THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Exhibit 10.50
THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of
June 26, 2009 (the “Effective Date”) by and among (a) SILICON VALLEY BANK, a California
corporation, with its principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx
00000 and with a loan production office located at One Xxxxxx Executive Park, Suite 200, 0000
Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 (“Bank”), and (b) TELECOMMUNICATION SYSTEMS, INC., a
Maryland corporation (“TCS”) and LONGHORN ACQUISITION, LLC, a Delaware limited liability company
(“Longhorn”, and together with TCS, jointly and severally, individually and collectively, referred
to as “Borrower”) each with a principal place of business located at 000 Xxxx Xxxxxx, Xxxxx 000,
Xxxxxxxxx, Xxxxxxxx 00000, amends and restates a certain Second Amended and Restated Loan and
Security Agreement by and among TCS and Bank dated as of October 14, 2005, as amended by a certain
First Amendment to Second Amended and Restated Loan and Security Agreement, dated as of December
30, 2005, as further amended by a certain Second Amendment to Second Amended and Restated Loan and
Security Agreement, dated as of March 10, 2006, as further amended by a certain Third Amendment to
Second Amended and Restated Loan and Security Agreement, dated as of November 14, 2006, and as
further amended by a certain Fourth Amendment to Second Amended and Restated Loan and Security
Agreement, dated as of June 27, 2007 (collectively, the “Prior Loan Agreement”), and 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. Notwithstanding the foregoing, all
financial covenant calculations shall be computed with respect to the Borrower only, and not on a
consolidated basis. 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 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
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 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)
Ten Million Dollars ($10,000,000), minus (i) the sum of all amounts used for Cash Management
Services, and minus (ii) the FX Reduction Amount, or (B) the lesser of the 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 110% 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, Borrower may enter into
foreign exchange contracts with Bank under which Borrower commits to purchase from or sell to Bank
a specific amount of Foreign Currency (each, a “FX Forward Contract”) on a specified date (the
“Settlement Date”). FX Forward Contracts shall have a Settlement Date of at least one (1) FX
Business Day after the contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract (the “FX Reserve”). The aggregate amount of FX Forward Contracts
at any one time may not exceed ten (10) times the lesser of (A) Ten Million Dollars ($10,000,000),
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 Ten Million Dollars ($10,000,000), 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.
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(a) Availability. Bank shall make one (1) term loan (the “Term Loan”) available to Borrower
in an amount up to the Term Loan Amount on the Effective Date subject to the satisfaction of the
terms and conditions of this Agreement.
(b) Use of Proceeds — Term Loan. Borrower acknowledges that it is indebted to Bank pursuant
to certain term loans made pursuant to a prior loan arrangement with Bank with an original maturity
date of July 1, 2012 and with a current outstanding principal balance of Six Thousand Five Hundred
Dollars ($6,500) (the “Prior Loan Agreement”) . Borrower acknowledges and agrees that a portion of
the proceeds of the Term Loan hereunder shall be used to immediately repay in full all remaining
outstand principal and accrued and unpaid interest on the Prior Term Loan, together with any
additional fees associated therewith.
(c) Repayment. In addition to the monthly payments of interest, as set forth in Section
2.3(a)(ii) below, Borrower shall repay the Term Loan in sixty (60) equal installments of principal
(the “Term Loan Payment”), beginning on July 31, 2009. Each Term Loan Payment shall be payable on
the last Business 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.
(d) Prepayment. Subject to the provisions of Section 12.1 hereof, the Term Loan may be
prepaid prior to the Term Loan Maturity Date.
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, which
interest shall 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 one-half of one percentage
point (0.50%) above the Prime Rate, which interest shall 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 four percentage
points (4.00%) 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.
(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
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Deposit Account, for principal and interest payments or any other amounts Borrower owes Bank when
due. These debits shall not constitute a set-off.
(f) Interest Payment Date. Unless otherwise provided, interest is payable monthly on
the last calendar day of each month.
(g) Payment; Interest Computation; Float Charge. Interest is payable monthly on the
last calendar day of each month. In computing interest on the Obligations, all Payments received
after 12:00 p.m. Pacific time on any day shall be deemed received on the next Business Day. All
wire transfers shall be deemed applied on account of the Obligations on the date of receipt thereof
by Bank, and Bank shall be entitled to charge Borrower a “float” charge in an amount equal to two
(2) Business Days interest, at the interest rate applicable to the Advances, on all Payments
consisting of checks and/or other items of Payment other than wire transfers received by Bank.
Said float charge is not included in interest for purposes of computing Minimum Monthly Interest
(if any) under this Agreement. The float charge for each month shall be payable on the last day of
the month. Bank shall not, however, be required to credit Borrower’s account for the amount of any
item of payment which is unsatisfactory to Bank in its good faith business judgment, and Bank may
charge Borrower’s Designated Deposit Account for the amount of any item of payment which is
returned to Bank unpaid.
2.4 Fees. Borrower shall pay to Bank:
(a) Commitment Fee. (i) a fully earned, non-refundable Term Loan commitment fee of
One Hundred Twenty Five Thousand Dollars ($125,000), on the Effective Date and (ii) a fully earned,
non-refundable Revolving Line Commitment Fee, payable as follows: (X) One Hundred Fifty Thousand
Dollars ($150,000) on the Effective Date; (Y) One Hundred Fifty Thousand Dollars ($150,000) the
first anniversary of the Effective Date; and (Z); One Hundred Fifty Thousand Dollars ($150,000) on
the second anniversary of the Effective Date.
(b) 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;
(c) Termination Fee. As provided in Section 12.1, a termination fee;
(d) Unused Revolving Line Facility Fee. A fee (the “Unused Revolving Line Facility
Fee”), payable monthly, in arrears, on a calendar year basis, in an amount equal to one-quarter
percent (0.25%) per annum of the average unused portion of the Revolving Line, as determined by
Bank. The unused portion of the Revolving Line, for the purposes of this calculation, shall
include amounts reserved for products provided in connection with Cash Management Services, FX
Forward Contracts and Letter of Credit usage. Borrower shall not be entitled to any credit, rebate
or repayment of any Unused Revolving Line Facility Fee previously earned by Bank pursuant to this
Section notwithstanding any termination of the Agreement or the suspension or termination of Bank’s
obligation to make loans and advances hereunder;
(e) Collateral Monitoring Fee. A monthly collateral monitoring fee of Five Hundred
Dollars ($500), payable in arrears on the last day of each month (prorated for any partial month at
the beginning and upon termination of this Agreement); and
(f) 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
12:00 p.m. Eastern time on the date when due. Payments of principal and/or interest received after
12:00 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 sole 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.
