LOAN AND SECURITY AGREEMENT
Exhibit 10.1
THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of the Effective Date by and
between (i) SILICON VALLEY BANK, a California corporation with a loan production office located at
000 Xxxxx Xxxxxx, Xxxxx 0-000, Xxxxxx, Xxxxxxxxxxxxx 00000 (“Bank”), and (ii) GLOBAL TELECOM &
TECHNOLOGY, INC., a Delaware corporation (“GTTI”), GLOBAL TELECOM & TECHNOLOGY AMERICAS, INC., a
Virginia corporation (“GTTA”), each with offices located at 0000 Xxxxxxxx Xxxxx, Xxxxx 000, XxXxxx,
Xxxxxxxx 00000, GTT-EMEA, LTD., a private limited liability company incorporated and registered in
England and Wales with offices located at 0xx Xxxxx, Xxxxxx Xxxxx, 00 Xxxxxxx Xxxxxxx,
Xxxxxx XX0X 0XX (“EMEA”) and WBS CONNECT, LLC, a Colorado limited liability company with offices
located at 0000 X. Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000 (“WBS”, and
together with GTTI, GTTA and EMEA, individually and collectively, jointly and severally, the
“Borrower”), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank.
The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed following GAAP.
Calculations and determinations must be made following GAAP, as applicable. 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 LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally, jointly and severally, 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 shall make Advances not exceeding 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.
2.1.2 Letters of Credit Sublimit.
(a) As part of the Revolving Line and subject to the deduction of Reserves, Bank shall issue
or have issued Letters of Credit denominated in Dollars or a Foreign Currency for Borrower’s
account. The aggregate Dollar Equivalent amount utilized for the issuance of Letters of Credit
shall at all times reduce the amount otherwise available for Advances under the Revolving Line.
The aggregate Dollar Equivalent of the face amount of outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve) may not exceed the
lesser of (A) Five Million Dollars ($5,000,000), minus (i) the sum of all amounts used for
Cash Management Services, and minus (ii) the FX Reduction Amount, or (B) the lesser of
Revolving Line or the Borrowing Base, minus (i) the sum of all outstanding principal
amounts of any Advances (including any amounts used for Cash Management Services), and
minus (ii) the FX Reduction Amount.
(b) If, on the Revolving Line Maturity Date (or the effective date of any termination of this
Agreement), there are any outstanding Letters of Credit, then on such date Borrower shall provide
to Bank cash collateral in an amount equal to (i) 105% if the Letter of Credit is denominated in
U.S. Dollars, or (ii) 110% if the Letter of Credit is denominated in a currency other than U.S.
Dollars, of the Dollar Equivalent 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 such 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.
(c) 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.
(d) 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 Dollar Equivalent of the amount thereof (plus fees and charges in
connection therewith such as wire, cable, SWIFT or similar charges).
(e) 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. The aggregate amount
of FX Forward Contracts at any one time may not exceed ten (10) times the lesser of (A) Five
Million Dollars ($5,000,000), minus (i) the sum of all amounts used for Cash Management
Services, and minus (ii) the Dollar Equivalent of the face amount of any outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve), or (B) the lesser of Revolving Line or the Borrowing Base, minus (i) the sum of
all outstanding principal amounts of any Advances (including any amounts used for Cash Management
Services), and minus (ii) the Dollar Equivalent of the face amount of any outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve). The amount otherwise available for Credit Extensions under the Revolving Line shall be
reduced by an amount equal to ten percent (10%) of each outstanding FX Forward Contract (the “FX
Reduction Amount”). Any amounts needed to fully reimburse Bank for any amounts not paid by
Borrower in connection with FX Forward Contracts will be treated as Advances under the Revolving
Line and will accrue interest at the interest rate applicable to Advances.
2.1.4 Cash Management Services Sublimit. Borrower may use 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”), in an aggregate amount not to exceed the
lesser of (A) Five Million Dollars ($5,000,000), minus (i) the Dollar Equivalent of the
face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve), and minus (ii) the FX Reduction Amount, or (B)
the lesser of Revolving Line or the Borrowing Base, minus (i) the sum of all outstanding
principal amounts of any Advances, minus (ii) the Dollar Equivalent of the face amount of any
outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve), and minus (iii) the FX Reduction Amount. Any amounts Bank pays on behalf
of 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 equal to the Term Loan Amount on the Effective Date subject to the satisfaction of the terms
and conditions of this Agreement.
(b) Repayment. Borrower shall repay the Term Loan in (i) sixty (60) equal
installments of principal based on a sixty (60) month amortization schedule, plus (ii) monthly
payments of accrued interest (the
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“Term Loan Payment”). Beginning on the last day of the month
following the month in which the Funding Date occurs, each Term Loan Payment shall be payable on
the last day of each month. 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. Once repaid, the Term Loan may not be reborrowed.
(c) Prepayment. The Term Loan may be prepaid, in whole or in part prior to the Term
Loan Maturity Date by Borrower, effective three (3) Business Days after written notice of such
prepayment is given to Bank. Notwithstanding any such prepayment, Bank’s lien and security
interest in the Collateral shall continue until Borrower fully satisfies its Obligations (other
than inchoate indemnity obligations). If such prepayment is at Borrower’s election or at Bank’s
election due to the occurrence and continuance of an Event of Default, Borrower shall pay to Bank,
in addition to the payment of any other expenses or fees then-owing, a prepayment premium in an
amount equal to (i) if such prepayment occurs after the Effective Date but prior to the First
Anniversary, two percent (2.00%) of the principal amount of the Term Loan Amount; (ii) if such
prepayment occurs on or after the First Anniversary but prior to the Second Anniversary, one and
one-half percent (1.50%) of the Term Loan Amount; (iii) if such prepayment occurs on or after the
Second Anniversary but prior to the Third Anniversary, one percent (1.00%) of the Term Loan Amount;
and (iv) if such prepayment occurs on or after the Third Anniversary, zero percent (0.00%);
provided that no prepayment premium shall be charged if the Term Loan is replaced
with a new facility from Bank or another division of Silicon Valley Bank. Upon payment in full of
the Obligations (other than inchoate indemnity obligations) and at such time as Bank’s obligation
to make Credit Extensions has terminated, Bank shall terminate and release its liens and security
interests in the Collateral and all rights therein shall revert to Borrower.
2.2 Overadvances. If, at any time, the sum of (a) the outstanding principal amount of any
Advances (including any amounts used for Cash Management Services); plus (b) the face
amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and
any Letter of Credit Reserve); plus (c) the FX Reduction Amount exceeds the lesser of
either the Revolving Line or the Borrowing Base (such excess amount being an “Overadvance”),
Borrower shall immediately pay to Bank in cash such Overadvance. Without limiting Borrower’s
obligation to repay Bank any amount of the Overadvance, Borrower agrees to pay Bank interest on the
outstanding amount of any Overadvance, on demand, at the Default Rate.
2.3 Payment of Interest on the Credit Extensions.
(a) Interest Rate.
(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 Prime Rate plus two
percent (2.00%); provided, however, during a Performance Pricing Period, the
principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum
rate equal to the Prime Rate plus one percent (1.00%). Such interest shall in any event be payable
monthly, in arrears, 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 the Prime Rate plus three
percent (3.00%)provided, however, during a Performance Pricing Period, the
principal amount outstanding under the Term Loan shall accrue interest at a floating per annum rate
equal to the Prime Rate plus two percent (2.00%), which interest shall in any event be payable
monthly.
(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 (5.00%) above the rate that is otherwise applicable thereto (the “Default Rate”) unless Bank
otherwise elects from time to time in its sole discretion to impose a smaller increase. Fees and
expenses which are required to be paid by Borrower pursuant to the Loan Documents (including,
without limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a
rate equal to the highest rate applicable to the Obligations. 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.
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(d) Computation; 360-Day Year. In computing interest, the date of the making of any
Credit Extension shall be included and the date of payment shall be excluded; provided,
however, that if any Credit Extension is repaid on the same day on which it is made, such
day shall be included in computing interest on such Credit Extension. 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. Bank will first debit the
Designated Deposit Account and will debit alternate accounts in the event Designated Deposit
Account balances are insufficient to satisfy the amounts Borrower owes Bank when due. Bank will
notify Borrower when alternate accounts are debited.
(f) Payment; Interest Computation. Unless otherwise provided, interest is payable
monthly on the last calendar day of each month. In computing interest on the Obligations, all
Payments received after 3:00 p.m. Eastern time on any day shall be deemed received on the next
Business Day. 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 Revolving Line
commitment fee of Fifty Thousand Dollars ($50,000), payable on the Effective Date;
(b) Term Loan Commitment Fee. A fully earned, non refundable Term Loan commitment fee
of One Hundred Thousand Dollars ($100,000), payable on the Effective Date;
(c) Letter of Credit Fee. Bank’s customary fees and expenses for the issuance or
renewal of Letters of Credit, upon the issuance of such Letter of Credit, each anniversary of the
issuance during the term of such Letter of Credit, and upon the renewal of such Letter of Credit by
Bank;
(d) Termination Fee. Subject to the terms of Section 2.1.5(c), a termination fee; and
(e) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and
expenses for documentation and negotiation of this Agreement) incurred through and after the
Effective Date, when due.
2.5 Payments; Application of Payments.
(a) All payments (including prepayments) to be made by Borrower under any Loan Document shall
be made in immediately available funds in U.S. Dollars, without setoff or counterclaim, before 3:00
p.m. Eastern time on the date when due. Payments of principal and/or interest received after 3:00
p.m. Eastern time are considered received at the opening of business on the next Business Day.
