Loan and Security Agreement by and between Silicon Valley Bank and the Registrant, dated October 23, 2018 and related amendments, as amended and restated on February 14, 2020
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this Agreement) dated as of February 14, 2020 (the Effective Date) between SILICON VALLEY BANK, a California corporation (Bank), and PROCORE TECHNOLOGIES, INC., a Delaware corporation (Borrower), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The parties agree as follows:
A. Bank and Borrower entered into that certain Loan and Security Agreement dated as of October 23, 2018 (as the same has been amended, modified, supplemented, renewed, or otherwise modified, from to time, the Prior Loan Agreement).
B. Pursuant to the Prior Loan Agreement, Bank made certain loans and other credit accommodations available to Borrower, including (i) the Revolving Line, and (ii) term loan advances in an aggregate principal amount of up to Fifteen Million Dollars ($15,000,000) as a sublimit under the Existing Revolving Line Facility (the Existing Term Loan Advances; together with the Revolving Line, collectively, the Existing Facilities).
C. Borrower has requested, and Bank has agreed, to replace, amend and restate the Prior Loan Agreement in its entirety.
The parties hereby agree that the Prior Loan Agreement is hereby amended, restated, and replaced in its entirety 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; provided that if at any time any change in GAAP would affect the computation of any covenant or requirement set forth in any Loan Document, and either Borrower or Bank shall so request, Borrower and Bank shall negotiate in good faith to amend such covenant or requirement to preserve the original intent thereof in light of such change in GAAP; provided, further, that, until so amended (a) such covenant or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) Borrower shall provide Bank financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.
2. 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.
2.2 Outstanding Obligations under Existing Facilities. Borrower represents and warrants to Bank that as of the Effective Date, the outstanding principal balance of (i) the Revolving Line is Zero Dollars ($0.00) and (ii) the Existing Term Loan Advances is Zero Dollars ($0.00). Borrower represents and warrants to Bank that all of such sum is due and owing Bank, without offset or defense of any kind or nature and in the event Borrower has any offsets or defenses thereto, Borrower hereby irrevocably waives all such offsets and defenses. Borrower acknowledges and agrees that there is no further availability to borrow under the Existing Term Loan Advances and that the provisions of this Agreement and the Loan Documents shall supersede all prior agreements with respect to the Existing Facilities.
2.3 Revolving Line.
(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.
2.4 Letters of Credit Sublimit.
(a) As part of the Revolving Line, Bank shall issue or have issued Letters of Credit denominated in Dollars or a Foreign Currency for Borrowers 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 Ten Million Dollars ($10,000,000).
(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 at least one hundred five percent (105.0%) for Letters of Credit denominated in Dollars or at least one hundred ten percent (110.0%) for Letters of Credit denominated in a Foreign Currency, in each case of the aggregate Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or estimated by Bank to become due in connection therewith, 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 Banks 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 Borrowers account or by Banks interpretations of any Letter of Credit issued by Bank for Borrowers 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 Borrowers 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 a percentage (which percentage shall be determined by Bank in its reasonable discretion) 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.
2.5 Existing Term Loan Advances.
(a) Availability. Borrower acknowledges and agrees that there is no further availability to borrow under the Existing Term Loan Advances. The aggregate amount outstanding under the Existing Term Loan Advances shall at all times reduce the amount otherwise available for Advances under the Revolving Line.
(b) Repayment. On the Payment Date of each month, Borrower shall continue to make equal monthly payments of principal, plus monthly payments of accrued interest at the rate set forth in Section 2.7(a), each in an amount that will fully amortize the Existing Term Loan Advances, as of the Term Loan Amortization Date, over thirty (30) months. All outstanding principal and accrued and unpaid interest under the Existing Term Loan Advances, and all other outstanding Obligations with respect to the Existing Term Loan Advances, are due and payable in full on the Term Loan Maturity Date.
(c) Permitted Prepayment. Borrower shall have the option to prepay all, but not less than all, of the Existing Term Loan Advances, provided Borrower (i) delivers written notice to Bank of its election to prepay the Existing Term Loan Advances at least five (5) days prior to such prepayment, and (ii) pays, on the date of such prepayment (A) the outstanding principal plus accrued and unpaid interest with respect to the Existing Term Loan Advances, and (B) all other sums, if any, that shall have become due and payable with respect to the Existing Term Loan Advances, including interest at the Default Rate with respect to any past due amounts.
(d) Mandatory Prepayment Upon an Acceleration. If the Existing Term Loan Advances are accelerated by Bank following the occurrence and during the continuance of an Event of Default, Borrower shall immediately pay to Bank an amount equal to the sum of (i) all outstanding principal plus accrued and unpaid interest with respect to the Existing Term Loan Advances, and (ii) all other sums, if any, that shall have become due and payable with respect to the Existing Term Loan Advances, including interest at the Default Rate with respect to any past due amounts.
2.6 Overadvances. If, at any time, (a) the sum of (i) the outstanding principal amount of any Advances, plus (ii) the face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), plus (iii) the outstanding principal amount of any Existing Term Loan Advances, exceeds (b) the lesser of either (i) the Revolving Line or (ii) the Borrowing Base, Borrower shall promptly pay to Bank in cash the amount of such excess (such excess, the Overadvance). Without limiting Borrowers obligation to repay Bank any Overadvance, Borrower agrees to pay Bank interest on the outstanding amount of any Overadvance, on demand, at a per annum rate equal to the rate that is otherwise applicable to Advances plus five percent (5.0%).
2.7 Payment of Interest on the Credit Extensions.
(a) Interest Rate. Subject to Section 2.7(b), the principal amount outstanding under the Revolving Line, including the principal amount outstanding under the Existing Term Loan Advances, shall accrue interest at a floating per annum rate equal to the Prime Rate, which interest shall be payable monthly in accordance with Section 2.7(d) below.
(b) Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is five percent (5.0%) above the rate that is otherwise applicable thereto (the Default Rate). 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 2.7(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) Payment; Interest Computation. Interest is payable monthly on the Payment Date of each month and shall be computed on the basis of a 360-day year for the actual number of days elapsed. In computing interest, (i) all payments received after 12:00 p.m. Pacific time on any day shall be deemed received at the opening of business on the next Business Day, and (ii) 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.
2.8 Fees. Borrower shall pay to Bank:
(a) Letter of Credit Fee. Banks 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.
(b) Termination Fee. Upon termination of this Agreement or the termination of the Revolving Line for any reason prior to the Revolving Line Maturity Date, in addition to the payment of any other amounts then-owing, a termination fee (the Termination Fee) in an amount equal to Five Hundred Thousand Dollars ($500,000) if such termination occurs prior to the Revolving Line Maturity Date, provided, that, no Termination Fee shall be charged if either the Revolving Line is (x) replaced with a new facility with Bank or Banks Affiliates, or (y) repaid with proceeds from a Liquidity Event.
(c) Unused Revolving Line Facility Fee. Payable monthly in arrears on the last day of each calendar month occurring prior to the Revolving Line Maturity Date, and on the Revolving Line Maturity Date, a fee (the Unused Revolving Line Facility Fee) in an amount equal to three-tenths of one percent (0.30%) per annum of the average unused portion of the Revolving Line, as determined by Bank, computed on the basis of a year with the applicable number of days as set forth in Section 2.7(d). The unused portion of the Revolving Line, for purposes of this calculation, shall be calculated on a calendar year basis and shall equal the difference between (i) the Revolving Line, and (ii) the average for the period of the daily closing balance of the Revolving Line outstanding, plus, without duplication, the sum of (x) the aggregate amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve) and (y) the aggregate amount of outstanding Existing Term Loan Advances.
(d) 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 (or, if no stated due date, upon demand by Bank).
(e) Fees Fully Earned. Unless otherwise provided in this Agreement or in a separate writing by Bank, Borrower shall not be entitled to any credit, rebate, or repayment of any fees earned by Bank pursuant to this Agreement notwithstanding any termination of this Agreement or the suspension or termination of Banks obligation to make loans and advances hereunder. Bank may deduct amounts owing by Borrower under the clauses of this Section 2.8 pursuant to the terms of Section 2.9(c). Bank shall provide Borrower written notice of deductions made from the Designated Deposit Account pursuant to the terms of the clauses of this Section 2.8.