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3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make the initial
Credit Extension is subject to the condition precedent that Bank shall have received, in form and
substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate, including, without limitation:
(a) duly executed original signatures to the Loan Documents;
(b) [Intentionally Omitted];
(c) Borrower’s Operating Documents and a good standing certificate of Borrower certified by
the Secretary of State of each applicable jurisdiction 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 Borrower;
(e) certified copies, dated as of a recent date, of financing statement searches, as Bank
shall request, accompanied by written evidence (including any UCC termination statements) that the
Liens indicated in any such financing statements either constitute Permitted Liens or have been or,
in connection with the initial Credit Extension, will be terminated or released;
(f) the Perfection Certificate of Borrower together with the duly executed original signatures
thereto;
(g) a landlord’s consent in favor of Bank for the following locations by the respective
landlord thereof, together with the duly executed original signatures thereto;
| A. | 000 Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000 | ||
| B. | 0000 Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000 | ||
| C. | 0000 Xxxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxx, Xxxxxxxxxx 00000 | ||
| D. | 000 Xxxxxx Xxxx, Xxxxx, Xxxxxxx 00000 |
(h) a bailee’s/warehouseman’s waiver executed by each bailee, if any, of Borrower as required
by Bank, in favor of Bank;
(i) 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;
(j) 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;
(k) payment of the fees and Bank Expenses then due as specified in Section 2.4 hereof;
(l) evidence that the capital structure of Borrower and its Subsidiaries is acceptable to
Bank, in its sole discretion; and
(m) such other documents, certificates and agreements in respect of Borrower and its
Subsidiaries as Bank may request, in its sole discretion.
3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make each Credit
Extension, including the initial Credit Extension, is subject to the following conditions
precedent:
(a) except as otherwise provided in Section 3.4(a), timely receipt of an executed Transaction
Report;
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(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 reasonable discretion, after consultation with Borrower, there has not been (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.
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.
(a) 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 12:00 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.
(b) Term Loan. Subject to the prior satisfaction of all other applicable conditions
to the making of the Term Loan set forth in this Agreement, if any portion of the proceeds of the
Term Loan shall be used to refinance outstanding Indebtedness of the Borrower, Borrower shall
deliver to Bank by electronic mail or facsimile a copy of the payoff letter stating the payoff
amount invoice for the refinancing of such existing Indebtedness and the request for the Term Loan.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment
and performance in full of all of the Obligations, a continuing security interest in, and pledges
to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and
all proceeds and products thereof.
4.2 Priority of Security Interest. Borrower represents, warrants, and covenants that
the security interest granted herein is and shall at all times continue to be a first priority
perfected security interest in the Collateral (subject only to Permitted Liens that may have
superior priority to Bank’s Lien under this Agreement). If Borrower shall acquire a commercial
tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general
details thereof and grant to Bank in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to Bank.
If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the
Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment
in full in cash of the Obligations and at such time as Bank’s obligation to make Credit Extensions
has terminated, Bank shall, at Borrower’s sole cost and expense, release its Liens in the
Collateral and all rights therein shall revert to Borrower.
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4.3 Authorization to File Financing Statements. Borrower hereby authorizes Bank to
file financing statements, without notice to Borrower, with any necessary jurisdictions to perfect
or protect Bank’s interest or rights hereunder, including an appropriate notice that any
disposition of certain of the Collateral, by either 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.
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. In connection with this
Agreement, Borrower has delivered to Bank a completed certificate signed by Borrower, 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.
5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer each
item of the Collateral upon which it purports to xxxxx x Xxxx hereunder, free and clear of any and
all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts
with Bank, the deposit accounts, if any described in the Perfection Certificate delivered to Bank
in connection herewith, 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 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 included in Borrower’s Books and intended for sale to its customers is in all
material respects of good and marketable quality, free from material defects.
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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. Whether or not an Event of Default has occurred and is
continuing, Bank may 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. Except as set forth on the Perfection Certificate, 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 any individual claim in excess of Fifty
Thousand Dollars ($50,000) or two or more claims involving One Hundred Thousand Dollars ($100,000)
in the aggregate.
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 as of the dates and for the
periods indicated therein. There has not been any material deterioration in Borrower’s
consolidated financial condition since the date of the most recent financial statements submitted
to Bank.
5.6 Solvency. The fair salable value of Borrower’s assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; Borrower is not left with
unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay
its debts (including trade debts) as they mature.
5.7 Regulatory Compliance. Borrower is not an “investment company” or a company “controlled”
by an “investment company” under the Investment Company Act 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. 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 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 Government Authorities that are necessary to continue their
respective businesses as currently conducted.
5.8 Subsidiaries; Investments. Except as set forth in the Perfection Certificate, 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 timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower, other than those that are not yet
delinquent, or that are contested in good faith as to which adequate reserves have been provided to
the extent required by law and in accordance with GAAP. Borrower may defer payment of any
contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Bank in
writing of the commencement of, and any material development in, the proceedings, (c) posts bonds
or takes any other steps required to prevent the governmental authority levying such contested
taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien”.
Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years
which could result in additional taxes becoming due and payable by Borrower. Borrower has paid all
amounts necessary to fund all present pension, profit sharing and deferred
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compensation plans in accordance with their terms, and Borrower has not withdrawn from
participation in, and has not permitted partial or complete termination of, or permitted the
occurrence of any other event with respect to, any such plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the Pension Benefit Guaranty
Corporation or its successors or any other governmental agency.
5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely to pay
off the outstanding term balance owed under the Prior Loan Agreement, as working capital and to
fund its general business requirements and not for personal, family, household or agricultural
purposes.
5.11 Full Disclosure. No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank, as of the date such 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. Maintain its and all its Subsidiaries’ legal existence and good
standing in their respective jurisdictions of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to have a material
adverse effect on Borrower’s business or operations. Borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is subject, the
noncompliance with which could have a material adverse effect on Borrower’s business.