When a payment is due on a day that is not a Business Day, the payment shall be due the next
Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid.
(b) Bank shall apply the whole or any part of collected funds against the Revolving Line or
credit such collected funds to a depository account of Borrower with Bank (or an account maintained
by an Affiliate of Bank), the order and method of such application to be in the reasonable
discretion of Bank. Borrower shall have no right to specify the order or the accounts to which
Bank shall allocate or apply any payments required to be made by Borrower to Bank or otherwise
received by Bank under this Agreement when any such allocation or application is not specified
elsewhere in this Agreement.
2.6 Withholding. Payments received by Bank from Borrower hereunder will be made free and
clear of any withholding taxes. Specifically, however, if at any time any governmental authority,
applicable law, regulation or international agreement requires any Borrower to make any such
withholding or deduction from any such payment or other sum payable hereunder to Bank, Borrower
hereby covenants and agrees that the amount due from Borrower with respect to such payment or other
sum payable hereunder will be increased to the extent necessary to ensure that, after the making of
such required withholding or deduction, Bank receives a net sum equal to the sum which it would
have received had no withholding or deduction been required and Borrower shall pay the full amount
withheld or deducted to the relevant governmental authority. Borrower will, upon request, furnish
Bank
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with proof satisfactory to Bank indicating that Borrower has made such withholding payment
provided, however, that Borrower need not make any withholding payment if the
amount or validity of such withholding payment is contested in good faith by appropriate and timely
proceedings and as to which payment in full is bonded or reserved against by Borrower. The
agreements and obligations of Borrower contained in this Section 2.6 shall survive the termination
of this Agreement.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make the initial
Credit Extension under this Agreement 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;
(b) duly executed original signatures to the Control Agreements, if any;
(c) for each Borrower other than EMEA, Borrower’s Operating Documents and a good standing
certificate of Borrower certified by each applicable jurisdiction of incorporation or formation,
together with a certificate of foreign qualification from each jurisdiction in which Borrower is
qualified as a foreign corporation, each dated as of a date no earlier than thirty (30) days prior
to the Effective Date;
(d) duly executed original signatures to the Secretary’s Certificate with completed Borrowing
Resolutions for each Borrower other than EMEA and, with respect to EMEA, a completed Secretary’s
Corporate Borrowing Certificate, together with all attachments thereto;
(e) the Subordination Agreement by 2010 Units Offering Investors in favor of Bank, together
with the duly executed original signatures thereto;
(f) an original Debenture, duly executed by EMEA and copy of the minutes of a meeting of the
board of directors of EMEA approving the terms of, and entry into, the Debenture, certified as a
true copy of the same by the company secretary of EMEA;
(g) evidence that all of GTTI’s outstanding Indebtedness evidenced by its Convertible Notes
and/or its Seller Notes, including, without limitation, Seller Notes held by Xx. Xxxx Xxxxxxxxx and
Xx. Xxxxx Charter, have or will, concurrently with the initial Credit Extension, be repaid in full;
(h) 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;
(i) the Perfection Certificates of Borrower and Guarantor, together with the duly executed
original signatures thereto;
(j) a landlord’s consent in favor of Bank for 0000 Xxxxxxxx Xxxxx, Xxxxx 000, XxXxxx, Xxxxxxxx
00000 by the respective landlord thereof, together with the duly executed original signatures
thereto;
(k) a bailee’s/warehouseman’s waiver executed by each bailee, if any, of Borrower as required
by Bank, in favor of Bank;
(l) a legal opinion of Borrower’s counsel, in form and substance acceptable to Bank, in its
reasonable discretion, dated as of the Effective Date together with the duly executed original
signature thereto;
(m) the duly executed original signatures to the Guaranty, together with Secretary’s
Certificate/duly executed original signatures to the completed Borrowing Resolutions for Guarantor;
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(n) evidence satisfactory to Bank that the insurance policies required by Section 6.7 hereof
are in full force and effect, together with appropriate evidence showing lender loss payable and/or
additional insured clauses or endorsements in favor of Bank;
(o) evidence satisfactory to Bank, in its sole discretion, that immediately prior to making
any Credit Extensions under this Agreement, Borrower has a maximum Leverage Ratio no greater than
2.75:1.00; and
(p) payment of the fees and Bank Expenses then due as specified in Section 2.4 hereof.
3.2 Conditions Precedent to all Credit Extensions. Bank’s obligation to make each Credit
Extension, including the initial Credit Extension, is subject to the following conditions
precedent:
(a) except as otherwise provided in Section 3.4, timely receipt of an executed Transaction
Report;
(b) the representations and warranties in this Agreement shall be true, accurate, and complete
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 this Agreement remain true,
accurate, and complete 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 good faith reasonable business judgment, 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 any material adverse deviation by Borrower from the
most recent business plan of Borrower presented to and accepted by Bank.
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 precedent to any Credit Extension. Borrower
expressly agrees that a Credit Extension made 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 the making of
any Credit Extension in the absence of a required item shall be in Bank’s sole discretion.
3.4 Procedures for Borrowing; Advances. 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 3:00 p.m. Eastern time on the
Funding Date of the Advance. Together with any such electronic or facsimile notification, Borrower
shall 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 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Each US 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.
4.2 Priority of Security Interest. Each US 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 a US Borrower shall acquire a
commercial tort claim, such US Borrower shall promptly notify Bank in a writing
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signed by such US
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.
4.3 Authorization to File Financing Statements. Each US 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 except as set forth in this Agreement, by either such US Borrower or any other
Person, shall be deemed to violate the rights of Bank under the Code. Such financing statements
may indicate the Collateral as “all assets of the Debtor” or words of similar effect, or as being
of an equal or lesser scope, or with greater detail, all in Bank’s discretion.
4.4 Debenture. The payment and performance of the Obligations and the performance of EMEA’s
duties under the Loan Documents is secured under the Debenture. EMEA hereby authorizes Bank to
make all relevant filings in the United Kingdom in relation to, or in connection with, the
Debenture, including, without limitation, filing the relevant Form MG01 at the Companies House in
the United Kingdom.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization; Authorization; Power and Authority. Borrower and each of its
Subsidiaries are duly existing and in good standing as a Registered Organization in its
jurisdiction of formation and each is qualified and licensed to do business and each is in good
standing in any jurisdiction in which the conduct of each of its business or its ownership of
property requires that it be qualified except where the failure to do so could not reasonably be
expected to have a material adverse effect on Borrower’s business, taken as a whole. In connection
with this Agreement, Borrower has delivered to Bank completed certificates each signed by Borrower
and Guarantor, respectively, entitled “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
(it being understood and agreed that Borrower may from time to time update certain information in
the Perfection Certificate after the Effective Date to the extent permitted by one or more specific
provisions in this Agreement). If Borrower is 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 by Borrower of the Loan Documents to which it is a
party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational
documents, (ii) contravene, conflict with, constitute a default under or violate any material
Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by which Borrower or any
of its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any
action by, filing, registration, or qualification with, or Governmental Approval from, any
Governmental Authority (except such Governmental Approvals which have already been obtained and are
in full force and effect) or (v) 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, taken as a whole.
5.2 Collateral. Borrower has good title to each item of the Collateral upon which it purports
to xxxxx x Xxxx hereunder (or, the case of EMEA, under the Debenture), free and clear of any and
all Liens except Permitted
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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, or of which Borrower has given Bank notice and taken such actions as are
necessary to give Bank a perfected security interest therein. 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 or as
permitted pursuant to Section 7.2. In the event that Borrower, after the date hereof, intends to
store or otherwise deliver any portion of the Collateral in excess of One Hundred Thirty Thousand
Dollars ($130,000.00) in the aggregate 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 the Intellectual Property which it owns or purports to own
except for (a) non-exclusive licenses granted to its customers in the ordinary course of business,
(b) over-the-counter software that is commercially available to the public, and (c) material
Intellectual Property licensed to Borrower and noted on the Perfection Certificate. Each Patent
which it owns or purports to own and which is material to Borrower’s business is to the knowledge
of Borrower, valid and enforceable, and no part of the Intellectual Property which Borrower owns or
purports to own and which is material to Borrower’s business, taken as a whole, has been judged
invalid or unenforceable, in whole or in part. To 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 would not have a material adverse effect on Borrower’s business, taken as a
whole.
Except as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound by,
any Restricted License.
5.3 Accounts Receivable; Inventory. For any Eligible Account in any Borrowing Base
Certificate, all statements made and all unpaid balances appearing in all invoices, instruments and
other documents evidencing such Eligible 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. If an Event of Default has occurred and is continuing, Bank may,
with notice to Borrower, notify any Account Debtor owing Borrower money of Bank’s security interest
in such funds and verify the amount of such Eligible Account. All sales and other transactions
underlying or giving rise to each Eligible 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 Eligible Accounts 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 Eligible 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, individually or in the aggregate, Five Hundred Thousand Dollars ($500,000).
5.5 Financial Condition. 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. 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 of 1940, as amended. Borrower is not
engaged as one of its important activities in extending credit for margin stock (under Regulations
X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material
respects with the Federal Fair Labor Standards Act or, in the case of EMEA, with all employment
legislation in force in England and Wales (including, without limitation, the Employment Rights Act
1996). Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a
“holding company” or a “subsidiary company” of a “holding company” as each term is defined
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and used
in the Public Utility Holding Company Act of 2005. 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
Governmental Authorities that are necessary to continue their respective businesses as currently
conducted, except where the failure to obtain or make such consents, declarations, notices or
filings would not reasonably be expected to have a material adverse effect on Borrower’s business,
taken as a whole.