2.9 Payments; Application of Payments; Debit of Accounts.
(a) All payments to be made by Borrower under any Loan Document shall be made in immediately available funds in Dollars, without setoff or counterclaim, before 12:00 p.m. Pacific time on the date when due. Payments of principal and/or interest received after 12:00 p.m. Pacific 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 has the exclusive right to determine the order and manner in which all payments with respect to the Obligations may be applied. 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.
(c) Bank may debit any of Borrowers deposit accounts, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes Bank when due. These debits shall not constitute a set-off.
2.10 Withholding. Payments received by Bank from Borrower under this Agreement will be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority (including any interest, additions to tax or penalties applicable thereto). Specifically, however, if at any time any Governmental Authority, applicable law, regulation or international agreement requires Borrower to make any withholding or deduction from any such payment or other sum payable hereunder to Bank, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, Bank receives a net sum equal to the sum which it would have received had no withholding or deduction been required, and Borrower shall pay the full amount withheld or deducted to the relevant Governmental Authority. Borrower will, upon request, furnish Bank with proof reasonably satisfactory to Bank indicating that Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower. The agreements and obligations of Borrower contained in this Section 2.10 shall survive the termination of this Agreement.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Banks 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 signatures to the Loan Documents;
(b) a secretarys certificate of Borrower certifying as to no change with respect to such Borrowers Operating Documents, incumbency and specimen signatures and Borrowing Resolutions;
(c) certified copies, dated as of a recent date, of financing statement searches, as Bank may 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;
(d) the Perfection Certificate of Borrower, together with the duly executed signature thereto;
(e) evidence satisfactory to Bank that the insurance policies and endorsements 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;
(f) with respect to the initial Advance, a completed Borrowing Base Report (and any schedules related thereto and including any other information requested by Bank with respect to Borrowers Accounts); and
(g) payment of the fees and Bank Expenses then due as specified in Section 2.8 hereof.
3.2 Conditions Precedent to all Credit Extensions. Banks obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:
(a) timely receipt of the Credit Extension request and any materials and documents required by Section 3.4;
(b) the representations and warranties in this Agreement shall be true, accurate, and complete in all material respects on the date of the proposed Credit Extension 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 Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrowers 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) Bank determines to its satisfaction that there has not been a Material Adverse Change.
3.3 Covenant to Deliver.
(a) Except as otherwise provided in Section 3.3(b), 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 Borrowers obligation to deliver such item, and the making of any Credit Extension in the absence of a required item shall be in Banks sole discretion.
(b) Unless otherwise provided in writing, within sixty (60) days after the Effective Date, Bank shall have received, in form and substance satisfactory to Bank, duly executed signatures to the Control Agreements for the Collateral Accounts of Borrower disclosed in the Borrower Disclosure Letter.
3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other applicable conditions to the making of an Advance (other than Advances under Section 2.4) set forth in this Agreement, to obtain an Advance, Borrower (via an individual duly authorized by an Administrator) shall notify Bank (which notice shall be irrevocable) by electronic mail by 12:00 p.m. Pacific time on the Funding Date of the Advance. Such notice shall be made by Borrower through Banks online banking program, provided, however, if Borrower is not utilizing Banks online banking program, then such notice shall be in a written format acceptable to Bank that is executed by an Authorized Signer. Bank shall have received satisfactory evidence that the Board has approved that such Authorized Signer may provide such notices and request Advances. In connection with any such notification, Borrower must promptly deliver to Bank by electronic mail or through Banks online banking program such reports and information, including without limitation, sales journals, cash receipts journals, accounts receivable aging reports, as Bank may reasonably request in its sole discretion. Bank shall credit proceeds of an Advance to the Designated Deposit Account. Bank may make Advances under this Agreement based on instructions from an Authorized Signer or without instructions if the Advances are necessary to meet Obligations which have become due.
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.
Borrower acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank. Regardless of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein (subject only to Permitted Liens that are permitted pursuant to the terms of this Agreement to have superior priority to Banks Lien in this Agreement).
If this Agreement is terminated, Banks 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 (other than inchoate indemnity obligations) and at such time as Banks obligation to make Credit Extensions has terminated, Bank shall, at the sole cost and expense of Borrower, release its Liens in the Collateral and all rights therein shall revert to Borrower. In the event (x) all Obligations (other than inchoate indemnity obligations), except for Bank Services, are satisfied in full, and (y) this Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good faith business judgment for Bank Services, if any. In the event such Bank Services consist of outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in an amount equal to (x) if such Letters of Credit are denominated in Dollars, then at least one hundred five percent (105.0%); and (y) if such Letters of Credit are denominated in a Foreign Currency, then at least one hundred ten percent (110.0%), 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 business judgment), to secure all of the Obligations relating to such Letters of Credit.
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). 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.
4.3 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Banks interest or rights hereunder. 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 Banks discretion.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization, Authorization; Power and Authority. Borrower is duly existing and in good standing as a Registered Organization in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct 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 Borrowers business. In connection with this Agreement, Borrower has delivered to Bank a completed certificate signed by Borrower, entitled Perfection Certificate (the Perfection Certificate). Borrower represents and warrants to Bank that as of the date of the Perfection Certificate (a) Borrowers 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 Borrowers organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrowers place of business, or, if more than one, its chief executive office as well as Borrowers 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 in all material respects (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).
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 Borrowers 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 (i) such Governmental Approvals which have already been obtained and are in full force and effect or are being obtained pursuant to Section 6.1(b), and (ii) any filings required by the Code in connection with perfecting the security interest granted herein), or (v) conflict with, contravene, constitute a default or breach under, or result in or permit the termination or acceleration of, 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 Borrowers business.
5.2 Collateral. Borrower has good title to, rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no Collateral Accounts at or with any bank or financial institution other than Bank or Banks Affiliates except for the Collateral Accounts described in the Perfection Certificate delivered to Bank in connection herewith or established in accordance with Section 6.8(b) of this Agreement and which Borrower has taken such actions as are necessary to give Bank a perfected security interest therein, pursuant to the terms of Section 6.8(b). 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 or as permitted pursuant to Section 7.2. 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.
All Inventory is in all material respects of good and marketable quality, free from material defects.
Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers in the ordinary course of business, (b) licenses permitted under clause (g) of the definition of Permitted Liens, (c) over-the-counter software that is commercially available to the public, and (d) material Intellectual Property licensed to Borrower and noted on the Perfection Certificate (as updated from time to time) or in written notice to Bank. To Borrowers knowledge, each Patent which it owns or purports to own and which is material to Borrowers business is valid and enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrowers business has been judged invalid or unenforceable, in whole or in part. To the best of Borrowers knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party except to the extent such claim would not reasonably be expected to have a material adverse effect on Borrowers business.
Except as noted on the Perfection Certificate (as updated from time to time) or as permitted pursuant to Section 6.10(b), Borrower is not a party to, nor is it bound by, any Restricted License.
5.3 Customer Accounts. For any customer Account that generates Recurring Revenue, all statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing such customer Accounts are and shall be true and correct in all material respects and all such invoices, instruments and other documents, and all of Borrowers Books are genuine and in all respects what they purport to be. All sales and other transactions underlying or giving rise to each customer Account that generates Recurring Revenue 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 customer Accounts that generate Recurring Revenue. To the best of Borrowers knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all customer Accounts are genuine, and all such documents, instruments and agreements are legally enforceable in accordance with their terms, except to the extent the enforceability thereof may be limited by applicable bankruptcy, insolvency, moratorium, and other laws affecting creditors rights generally and by equitable principles (regardless of whether enforcement is sought in equity or in law). Borrower is the owner of and has the legal right to sell, transfer, assign and encumber each customer Account, and, there are no defenses, offsets, counterclaims or agreements for which the Account Debtor may claim any deduction or discount.
5.4 Litigation. Except as disclosed in the Perfection Certificate delivered on the Effective Date or in written notice to Bank, there are no actions or proceedings pending or, to the knowledge of any Responsible Officer, threatened in writing by or against Borrower or any of its Subsidiaries involving more than, individually or in the aggregate, Five Hundred Thousand Dollars ($500,000).
5.5 Financial Statements; Financial Condition. All consolidated financial statements for Borrower and any of its Subsidiaries delivered to Bank by submission to the Financial Statement Repository or otherwise submitted to Bank fairly present in all material respects Borrowers consolidated financial condition and Borrowers consolidated results of operations as of the date or for the period covered by such (except with respect to unaudited financial statements, subject to normal year-end adjustments and the absence of footnotes). There has not been any material deterioration in Borrowers consolidated financial condition since the date of the most recent financial statements submitted to the Financial Statement Repository or otherwise submitted to Bank.