6.2 Financial Statements, Reports, Certificates.
(a) Borrower shall provide Bank with the following:
(i) (A) weekly, and (B) upon each request for a Credit Extension, a Transaction Report;
(ii) within fifteen (15) days after the end of each month, (A) monthly accounts receivable
agings, aged by invoice date, (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), transaction reports, deferred revenue report and general
ledger,
(iii) as soon as available, and in any event within thirty (30) days after the end of each
month, monthly management prepared 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) as soon as available, and in any event within forty-five (45) days after the end
of each fiscal quarter of Borrower, quarterly consolidated and consolidating management
prepared unaudited financial statements;
(vi) within sixty (60) days prior to the end of each fiscal year of Borrower, 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; and within sixty (60) days after the end of each fiscal year of Borrower,
annual operating budgets (including income statements, balance sheets
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and cash flow statements, by month) for the current fiscal year of Borrower as
approved by Borrower’s board of directors;
(vii) as soon as available, and in any event within one hundred twenty (120) days
following the end of Borrower’s fiscal year, annual consolidated and consolidating
financial statements certified by, and with an unqualified opinion of, independent
certified public accountants acceptable to Bank;
(viii) within five (5) days of delivery, copies of all statements, reports and
notices, if any, made available to Borrower’s security holders or to any holders of
Subordinated Debt;
(ix) 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;
Notwithstanding the foregoing, provided no Event of Default has occurred and is
continuing, Borrower shall be required to provide Bank with the reports and schedules
required pursuant to clause (a)(i) (A) above monthly, within thirty (30) days after the
end of each month.
(b) 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.
6.3 Accounts Receivable.
(a) Schedules and Documents Relating to Accounts. Borrower shall deliver to Bank
transaction reports and schedules of collections, as provided in Section 6.2, on Bank’s standard
forms; provided, however, that Borrower’s failure to execute and deliver the same shall not affect
or limit Bank’s Lien and other rights in all of Borrower’s Accounts, nor shall Bank’s failure to
advance or lend against a specific Account affect or limit Bank’s Lien and other rights therein.
If requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s request, originals) of
all contracts, orders, invoices, and other similar documents, and all shipping instructions,
delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or
disposition of which gave rise to such Accounts. In addition, Borrower shall deliver to Bank, on
its request, the originals of all instruments, chattel paper, security agreements, guarantees and
other documents and property evidencing or securing any Accounts, in the same form as received,
with all necessary endorsements, and copies of all credit memos.
(b) Disputes. Borrower shall promptly notify Bank of all disputes or claims relating
to Accounts (i) in excess of an aggregate amount for any Account Debtor in excess One Hundred
Thousand Dollars ($100,000) and (ii) in excess of an aggregate amount for all Account Debtors of
Five Hundred Thousand Dollars ($500,000). 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 hold all payments on, and proceeds
of, Accounts in trust for Bank, and Borrower shall promptly deliver all such payments and proceeds
to Bank in their original form, duly endorsed, to be applied to the Obligations pursuant to the
terms of Section 9.4 hereof.
(d) Returns. Provided no Event of Default has occurred and is continuing, if any
Account Debtor returns any Inventory to Borrower, Borrower shall promptly (i) determine the reason
for such return, (ii) issue a credit memorandum to the Account Debtor in the appropriate amount,
and (iii) provide a copy of such credit memorandum to Bank, upon request from Bank. In the event
any attempted return occurs after the occurrence and during the continuance of any Event of
Default, Borrower shall hold the returned Inventory in trust for Bank, and immediately notify Bank
of the return of the Inventory.
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(e) Verification. Bank may, from time to time, verify directly with the respective
Account Debtors the validity, amount and other matters relating to the Accounts, either in the name
of Borrower or Bank or such other name as Bank may choose.
(f) No Liability. Bank shall not be responsible or liable for any shortage or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of
which gives rise to an Account, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any Account, or for settling
any Account in good faith for less than the full amount thereof, nor shall Bank be deemed to be
responsible for any of Borrower’s obligations under any contract or agreement giving rise to an
Account. Nothing herein shall, however, relieve Bank from liability for its own gross negligence
or willful misconduct.
6.4 Remittance of Proceeds. Except as otherwise provided in Section 6.3(c), deliver, in kind,
all proceeds arising from the disposition of any Collateral to Bank in the original form in which
received by Borrower not later than the following Business Day after receipt by Borrower, to be
applied to the Obligations pursuant to the terms of Section 9.4 hereof; provided that, if no
Default or Event of Default has occurred and is continuing, Borrower shall not be obligated to
remit to Bank the proceeds of the sale of worn out or obsolete Equipment disposed of by Borrower in
good faith in an arm’s length transaction for an aggregate purchase price of $25,000 or less (for
all such transactions in any fiscal year). Borrower agrees that it will not commingle proceeds of
Collateral with any of Borrower’s other funds or property, but will hold such proceeds separate and
apart from such other funds and property and in an express trust for Bank. Nothing in this Section
limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.
6.5 Taxes; Pensions; 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 and local taxes, assessments, deposits and contributions
owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested
pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate
certificates attesting to such payments, and pay all amounts necessary to fund all present pension,
profit sharing and deferred compensation plans in accordance with their terms.
6.6 Access to Collateral; Books and Records. At reasonable times, on one (1) Business Day’s
notice (provided no notice is required if an Event of Default has occurred and is continuing),
Bank, or its agents, shall have the right, on an annual basis (or more frequently at Bank’s sole
discretion after a Default or an Event of Default has occurred), 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; provided, however, that the cost of such inspections and audits will not
exceed Fifteen Thousand Dollars ($15,000) in any twelve (12) month period (excluding the cost of
inspections and audits conducted after the occurrence of an Event of Default). In the event
Borrower and Bank schedule an audit more than ten (10) days in advance, and Borrower cancels or
seeks to reschedules the audit with less than ten (10) days written notice to Bank, then (without
limiting any of Bank’s rights or remedies), Borrower shall pay Bank a fee of $1,000 plus any
out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses
of the cancellation or rescheduling.
6.7 Insurance. Keep its business and the Collateral insured for risks and in amounts standard
for companies in Borrower’s industry and location and as Bank may reasonably request. Insurance
policies shall be in a form, with companies, and in amounts that are satisfactory to Bank. All
property policies shall have a lender’s loss payable endorsement showing Bank as an additional
lender loss payee and waive subrogation against Bank and shall provide that the insurer
must give Bank at least twenty (20) days notice before canceling, amending, 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 give Bank at least twenty (20) days notice before canceling,
amending, or declining to renew its policy. At Bank’s request, Borrower shall deliver certified
copies of policies and evidence of all premium payments. Proceeds payable under any policy shall,
at Bank’s option, be payable to Bank on account of the Obligations. Notwithstanding the foregoing,
(a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option
of applying the proceeds of any casualty policy up to Fifty Thousand Dollars ($50,000) with respect
to any loss, but in any event not exceeding One Hundred Thousand Dollars ($100,000) in the
aggregate for all losses under all casualty policies in any one year, toward the replacement or
repair of destroyed or damaged property; provided that any such replaced or repaired property (i)
shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be
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deemed Collateral in which Bank has been granted a first priority security interest, and (b)
after the occurrence and during the continuance of an Event of Default, all proceeds payable under
such casualty policy shall, at the option of Bank, be payable to Bank on account of the
Obligations. If Borrower fails to obtain insurance as required under this Section 6.7 or to pay
any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or
part of such payment or obtain such insurance policies required in this Section 6.7 and take any
action under the policies Bank deems prudent.
