No
|
|
10-Q,
10-K and 8-K
|
Within
5 days after filing with SEC
|
Yes
No
|
|
Borrowing
Base Certificate A/R Agings
|
Monthly
within 30 days
|
Yes
No
|
|
Audit
|
Annually
and within 45 days of Effective
Date
|
Yes
No
|
|
Board
approved projections Annually Yes No
|
||
|
The
following Intellectual Property was registered after the Effective
Date
(if no registrations, state “None”)
____________________________________________________________________________
|
||
|
Required
|
Actual
|
||
|
Minimum
Cash Balances
|
$2,500,000.00
|
$
|
Yes
No
|
|
Minimum
Quarterly Net Loss/Net Income
|
$______
*
|
$
|
Yes
No
|
|
Adjusted
Quick Ratio**
|
Actual
|
|
|
Minimum
Adjusted Quick Ratio
|
*
As set
forth in Section 6.7(b) of the Agreement
**
Note,
this is not a financial covenant.
-29-
The
following financial covenant analyses and information set forth in Schedule
1
attached hereto are true and accurate as of the date of this
Certificate.
The
following are the exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions to note.”)
|
Voxware,
Inc.
By:
______________________________________
Name:
▇▇▇▇
Commons
Title:
Vice President and
CFO
|
BANK
USE ONLY
Received
by: _____________________
authorized
signer
Date:
_________________________
Verified:
________________________
authorized
signer
Date:
_________________________
Compliance
Status: Yes
No
|
-30-
Dated: ____________________
In
the
event of a conflict between this Schedule and the Loan Agreement, the terms
of
the Loan Agreement shall control.
| I. |
TANGIBLE
NET WORTH
|
|
A.
|
Aggregate
value of total assets of Borrower and
|
$
|
_______
|
||
|
B.
|
Aggregate
value of goodwill of Borrower
|
$
|
_______
|
||
|
C.
|
Aggregate
value of intangible assets of Borrower
|
$
|
_______
|
||
|
D.
|
Aggregate
value of any reserves not already deducted from assets
|
$
|
_______
|
||
|
E.
|
Aggregate
value of obligations owing to Borrower from officers or other
directors
|
$
|
_______
|
||
|
F.
|
Aggregate
value of liabilities of Borrower (including all Indebtedness)
and
current portion of Subordinated Debt permitted by Bank to be paid
by
Borrower (but no other Subordinated Debt)
|
|
$
|
_______
|
|
|
G.
|
Value
of Subordinated Debt
|
$
|
_______
|
||
|
H.
|
Tangible
Net Worth (line A minus line B minus line C minus line D minus
line E
minus line F, plus line G)
|
|
$
|
_______
|
Is
line H
equal to or greater than $_____________?
|
_____ No,
not in compliance
|
_____ Yes,
in compliance
|
| II. |
ADJUSTED
QUICK RATIO
|
|
A.
|
Aggregate
value of the unrestricted cash of Borrower
|
$
|
_______
|
||
|
B.
|
Aggregate
value of the net billed accounts receivable of Borrower
|
$
|
_______
|
||
|
C.
|
Quick
Assets (the sum of lines A and B)
|
|
$
|
_______
|
|
|
D.
|
Aggregate
value of Obligations to Bank
|
$
|
_______
|
||
|
E.
|
Aggregate
value of liabilities of Borrower (including all Indebtedness)
that
matures within one (1) year and current portion of Subordinated
Debt
permitted by Bank to be paid by Borrower
|
$
|
_______
|
||
|
F
|
Aggregate
value of (i) the current portion of Subordinated Debt and Deferred
Revenue
and (ii) accrued bonuses due to employees
|
||||
|
G.
|
Quick
Liabilities (the sum of lines D, E minus F)
|
|
$
|
_______
|
|
|
G.
|
Adjusted
Quick Ratio (line C divided by line G)
|
|
_______
|
Is
line G
equal to or greater than 1.25:1:00?