5.6 Solvency. The fair salable value of Borrowers consolidated assets (including goodwill minus disposition costs) exceeds the fair value of Borrowers 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 (a) has complied in all material respects with all Requirements of Law except where Borrowers failure to do so could not reasonably be expected to have a Material Adverse Effect, and (b) has not violated any Requirements of Law the violation of which could reasonably be expected to have a material adverse effect on its business. None of Borrowers or any of its Subsidiaries properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrowers knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally in compliance in all material respects with applicable law. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted except where the failure to do so could not reasonably be expected to cause a material adverse effect on Borrowers business.
5.8 Subsidiaries; Investments. Borrower does not own any stock, partnership, or other ownership 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 except (a) to the extent such taxes are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor, or (b) if such taxes, assessments, deposits and contributions do not, individually or in the aggregate, exceed Three Hundred Fifty Thousand Dollars ($350,000).
To the extent Borrower defers payment of any contested taxes, Borrower shall (i) notify Bank in writing of the commencement of, and any material development in, the proceedings, and (ii) post bonds or take 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 Borrowers prior tax years which could result in additional taxes becoming due and payable by Borrower in excess of Three Hundred Fifty Thousand Dollars ($350,000). Borrower has paid all material amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any material liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely as working capital (including mergers and acquisitions) 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 report, certificate or written statement submitted to the Financial Statement Repository or otherwise given to Bank, as of the date such representation, warranty, or other statement was made, taken together with all such written reports, written certificates and written statements submitted to the Financial Statement Repository or otherwise 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 reports, 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 Borrowers knowledge or awareness, to the best of Borrowers knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of any Responsible Officer.
6. AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 Government Compliance.
(a) Maintain its and all its Subsidiaries legal existence and good standing in their respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrowers business or operations; provided that nothing in this Section 6.1 shall prohibit or prevent Borrower from discontinuing the legal existence and qualification of any Immaterial Subsidiary, with prior written notice to Bank, if in the reasonable good faith judgment of Borrower, such discontinuance or qualification is no longer desirable in the conduct of its business or such Subsidiary is no longer useful to the business of Borrower or such Subsidiary. Borrower shall comply, and have each Subsidiary comply, in all material respects, with all laws, ordinances and regulations to which it is subject, noncompliance with which could reasonably be expected to have a material adverse effect on Borrowers business.
(b) Obtain all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Bank in all of its property. Borrower shall promptly provide copies of any such obtained Governmental Approvals to Bank.
6.2 Financial Statements, Reports, Certificates. Provide Bank with the following by submitting to the Financial Statement Repository or otherwise submitting to Bank:
(a) within forty-five (45) days after the end of each fiscal quarter of Borrower, a Borrowing Base Report (and any schedules related thereto and including any other information requested by Bank with respect to Borrowers Accounts), including, without limitation, details of Borrowers Recurring Revenue in form acceptable to Bank including, without limitation, SaaS metrics (including client count and calculated CAC), total Recurring Revenue, total customers, the Advance Rate, the rolling LTM Churn Percentage, and the Annualized Revenue Retention Percentage;
(b) as soon as available, and in any event within forty-five (45) days after the end of each fiscal quarter of Borrower, company prepared consolidated balance sheet and income statement covering Borrowers consolidated operations for such quarter certified by a Responsible Officer and in a form acceptable to Bank (the Quarterly Financial Statements);
(c) within forty-five (45) days after the last day of each fiscal quarter of Borrower and together with the Quarterly Financial Statements, a duly completed Compliance Statement confirming that as of the end of such fiscal quarter of Borrower, 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 may reasonably request;
(d) within sixty (60) days after the end of each fiscal year of Borrower, and contemporaneously with any updates or amendments thereto, annual financial projections for the current fiscal year (on a quarterly basis), in each case as approved by the Board, together with any related business forecasts used in the preparation of such annual financial projections;
(e) commencing with the fiscal year ending December 31, 2019, as soon as available, and in any event within one hundred eighty (180) days following the end of Borrowers fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank;
(f) as soon as available, but no later than within (30) days of completion, a copy of each 409(a) valuation report for Borrowers capital stock;
(g) prompt written notice of any changes to the beneficial ownership information set out in Section 13 of the Perfection Certificate. Borrower understands and acknowledges that Bank relies on such true, accurate and up-to-date beneficial ownership information to meet Banks regulatory obligations to obtain, verify and record information about the beneficial owners of its legal entity customers;
(h) in the event that Borrower becomes subject to the reporting requirements under the Exchange Act within five (5) days of filing, copies of all periodic and other reports, proxy statements and other materials filed by Borrower and/or any Guarantor with the SEC, any Governmental Authority succeeding to any or all of the functions of the SEC or with any national securities exchange, or distributed to its shareholders, as the case may be. Documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrowers website on the internet at Borrowers website address; provided, however, Borrower shall promptly notify Bank in writing (which may be by electronic mail) of the posting of any such documents;
(i) within five (5) days of delivery, copies of all statements, reports and notices made available to Borrowers security holders or to any holders of Subordinated Debt;
(j) 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; and
(k) promptly, from time to time, such other information regarding Borrower or compliance with the terms of any Loan Documents as reasonably requested by Bank.
Any submission by Borrower of a Compliance Statement or any other financial statement submitted to the Financial Statement Repository pursuant to this Section 6.2 or otherwise submitted to Bank shall be deemed to be a representation by Borrower that (a) as of the date of such Compliance Statement or other financial statement, the information and calculations set forth therein are true, accurate and correct, (b) as of the end of the compliance period set forth in such submission, Borrower is in complete compliance with all required covenants except as noted in such Compliance Statement or other financial statement, as applicable; (c) as of the date of such submission, no Events of Default have occurred or are continuing; (d) all representations and warranties other than any representations or warranties that are made as of a specific date in Article 5 remain true and correct in all material respects as of the date of such submission except as noted in such Compliance Statement or other financial statement, as applicable; (e) as of the date of such submission, 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; and (f) as of the date of such submission, no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.
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 Banks standard forms; provided, however, that Borrowers failure to execute and deliver the same shall not affect or limit Banks Lien and other rights in all of Borrowers Accounts, nor shall Banks failure to advance or lend against a specific Account affect or limit Banks Lien and other rights therein. If requested by Bank, Borrower shall furnish Bank with copies (or, at Banks
request, originals) of all contracts, orders, invoices, and other similar documents, and all shipping instructions, delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Accounts. In addition, Borrower shall deliver to Bank, on its request, the originals of all instruments, chattel paper, security agreements, guarantees and other documents and property evidencing or securing any Accounts, in the same form as received, with all necessary indorsements, and copies of all credit memos.
(b) Disputes. Borrower shall promptly notify Bank of all disputes or claims relating to Accounts in excess of Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate for all such disputes or claims. 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 for any such Account in excess of Two Hundred Fifty Thousand Dollars ($250,000) (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, in arms-length transactions, and reports the same to Bank in the regular reports provided to Bank; (ii) no 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 lesser of the Revolving Line or the Borrowing Base.
(c) Collection of Accounts. Borrower shall direct its Account Debtors to deliver or transmit all proceeds of Accounts into a lockbox account, or via electronic deposit capture into a blocked account as specified by Bank (either such account, the Cash Collateral Account). Whether or not an Event of Default has occurred and is continuing, Borrower shall immediately deliver all payments on and proceeds of Accounts to the Cash Collateral Account. Subject to Banks right to maintain a reserve pursuant to Section 6.3(d), all amounts received in the Cash Collateral Account shall be transferred on a daily basis to Borrowers operating account with Bank, unless Bank, in its sole discretion, at times when an Event of Default exists, elects to apply such amounts to the outstanding Obligations. Borrower hereby authorizes Bank to transfer to the Cash Collateral Account any amounts that Bank reasonably determines are proceeds of the Accounts (provided that Bank is under no obligation to do so and this allowance shall in no event relieve Borrower of its obligations hereunder).