6.8 Operating Accounts.
(a) Maintain its and its Subsidiaries’ primary depository, operating accounts and securities
accounts with Bank and Bank’s affiliates with all excess funds maintained at or invested through
Bank or an affiliate of Bank, which accounts shall represent at least seventy percent (70%) of the
dollar value of Borrower’s and such Subsidiaries accounts at all financial institutions, excluding
cash collateral held at other financial institutions used to secure letters of credit or cash held
as lease deposits; and
(b) Monthly, within thirty (30) days after the end of each month, provide Bank written notice
of any Collateral Account established at or with any bank or financial institution other than Bank
or Bank’s Affiliates. For any Collateral Account that Borrower at any time maintains, Borrower
shall, after the occurrence of an Event of Default, upon the written request by Bank, in its sole
discretion, either (i) cause the applicable bank or financial institution (other than Bank) at or
with which any Collateral Account is maintained to execute and deliver a Control Agreement or other
appropriate instrument with respect to such Collateral Account to perfect Bank’s Lien in such
Collateral Account in accordance with the terms hereunder, which Control Agreement may not be
terminated without the prior written consent of Bank; or (ii) close such Collateral Account and
transfer the proceeds of such Collateral Account to a Collateral Account of Borrower maintained at
Bank or Bank’s Affiliates. The provisions of the previous sentence shall not apply to deposit
accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments
to or for the benefit of Borrower’s employees and identified to Bank by Borrower as such.
6.9 Financial Covenants.
Maintain as of the last day of each month, unless otherwise noted, on a consolidated basis
with respect to Borrower and its Subsidiaries:
(a) Adjusted Quick Ratio. (i) for each monthly period beginning with the monthly
period ending April 30, 2009 through and including August 31, 2009, an Adjusted Quick Ratio of not
less than 1.65:1.00; and (ii) for each monthly period beginning with the monthly period ending
September 30, 2009 and as of the last day of each monthly period thereafter, an Adjusted Quick
Ratio of not less than 1.75:1.00.
(b) Fixed Charge Coverage Ratio. Maintain, as of the last day of each fiscal quarter,
a Fixed Charge Coverage Ratio of not less than 1.50:1.00.
6.10 Protection of Intellectual Property Rights.
(a) Protect, defend and maintain the validity and enforceability of its material Intellectual
Property; (ii) promptly advise Bank in writing of material infringements of its material
Intellectual Property; and (iii) not allow any Intellectual Property material to Borrower’s
business, to be abandoned, forfeited or dedicated to the public without Bank’s prior written
consent, such consent not to be unreasonably withheld.
(b) Provide written notice to Bank within thirty (30) days of entering or becoming bound by
any Restricted License (other than over-the-counter software that is commercially available to the
public). Borrower shall take such steps as Bank requests to obtain the consent of, or waiver by,
any person whose consent or waiver is necessary for (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
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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 (substantially as described on
Exhibit A hereto); and Borrower shall, at Bank’s request, grant and pledge to Bank a perfected
security interest in the stock, units or other evidence of ownership of each Subsidiary.
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 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 adverse effect on any of the Governmental Approvals
or otherwise on the operations of Borrower or any of its Subsidiaries.
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) in connection with Permitted Liens and Permitted
Investments; and (d) of non-exclusive licenses for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business and licenses that could not result in a legal
transfer of title of the licensed property but that may be exclusive in respects other than
territory and that may be exclusive as to territory only as to discreet geographical areas outside
of the United States.
7.2 Changes in Business, Control, or Business Locations. (a) Engage in or permit any of its
Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower
and such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or dissolve; or
(c) permit or suffer any Change in Control.
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 Fifty Thousand Dollars ($50,000) in Borrower’s assets or property at
any one location and not more than Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate
at all such locations) or deliver any portion of the Collateral valued, individually or in the
aggregate, in excess of Fifty Thousand Dollars ($50,000) 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 in excess of
Fifty Thousand Dollars ($50,000) to a bailee that has not executed and delivered a bailee agreement
with Bank, such bailee shall execute and deliver a bailee agreement in form and substance
satisfactory to Bank in its sole 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 or property of another Person in an acquisition or
acquisitions in which the aggregate consideration paid for all such acquisitions exceeds Two
Million Dollars ($2,000,000) (a “Permitted Acquisition”); provided, however, that
no Default or Event of Default shall exist immediately prior to or immediately after giving effect
to such Permitted Acquisition. A Subsidiary may merge or consolidate into another Subsidiary or
into Borrower, and a Borrower may merge or consolidate into TCS.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
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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 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; or (b) directly or indirectly make any Investment
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 between one Borrower
and another Borrower or with any Subsidiary of a Borrower that is a party to the Loan Documents, or
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 and transactions permitted pursuant to the terms of Section 7.2 or Section
7.3 hereof.
7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under
the terms of the subordination, intercreditor, or other similar agreement to which such
Subordinated Debt is subject, or (b) amend any provision in any document relating to the
Subordinated Debt which would increase the amount thereof or adversely affect the subordination
thereof to Obligations owed to Bank.
7.10 Compliance. Become an “investment company” or a company controlled by an “investment
company”, under the Investment Company Act of 1940, 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 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.
7.11 Subsidiary Limitations. Permit any Subsidiary that is not a Borrower to maintain assets
in an aggregate amount for all such Subsidiaries in excess of One Million Dollars ($1,000,000)
outstanding at any time.