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 has paid, or made provision to pay, all foreign, federal,
state, national, and local taxes, assessments, deposits and contributions owed by Borrower in
excess of $50,000.00; provided that Borrower may defer payment of any contested taxes,
provided further 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 has no knowledge 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 (i) Term Loan to refinance
Borrower’s existing Indebtedness and (ii) Credit Extensions under the Revolving Line solely as
working capital to fund its general business requirements. In no event shall any Credit Extensions
be used 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 representation, warranty,
or other statement was 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).
5.12 Definition of “Knowledge.” For purposes of the Loan Documents, whenever a representation
or warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or
with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable
investigation, of the Responsible Officers.
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 Government Compliance. (a) 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 would reasonably be expected to have a material adverse effect on
Borrower’s business, taken as a whole.
(b) Obtain all of the Governmental Approvals necessary for the performance by Borrower of its
obligations under the Loan Documents to which it is a party and the grant of a security interest to
Bank in all of
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its property. Borrower shall promptly notify Bank of any such Governmental
Approvals obtained by Borrower and, upon request of Bank, provide copies of any such obtained
Governmental Approvals to Bank.
6.2 Financial Statements, Reports, Certificates.
(a) Borrower shall provide Bank with the following:
(i) (A) within twenty (20) days after the end of each month, and (B) upon each request for a
Credit Extension, a Transaction Report;
(ii) within twenty (20) days after the end of each month, (A) monthly accounts receivable
agings, aged by invoice date, (B) monthly accounts payable agings, aged by invoice date, and
outstanding or held check registers, if any, and (C) monthly reconciliations of accounts receivable
agings (aged by invoice date), and Deferred Revenue report;
(iii) 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 sixty (60) days after the end of each fiscal year of Borrower, and as and when
amended or updated in any material respect, (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), together with any related business forecasts used in the preparation of such annual
financial projections;
(vi) within one hundred fifty (150) days following the end of Borrower’s fiscal year, annual
financial statements certified by, and with an unqualified opinion of X.X. Xxxx LLP, or any other
independent certified public accountants acceptable to Bank;
(vii) within five (5) days of delivery, copies of all statements, reports and notices made
available to Borrower’s security holders or to any holders of Subordinated Debt;
(viii) a prompt report of any legal actions pending or threatened in writing against Borrower
or any of its Subsidiaries that could result in damages or costs to Borrower or any of its
Subsidiaries of, individually or in the aggregate, Five Hundred Thousand Dollars ($500,000) or
more;
(b) In the event that Borrower is or becomes subject to the reporting requirements under the
Securities Exchange Act of 1934, as amended, within five (5) days after filing, all reports on Form
10-K, 10-Q and 8-K filed with the SEC or a link thereto on Borrower’s or another website on the
Internet, including the SEC’s XXXXX website. Any materials filed with the SEC reports that
otherwise satisfy the requirements of section 6.2(a) shall be considered delivered for the purposes
of that section when filed with the SEC.
(c) Borrower shall provide Bank with prompt written notice of (i) any material change in the
composition of the Intellectual Property, (ii) the registration of any Copyright (including any
subsequent ownership right of Borrower in or to any Copyright), Patent or Trademark not previously
disclosed to Bank, or (iii) Borrower’s knowledge of an event that materially adversely affects the
value of the Intellectual Property.
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
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limit Bank’s Lien and other
rights therein. If requested in writing by Bank, Borrower shall furnish Bank with copies (or, at
Bank’s written request, originals to the extent readily available) 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 written request (to the extent
readily available), 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 endorsements, and copies of all credit memos.
(b) Disputes. Borrower shall promptly notify Bank of all disputes or claims in excess
of Fifty Thousand Dollars ($50,000.00) 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. All payments on,
and proceeds of, Accounts shall be deposited directly by the applicable Account Debtor into a
lockbox account, or such other “blocked account” as Bank may specify, pursuant to a blocked account
agreement in form and substance satisfactory to Bank in its sole discretion. Whether or not an
Event of Default has occurred and is continuing, Borrower shall immediately deliver all payments on
and proceeds of Accounts to an account maintained with Bank to be applied (i) prior to an Event of
Default, to the Revolving Line pursuant to the terms of Section 2.5(b) hereof, and (ii) after the
occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4
hereof; provided however, during a Streamline Period, such payments and proceeds shall be
transferred to an account of Borrower maintained at Bank.
(d) Returns. Provided no Event of Default has occurred and is continuing, if any
Account Debtor returns any Inventory in excess of Fifty Thousand Dollars ($50,000.00) 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 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, provided that, prior to the occurrence
of an Event of Default, any such verification shall be subject to prior written notice to Borrower.
(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 second Business Day after receipt by Borrower, to be
applied to the Obligations (1) prior to an Event of Default, pursuant to the terms of Section
2.5(b) hereof, and (2) after the occurrence and during the continuance of an Event of Default,
pursuant to the terms of Section 9.4 hereof; provided that, if no Event of Default
has occurred and is continuing, Borrower shall not be obligated to remit to Bank the proceeds of
the sale of surplus, worn out or obsolete Equipment disposed of by Borrower in good faith in an
arm’s length transaction for an aggregate purchase price of Two Hundred Thousand Dollars ($200,000)
or less (for all such transactions in any fiscal year). Borrower agrees that it will maintain all
proceeds of Collateral in an account maintained with Bank. Nothing in this Section limits the
restrictions on disposition of Collateral set forth elsewhere in this Agreement.
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6.5 Taxes; Pensions; Withholding. Timely file, and require each of its Subsidiaries to timely
file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to
timely pay, all foreign, federal, state, national and local taxes, assessments, deposits and
contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any
taxes contested, or otherwise permitted, 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 two (2) Business Days’
notice (provided no notice is required if an Event of Default has occurred and is continuing),
Bank, or its agents, shall have the right, up to two (2) times in any fiscal year (or more
frequently, as Bank shall determine necessary), 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 $850 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 fifteen (15) days in advance, and Borrower
cancels or seeks to reschedule 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 reasonably satisfactory to
Bank. All property policies shall have a lender’s loss payable endorsement showing Bank as the
sole lender loss payee and waive subrogation against Bank and shall provide that the insurer shall
endeavor to give Bank at least thirty (30) days notice before canceling or declining to renew its
policy. All liability policies shall show, or have endorsements showing, Bank as an additional
insured, and all such policies (or the loss payable and additional insured endorsements) shall
provide that the insurer shall endeavor to give Bank at least thirty (30) days notice before
canceling 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 option, following the occurrence and during the continuance of an Event of Default, 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’, if any, domestic depository, operating accounts and
securities accounts with Bank and Bank’s affiliates with all excess domestic funds maintained at or
invested through Bank or an affiliate of Bank, which accounts shall represent at least sixty
percent (60%) of the dollar value of Borrower’s and such Subsidiaries accounts at all financial
institutions worldwide. Any domestic Guarantor shall maintain all depository, operating and
securities accounts with Bank or SVB Securities. Notwithstanding the foregoing, EMEA shall be
permitted to maintain its existing deposit accounts with (i) Standard Chartered Bank (the “Standard
Accounts”), provided that the aggregate maximum balance of such Standard Accounts does not exceed
Seven Hundred Fifty Thousand Dollars ($750,000) at any time, and (ii) Commerzbank (the “Commerzbank
Accounts”), provided that the aggregate maximum balance of such Commerzbank Accounts does not
exceed One Million Dollars ($1,000,000) at any time.
(b) 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 Bank’s Affiliates. For each
Collateral Account that Borrower at any time maintains in the United States or the United Kingdom,
Borrower shall cause the applicable bank or financial institution (other than Bank) at or with
which any such 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 which Control Agreement may not be
terminated without the prior written consent of Bank. The provisions of the previous sentence
shall not apply to the Standard Accounts, the Commerzbank Accounts, 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.
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Maintain at all times, to be tested and certified as of the last day of each month, unless
otherwise noted, on a consolidated basis, unless otherwise noted:
(a) Liquidity. Borrower shall at all times maintain unrestricted cash plus
the unused availability under the Borrowing Base of at least Five Million Dollars ($5,000,000).
(b) Fixed Charge Coverage Ratio. On a quarterly basis, as of the last day of each
fiscal quarter of the Borrower, measured on a trailing three month basis, Borrower shall maintain a
ratio of (i) Cash Basis EBITDA for such period divided by (ii) Fixed Charges of at
least 1.25:1.00.
6.10 Protection and Registration of Intellectual Property Rights.
(a) (i) Protect, defend and maintain the validity and enforceability of its Intellectual
Property; (ii) promptly advise Bank in writing of material infringements of its Intellectual
Property known to Borrower; and (iii) not allow any Intellectual Property material to Borrower’s
business, taken as a whole, to be abandoned, forfeited or dedicated to the public without Bank’s
written consent.