(d) Reserves. Notwithstanding any terms in this Agreement to the contrary, at times when an Event of Default exists, Bank may hold any proceeds of the Accounts and any amounts in the Cash Collateral Account that are not applied to the Obligations pursuant to Section 6.3(c) above (including amounts otherwise required to be transferred to Borrowers operating account with Bank) as a reserve to be applied to any Obligations regardless of whether such Obligations are then due and payable.
(e) 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.
(f) Verifications; Confirmations; Credit Quality; Notifications. Upon prior written notice to Borrower (provided, however, if an Event of Default has occurred and is continuing, such prior written notice shall not be required), Bank may, from time to time, (i) verify and confirm 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, and notify any Account Debtor of Banks security interest in such Account and/or (ii) conduct a credit check of any Account Debtor to approve any such Account Debtors credit.
(g) 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 Borrowers 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 (a) prior to an
Event of Default, pursuant to the terms of Section 6.3(c) hereof, and (b) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof; provided that, if no Event of Default has occurred and is continuing, Borrower shall not be obligated to remit to Bank the proceeds of the sale of worn out or obsolete Equipment disposed of by Borrower in good faith in an arms length transaction for an aggregate purchase price of Five Hundred Thousand Dollars ($500,000) or less (for all such transactions in any fiscal year). Borrower agrees that it will maintain in an account with Bank proceeds of Collateral, 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 6.4 limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.
6.5 Taxes; Pensions. 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 (a) deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof and (b) such other amounts described in Section 5.9(b), 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 seven (7) Business Days notice (provided no notice is required if an Event of Default has occurred and is continuing), Bank, or its agents, shall have the right to inspect the Collateral and the right to audit and copy Borrowers Books. The foregoing inspections and audits shall be conducted no more often than once every twelve (12) months (or more frequently as Bank in its sole discretion determines that conditions warrant) unless an Event of Default has occurred and is continuing in which case such inspections and audits shall occur as often as Bank shall determine is necessary. The foregoing inspections and audits shall be conducted at Borrowers expense and the charge therefor shall be One Thousand Dollars ($1,000) per person per day (or such higher amount as shall represent Banks then-current standard charge for the same), plus reasonable out-of-pocket expenses. In the event Borrower and Bank schedule an audit more than eight (8) days in advance, and Borrower cancels or seeks to or reschedules the audit with less than eight (8) days written notice to Bank, then (without limiting any of Banks rights or remedies) Borrower shall pay Bank a fee of Two Thousand Dollars ($2,000) plus any out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling. The Initial Audit shall be completed no later than ninety (90) days after the Effective Date.
(a) Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrowers industry and location and as Bank may reasonably request. Insurance policies shall be in a form, with financially sound and reputable insurance companies that are not Affiliates of Borrower, and in amounts that are reasonably satisfactory to Bank. All property policies shall have a lenders loss payable endorsement showing Bank as the sole lender loss payee. All liability policies shall show, or have endorsements showing, Bank as an additional insured. Bank shall be named as lender loss payee and/or additional insured with respect to any such insurance providing coverage in respect of any Collateral.
(b) Ensure that proceeds payable under any property policy are, at Banks option, 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 Five Hundred Thousand Dollars ($500,000) 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 deemed Collateral in which Bank has been granted a first priority security interest (except for Liens permitted under clause (c) of the definition of Permitted Liens), 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.
(c) At Banks request, Borrower shall deliver certified copies of insurance policies and evidence of all premium payments. Each provider of any such insurance required under this Section 6.7 shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to Bank, that it will give Bank twenty (20) days (ten (10) days for nonpayment of premium) prior written notice before cancellation of any
insurance policy or policies required under this Section 6.7 (or forward to Bank any such notice received from its insurance providers). 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.
(a) Maintain, no later than sixty (60) days after the Effective Date, Borrowers primary domestic banking relationship, including operating and other deposit accounts, and the Cash Collateral Account with Bank and Banks Affiliates. The aggregate balance of Borrowers Collateral Accounts with JPMorgan Chase shall not exceed Three Million Dollars ($3,000,000) at any time.
(b) In addition to and without limiting the restrictions in (a), Borrower shall provide Bank five (5) days prior written notice before Borrower establishing any Collateral Account (other than Excluded Accounts) at or with any bank or financial institution other than Bank or Banks Affiliates. For each Collateral Account (other than Excluded Accounts) that Borrower at any time maintains, Borrower shall cause the applicable bank or financial institution (other than Bank) at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Banks Lien in such Collateral Account in accordance with the terms hereunder which Control Agreement may not be terminated without the prior written consent of Bank. The provisions of the previous sentence shall not apply to (i) deposit accounts exclusively used for payroll, payroll taxes, and other employee wage and benefit payments to or for the benefit of Borrowers employees and identified to Bank by Borrower as such, (ii) payment processing accounts provided that the balance of such payment processing accounts is wired, at least weekly, to a Collateral Account of Borrower at Bank, (iii) escrow or trust accounts established in connection with a Permitted Acquisition, (iv) Deposit Accounts securing corporate credit cards in an aggregate amount not to exceed the amount of Indebtedness permitted under clause (g) of the definition of Permitted Indebtedness, (v) operating accounts of Foreign Subsidiaries, and (vi) Deposit Accounts securing letters of credit in an aggregate amount not to exceed the amount of Indebtedness permitted under clause (h) of the definition of Permitted Indebtedness (Excluded Accounts).
6.9 Financial Covenants. Maintain on a consolidated basis with respect to Borrower:
(a) Annual Recurring Revenue. Tested as of the last day of each fiscal quarter of Borrower commencing with the fiscal quarter ending December 31, 2019, Annual Recurring Revenue of at least the following amounts at the following times:
|Annual Recurring Revenue|
December 31, 2019
March 31, 2020
June 30, 2020
September 30, 2020
(b) Liquidity Ratio. Tested as of the last day of each month when (i) the sum of the outstanding principal amount of Advances and Existing Term Loan Advances, plus the face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), was greater than or equal to (ii) sixty percent (60%) of the lesser of the Borrowing Base or the Revolving Line, a Liquidity Ratio of at least 1.25 to 1.00.
6.10 Protection of Intellectual Property Rights.
(a) (i) Use commercially reasonable efforts to protect, defend and maintain the validity and enforceability of its Intellectual Property material to the operation of its business; (ii) promptly advise Bank in writing of material infringements or any other event that could reasonably be expected to materially and adversely affect the value of its Intellectual Property material to the operation of its business; and (iii) not allow any Intellectual Property material to Borrowers business to be abandoned, forfeited or dedicated to the public without Banks written consent.
(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 use commercially reasonable efforts to take such steps as Bank reasonably requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License to be deemed Collateral and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (ii) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Banks 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 Borrowers books and records, to the extent that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with respect to any Collateral or relating to Borrower.
6.12 Online Banking.
(a) Utilize Banks online banking platform for all matters requested by Bank which shall include, without limitation (and without request by Bank for the following matters), uploading information pertaining to Accounts and Account Debtors, requesting approval for exceptions, requesting Credit Extensions, and uploading financial statements and other reports required to be delivered by this Agreement (including, without limitation, those described in Section 6.2 of this Agreement); provided, however, if Banks online banking platform is not operational then Borrower shall notify Bank and arrange with Bank for an alternative method of delivering the applicable information.
(b) Comply with the terms of Banks Online Banking Agreement as in effect from time to time and ensure that all persons utilizing Banks online banking platform are duly authorized to do so by an Administrator. Bank shall be entitled to assume the authenticity, accuracy and completeness on any information, instruction or request for a Credit Extension submitted via Banks online banking platform and to further assume that any submissions or requests made via Banks online banking platform have been duly authorized by an Administrator.
6.13 Formation or Acquisition of Subsidiaries. Notwithstanding and without limiting the negative covenants contained in Sections 7.3 and 7.7 hereof, at the time that Borrower or any Guarantor forms any direct or indirect Subsidiary or acquires any direct or indirect Subsidiary after the Effective Date (including, without limitation, pursuant to a Division), Borrower and such Guarantor shall (a) cause such new Domestic Subsidiary to provide to Bank a joinder to this Agreement to cause such Domestic Subsidiary to become a co-borrower hereunder or a Guaranty to become a Guarantor hereunder, together with such appropriate financing statements and/or Control Agreements, all in form and substance reasonably satisfactory to Bank (including being sufficient to grant Bank a first priority Lien (subject to Permitted Liens) in and to the assets of such newly formed or acquired Subsidiary), (b) provide to Bank appropriate certificates and powers and financing statements, pledging all (or sixty-five percent (65%) with respect to any Foreign Subsidiary) of the direct or beneficial ownership interest in such new Subsidiary, in form and substance satisfactory to Bank; and (c) provide to Bank all other documentation in form and substance reasonably satisfactory to Bank, which in its opinion is appropriate with respect to the execution and delivery of the applicable documentation referred to above. Any document, agreement, or instrument executed or issued pursuant to this Section 6.13 shall be a Loan Document.