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 five (5) Business Days
after such Obligations are due and payable (which five (5) Business Day cure period shall not apply
to payments due on the Revolving Line Maturity Date or the Term Loan Maturity Date). During the
cure period, the failure to make or pay any payment specified under clause (a) or (b) hereunder is
not an Event of Default (but no Credit Extension will be made during the cure period);
8.2 Covenant Default.
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(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
(b) Borrower fails or neglects to perform, keep, or observe any other term, provision,
condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any
default (other than those specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within fifteen (15) days
after the occurrence thereof; provided, however, that if the default cannot by its nature be cured
within the fifteen (15) day period or cannot after diligent attempts by Borrower be cured within
such fifteen (15) 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; Change in Control. A Material Adverse Change or a Change in
Control 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 with a fair market value of Five Hundred Thousand Dollars
($500,000) or more, individually or in the aggregate 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 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 Five Hundred Thousand Dollars ($500,000); or (b) any default by Borrower,
the result of which could have a material adverse effect on Borrower’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 Five Hundred Thousand Dollars ($500,000) (not
covered by independent third-party insurance as to which liability has been accepted by such
insurance carrier) shall be rendered against Borrower and the same are not, within ten (10) 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 this Agreement or any Loan Document, and such
representation, warranty, or other statement is incorrect in any material respect when made;
8.9 Subordinated Debt. Any document, instrument, or agreement evidencing any Subordinated
Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and
effect, any Person shall be in breach thereof or contest in any manner the validity or
enforceability thereof or deny that it has any further liability
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or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have
the priority contemplated by this Agreement or the Subordination Agreement; or
8.10 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 (i) has, or could
reasonably be expected to have, a Material Adverse Change, or (ii) materially adversely affects the
legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in
any applicable jurisdiction and such revocation, rescission, suspension, modification or
non-renewal could reasonably be expected to have a material adverse effect on the status of or
legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in
any other jurisdiction.
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 110% 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;
(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;
(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;
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(j) demand and receive possession of Borrower’s Books; and
(k) exercise all rights and remedies available to Bank under the Loan Documents or at law or
equity, including all remedies provided under the Code (including disposal of the Collateral
pursuant to the terms thereof).
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. Bank’s foregoing appointment as
Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are
irrevocable until all Obligations have been fully repaid and performed and Bank’s obligation to
provide Credit Extensions terminates.
9.3 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.7
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 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.
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Bank’s exercise of one
right or remedy is not an election and shall not preclude Bank from exercising any other remedy
under this Agreement or other 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.
9.8 Borrower Liability. Any Borrower may, acting singly, request Advances hereunder. Each
Borrower hereby appoints the other as agent for the other for all purposes hereunder, including
with respect to requesting Advances/Credit Extensions hereunder. Each Borrower hereunder shall be
jointly and severally obligated to repay all Advances/Credit Extensions made hereunder, regardless
of which Borrower actually receives said Advance/Credit Extension, as if each Borrower hereunder
directly received all Advances/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 Borrower’s liability. Notwithstanding any other provision
of this Agreement or other related document, until the Obligations have been indefeasibly paid in
full, 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.
10 NOTICES
All notices, consents, requests, approvals, demands, or other communication (collectively,
“Communication”), other than Advance requests made pursuant to Section 3.4, by any party to this
Agreement or any other Loan Document must be in writing and be delivered or sent by facsimile at
the addresses or facsimile numbers listed below. Bank or Borrower may change its notice address by
giving the other party written notice thereof. Each such Communication shall be deemed to have
been validly served, given, or delivered: (a) upon the 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.
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If to Borrower:
|
TELECOMMUNICATION SYSTEMS, INC. LONGHORN ACQUISITION, LLC c/o TELECOMMUNICATION SYSTEMS, INC. 000 Xxxx Xxxxxx, Xxxxx 000 Xxxxxxxxx, Xxxxxxxx 00000 Attn: Xxxxxx X. Xxxxxx, Xx., Chief Financial Officer Fax: (000) 000-0000 Email: xxxxxxx@xxxxxxxxxx.xxx |
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with a copy to:
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TELECOMMUNICATION SYSTEMS, INC. 000 Xxxx Xxxxxx, Xxxxx 000 Xxxxxxxxx, Xxxxxxxx 00000 Attn: Xxxxx Xxxxx, Vice President and General Counsel Fax: (000) 000-0000 Email: xxxxxx@xxxxxxxxxx.xxx |
|
If to Bank:
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Silicon Valley Bank One Xxxxxx Executive Park, Suite 200 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx, XX 00000 Attn: Xx. Xxxx Xxxxxxxxxxx Fax: (000) 000-0000 Email: xxxxxxxxxxxx@xxx.xxx |
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with a copy to:
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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 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. Borrower hereby waives personal service of the summons, complaints, and
other process issued in such action or suit and agrees that service of such summons, complaints,
and other process may be made by registered or certified mail addressed to Borrower at the address
set forth in Section 10 of this Agreement and that service so made shall be deemed completed upon
the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the
U.S. mails, proper postage prepaid. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREINABOVE,
BANK SHALL SPECIFICALLY HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER
TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE BANK’S RIGHTS AGAINST BORROWER OR ITS
PROPERTY.
TO THE FULLESTEXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN
DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH
PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
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12.1 Termination Prior to Maturity Date. (a) Term Loan. The Term Loan may be prepaid
in full or terminated prior to the Term Loan Maturity Date by Borrower, effective three (3)
Business Days after written notice of termination is given to Bank. Notwithstanding any such
prepayment or termination, Bank’s lien and security interest in the Collateral shall continue until
Borrower fully satisfies its Obligations. If such prepayment or termination is at Borrower’s
election (regardless of the existence of any Event of Default), 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 termination fee in an amount equal to (i) if
prepaid or terminated at any time prior to the first anniversary of the Effective Date, an amount
equal to two percent (2.00%) of amount of the Term Loan Amount prepaid; (ii) if prepaid or
terminated on or at any time after the first anniversary of the Effective Date but prior to the
second anniversary of the Effective Date, an amount equal to one and one half percent (1.50%) of
the amount of the Term Loan Amount prepaid; (iii) if prepaid or terminated on or at any time after
the second anniversary of the Effective Date but prior to the third anniversary of the Effective
Date, one percent (1.00%) of the amount of the Term Loan Amount prepaid; (iv) if prepaid or
terminated on or at any time after the third anniversary of the Effective Date but prior to the
fourth anniversary of the Effective Date, one-half of one percent (0.50%) of the amount of the Term
Loan Prepaid; and (v) from the fourth anniversary of the Effective Date and thereafter, Zero
Dollars ($0.00); provided that no termination fee shall be charged if the credit
facility hereunder is replaced with a new facility from another division of Silicon Valley Bank.
Amounts so prepaid or terminated cannot be reborrowed. Upon payment in full of the Obligations 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.
(b) Revolving Line. Subject in any event to the provisions of Section 12.9 hereof,
the Revolving Line commitment 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.