(b) If Borrower (i) obtains any Patent, registered Trademark, registered Copyright, registered
mask work, or any pending application for any of the foregoing, whether as owner, licensee or
otherwise, or (ii) applies for any Patent or the registration of any Trademark, then Borrower shall
promptly provide written notice
thereof to Bank and shall execute such intellectual property security agreements and other
documents and take such other actions as Bank shall request in its good faith business judgment to
perfect and maintain a first priority perfected security interest in favor of Bank in such
property. 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 Borrower’s 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 and such other documents and take
such other actions as Bank may request in its good faith business judgment to perfect and maintain
a first priority perfected security interest in favor of Bank 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 copies of all applications that it files for Patents or for the
registration of Trademarks, Copyrights or mask works, together with evidence of the recording of
the intellectual property security agreement necessary for Bank to perfect and maintain a first
priority security interest in such property.
(c) Provide written notice to Bank within ten (10) days of entering or becoming bound by any
material Restricted License (other than over-the-counter software that is commercially available to
the public). Borrower shall take such steps as Bank reasonably requests to obtain the consent of,
or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License 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 Restricted License, whether now
existing or entered into in the future, and (ii) Bank to have the ability in the event of a
liquidation of any Collateral to dispose of such Collateral in accordance with Bank’s rights and
remedies under this Agreement and the other Loan Documents.
6.11 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, 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.
6.12 Creation/Acquisition of Subsidiaries. Notwithstanding and without limiting the negative
covenant contained in Section 7.3 hereof, in the event Borrower or any Subsidiary creates or
acquires any Subsidiary, Borrower and such Subsidiary shall promptly notify Bank of the creation or
acquisition of such new Subsidiary and, at Bank’s request, in its sole discretion, take all such
action as may be reasonably required by Bank to cause each such Subsidiary to, in Bank’s sole
discretion, become a co-Borrower or Guarantor under the Loan Documents and grant a continuing
pledge and security interest in and to the assets of such Subsidiary (the description of such
assets to be substantially the same as the Collateral described on Exhibit A hereto); and Borrower
shall grant and pledge to Bank a perfected security interest in the stock, units or other evidence
of ownership of each Subsidiary.
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6.13 Further Assurances. 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 and/or any of the other Loan Documents. Borrower shall deliver to Bank, within
five (5) days after the same are sent or received, copies of all correspondence, reports, documents
and other filings with any Governmental Authority regarding compliance with or maintenance of
Governmental Approvals or Requirements of Law or that could reasonably be expected to have a
material effect on any of the Governmental Approvals or otherwise on the operations of Borrower or
any of its Subsidiaries.
6.14 Post-Closing Requirements. Provide Bank, within ten (10) days after the Effective Date
(or such later date as Bank may determine, in its reasonable discretion), with a completed and
fully executed Perfection Certificate, in form and substance acceptable to Bank, in its reasonable
discretion, for each of the following Guarantors: GTT Global Telecom Government Services, LLC, a
Virginia limited liability company and TEK Channel Consulting, LLC, a Colorado limited liability
company.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without Bank’s prior written consent:
7.1 Dispositions. Convey, sell, lease, transfer, assign, 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) non-exclusive licenses and similar arrangements for the use of property of Borrower and/or its
Subsidiaries in the ordinary course of business; and (d) in connection with Permitted Liens and
Permitted Investments.
7.2 Changes in Business, Management, Ownership, or Business Locations. (a) Engage in or
permit any of its Subsidiaries, if any, 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 change in both of GTTI’s Chief Executive
Officer and Chief Financial Officer; or (ii) enter into any transaction or series of related
transactions in which the stockholders/shareholders of Borrower who were not
stockholders/shareholders immediately prior to the first such transaction own more than forty
percent (40%) of the voting stock/shares 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 and provides to Bank a
description of the material terms 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 Twenty-Five Thousand Dollars ($25,000) in Borrower’s assets or
property) or deliver any portion of the Collateral valued, individually or in the aggregate, in
excess of Twenty-Five Thousand Dollars ($25,000) to a bailee at a location other than to a bailee
and at a location already disclosed in the Perfection Certificate, (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. If
Borrower intends to deliver any portion of the Collateral valued, individually or in the aggregate,
in excess of Twenty-Five Thousand Dollars ($25,000) to a bailee, and Bank and such bailee are not
already parties to a bailee agreement governing both the Collateral and the location to which
Borrower intends to deliver the Collateral, then Borrower will first receive the written consent of
Bank, and such bailee shall execute and deliver a bailee agreement in form and substance
satisfactory to Bank in its reasonable discretion.
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/shares or property of another Person, other than
Permitted Acquisitions. 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, allow, or suffer 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, permit any Collateral not to be subject to the
first priority security interest granted herein (or, in the
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case of EMEA, granted under the
Debenture), 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 Liens”
herein.
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) Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock/shares provided that (i) Borrower may convert any of
its convertible securities into other securities pursuant to the terms of such convertible
securities or otherwise in exchange thereof, (ii) Borrower may pay dividends solely in common
stock/shares; and (iii) Borrower may repurchase the stock of former employees or consultants
pursuant to stock/share repurchase agreements so long as an Event of Default does not exist at the
time of such repurchase and would not exist after giving effect to such repurchase, provided such
repurchase does not exceed in the aggregate of One Hundred Thousand Dollars ($100,000) per fiscal
year; or (b) directly or indirectly make any Investment (including, without limitation, any
additional Investment in any Subsidiary) other than Permitted Investments, or permit any of its
Subsidiaries to do so.
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any
material transaction with any Affiliate of Borrower, except for 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 Subordinated Debt, 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, as amended, 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 non-exempt Prohibited Transaction, as defined in ERISA, to occur; fail to
comply with the Federal Fair Labor Standards Act (or, in the case of EMEA, with all employment
legislation in force in England and Wales (including, without limitation, the Employment Rights Act
1996)) 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.
8 EVENTS OF DEFAULT
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 (a) make any payment of principal or interest on any
Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days
after such Obligations are due and payable (which three (3) Business Day cure period shall not
apply to payments due on the Revolving Line Maturity Date and/or the Term Loan Maturity Date).
During the cure period, the failure to make or pay any payment specified under clause (b) hereunder
is not an Event of Default (but no Credit Extension will be made during the cure period);
8.2 Covenant Default.
(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4, 6.5, 6.6, 6.7,
6.8, 6.9, 6.10, or 6.11, or violates any covenant in Section 7; or
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(b) Borrower fails or neglects to perform, keep, or observe any other material term,
provision, condition, covenant or agreement contained in this Agreement or any of the other 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). Cure periods provided under this section shall
not apply, among other things, to financial covenants or any other covenants set forth in clause
(a) above;
8.3 Material Adverse Change. A Material Adverse Change occurs;
8.4 Attachment; Levy; Restraint on Business.
(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of
Borrower or of any entity under the control of Borrower (including a Subsidiary) on deposit or
otherwise maintained with Bank or any Bank Affiliate, or (ii) a notice of lien or levy is filed
against any of Borrower’s assets by any government agency, and the same under subclauses (i) and
(ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed
(whether through the posting of a bond or otherwise); provided, however, no Credit
Extensions shall be made during any ten (10) day cure period; or
(b) (i) any material portion of Borrower’s assets is attached, seized, levied on, or comes
into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents
Borrower from conducting any material part of its business;
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 thirty (30) 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, under any agreement to which Borrower or any Guarantor is a
party with a third party or parties, (a) any default resulting in a right by such third party or
parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount
individually or in the aggregate in excess of the Dollar Equivalent of Two Hundred Thousand Dollars
($200,000); or (b) any default by Borrower or Guarantor, the result of which could have a material
adverse effect on Borrower’s or any Guarantor’s business;
8.7 Judgments. One or more final judgments, orders, or decrees for the payment of money in an
amount, individually or in the aggregate, of at least the Dollar Equivalent of Two Hundred Thousand
Dollars ($200,000) shall be rendered against Borrower and the same are not, within thirty (30) days
after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such
judgments are not discharged prior to the expiration of any such stay (provided that no Credit
Extensions will be made prior to the discharge, stay, or bonding of such judgment, order, or
decree);
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 into this Agreement or any other Loan Document, and
such representation, warranty, or other statement is incorrect in any material respect when made;
8.9 Subordinated Debt. Any default or breach occurs under any agreement between either
Borrower and any creditor of such Borrower that signed a subordination agreement with Bank, or any
creditor that has signed a subordination agreement with Bank breaches any terms of the
subordination agreement, in each case, that is not covered within the cure periods set forth for
any such breach therein, or the Obligations shall for any reason be subordinated or shall not have
the priority contemplated by this Agreement;
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
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Guarantor, or (d) the liquidation, winding up, or termination of
existence of any Guarantor; or (e) (i) a material impairment in the perfection or priority of
Bank’s Lien in the collateral provided by any Guarantor or in the value of such collateral or (ii)
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; or
8.11 Governmental Approvals. Any Governmental Approval shall have been (a) revoked,
rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a
full term or (b) subject to any decision by a Governmental Authority that designates a hearing with
respect to any applications for renewal of any of such Governmental Approval or that could result
in the Governmental Authority taking any of the actions described in clause (a) above, and such
decision or such revocation, rescission, suspension, modification or non-renewal has, or could
reasonably be expected to have, a Material Adverse Change.
9 BANK’S RIGHTS AND REMEDIES
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) deposit cash with Bank in an amount equal to (i) 105% if the
Letter of Credit is denominated in U.S. Dollars, or (ii) 110% if the Letter of Credit is
denominated in a currency other than U.S. Dollars, of the Dollar Equivalent of the aggregate face
amount of all Letters of Credit remaining undrawn 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 such Letters of Credit, 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; provided, however, if an
Event of Default described in Section 8.5 occurs, the obligation of Borrower to cash collateralize
all Letters of Credit remaining undrawn shall automatically become effective without any action by
Bank;
(d) terminate any FX Forward 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, 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;
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(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;
(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); and
(l) enforce the Debenture in accordance with its terms.