6.14 Further Assurances. Execute any further instruments and take further action as Bank reasonably requests to perfect or continue Banks Lien in the Collateral or to effect the purposes of this Agreement. Deliver to Bank, within five (5) days after the same are sent or received, copies of all correspondence, reports, documents and
other filings with any Governmental Authority regarding compliance with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be expected to have a material effect on any of the Governmental Approvals or otherwise on the operations of Borrower or any of its Subsidiaries.
7. NEGATIVE COVENANTS
Borrower shall not do any of the following without Banks prior written consent:
7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (including, without limitation, pursuant to a Division) (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, unneeded, or obsolete Equipment that is, in the reasonable judgment of Borrower, no longer economically practicable to maintain or useful in the ordinary course of business of Borrower; (c) consisting of Permitted Liens and Permitted Investments, or Transfers permitted by Section 7.7; (d) consisting of the sale or issuance of any stock of Borrower permitted under Section 7.2 of this Agreement; (e) consisting of Borrowers use or transfer of money or Cash Equivalents in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents; (f) of non-exclusive licenses for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; (g) of improvements or alterations upon termination of any lease of property; (h) subject to the limitations set forth in Section 6.7(b) with respect to the remittance of proceeds, Transfers of any property subject to a casualty event; (i) any abandonment, cancellation, non-renewal or discontinuance of use or maintenance of any Intellectual Property (or rights relating thereto) that Borrower determines in good faith is desirable in the conduct of its business and not materially disadvantageous to the interests of Bank; (j) Transfers between or among (x) the Borrower and one or more Guarantors, (y) any Guarantor with one or more other Guarantors or (z) one or more Subsidiaries that are not Guarantors with one or more such other Subsidiaries; and (k) other Transfers of property not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate in any fiscal year of Borrower.
7.2 Changes in Business, Management, 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 or incidental thereto or constituting a reasonable extension thereof; (b) liquidate or dissolve; (c) fail to provide notice to Bank of any Key Person departing from or ceasing to be employed by Borrower within five (5) days after such Key Persons departure from Borrower; or (d) permit or suffer any Change in Control.
Borrower shall not, without at least ten (10) days prior written notice to Bank: (1) add any new offices or business locations in the United States, including warehouses (unless such new offices or business locations contain less than Five Hundred Thousand Dollars ($500,000) in Borrowers assets or property or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Five Hundred Thousand Dollars ($500,000) to a bailee at a location in the United States 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 add any new offices or business locations, including warehouses, containing in excess of Five Hundred Thousand Dollars ($500,000) of Borrowers assets or property, then Borrower and the landlord of any such new offices or business locations, including warehouses, shall execute and deliver a landlord consent in form and substance reasonably satisfactory to Bank in Banks reasonable discretion (for any new offices or business locations containing Five Hundred Thousand Dollars ($500,000). If Borrower intends to deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Five Hundred Thousand Dollars ($500,000) to a bailee, and Bank and such bailee are not already parties to a bailee agreement governing both the Collateral and the location to which Borrower intends to deliver the Collateral, then Borrower and such bailee shall execute and deliver a bailee agreement in form and substance satisfactory to Bank in Banks reasonable discretion (for any bailee location where the Collateral is valued at Five Hundred Thousand Dollars ($500,000)).
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 (including, without limitation, by the formation of any Subsidiary or pursuant to a Division in each case other than in connection with a Permitted Acquisition) (an Acquisition, and such Person or assets so acquired, the Target). A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein, or 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 Borrowers or any Subsidiarys Intellectual Property other than (i) restrictions in agreements governing property subject to a Lien that is otherwise permitted pursuant to clauses (c) and (l) of the definition of Permitted Lien; (ii) restrictions contained in any Loan Document; (iii) customary restrictions on the assignment of leases, licenses, and other agreements; and (iv) 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 (including, without limitation, by the formation of any Subsidiary) other than Permitted Investments, or permit any of its Subsidiaries to do so; provided, however, (A) Borrower may (i) declare dividends payable solely in shares of capital stock and make de minimis cash payments in lieu of issuance of fractional shares upon the conversion or exercise of convertible securities (including warrants); (ii) purchases or de minimis cash payments in lieu of fractional shares of capital stock arising out of stock dividends, splits or combinations or Permitted Acquisitions; (iii) the distribution of securities to employees, directors, or consultants upon the exercise of stock options; (iv) conversions of its convertible securities into other securities; (v) withholding of shares otherwise issuable to employees upon the vesting of such employees restricted stock in order to cover such employees tax liabilities; and (vi) repurchases of the stock of current officers or former employees or consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist at the time of any such repurchase and would not exist after giving effect to any such repurchase and (x) such repurchase is effected by the cancellation of Indebtedness, (y) the sole cash paid by Borrower for such repurchase shall consist of cash from a concurrent equity offering, or (z) after giving effect to such repurchase, the aggregate amount of all such repurchases (excluding any repurchases permitted under the foregoing clauses (A)(vi)(x) and (A)(vi)(y)) does not exceed Five Hundred Thousand Dollars ($500,000) in any fiscal year, and (B) any Subsidiary of Borrower may pay dividends, make distributions and pay, redeem, retire or purchase capital stock of any other Subsidiary of Borrower.
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower, except for transactions that are in the ordinary course of Borrowers business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arms length transaction with a non-affiliated Person, provided that the foregoing restriction shall not apply to (i) reasonable and customary fees paid to members of the board of directors of Borrower and its Subsidiaries, (ii) compensation arrangements and benefit plans for officers and other employees of Borrower and its Subsidiaries entered into or maintained in the ordinary course of business, (iii) bridge financings and equity financings with Borrowers investors that are otherwise permitted by Section 7.2 and constitutes Subordinated Debt, (iv) distributions permitted by Section 7.7, (v) Permitted Investments and Permitted Indebtedness, and (vi) any transaction between Borrower and any of its Subsidiaries or between any Subsidiaries that is permitted by this Agreement.
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, provide for earlier or greater principal, interest, or other payments thereon, 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 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 Borrowers business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
8. EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an Event of Default) under this Agreement:
8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension when due, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day cure period shall not apply to payments due on the Revolving Line Maturity Date or the Term Loan Maturity Date). During the cure period, the failure to make or pay any payment specified under clause (b) hereunder is not an Event of Default (but no Credit Extension will be made during the cure period);
8.2 Covenant Default.
(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, or 6.12, 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 ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Cure periods provided under this section shall not apply, among other things, to financial covenants or any other covenants set forth in clause (a) above;
8.3 Investor Abandonment. Bank determines that there is a lack of Investor Support, or Investor Support ceases to be provided to Borrower for any reason;
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), or (ii) a notice of lien or levy is filed against any of Borrowers assets by any Governmental Authority, 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 the Collateral 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 all or 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 or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of its Subsidiaries and is not dismissed or stayed within forty-five (45) days (but no Credit Extensions shall be made while any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);
8.6 Other Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties, (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Five Hundred Thousand Dollars ($500,000); or (b) any breach or default by Borrower or Guarantor, the result of which could have a material adverse effect on Borrowers or any Guarantors business; provided, however, that the Event of Default under this Section 8.6 caused by the occurrence of a breach or default under such other agreement shall be cured or waived for purposes of this Agreement upon Bank receiving written notice from the party asserting such breach or default of such cure or waiver of the breach or default under such other agreement, if at the time of such cure or waiver under such other agreement (x) Bank has not declared an Event of Default under this Agreement and/or exercised any rights with respect thereto; (y) any such cure or waiver does not result in an Event of Default under any other provision of this Agreement or any Loan Document; and (z) in connection with any such cure or waiver under such other agreement, the terms of any agreement with such third party are not modified or amended in any manner which could in the good faith business judgment of Bank be materially less advantageous to Borrower or any Guarantor;
8.7 Judgments; Penalties. One or more fines, penalties or 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 by any Governmental Authority, and the same are not, within ten (10) days after the entry, assessment or issuance thereof, discharged, satisfied, or paid, or after 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 satisfaction, payment, discharge, stay, or bonding of such fine, penalty, 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 (provided that any revocation, cancellation, invalidation, or termination of any such document, instrument or agreement that (i) is consented to by Bank or (ii) results from Borrowers payment in full of the Subordinated Debt if permitted under any subordination agreement, shall not constitute an Event of Default under this Section 8.9), 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 or obligation thereunder, or the Obligations shall not have the priority contemplated by this Agreement or any applicable subordination or intercreditor agreement;
8.10 Guaranty. (a) Any guaranty of any Obligations terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform any obligation or covenant under any guaranty of the Obligations; (c) any circumstance described in Sections 8.4, 8.5, 8.6, 8.7, or 8.8 of this Agreement occurs with respect to any Guarantor, (d) the death, liquidation, winding up, or termination of existence of any Guarantor; or (e)(i) a material impairment in the perfection or priority of Banks Lien in the collateral provided by Guarantor or in the value of such collateral or (ii) a material adverse change in the general affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations occurs with respect to any Guarantor; or
8.11 Governmental Approvals. Any Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in a material 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) cause, or could reasonably be expected to cause, 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 materially adversely affect the status of or legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction.