Notwithstanding any such termination, Bank’s lien and security interest in the Collateral shall
continue until Borrower fully satisfies all of its Obligations to Bank. Amounts so terminated
cannot be reborrowed. Upon payment in full of the Obligations 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 or
obligations under it without Bank’s prior written consent (which may be granted or withheld in
Bank’s discretion). Bank has the right, without the consent of or notice to Borrower, to sell,
transfer, 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, attorneys, or any other Person affiliated with or representing Bank
(each, an “Indemnified Person”) harmless against: (a) all obligations, demands, claims, and
liabilities (collectively, “Claims”) claimed or asserted by any other party in connection
with the transactions contemplated by the Loan Documents; and (b) all losses or expenses (including
Bank Expenses) in any way suffered, incurred, or paid by such Indemnified Person as a result of,
following from, consequential to, or arising from transactions between Bank and Borrower (including
reasonable attorneys’ fees and expenses), except for Claims and/or losses directly 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
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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 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; (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 that any prospective transferee or purchaser shall have entered into an agreement
containing provisions substantially the same as those in this Section); (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; 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 may use confidential information for the development of databases, reporting purposes,
and market analysis 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.
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.
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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 Amended and Restated Loan and Security Agreement. This Agreement amends and restates in
its entirety a certain Second Amended and Restated Loan and Security Agreement by and among TCS and
Bank dated as of October 14, 2005, as amended by a certain first Amendment to Second Amended and
Restated Loan and Security Agreement, dated as of December 30, 2005, as further amended by a
certain Second Amendment to Second Amended and Restated Loan and Security Agreement, dated as of
March 10, 2006, as further amended by a certain Third Amendment to Second Amended and Restated Loan
and Security Agreement, dated as of November 14, 2006, and as further amended by a certain Fourth
Amendment to Second Amended and Restated Loan and Security Agreement, dated as of June 27, 2007.
13 DEFINITIONS
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:
“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.
“Adjusted Quick Ratio” shall mean the ratio of (A) Borrower’s domestic unrestricted cash and
domestic unrestricted Cash Equivalents plus the aggregate value of Borrower’s net billed accounts
receivable divided by (B) Borrower’s Current Liabilities (including, without limitation,
all Indebtedness owed to Bank and any Reserves established by Bank), less the current portion of
Borrower’s Deferred Revenue.
“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.
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“Bank” is defined in the preamble hereof.
“Bank Expenses” are all audit fees and expenses, costs, and expenses (including reasonable
attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and
enforcing the Loan Documents
(including, without limitation, those incurred in connection with appeals or Insolvency
Proceedings) or otherwise incurred with respect to Borrower.
“Borrower” is defined in the preamble hereof.
“Borrower’s Books” are all Borrower’s books and records including ledgers, federal and state
tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition, and all computer programs or storage or any equipment containing
such information.
“Borrowing Base” is (a) eighty-five percent (85%) of Eligible Accounts, as determined by Bank
from Borrower’s most recent Borrowing Base Certificate.
“Borrowing Base Certificate” is that certain certificate included within each Transaction
Report.
“Borrowing Resolutions” are, with respect to any Person, those resolutions adopted by such
Person’s Board of Directors or other appropriate body and delivered by such Person to Bank
approving the Loan Documents to which such Person is a party and the transactions contemplated
thereby, together with a certificate executed by its secretary on behalf of such Person certifying
that (a) such Person has the authority to execute, deliver, and perform its obligations under each
of the Loan Documents to which it is a party, (b) that attached as Exhibit A to such certificate is
a true, correct, and complete copy of the resolutions then in full force and effect authorizing and
ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it
is a party, (c) the name(s) of the Person(s) authorized to execute the Loan Documents on behalf of
such Person, together with a sample of the true signature(s) of such Person(s), and (d) that Bank
may conclusively rely on such certificate unless and until such Person shall have delivered to Bank
a further certificate canceling or amending such prior certificate.
“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed.
“Cash Equivalents” means (a) marketable direct obligations issued or unconditionally
guaranteed by the United States or any agency or any State thereof having maturities of not more
than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1)
year after its creation and having the highest rating from either Standard & Poor’s Ratings Group
or 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.
“Change in Control” is a transaction in which any “person” or “group” (within the meaning of
Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended), directly or indirectly, of greater than 35% of the shares of all classes of stock then
outstanding of TCS ordinarily entitled to vote in the election of directors.
“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.
“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.
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“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 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.
“Current Liabilities” are all obligations and liabilities of Borrower to Bank, plus, without
duplication, the aggregate amount of Borrower’s Total Liabilities that mature within one (1) year.
“Default” means any event which with notice or passage of time or both, would constitute an
Event of Default.
“Default Rate” is defined in Section 2.3(b).
“Deferred Revenue” is all amounts received or invoiced in advance of performance under
contracts and not yet recognized as revenue.
“Deposit Account” is any “deposit account” as defined in the Code with such additions to such
term as may hereafter be made.
“Designated Deposit Account” is Borrower’s deposit account, account number 3300363939,
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.
“EBITDA” shall mean (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 (e)
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reasonable add-backs for non-cash deductions
from Net Income, including, without limitation, non-cash stock compensation expense, in each case
in this clause (e) in Bank’s sole discretion, minus (e) capitalized software development
expense.
“Effective Date” is the date Bank executes this Agreement and as indicated on the signature
page hereof.
“Eligible Accounts” are Accounts which arise in the ordinary course of Borrower’s business
that meet all Borrower’s representations and warranties in Section 5.3. Bank reserves the right at
any time and from time to time after the Effective Date upon notice to 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 judgment, the following (“Minimum Eligibility Requirements”) are the
minimum requirements for an Account to be an Eligible Account. Unless Bank agrees otherwise in
writing, Eligible Accounts shall not include:
(a) Accounts for which the Account Debtor has not been invoiced or where goods or services
have not yet been rendered to the Account Debtor (sometimes called memo xxxxxxxx or pre-xxxxxxxx);
(b) Accounts that the Account Debtor has not paid within ninety (90) days of invoice date,
regardless of invoice payment period terms;
(c) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose Accounts have
not been paid within ninety (90) days of invoice date;
(d) Accounts billed and/or payable outside the United States;
(e) Accounts with credit balances over ninety (90) days from invoice date;
(f) Accounts owing from an Account Debtor, including Affiliates, 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;
(g) 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);
(h) 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);
(i) Accounts owing from an Account Debtor which does not have its principal place of business
in the United States or Canada except for Eligible Foreign Accounts;
(i) Accounts owing from the United States or any department, agency, or instrumentality
thereof except for Accounts of the United States if Borrower has assigned its payment rights to
Bank and the assignment has been acknowledged under the Federal Assignment of Claims Act of 1940,
as amended;
(j) Accounts owing from an Account Debtor to the extent that Borrower is indebted or obligated
in any manner to the Account Debtor (as creditor, lessor, supplier or otherwise — sometimes called
“contra” accounts, accounts payable, customer deposits or credit accounts), with the exception of
customary credits, adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;
(k) Accounts for demonstration or promotional equipment, or in which goods are consigned, or
sold on a “sale guaranteed”, “sale or return”, “sale on approval”, “xxxx and hold”, or other terms
if Account Debtor’s payment may be conditional;
(l) Accounts that represent non-trade receivables or that are derived by means other than in
the ordinary course of Borrower’s business;
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(m) Accounts for which the Account Debtor is Borrower’s Affiliate, officer, employee, or
agent;
(n) 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;
(o) Accounts subject to liens in favor of any other Person, including, without limitation,
Tatonka Capital Corporation;
(p) Accounts subject to chargebacks or other payment deductions taken by an Account Debtor;
(q) Accounts for which Bank in its good faith business judgment determines collection to be
doubtful; and
(r) other Accounts Bank deems ineligible in the exercise of its good faith business judgment.