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 xxxx 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 and do all acts and things necessary or
expedient, as determined solely and exclusively by Bank, to protect or preserve, Bank’s rights and
remedies under the Loan Documents, as directed by Bank. Bank’s foregoing appointment as Borrower’s
attorney in fact, and all of Bank’s rights and powers, being
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 6.7
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 rate applicable to the Obligations, 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. Unless an Event of Default has occurred and is
continuing, Bank may apply any funds in its possession, whether from Borrower account balances,
payments, or proceeds realized as the result of any collection of Accounts or other disposition of
the Collateral, first, to Bank Expenses, including without limitation, the reasonable costs,
expenses, liabilities, obligations and attorneys’ fees incurred by Bank in the exercise of its
rights under this Agreement; second, to the interest due upon any of the Obligations; and third, to
the principal of the Obligations and any applicable fees and other charges, 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 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 to 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
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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 the party granting
the waiver 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 shall not preclude Bank from exercising any other right or
remedy under this Agreement or any other Loan Document or other right or remedy available at law or
in equity, 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 and any notice, demand
or other communication under the Debenture), 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 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:
|
c/o Global Telecom and Technology, Inc. 0000 Xxxxxxxx Xxxxx, Xxxxx 000 XxXxxx, Xxxxxxxx 00000 Attn: Xx. Xxxx Xxxxx Fax: (000) 000-0000 Email: xxxx.xxxxx@xx-x.xxx |
|
with a copy to:
|
Xxxxxx Xxxx & Xxxxxx, LLP Washington Harbour, Xxxxx 000 0000 X Xxxxxx XX Xxxxxxxxxx, X.X. 00000 Attn: Xxxx Xxxxxxxxxxxxx, Esquire Fax: (000) 000-0000 Email: xxxxxxxxxxxxxx@xxxxxxxxxx.xxx |
|
If to Bank:
|
Silicon Valley Bank 000 Xxxxx Xxxxxx, Xxxxx 0-000 Xxxxxx, Xxxxxxxxxxxxx 00000 Attn: Xx. Xxxxxxxxxxx Xxxxx |
|
| Fax: (000) 000-0000 Email: xxxxxx@xxx.xxx |
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with a copy to:
|
Xxxxxx & Xxxxxxxxxx LLP Xxxxx Xxxxxx Xxxxx Xxxxxx, Xxxxxxxxxxxxx 00000 Attn: Xxxxxxx X. Xxxxxxx, Esquire Fax: (000) 000-0000 Email: xxxxxxxx@xxxxxxxxx.xxx |
11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE
New York law governs the Loan Documents (other than the Debenture which is governed by the
laws of England and Wales) without regard to principles of conflicts of law. Borrower and Bank
each submit to the exclusive jurisdiction of the State and Federal courts in New York;
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. 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.
TO THE FULLEST 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.
____________ Borrower initials (WBS)
12 GENERAL PROVISIONS
12.1 Termination Prior to Maturity Date. This Agreement may be terminated prior to the
Revolving Line Maturity Date by Borrower, effective three (3) Business Days after written notice of
termination is given to Bank or if Bank’s obligation to fund Credit Extensions terminates pursuant
to the terms of Section 2.1.1(b). Notwithstanding any such termination, Bank’s lien and security
interest in the Collateral shall continue until Borrower fully satisfies its Obligations (other
than inchoate liabilities). Upon payment in full of the Obligations (other than inchoate
liabilities) and at such time as Bank’s obligation to make Credit Extensions has terminated, Bank
shall release its liens and security interests in the Collateral and all rights therein shall
revert to Borrower.
12.2 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,
benefits or obligations under it or under any of the other Loan Documents 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, assign, 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.
12.3 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its directors,
officers, employees, agents, or attorneys (each, an “Indemnified Person”) 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
expenses (including Bank Expenses) incurred, or paid by such Indemnified Person as a result of,
following from, consequential to transactions between Bank and
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Borrower contemplated by the Loan
Documents (including reasonable attorneys’ fees and expenses), except for Claims and/or losses
caused by such Indemnified Person’s gross negligence or willful misconduct.
12.4 Time of Essence. Time is of the essence for the performance of all Obligations in this
Agreement.
12.5 Correction of Loan Documents. Bank may correct patent errors and fill in any blanks in
the Loan Documents consistent with the agreement of the parties so long as Bank provides Borrower
with written notice of such correction and allows Borrower at least ten (10) days to object to such
correction. In the event of such objection, such correction shall not be made except by an
amendment signed by both Bank and Borrower.
12.6 Severability of Provisions. Each provision of this Agreement is severable from every
other provision in determining the enforceability of any provision.
12.7 Amendments in Writing; Waiver; Integration. No purported amendment or modification of
any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document,
shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing
signed by the party against which enforcement or admission is sought. Without limiting the
generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure
to require performance or course of conduct shall operate as, or evidence, an amendment, supplement
or waiver or have any other effect on any Loan Document. Any waiver granted shall be limited to
the specific circumstance expressly described in it, and shall not apply to any subsequent or other
circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or
commitment to grant any further waiver. 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 the Loan Documents merge into the Loan Documents.
12.8 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, is an
original, and all taken together, constitute one Agreement.
12.9 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 paid in full and satisfied. The obligation of Borrower in Section 12.3 to indemnify Bank
shall survive until the statute of limitations with respect to such claim or cause of action shall
have run.
12.10 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 (such Subsidiaries and Affiliates, together
with Bank, collectively, “Bank Entities”) in connection with their business with Borrower; (b) to
prospective transferees or purchasers of any interest in the Credit Extensions (provided,
however, Bank shall use commercially reasonable efforts to obtain any 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; (e) as Bank considers appropriate in exercising
remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such
service providers have executed a confidentiality agreement with Bank with terms no less
restrictive than those contained herein. Confidential information does not include information
that is either: (i) in the public domain or in Bank’s possession when disclosed to Bank, or becomes
part of the public domain after disclosure to Bank other than as a result of a breach by Bank or
its Affiliates of their confidentiality obligations hereunder; or (ii) disclosed to Bank by a third
party if Bank does not know that the third party is prohibited from disclosing the information.
Bank Entities may use the confidential information for reporting purposes and the development
and distribution of databases and market analyses so long as such confidential information is
aggregated and anonymized prior to distribution, unless otherwise expressly permitted by Borrower.
The provisions of the immediately preceding sentence shall survive the termination of this
Agreement.
12.11 Attorneys’ Fees, Costs and Expenses. In any action or proceeding between Borrower and
Bank arising out of or relating to the Loan Documents, Bank shall be entitled to recover its
reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief
to which it may be entitled.
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12.12 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.
12.13 Electronic Execution of Documents. The words “execution,” “signed,” “signature” and
words of like import in any Loan Document shall be deemed to include electronic signatures or the
keeping of records in electronic form, each of which shall be of the same legal effect, validity
and enforceability as a manually executed signature or the use of a paper-based recordkeeping
systems, as the case may be, to the extent and as provided for in any applicable law, including,
without limitation, any state law based on the Uniform Electronic Transactions Act.
12.14 Captions. The headings used in this Agreement are for convenience only and shall not
affect the interpretation of this Agreement.
12.15 Construction of Agreement. The parties mutually acknowledge that they and their
attorneys have participated in the preparation and negotiation of this Agreement. In cases of
uncertainty this Agreement shall be construed without regard to which of the parties caused the
uncertainty to exist.
12.16 Relationship. The relationship of the parties to this Agreement is determined solely by
the provisions of this Agreement. The parties do not intend to create any agency, partnership,
joint venture, trust, fiduciary or other relationship with duties or incidents different from those
of parties to an arm’s-length contract.
12.17 Third Parties. Nothing in this Agreement, whether express or implied, is intended to:
(a) confer any benefits, rights or remedies under or by reason of this Agreement on any Persons
other than the express parties to it and their respective permitted successors and assigns; (b)
relieve or discharge the obligation or liability of any Person not an express party to this
Agreement; or (c) give any Person not an express party to this Agreement any right of subrogation
or action against any party to this Agreement.
12.18 Borrower Liability. Any Borrower may, acting singly, request Credit Extensions
hereunder. Each Borrower hereby appoints the other as agent for the other for all purposes
hereunder, including with respect to requesting Credit Extensions hereunder. Each Borrower
hereunder shall be jointly and severally obligated to repay all Credit Extensions made hereunder,
regardless of which Borrower actually receives said Credit Extension, as if each Borrower hereunder
directly received all Credit Extensions. Each Borrower waives (a) any suretyship defenses
available to it under the Code or any other applicable law, and (b) any right to require Bank to:
(i) proceed against any Borrower or any other person; (ii) proceed against or exhaust any security;
or (iii) pursue any other remedy. Bank may exercise or not exercise any right or remedy it has
against any Borrower or any security it holds (including the right to foreclose by judicial or
non-judicial sale) without affecting any other Borrower’s liability. Notwithstanding any other
provision of this Agreement or other related document, each Borrower irrevocably waives all rights
that it may have at law or in equity (including, without limitation, any law subrogating Borrower
to the rights of Bank under this Agreement) to seek contribution, indemnification or any other form
of reimbursement from any other Borrower, or any other Person now or hereafter primarily or
secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the
Obligations in connection with this Agreement or otherwise and all rights that it might have to
benefit from, or to participate in, any security for the Obligations as a result of any payment
made by Borrower with respect to the Obligations in connection with this Agreement or otherwise.