9. BANKS RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, 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 Borrowers benefit under this Agreement or under any other agreement between Borrower and Bank;
(c) demand that Borrower (i) deposit cash with Bank in an amount equal to at least (A) one hundred five percent (105.0%) of the Dollar Equivalent of the aggregate face amount of all Letters of Credit denominated in Dollars remaining undrawn, and (B) one hundred ten percent (110.0%) of the Dollar Equivalent of the aggregate face amount of all Letters of Credit denominated in a Foreign Currency remaining undrawn (plus, in each case, 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 Contracts;
(e) verify the amount of, demand payment of and performance under, and collect any Accounts and General Intangibles, settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable, and notify any Person owing Borrower money of Banks security interest in such funds. Borrower shall collect all payments in trust for Bank and, if requested by Bank, immediately deliver the payments to Bank in the form received from the Account Debtor, with proper endorsements for deposit;
(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 Banks rights or remedies;
(g) apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) 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, Borrowers 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 Banks exercise of its rights under this Section 9.1, Borrowers rights under all licenses and all franchise agreements inure to Banks benefit;
(i) place a hold on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;
(j) demand and receive possession of Borrowers 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 Borrowers name on any checks, payment instruments, or other forms of payment or security; (b) sign Borrowers name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) demand, collect, sue, and give releases to any Account Debtor for monies due, settle and adjust disputes and claims about the Accounts directly with Account Debtors, and compromise, prosecute, or defend any action, claim, case, or proceeding about any Collateral (including filing a claim or voting a claim in any bankruptcy case in Banks or Borrowers name, as Bank chooses); (d) make, settle, and adjust all claims under Borrowers insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, or other 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 Borrowers name on any documents necessary to perfect or continue the perfection of Banks security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations (other than obligations for taxes, indemnifications, damages and other liabilities in respect of which no claim or demand for payment has been made) have been satisfied in full and the Loan Documents have been terminated. Banks foregoing appointment as Borrowers attorney in fact, and all of Banks rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and the Loan Documents have been terminated.
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 or which may be required to preserve the Collateral, 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 Banks waiver of any Event of Default.
9.4 Application of Payments and Proceeds. If an Event of Default has occurred and is continuing, Bank shall have the right to apply in any order 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. Bank shall pay any surplus to Borrower by credit to the Designated Deposit Account or to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, 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 Banks 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. Banks 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. Banks 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. Banks 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 Banks waiver of any Event of Default is not a continuing waiver. Banks 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.
All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and 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, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission; (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, facsimile number, or email address indicated below. Bank or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10
|If to Borrower:||Procore Technologies, Inc.|
|6309 Carpinteria Ave.|
|Carpinteria, California 93013|
|Attn: Guzel Lumpkin|
|If to Bank:||Silicon Valley Bank|
|1901 Main Street, Third Floor|
|Santa Monica, California 90405|
|Attn: Andy Riggs|
11. CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE
Except as otherwise expressly provided in any of the Loan Documents, California 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 Santa Clara County, California; 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, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrowers actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding
Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure Sections 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure Section 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
This Section 11 shall survive the termination of this Agreement.
12. GENERAL PROVISIONS
12.1 Termination Prior to Maturity Date; Survival. All covenants, representations and warranties made in this Agreement shall continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than obligations for taxes, indemnifications, damages and other liabilities in respect of which no claim or demand for payment has been made) have been satisfied. So long as Borrower has satisfied the Obligations (other than inchoate indemnity obligations, and any other obligations which, by their terms, are to survive the termination of this Agreement, and any Obligations under Bank Services Agreements that are cash collateralized in accordance with Section 4.1 of this Agreement), this Agreement may be terminated prior to the Revolving Line Maturity Date and the Term Loan Maturity Date by Borrower, effective three (3) Business Days after written notice of termination is given to Bank. Those obligations that are expressly specified in this Agreement as surviving this Agreements termination shall continue to survive notwithstanding this Agreements termination.
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 Banks prior written consent (which may be granted or withheld in Banks 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, Banks obligations, rights, and benefits under this Agreement and the other Loan Documents. Notwithstanding the foregoing, prior to the occurrence of an Event of Default that is continuing, Bank shall not assign any interest in the Loan Documents to any Person who in the reasonable estimation of Bank is (1) a direct competitor of Borrower, whether as an operating company or direct or indirect parent with voting control over such operating company, or (2) a vulture fund or distressed debt fund.
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: (i) 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 (ii) 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 Persons gross negligence or willful misconduct.
This Section 12.3 shall survive until all statutes of limitation with respect to the Claims, losses, and expenses for which indemnity is given shall have run.
12.4 Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.
12.5 Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.
12.6 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.
12.7 Amendments in Writing; Waiver; Integration. No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document. Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver. The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents merge into the Loan Documents.
12.8 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.
12.9 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 Banks Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with Bank, collectively, Bank Entities) provided, however, that Bank shall inform such Persons of the confidential nature of such information and instruct them to keep such information confidential; (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, prior to such disclosure, Bank shall obtain any prospective transferees or purchasers agreement containing provisions substantially the same as the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to Banks regulators or as otherwise required in connection with Banks 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 Banks possession when disclosed to Bank, or becomes part of the public domain (other than as a result of its disclosure by Bank in violation of this Agreement) 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 Entities may use anonymous forms of confidential information for aggregate datasets, for analyses or reporting, and for any other uses not expressly prohibited in writing by Borrower. The provisions of the immediately preceding sentence shall survive the termination of this Agreement.
12.10 Attorneys Fees, Costs and Expenses. In any action or proceeding between Borrower and Bank arising out of or relating to the Loan Documents, the prevailing party 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.
12.11 Electronic Execution of Documents. The words execution, signed, signature and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
12.12 Right of Setoff. Borrower hereby grants to Bank a Lien and a right of setoff 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 subsidiary of Bank) 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 setoff 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 Captions. The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.
12.14 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.
12.15 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 arms-length contract.
12.16 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.
12.17 Transitional Arrangements. On the Effective Date, this Agreement shall amend, restate and supersede the Prior Loan Agreement in its entirety, except as provided in this Section. On the Effective Date, the rights and obligations of the parties evidenced by the Prior Loan Agreement shall be evidenced by this Agreement and the other Loan Documents and the grant of security interest in the Collateral by the Borrower under the Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan Agreement) shall continue under this Agreement and the other Loan Documents, and such security interest and any other rights and obligations which by their express terms survive the termination of the Loan Documents shall not in any event be terminated, extinguished or annulled but shall hereafter be governed by this Agreement and the other Loan Documents. This Agreement is not intended to, and does not, novate the Prior Loan Agreement and Borrower reaffirms that the existing security interest created by the Prior Loan Agreement is and remains in full force and effect. All references to the Prior Loan Agreement in any Loan Document or other document or instrument delivered in connection therewith shall be deemed to refer to this Agreement and the provisions hereof as amended, restated, or otherwise modified from time to time.