“Eligible Foreign Accounts” are Accounts for which the Account Debtor does not have its
principal place of business in the United States but are otherwise Eligible Accounts that (a) Bank
pre-approves in writing and (b) are supported by letter(s) of credit acceptable to Bank, in its
sole discretion.
“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.
“Fixed Charge Coverage Ratio” means the ratio of (A) (i) Borrower’s EBITDA for the trailing
twelve (12) month period then ending minus (ii) Borrower’s unfinanced Capital Expenditures
(made during such period) minus (iii) taxes and dividends paid in cash (during such
period), divided by (B) Borrower’s Fixed Charges for the trailing three (3) month period
then ended (including, for the period ending June 30, 2009, an amount equal to three regularly
scheduled Term Loan Payments) multiplied by four (4).
“Fixed Charges” means the sum of Borrower’s Interest Expense plus all required principal
payments on Indebtedness during the trailing three (3) month period then ended.
“Foreign Currency” means lawful money of a country other than the United States.
“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.
“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.
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“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.
“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 12.2.
“Insolvency Proceeding” is any proceeding by or against any Person under the United States
Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit
of creditors, compositions, extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
“Intellectual Property” means all of Borrower’s right, title, and interest in and to the
following:
(a) its Copyrights, Trademarks and Patents, and all related applications;
(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;
(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,
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.
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“Letter of Credit” means a standby letter of credit issued by Bank or another institution
based upon an application, guarantee, indemnity or similar agreement on the part of Bank as set
forth in Section 2.1.2.
“Letter of Credit Application” is defined in Section 2.1.2(a).
“Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(d).
“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 Perfection Certificate, the
Subordination Agreement, any note, or notes or guaranties executed by Borrower or any guarantor,
and any other present or future agreement between Borrower 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), after provision
for taxes, of Borrower and its Subsidiaries for such period taken as a single accounting period.
“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 including interest accruing after
Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank,
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.
“Permitted Acquisition” is defined in Section 7.3.
“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, including, without limitation, Indebtedness owed to Tatonka Capital
corporation pursuant to the terms and conditions of a certain promissory note, as amended from time
to time,
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described in that certain Subordination Document, dated December 28, 2006, by and between
Bank and Tatonka Capital Corporation;
(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(e) Indebtedness secured by Permitted Liens;
(f) Indebtedness owed by one Borrower to another Borrower, or, subject to clause (d) of the
definition of “Permitted Investments hereof, Indebtedness owed by a Subsidiary to a Borrower; 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) Investments by Borrower in Subsidiaries that are not a Borrower in an amount not to exceed
One Million Dollars ($1,000,000) in the aggregate for all such Subsidiaries;
(e) 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;
(f) 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;
(g) Investments consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business;
provided that this paragraph (g) shall not apply to Investments of Borrower in any
Subsidiary; and
(h) Investments in other assets in an amount not to exceed One Million Dollars ($1,000,000) in
the aggregate.
“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, 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 Five Hundred Thousand Dollars ($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) statutory Liens securing claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other Persons imposed without action of such parties, provided, they
have no priority over any of
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Bank’s Lien, such Liens attach only to Inventory and the aggregate
amount of the Indebtedness secured by such Liens does not at any time exceed One Hundred Fifty
Thousand Dollars ($150,000) and is not delinquent or is being contested in good faith by
appropriate proceedings;
(e) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions,
social security and other like obligations incurred in the ordinary course of business, provided,
they have no priority over any of Bank’s Liens and the aggregate amount of the Indebtedness secured
by such Liens does not at any time exceed One Hundred Fifty Thousand Dollars ($150,000);
(f) Liens in favor of customs and revenue authorities securing the payment of customs duties
in connection with the importation of goods in the ordinary course of Borrower’s business,
consistent with past practices;
(g) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by
Liens described in (a) through (f), 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;
(h) 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;
(i) non-exclusive license of Intellectual Property granted to third parties in the ordinary
course of business; and
(j) Liens arising from 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 the greater of (i) four percent (4.00%) per annum, or (ii) the Bank’s most
recently announced “prime rate,” even if it is not Bank’s lowest rate.
“Prior Loan Agreement” is defined in the preamble hereof.
“Prior Term Loan” is defined in Section 2.1.5(b) hereof.
“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 from time to time
establish and revise in good faith reducing the amount of Advances, Letters of Credit and other
financial accommodations which would otherwise be available to Borrower under the lending formulas:
(a) to reflect events, conditions, contingencies or risks which, as determined by Bank in good
faith, do or may affect (i) the Collateral or any other property which is security for the
Obligations or its value (including without limitation any increase in delinquencies of Accounts),
(ii) the assets or business of Borrower or any guarantor, or (iii) the security interests and other
rights of Bank in the Collateral (including the enforceability, perfection and priority thereof);
or (b) to reflect Bank’s good faith belief that any collateral report or financial information
furnished by or on behalf of Borrower or any guarantor to Bank is or may have been incomplete,
inaccurate or misleading in any material respect; or (c) in respect of any state of facts which
Bank determines in good faith constitutes an Event of Default or may, with notice or passage of
time or both, constitute an Event of Default.
-30-
“Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial
Officer and Controller of Borrower.
“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 equal to Thirty Million Dollars
($30,000,000).
“Revolving Line Maturity Date” is June , 2012.
“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.
“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now
or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar
agreement in form and substance satisfactory to Bank entered into between Bank and the other
creditor), on terms acceptable to Bank.
“Subsidiary” 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.