Any agreement providing for indemnification, reimbursement or any other arrangement prohibited
under this Section shall be null and void. If any payment is made to a Borrower in contravention
of this Section, such Borrower shall hold such payment in trust for Bank and such payment shall be
promptly delivered to Bank for application to the Obligations, whether matured or unmatured.
13 DEFINITIONS
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13.1 Definitions. As used in the Loan Documents, the word “shall” is mandatory, the word
“may” is permissive, the word “or” is not exclusive, the words “includes” and “including” are not
limiting, the singular includes the plural, and numbers denoting amounts that are set off in
brackets are negative. As used in this Agreement, the following capitalized terms have the
following meanings:
“2010 Units Offering Investors” are Xxxxxxx X. Xxxxxx, Xxxx X. Xxxxx, Universal
Telecommunications, Inc., Xxxxxxx Family Trust, Xxxxxx X. Xxxxxx, and the Spitfire Fund, L.P.
“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.
“Acquisition” is (a) the purchase or other acquisition by Borrower of all or substantially all
of the assets of any other Person, or (b) the purchase or other acquisition (whether by means of
merger, consolidation, or otherwise) by Borrower of all or substantially all of the stock or other
equity interest of any other Person.
“Advance” or “Advances” means an advance (or advances) under the Revolving Line.
“Affiliate” is, with respect to any Person, each other 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 amount available
under the Borrowing Base minus (b) the Dollar Equivalent amount of all outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit plus an amount equal to the Letter of
Credit Reserve), minus (c) the FX Reduction Amount, minus (d) any amounts used for
Cash Management Services, and minus (e) the outstanding principal balance of any Advances.
“Bank” is defined in the preamble hereof.
“Bank Entities” is defined in Section 12.10.
“Bank Expenses” are all audit fees and expenses, and reasonable costs, and expenses (including
reasonable attorneys’ fees and expenses) for preparing, amending, negotiating, administering,
defending and enforcing the Loan Documents (including, without limitation, those incurred in
connection with appeals or Insolvency Proceedings).
“Borrower” is defined in the preamble hereof.
“Borrower’s Books” are all Borrower’s books and records including ledgers, 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 (a) eighty percent (80%) of Eligible Accounts, as determined by Bank from
Borrower’s most recent Borrowing Base Certificate; provided, however, that Bank
may, after consultation with Borrower, decrease the foregoing percentage in its good faith business
judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may
adversely affect the 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,
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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.
“Capital Expenditures” means, with respect to any Person for any period, the sum of (a) the
aggregate of all expenditures by such Person and its Subsidiaries during such period that are
capital expenditures as determined in accordance with GAAP, whether such expenditures are paid in
cash or financed, plus (b) to the extent not covered by clause (a), the aggregate of all
expenditures by such Person and its Subsidiaries during such period to acquire by purchase or
otherwise the business or capitalized assets or the capital stock of any other Person.
“Cash Basis EBITDA” is, for any period of measurement, EBITDA minus (a) unfinanced
Capital Expenditures; minus (b) taxes actually paid in cash and minus (c) cash
interest expense paid on Subordinated Debt, minus (d) principal payments on Subordinated
Debt not existing on the Effective Date, and minus (e) other cash distributions approved by
Bank, in its reasonable discretion, on a case-by-case basis.
“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 Xxxxx’x Investors Service, Inc., (c) Bank’s certificates of deposit issued maturing no more than
one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the
assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of
this definition.
“Cash Management Services” is defined in Section 2.1.4.
“Claims” is defined in Section 12.3.
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in
effect in the State of New York; 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 State of New York, the term “Code” shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction solely for purposes of 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
and for the purposes of this Agreement (other than Sections 4.1, 4.2 and 4.3) the term “Collateral”
shall also include, in the case of EMEA, the property and assets detailed in clause 3 of the
Debenture.
“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.
“Communication” is defined in Section 10.
“Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit B.
“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, in each case directly or indirectly guaranteed, endorsed, co
made, discounted or sold with recourse by
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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.
“Copyrights” are any and all copyright rights, copyright applications, copyright registrations
and like protections in each work or authorship and derivative work thereof, whether published or
unpublished and whether or not the same also constitutes a trade secret.
“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.
“Debenture” is the debenture of even date between EMEA and Bank.
“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 GTTA’s deposit account, account number 3300601391, maintained
with Bank.
“Dollars,” “dollars” or use of the sign “$” means only lawful money of the United States and
not any other currency, regardless of whether that currency uses the “$” sign to denote its
currency or may be readily converted into lawful money of the United States.
“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated in Dollars,
such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent
amount therefor in Dollars as determined by Bank at such time on the basis of 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.
“Domestic Subsidiary” means a Subsidiary organized under the laws of the United States or any
state or territory thereof or the District of Columbia.
“EBITDA” shall mean, for any period of measurement, (a) Net Income, plus (b) Interest
Expense, plus (c) to the extent deducted in the calculation of Net Income, depreciation
expense and amortization expense, plus (d) income tax expense, plus (f) non-cash
stock compensation expense, plus (g) at Bank’s discretion, other non-cash one-time charges
reasonably acceptable to and approved by Bank, on a case-by-case basis.
“Effective Date” is the date Bank executes this Agreement and as indicated on the signature
page hereof.
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“Eligible Accounts” means 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 upon notice to, and after consultation
with, Borrower, 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 reasonable business 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 is Borrower’s Affiliate, officer, employee, or
agent;
(b) Accounts that the Account Debtor has not paid within ninety (90) days of invoice date
regardless of invoice payment period terms;
(c) Accounts with credit balances over ninety (90) days from invoice date to the extent of
such credit balances;
(d) Accounts owing from an Account Debtor, in which fifty percent (50%) or more of the
Accounts have not been paid within ninety (90) days of invoice date;
(e) Accounts owing from an Account Debtor which does not have its principal place of business
in the United States, other than with respect to Account Debtors of EMEA which have a principal
place of business in the United Kingdom but which are otherwise Eligible Accounts;
(f) Accounts billed and/or payable outside of the United States unless Bank has a first
priority, perfected security interest or other enforceable Lien in such Accounts under all
applicable laws, including foreign laws (sometimes called foreign invoiced accounts);
(g) 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);
(h) Accounts owing from an Account Debtor which is a United States government entity or any
department, agency, or instrumentality thereof unless 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;
(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”, or other terms if Account
Debtor’s payment may be conditional;
(j) Accounts owing from an Account Debtor where goods or services have not yet been rendered
to the Account Debtor (sometimes called memo xxxxxxxx or pre-xxxxxxxx) other than with respect to
advanced monthly billing in the ordinary course of Borrower’s business consistent with past
practices;
(k) Accounts subject to contractual arrangements between Borrower and an Account Debtor where
payments shall be scheduled or due according to completion or fulfillment requirements where the
Account Debtor has a right of offset for damages suffered as a result of Borrower’s failure to
perform in accordance with the contract (sometimes called contracts accounts receivable, progress
xxxxxxxx, milestone xxxxxxxx, or fulfillment contracts);
(l) Accounts owing from an Account Debtor the amount of which may be subject to withholding
based on the Account Debtor’s satisfaction of Borrower’s complete performance (but only to the
extent of the amount withheld; sometimes called retainage xxxxxxxx);
(m) Accounts subject to trust provisions, subrogation rights of a bonding company, or a
statutory trust;
(n) Accounts owing from an Account Debtor that has been invoiced for goods that have not been
shipped to the Account Debtor unless Bank, Borrower, and the Account Debtor have entered into an
agreement acceptable to Bank in its sole discretion wherein the Account Debtor acknowledges that
(i) it has title to and has ownership of the goods wherever located, (ii) a bona fide sale of the
goods has occurred, and (iii) it owes payment for such goods in accordance with invoices from
Borrower (sometimes called “xxxx and hold” accounts);
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(o) Accounts for which the Account Debtor has not been invoiced;
(p) Accounts that represent non-trade receivables or that are derived by means other than in
the ordinary course of Borrower’s business;
(q) Accounts for which Borrower has permitted Account Debtor’s payment to extend beyond 90
days;
(r) Accounts arising from chargebacks, debit memos or others payment deductions taken by an
Account Debtor;
(s) Accounts arising from product returns and/or exchanges (sometimes called “warranty” or
“RMA” accounts);
(t) 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;
(u) at Bank’s discretion, Accounts owing from an Account Debtor with respect to which Borrower
has received Deferred Revenue other than Deferred Revenue related to advanced monthly billing in
the ordinary course of Borrower’s business consistent with past practices (but only to the extent
of such Deferred Revenue);
(v) Accounts owing from an Account Debtor, whose total obligations to Borrower exceed
twenty-five percent (25%) of all Accounts, for the amounts that exceed that percentage, unless Bank
approves in writing;
(w) Accounts for which Bank in its good faith business judgment determines collection to be
doubtful, including, without limitation, accounts represented by “refreshed” or “recycled”
invoices; and
(x) other Accounts Bank deems ineligible in the exercise of its good faith business judgment.
“EMEA” is defined in the preamble.
“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 Employee Retirement Income Security Act of 1974, and its regulations.
“Event of Default” is defined in Section 8.
“First Anniversary” is the date that is 365 days after the Effective Date.