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, as to any Person, any account of such Person as account is 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 such Person.
Account Debtor is any account debtor as defined in the Code with such additions to such term as may hereafter be made.
Acquisition is defined in Section 7.3.
Administrator is an individual that is named:
(a) as an Administrator in the SVB Online Services form completed by Borrower with the authority to determine who will be authorized to use SVB Online Services (as defined in Banks Online Banking Agreement as in effect from time to time) on behalf of Borrower; and
(b) as an Authorized Signer of Borrower in an approval by the Board.
Advance or Advances means a revolving credit loan (or revolving credit loans) under the Revolving Line.
Advance Rate is the product of (a) the Advance Rate Multiplier and (b) the Annualized Revenue Retention Percentage; provided that the Advance Rate shall be adjusted monthly on the first (1st) day of each month based on the Annualized Revenue Retention Percentage calculated as of the last day of the prior month. Notwithstanding the foregoing, Bank may change any of the Advance Rate, Advance Rate Multiplier, or Annualized Churn Rate Percentage in its good faith business discretion upon at least five (5) Business Days prior to written notice to Borrower (unless an Event of Default is continuing in which case no notice shall be required).
Advance Rate Multiplier is four hundred percent (400%).
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 Persons senior executive officers, directors, partners and, for any Person that is a limited liability company, that Persons managers and members. For purposes of the definition of Eligible Accounts, Affiliate shall include a Specified Affiliate.
Agreement is defined in the preamble hereof.
Annualized Churn Rate Percentage is, as of the last day of each month, for the immediately preceding month, a percentage equal to (a) the Average Churn Rate for such month then ended, multiplied by (b) twelve (12).
Annualized Revenue Retention Percentage is, as of the last day of each month, a percentage calculated as follows: (a) one hundred percent (100%) minus (b) the Annualized Churn Rate Percentage for the month then ended.
Annual Recurring Revenue is, for each fiscal quarter of Borrower, (a) the aggregate amount payable to Borrower under all binding and enforceable contracts that Borrower has entered into with customers for such period annualized for a calendar year, plus (b) New Logo ARR, plus (c) Expansion ARR, minus (d) Debooked ARR, minus (e) Downsell ARR, minus (f) Churned ARR. As used herein, the above definitions have the following meanings, provided that such deductions have not already been deducted in calculating the Recurring Revenue.
ARR means Borrowers annualized Recurring Revenue.
Churned ARR means ARR that is lost from an existing customer from contracts that are no longer in effect whether due to non-renewal or otherwise.
Debooked ARR means ARR that is lost due to the cancellation of a contract.
Downsell ARR means the amount of ARR decreased from an existing customer.
Expansion ARR means ARR derived from an increase in ARR to an existing customer.
New Logo ARR mean ARR that is derived from new customers (i.e. logos).
NRR means revenue that is not recurring.
Authorized Signer is any individual listed in Borrowers Borrowing Resolution who is authorized to execute the Loan Documents, including making (and executing if applicable) any Credit Extension request, on behalf of Borrower.
Availability Amount is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the Borrowing Base minus (b) the aggregate 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 aggregate amount of outstanding Existing Term Loan Advances, and minus (d) the outstanding principal balance of any Advances.
Average Churn Rate means, as of the last day of each month, an amount equal to (a) the sum of Churn Percentages for each Measurement Period in the trailing three (3) months then ended, divided by (b) three (3).
Bank is defined in the preamble hereof.
Bank Entities is defined in Section 12.9.
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 or any Guarantor.
Bank Services are any products, credit services, and/or financial accommodations previously, now, or hereafter provided to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified in Banks various agreements related thereto (each, a Bank Services Agreement), and shall include, without limitation, any Letters of Credit pursuant to Section 2.4.
Bank Services Agreement is defined in the definition of Bank Services.
Board is Borrowers board of directors.
Borrower is defined in the preamble hereof.
Borrowers Books are all Borrowers books and records including ledgers, federal and state tax returns, records regarding Borrowers 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 the product of (a) Borrowers Recurring Revenue for the most recent month, as determined by Bank from Borrowers most recent Borrowing Base Report and financial reporting multiplied by (b) the Advance Rate.
Borrowing Base Report is that certain report of the value of certain Collateral in the form specified by Bank to Borrower from time to time.
Borrower Disclosure Letter means the disclosure letter delivered to Bank on the Effective Date.
Borrowing Resolutions are, with respect to any Person, those resolutions adopted by such Persons board of directors (and, if required under the terms of such Persons Operating Documents, stockholders) and delivered by such Person to Bank approving the Loan Documents to which such Person is a party and the transactions contemplated thereby.
Business Day is any day that is not a Saturday, Sunday or a day on which Bank is closed.
Cash Collateral Account is defined in Section 6.3(c).
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 & Poors Ratings Group or Moodys Investors Service, Inc.; (c) Banks 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.
Change in Control means (a) at any time, any person or group (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the beneficial owner (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act) (each, a Person for purposes of this definition), directly or indirectly, of fifty percent (50%) or more of the ordinary voting power for the election of directors of Borrower (determined on a fully diluted basis) other than (A) by the sale of Borrowers capital stock in (x) a public offering or (y) to venture capital or private equity investors so long as Borrower identifies to Bank the venture capital or private equity investors at least seven (7) Business Days prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction or (B) if such Person is comprised of the holders of any class (or classes) of capital stock of Borrower, authorized or issued subsequent to the Effective Date, which has preferential or enhanced voting rights (which voting rights may or may not be tied to the economic rights of such class (or classes) of capital stock), provided, that, only with respect to any such authorization or issuance consummated prior to the date of an initial public offering of Borrowers capital stock, Borrower (i) provides to Bank a description of the material terms of the transaction and (ii) identifies to Bank any Person, other than any Permitted Holder which will, upon the consummation of such issuance, own and control at least twenty-five percent (25%) or more of the voting power for the election of the board of directors (or equivalent governing body) of the Borrower (determined on a fully diluted basis) at least seven (7) Business Days prior to the closing of such issuance; or (b) at any time, Borrower shall cease to own and control, of record and beneficially, directly or indirectly, one hundred percent (100.0%) of each class of outstanding capital stock of each subsidiary of Borrower (other than as otherwise permitted by this Agreement and other than, with respect to any subsidiary organized in a jurisdiction outside the United States, any de minimis equity ownership by any director, officer or other authorized person of such subsidiary as required by local law) free and clear of all Liens (except Liens created by this Agreement).
Churn Percentage is, expressed as a percentage, (a) the Churned ARR for such Measurement Period (provided, however, if such amount is less than zero (0), then such amount shall be deemed to be zero (0)), divided by (b) the amount of Annual Recurring Revenue at the beginning of such Measurement Period.
Claims is defined in Section 12.3.
Code is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; 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, Banks Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, 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.
Commodity Account is any commodity account as defined in the Code with such additions to such term as may hereafter be made.
Compliance Statement is that certain statement 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 of 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, any Overadvance, Letter of Credit, Existing Term Loan Advance, or any other extension of credit by Bank for Borrowers benefit.
Default Rate is defined in Section 2.7(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 any deposit account of Borrower maintained with Bank as chosen by Bank.
Division means, in reference to any Person which is an entity, the division of such Person into two (2) or more separate Persons, with the dividing Person either continuing or terminating its existence as part of such division, including, without limitation, as contemplated under Section 18-217 of the Delaware Limited Liability Company Act for limited liability companies formed under Delaware law, or any analogous action taken pursuant to any other applicable law with respect to any corporation, limited liability company, partnership or other entity.
Dollars, dollars or use of the sign $ means only lawful money of the United States and not any other currency, regardless of whether that currency uses the $ sign to denote its currency or may be readily converted into lawful money of the United States.
Dollar Equivalent is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.
Domestic Subsidiary means a Subsidiary organized under the laws of the United States or any state or territory thereof or the District of Columbia.
Effective Date is defined in the preamble hereof.
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.
Exchange Act is the Securities Exchange Act of 1934, as amended.
Existing Facilities is defined in Recital B.
Existing Term Loan Advances is defined in Recital B.
Financial Statement Repository is ***@*** or such other means of collecting information approved and designated by Bank after providing notice thereof to Borrower from time to time.
Foreign Currency means lawful money of a country other than the United States.
Foreign Subsidiary means any Subsidiary which is not a Domestic Subsidiary.