“Term Loan” is a loan made by Bank pursuant to the terms of Section 2.1.5 hereof.
“Term Loan Amount” is an aggregate amount equal to Twenty Million Dollars ($20,000,000).
“Term Loan Maturity Date” is the earliest to occur of (a) June 30, 2014 or (b) the occurrence
of an Event of Default.
“Term Loan Payment” is defined in Section 2.1.5(c).
“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.
“Unused Revolving Line Facility Fee” is defined in Section 2.4(d).
[Signature page follows.]
31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
Effective Date.
| BORROWER: TELECOMMUNICATION SYSTEMS, INC. |
||||
| By: | /s/ Xxxxxx X. Xxxxxx, Xx. | |||
| Name: | Xxxxxx X. Xxxxxx, Xx. | |||
| Title: | Sr. Vice President & CFO | |||
| LONGHORN ACQUISITION LLC |
||||
| By: | /s/ Xxxxxx X. Xxxxxx, Xx. | |||
| Name: | Xxxxxx X. Xxxxxx, Xx. | |||
| Title: | Sr. Vice President & CFO | |||
| BANK: SILICON VALLEY BANK |
||||
| By: | /s/ Xxxx Xxxxxxxxxxx | |||
| Name: | Xxxx Xxxxxxxxxxx | |||
| Title: | Vice President | |||
Effective Date: June 26, 2009
[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 (except as provided below), 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;
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.
Notwithstanding the foregoing, the Collateral does not include any Intellectual Property;
provided, however, the Collateral shall include all Accounts and all proceeds of
Intellectual Property. If a judicial authority (including a U.S. Bankruptcy Court) would hold that
a security interest in the underlying Intellectual Property is necessary to have a security
interest in such Accounts and such property that are proceeds of Intellectual Property, then the
Collateral shall automatically, and effective as of the Effective Date, include the Intellectual
Property to the extent necessary to permit perfection of Bank’s security interest in such Accounts
and such other property of Borrower that are proceeds of the Intellectual Property.
1
EXHIBIT B
COMPLIANCE CERTIFICATE
TO:
|
SILICON VALLEY BANK | Date: | ||
FROM:
|
TELECOMMUNICATION SYSTEMS, INC. LONGHORN ACQUISITION LLC |
The undersigned authorized officer of TELECOMMUNICATION SYSTEMS, INC. and LONGHORN ACQUISITION
LLC (individually and collectively, jointly and severally, the “Borrower”) certifies that under the
terms and conditions of the Loan and Security Agreement between Borrower and Bank (the
“Agreement”), (1) Borrower is in complete compliance for the period ending with all
required covenants except as noted below, (2) there are no Events of Default, (3) all
representations and warranties in the Agreement are true and correct in all material respects on
this date except as noted below; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in all material
respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required
tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to
the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against
Borrower or any of its Subsidiaries, if any, relating to unpaid employee payroll or benefits of
which Borrower has not previously provided written notification to Bank. Attached are the required
documents supporting the certification. The undersigned certifies that these are prepared in
accordance with generally GAAP consistently applied from one period to the next except as explained
in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be
requested at any time or date of determination that Borrower is not in compliance with any of the
terms of the Agreement, and that compliance is determined not just at the date this certificate is
delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given
them in the Agreement.
Please indicate compliance status by circling Yes/No under “Complies” column.
Reporting Covenant
|
Required | Complies | ||
Monthly financial statements with Compliance Certificate
|
Monthly within 30 days | Yes No | ||
Quarterly consolidated and consolidating financial
Statements (management prepared)
|
Quarterly within 45 days | Yes No | ||
Annual financial statement (CPA Audited) + XX
|
XXX within 120 days | Yes No | ||
10-Q, 10-K and 8-K
|
Within 5 days after filing with SEC | Yes No | ||
A/R & A/P Agings
|
Monthly within 15 days | Yes No | ||
Projections
|
60 days prior to FYE and as amended | Yes No | ||
Transaction Reports
|
Weekly (monthly within 30 days if no Event of Default) and with each request for a Credit Extension | Yes No | ||
The following Intellectual Property was registered after the Effective Date (if no registrations, state “None”):
The following Collateral Accounts were established after the Effective Date (if no such Collateral Accounts, state “None”):
| Financial Covenant | Required | Actual | Complies | |||
Maintain as indicated: |
||||||
Minimum Adjusted Quick Ratio (Monthly)
|
* | ___:1.00 | Yes No | |||
Minimum Fixed Charge Coverage Ratio (Quarterly)
|
1.50:1.00 | ___:1.00 | Yes No |
| * | See Section 6.9(a) |
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.”)
| TELECOMMUNICATION SYSTEMS, INC. LONGHORN ACQUISITION LLC |
BANK USE ONLY | ||||
| Received by: | |||||
| authorized signer | |||||
| By: | Date: | ||||
| Name: | Verified: | ||||
| Title: | authorized signer | ||||
| Date: | |||||
| Compliance Status: Yes No | |||||
2
Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
Dated: ____________________
I. Adjusted Quick Ratio (Section 6.9(a))
Required: See Section 6.9(a)
Actual:
A. Borrower’s unrestricted cash at Bank and unrestricted Cash Equivalents at Bank
|
$_________ | |
B. Aggregate value of the net billed accounts receivable of Borrower
|
$_________ | |
C. Quick Assets (the sum of lines A plus B)
|
$_________ | |
D. Borrower’s Current Liabilities (including, without limitation, the current
portion of all Indebtedness owed to Bank and any Reserves established by
Bank), less the current portion of Borrower’s Deferred Revenue
|
$_________ | |
E. Adjusted Quick Ratio (line C divided by line D)
|
$_________ |
Is line E equal to or greater than _______:1:00?
______ No, not
in compliance
______ Yes, in compliance
3
II.Fixed Charge Coverage Ratio (Section 6.9(b))
Required: 1.50:1.00
Actual:
A. Borrower’s EBITDA for the trailing twelve (12) month period
|
$_________ | |
B. Borrower’s unfinanced Capital Expenditures (made during such period)
|
$_________ | |
C. taxes and dividends paid in cash (made during such period)
|
$_________ | |
D. Adjusted EBITDA
|
$_________ | |
E. Borrower’s Fixed Charges for the trailing three (3) month period
(including, for the period ending June 30, 2009, an amount equal to
three regularly scheduled Term Loan Payments) then ended multiplied
by four (4)
|
$_________ | |
F Fixed Charge Coverage Ratio (line D divided by line E)
|
_________ |
Is line D greater than or equal to 1.50:1.00?
______ No, not
in compliance
______ Yes, in compliance
1