“Fixed Charges” are, for any period of measurement, the sum of Borrower’s (a) interest
payments made to Bank, plus (b) any regularly scheduled principal payments on outstanding
Indebtedness owed to Bank (including, without limitation, principal amortization and
prepayments of the Term Loan but excluding payments of principal on the Revolving Line),
plus (c) principal amortization of and interest payments on capitalized leases.
“Foreign Currency” means lawful money of a country other than the United States.
“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.
“Funding Date” is any date on which a Credit Extension is made to or for the 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.
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“FX Forward Contract” is defined in Section 2.1.3.
“FX Reserve” is defined in Section 2.1.3.
“FX Reduction Amount” 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 Intellectual Property, claims, income and other tax refunds, security and other
deposits, payment intangibles, contract rights, 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.
“Governmental Approval” is any consent, authorization, approval, order, license, franchise,
permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or
other act by or in respect of, any Governmental Authority.
“Governmental Authority” is any nation or government, any state or other political subdivision
thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other
entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions
of or pertaining to government, any securities exchange and any self-regulatory organization.
“GTTA” is defined in the preamble.
“GTTI” is defined in the preamble.
“Guarantor” is any present or future guarantor of the Obligations, including, without
limitation, GTT Global Telecom Government Services, LLC and TEK Channel Consulting, LLC.
“Guaranty” is the Guaranty of even date executed by the Guarantor in favor of Bank and any
additional guaranty which may previously have been entered into or which may be executed after the
date of this Agreement with respect to the Obligations hereunder.
“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.
“Indemnified Person” is defined in Section 12.3.
“Insolvency Proceeding” is any proceeding by or against any Person under the United States
Bankruptcy Code or the UK Insolvency Xxx 0000, or under any other bankruptcy or insolvency law in
any jurisdiction, including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
“Intellectual Property” means all of Borrower’s right, title, and interest in and to the
following:
(a) its Copyrights, Trademarks and Patents;
(b) any and all trade secrets and trade secret rights, including, without limitation, any
rights to unpatented inventions, know-how, operating manuals;
(c) any and all source code;
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(d) any and all design rights which may be available to a Borrower;
(e) any and all claims for damages by way of past, present and future infringement of any of
the foregoing, with the right, but not the obligation, to xxx for and collect such damages for said
use or infringement of the Intellectual Property rights identified above; and
(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.
“Interest Expense” means for any fiscal period, interest expense (whether cash or non-cash)
determined in accordance with GAAP for the relevant period ending on such date, including, in any
event, interest expense with respect to any Credit Extension and other Indebtedness of Borrower and
its Subsidiaries, if any, including, without limitation or duplication, all commissions, discounts,
or related amortization and other fees and charges with respect to letters of credit and bankers’
acceptance financing and the net costs associated with interest rate swap, cap, and similar
arrangements, and the interest portion of any deferred payment obligation (including leases of all
types).
“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 any Intellectual Property Security Agreement executed and delivered by US
Borrower or any Guarantor to Bank, including, without limitation, each Intellectual Property
Security Agreement delivered by each US Borrower and each Guarantor on the Effective Date.
“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(b).
“Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(e).
“Leverage Ratio” is, for any period of measurement, the sum of Borrower’s Indebtedness to Bank
divided by Cash Basis EBITDA.
“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other
encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise
against any property.
“Loan Documents” are, collectively, this Agreement, the Debenture, each Guaranty, each
Security Agreement, the Perfection Certificate, the IP Agreement, 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.
“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; or (c) a material
impairment of the prospect of repayment of any portion of the Obligations.
“Minimum Eligibility Requirements” is defined in the defined term “Eligible Accounts”.
“Net Income” means, as calculated on a consolidated basis for Borrower and its Subsidiaries,
if any, for any period as at any date of determination, the net profit (or loss), exclusive of any
extraordinary gains, after provision for taxes, of Borrower and its Subsidiaries for such period
taken as a single accounting period.
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“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 Loan
Documents, or otherwise, including, without limitation, all obligations relating to letters of
credit (including reimbursement obligations for drawn and undrawn letters of credit), cash
management services, and foreign exchange contracts, if any, and to perform 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, (a) if such Person is a corporation, its bylaws in
current form, (b) if such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its partnership
agreement (or similar agreement), each of the foregoing with all current amendments or
modifications thereto.
“Patents” means all patents, patent applications and like protections including without
limitation improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
“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.
“Perfection Certificate” is defined in Section 5.1.
“Performance Pricing Period” is, provided no Event of Default has occurred and is continuing,
the period (i) commencing on the first (1st) day of the month following the Subject
Month in which Borrower reports, for such Subject Month that Borrower has maintained its Leverage
Ratio in an amount at all times equal to or less than 2.00:1.00, as confirmed by Bank, in good
faith (the “Performance Pricing Threshold”); and (ii) terminating on the earlier to occur of (A)
the occurrence of a Default or an Event of Default; and (B) the first (1st) day of the
month following the Subject Month in which Borrower fails to maintain the Performance Pricing
Threshold, as determined by Bank, in its reasonable discretion. Upon the termination of a
Performance Pricing Period, Borrower must maintain the Performance Pricing Threshold each
consecutive day for a complete Subject Month, as determined by Bank, in good faith, prior to
entering into a subsequent Performance Pricing Period. Borrower shall give Bank prior-written
notice of Borrower’s intention to enter into any such Performance Pricing Period.
“Permitted Acquisition” is, after the Effective Date, any Acquisition disclosed to Bank and
agreed to by Bank, provided that each of the following shall be applicable to any such Acquisition:
(a) no Default or Event of Default shall have occurred and be continuing or would result from
the consummation of the proposed Acquisition;
(b) the entity or assets acquired in such Acquisition are in the same or similar line of
Business as Borrower is in as of the date hereof;
(c) the pro forma organizational structure of Borrower and its Subsidiaries shall be
reasonably satisfactory to Bank;
(d) Borrower shall have provided Bank evidence and reasonably detailed calculations
satisfactory to Bank, in its sole discretion, that, after giving effect to such Acquisition, the
net effect of such Acquisition shall be EBITDA accretive to Borrower on a pro forma basis for the
12 month period ended one year after the proposed date of consummation of such proposed
Acquisition;
(e) Borrower shall remain a surviving entity after giving effect to such Acquisition; if, as a
result of such Acquisition, a new Subsidiary of Borrower is formed or acquired, Borrower shall
cause such new Subsidiary to comply with the requirements of Section 6.12;
(f) Borrower shall provide Bank with: (i) written notice of the proposed Acquisition at least
ten (10) Business Days prior to the anticipated closing date of the proposed Acquisition, (ii)
drafts of the acquisition agreement and all other material documents relative to the proposed
Acquisition at least five (5) Business Days prior
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to the anticipated closing date of the proposed
Acquisition, and (iii) fully executed copies of the acquisition agreement and all other material
documents relative to the proposed Acquisition promptly after the closing date of the proposed
Acquisition;
(g) the total cash payable and liabilities assumed by Borrower (either directly or indirectly)
for all such Acquisitions may not exceed Two Million Five Hundred Thousand Dollars ($2,500,000) in
the aggregate per annum; and
(h) the entity or assets acquired in such Acquisition shall not be subject to any Lien other
than the first-priority Liens granted in favor of Bank and Permitted Liens, including, without
limitation, purchase money Liens existing on Equipment when acquired, so long as the Lien is
confined to the property and improvements and the proceeds of the Equipment.
“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;
(c) Subordinated Debt, if any;
(d) unsecured Indebtedness from any Borrower or and Guarantor that executes a Security
Agreement to any other Borrower or Guarantor that executes a Security Agreement;
(e) unsecured Indebtedness to trade debtors incurred in the ordinary business, in amounts and
in a manner consistent with past practices;
(f) Indebtedness secured by Permitted Liens; and
(g) extensions, refinancings, modifications, amendments and restatements of any items of
Permitted Indebtedness (a) through (f) 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.
“Permitted Investments” are:
(a) Investments shown on the Perfection Certificate and existing on the Effective Date;
(b) Cash Equivalents;
(c) Investments consisting of the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of Borrower’s business;
(d) Cash Investments (i) by Borrower in Subsidiaries that are Guarantors which have executed a
Security Agreement; (ii) by Borrower in Subsidiaries that are not Guarantors, not to exceed an
aggregate amount of Five Hundred Thousand Dollars ($500,000) per annum and (iii) by Subsidiaries in
other Subsidiaries that are not Guarantors or in Borrower, not to exceed an aggregate amount per
annum of Five Hundred Thousand Dollars ($500,000);
(e) Investments by EMEA in Global Telecom & Technology Deutschland GmbH in an aggregate amount
not to exceed One Million Dollars ($1,000,000) per annum;
(f) Investments consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the ordinary course of business, and (ii) loans to employees,
officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries
pursuant to employee stock purchase plans or agreements approved by Borrower’s board of directors;
and
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(g) Investments (including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent obligations of, and other
disputes with, customers or suppliers arising in the ordinary course of business.
“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 (i) not
due and payable or (ii) being contested in good faith and for which Borrower maintains adequate
reserves on its Books, provided that no notice of any such Lien has been filed or recorded
under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted
thereunder;
(c) purchase money Liens (i) on Equipment acquired or held by Borrower incurred for financing
the acquisition of the Equipment securing no more than One Million Five Hundred Thousand Dollars
($1,500,000) 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) leases or subleases of real property granted in the ordinary course of business, and
leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or
Intellectual Property) granted in the ordinary course of Borrower’s business, if the
leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest;
(f) Liens in favor of other financial institutions arising in connection with Borrower’s
deposit and/or securities accounts held at such institutions, provided that Bank has a
perfected security interest in the amounts held in such deposit and/or securities accounts; and
(g) Liens arising from (i) Permitted Indebtedness and (ii) orders, judgments, decrees or
attachments in circumstances not constituting an Event of Default under Section 8.4 or 8.7.
“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.
“Registered Organization” is any “registered organization” as defined in the Code with such
additions to such term as may hereafter be made.
“Requirement of Law” is as to any Person, the organizational or governing documents of such
Person, and any law (statutory or common), treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any of its property is subject.
“Reserves” means, as of any date of determination, such amounts as Bank may, after
consultation with Borrower, 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 have a material adverse affect on
(i) the Collateral or any other property which is security for the Obligations or its value
(including without limitation any increase in delinquencies of Accounts), (ii) the assets 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
-32-
incomplete, inaccurate or
misleading in any material respect; or (c) in respect of any state of facts which Bank determines
in good faith reasonable business judgment 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 Chief Executive Officer, President, Chief Financial
Officer and Controller of Borrower and, in the case of EMEA, also any of its directors.
“Restricted License” is any material license or other agreement with respect to which Borrower
is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security
interest in Borrower’s interest in such license or agreement or any other property, or (b) for
which a default under or termination of could interfere with the Bank’s right to sell any
Collateral.
“Revolving Line” is an Advance or Advances in an amount not to exceed Five Million Dollars
($5,000,000).
“Revolving Line Maturity Date” is September 29, 2012.
“Second Anniversary” is the date that is 365 days after the First Anniversary.
“SEC” shall mean the Securities and Exchange Commission, any successor thereto, and any
analogous Governmental Authority
“Securities Account” is any “securities account” as defined in the Code with such additions to
such term as may hereafter be made.
“Security Agreement” is any Security Agreement executed and delivered by any Guarantor to
Bank, including, without limitation, each Security Agreement delivered by each Guarantor on the
Effective Date.
“Streamline Period” is, provided no Default or Event of Default has occurred and is
continuing, the period (i) beginning on the first (1st) day in which Borrower has, for
each consecutive day in the immediately preceding thirty (30) day period, maintained unrestricted
cash at Bank plus the unused Availability Amount, as determined by Bank, in good faith, in an
amount at all times greater than Five Million Dollars ($5,000,000) (the “Streamline Balance”); and
(ii) ending on the earlier to occur of (A) the occurrence of a Default or an Event of Default; and
(B) the first day thereafter in which Borrower fails to maintain the Streamline Balance, as
determined by Bank, in good faith. Testing for the Streamline Period shall include the period that
is thirty (30) days prior to the Effective Date. Upon the termination of a Streamline Period,
Borrower must maintain the Streamline Balance each consecutive day for thirty (30) consecutive
days, as determined by Bank, in good faith, prior to entering into a subsequent Streamline Period.
Borrower shall give Bank prior-written notice of Borrower’s intention to enter into any such
Streamline Period.
“Subject Month” is the latest calendar month for which Borrower has timely delivered the
reports and schedules required pursuant to Section 6.2(a) hereof.
“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 reasonably satisfactory to Bank entered into between Bank and the
other creditor), on terms reasonably acceptable to Bank.
“Subsidiary” is, as to any Person, a corporation, partnership, limited liability company or
other entity of which shares of stock or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such
Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a
reference to a Subsidiary of Borrower or Guarantor.
“Term Loan” is a loan made by Bank pursuant to the terms of Section 2.1.5 hereof.
-33-
“Term Loan Amount” is an aggregate amount equal to Ten Million Dollars ($10,000,000)
outstanding at any time.
“Term Loan Maturity Date” is the earliest of (a) September 30, 2015 or (b) the occurrence of
an Event of Default.
“Term Loan Payment” is defined in Section 2.1.5(b).
“Third Anniversary” is the date that is 365 days after the Second Anniversary.
“Trademarks” means any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and the entire
goodwill of the business of Borrower connected with and symbolized by such trademarks.
“Transaction Report” is the Bank’s standard reporting package provided by Bank to Borrower.
“Transfer” is defined in Section 7.1.
“US Borrower” is, singly and collectively, jointly and severally, each Borrower other than
EMEA.
“WBS” is defined in the preamble.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of
the Effective Date.
BORROWER:
| GLOBAL TELECOM & TECHNOLOGY, INC. | GLOBAL TELECOM & TECHNOLOGY AMERICAS, INC. |
|||||||||
By:
|
/s/ Xxxx X. Xxxxx | By: | /s/ Xxxx X. Xxxxx | |||||||
| Name: Xxxx X. Xxxxx | Name: Xxxx X. Xxxxx | |||||||||
| Title: Chief Financial Officer | Title: Chief Financial Officer | |||||||||
| GTT-EMEA, LTD. | WBS CONNECT, LLC | |||||||||
By:
|
/s/ Xxxxxxx X. Xxxxxx | By: | /s/ Xxxx X. Xxxxx | |||||||
| Name: Xxxxxxx X. Xxxxxx | Name: Xxxx X. Xxxxx | |||||||||
| Title: Director | Title: CFO of Managing Member | |||||||||
| BANK: SILICON VALLEY BANK |
||||
| By: | /s/ Xxxxxxxxxxx Xxxxx | |||
| Name: | Xxxxxxxxxxx Xxxxx | |||
| Title: | Vice President | |||
Effective Date: September 30, 2010
[Signature page to Loan and Security Agreement]
EXHIBIT A — COLLATERAL DESCRIPTION
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, 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
EXHIBIT B
COMPLIANCE CERTIFICATE
| TO: SILICON VALLEY BANK | Date: | |
| FROM: GLOBAL TELECOM & TECHNOLOGY, INC. et al. |
The undersigned authorized officer of Global Telecom and Technology, Inc. ( a “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) each Borrower, and each of its
respective Subsidiaries, has timely filed all required tax returns and reports, and Borrower has
timely paid all foreign, federal, state, national 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 any Borrower or any of
its respective Subsidiaries, if any, relating to unpaid employee payroll or benefits of which any
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 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.
| Reporting Covenant | Required | Complies | ||
Monthly financial statements with Compliance Certificate |
Monthly within 30 days | Yes No | ||
Annual financial statement (CPA Audited) + XX
|
XXX within 150 days | Yes No | ||
10-Q, 10-K and 8-K
|
Within 5 days after filing with SEC | Yes No | ||
A/R & A/P Agings, Deferred Revenue report
|
Monthly within 15 days | Yes No | ||
Transaction Reports
|
Monthly within 20 days and with each request for a Credit Extension | Yes No | ||
Projections
|
FYE within 45 days and as amended or updated | Yes No |
The following Intellectual Property was registered and/or the following Governmental Approvals were obtained
after the Effective Date (if no registrations or approvals, state “None”)
| Financial Covenant | Required | Actual | Complies | |||||||||
Maintain as indicated: |
||||||||||||
Minimum Liquidity (certified monthly) |
$ | 5,000,000 | $ | Yes No | ||||||||
Minimum Fixed Charge Coverage Ratio
(tested quarterly, on
a T3M basis |
1.25:1.00 | ______ :1.0 | Yes No | |||||||||
1
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.”)
| GLOBAL TELECOM & TECHNOLOGY, INC. et al. | BANK USE ONLY | |||||||
By:
|
Received by: | |||||||
| Name: | authorized signer | |||||||
| Title: | Date: |
|||||||
| Verified: | ||||||||
| authorized signer | ||||||||
| Date: | ||||||||
| Compliance Status: Yes No | ||||||||
2
Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan
Agreement shall govern.
Dated:
I. Liquidity (Section 6.9(a))
Required: Maintain unrestricted cash plus the unused availability under the Borrowing Base
of at least Five Million Dollars ($5,000,000).
Actual:
A. Aggregate value of the unrestricted cash of Borrower |
$ | |||
B. Aggregate value of the unused Availability under the Borrowing Base |
$ | |||
C. LIQUIDITY (line A plus line B) |
$ |
Is line C equal to or greater than $5,000,000?
o No, not in compliance
|
o Yes, in compliance |
3
II. Fixed Charge Coverage Ratio. (Section 6.9(b))
Required: Maintain on a quarterly basis, as of the last day of each fiscal quarter of the Borrower,
measured on a trailing three month basis, Borrower shall maintain a ratio of (i) Cash Basis EBITDA
for such period divided by (ii) Fixed Charges of at least 1.25:1.00
Actual: All amounts measured on a trailing three month basis:
A. EBITDA |
$ | |||
B. Unfinanced Capital Expenditures |
$ | |||
C. Taxes actually paid in cash |
$ | |||
D. cash interest expense paid on Subordinated Debt |
$ | |||
E. principal payments on Subordinated Debt not existing on the Effective Date |
$ | |||
F. Other cash distributions approved by Bank, in its sole discretion, on a case-by-case basis |
$ | |||
G. CASH
BASIS EBITDA (line A minus line B minus line C
minus line D minus line E minus line F) |
$ | |||
H. Fixed Charges |
$ | |||
I. FIXED CHARGE COVERAGE RATIO (line G divided by line H, expressed as a ratio) |
_______:1.00 |
Is line I equal to or greater than 1.25:1:00?
o No, not in compliance
|
o Yes, in compliance |
1