Funding Date is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business Day.
FX Contract is any foreign exchange contract by and between Borrower and Bank under which Borrower commits to purchase from or sell to Bank a specific amount of Foreign Currency on a specified date.
GAAP is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.
General Intangibles is all general intangibles as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.
Governmental Approval is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
Governmental Authority is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
Guarantor is any Person providing a Guaranty in favor of Bank.
Guaranty is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise supplemented.
Immaterial Subsidiary is any Subsidiary of Borrower which is not a Material Subsidiary.
Increased Cap Requirement means (i) Borrowers pro-forma unrestricted cash at Bank is at least Twenty-Five Million Dollars ($25,000,000) immediately after any Permitted Investment, and (ii) no Event of Default shall have occurred and be continuing or would result from the consummation of the proposed Investment.
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. For purposes of clarification, operating lease obligations shall not be deemed to be Indebtedness hereunder.
Indemnified Person is defined in Section 12.3.
Initial Audit is Banks inspection of Borrowers Accounts, the Collateral, and Borrowers Books, with results satisfactory to Bank in its sole and absolute discretion.
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, with respect to any Person, all of such Persons right, title, and interest in and to the following:
(a) its Copyrights, Trademarks and Patents;
(b) any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, methods, processes, drawing, specifications, data, know-how and operating manuals;
(c) any and all source code;
(d) any and all design rights which may be available to such Person;
(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 sue 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.
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 Borrowers 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.
Investor Support means it is the clear intention of Borrowers investors to continue to fund Borrower in the amounts and timeframe necessary to enable Borrower to satisfy the Obligations as they become due and payable.
Key Person is Borrowers CEO, CFO, and President, who are Craig Courtemanche, Robert Reed and Steve Zahm, respectively, as of the Effective Date.
Letter of Credit means a standby letter of credit issued by Bank or another institution based upon an application, guarantee, indemnity or similar agreement on the part of Bank as set forth in Section 2.4.
Letter of Credit Application is defined in Section 2.4(b).
Letter of Credit Reserve is defined in Section 2.4(e).
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.
Liquidity Event is (a) any sale of all or substantially all of the assets of Borrower through a merger or acquisition, (b) any sale or merger of the voting securities of Borrower where the holders of Borrowers securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction, (c) a bona fide private round of equity financing of Borrower in an amount of no less than Fifty Million Dollars ($50,000,000), or (d) an initial public offering of Borrowers equity securities in an amount of no less than Seventy-Five Million Dollars ($75,000,000).
Liquidity Ratio is the ratio of (a) Quick Assets to (b) all outstanding Obligations.
Loan Documents are, collectively, this Agreement and any schedules, exhibits, certificates, notices, and any other documents related to this Agreement, any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower or any Guarantor, and any other present or future agreement by Borrower and/or any Guarantor with or for the benefit of Bank, all as amended, restated, or otherwise modified.
Material Adverse Change or Material Adverse Effect is (a) a material impairment in the perfection or priority of Banks Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; (c) a material impairment of the prospect of repayment of any portion of the Obligations; or (d) Bank determines, based upon information available to it and in its reasonable judgment, that there is a reasonable likelihood that Borrower shall fail to comply with one or more of the financial covenants in Section 6 during the next succeeding financial reporting period.
Material Subsidiary is any Subsidiary of Borrower that has assets or annual revenue in excess of Five Hundred Thousand Dollars ($500,000) or is a Borrower hereunder.
Measurement Period is each calendar month.
Obligations are Borrowers obligations to pay when due any debts, principal, interest, fees, Bank Expenses, the Termination Fee, the Unused Revolving Line Facility Fee, and other amounts Borrower owes Bank now or later, whether under this Agreement, the other Loan Documents, or otherwise, including, without limitation, all obligations relating to Bank Services and interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and to perform Borrowers duties under the Loan Documents.
Operating Documents are, for any Person, such Persons formation documents, as certified by the Secretary of State (or equivalent agency) of such Persons jurisdiction of organization, 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.
Overadvance is defined in Section 2.4.
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 Date is (a) with respect to Existing Term Loan Advances, the first (1st) calendar day of each month and (b) with respect to Advances, the last calendar day of each month.
Perfection Certificate is defined in Section 5.1.
Permitted Acquisition or Permitted Acquisitions is any Acquisition for which each of the conditions below is satisfied:
(a) no Event of Default shall have occurred and be continuing or would result from the consummation of the proposed Acquisition;
(b) the entity or assets acquired in such Acquisition are in the same or similar line of business as Borrower is in as of the date hereof or reasonably related thereto;
(c) Borrower shall provide Bank with written notice of the proposed Acquisition at least ten (10) Business Days prior to the anticipated closing date of the proposed Acquisition, and not less than five (5) Business Days prior to the anticipated closing date of the proposed Acquisition, copies of the acquisition agreement and all other material documents relative to the proposed Acquisition (or if such acquisition agreement and other material documents are not in final form, drafts of such acquisition agreement and other material documents; provided that Borrower shall deliver final forms of such acquisition agreement and other material documents promptly upon completion);
(d) subject to the proviso herein and provided pro-forma unrestricted cash at Bank immediately after such Acquisition is at least Twenty-Five Million Dollars ($25,000,000), the total consideration for each such Acquisition (including the maximum amount of the Indebtedness assumed in connection therewith as described in clause (m) of Permitted Indebtedness) does not exceed One Hundred Fifty Million Dollars ($150,000,000) per Acquisition, provided that (x) not more than Thirty Five Million Dollars ($35,000,000) of which in any fiscal year may be cash consideration (subject to clause (y) hereof) (the Acquisition Cap), (y) there shall be no limitation on the aggregate amount of non-cash consideration or consideration paid with the proceeds of equity issuances by Borrower or any parent entity thereof which are contributed to Borrower, in each case, paid or payable in connection with any such Acquisition or Acquisitions, and (z) there shall be no Acquisition Cap on an Acquisition if pro-forma unrestricted cash at Bank immediately after such Acquisition is at least Fifty Million Dollars ($50,000,000);
(e) the Acquisition shall not constitute a hostile acquisition;
(f) the entity or assets acquired in such Acquisition shall not be subject to any Lien other than (x) the first-priority Liens granted in favor of Bank, if applicable and (y) Permitted Liens; and
(g) if such Acquisition is in the form of a merger by Borrower into another Person, Borrower is the surviving legal entity;
(h) if such Acquisition is in the form of a merger by a Subsidiary into another Person, one hundred percent (100%) of the outstanding and issued equity of the surviving legal entity shall be owned by Borrower or a Subsidiary, provided that only sixty-five percent (65%) of the direct or beneficial ownership interest of any Foreign Subsidiary shall be pledged in favor of Bank;
(i) no Indebtedness shall be assumed by any Borrower in connection with such Acquisition other than Permitted Indebtedness;
(j) Borrower shall be in compliance, on a pro forma basis, immediately after giving effect to such Acquisition; and
(k) the credit risk to Bank, in its good faith business judgment, shall not be increased as a result of the Permitted Acquisition.
Permitted Holders means those Persons identified in the Borrower Disclosure Letter.
Permitted Indebtedness is:
(a) Borrowers Indebtedness to Bank under this Agreement and the other Loan Documents;
(b) Indebtedness existing on the Effective Date which is shown on the Perfection Certificate;
(c) Subordinated Debt;
(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(e) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;
(f) Indebtedness secured by Liens permitted under clauses (a) and (c) of the definition of Permitted Liens hereunder;
(g) Indebtedness incurred on a corporate credit cards in the ordinary course of business with other financial institutions in an aggregate outstanding amount (including such amounts included in clause (b) of this definition) not to exceed Three Million Dollars ($3,000,000) at any time;
(h) Indebtedness consisting of letters of credit with other financial institutions in aggregate amount (including such amounts included in clause (b) of this definition) not to exceed Five Million Dollars ($5,000,000);
(i) Indebtedness constituting Permitted Investments;
(j) Indebtedness consisting of the financing of insurance premiums, provided such financing arrangement has been approved in writing by Bank;
(k) Indebtedness of any Person that becomes a Subsidiary after the date hereof pursuant to a Permitted Acquisition; provided that (i) such Indebtedness exists at the time such Person becomes a Subsidiary and was not created in contemplation of or in connection with such Person becoming a Subsidiary and (ii) the maximum aggregate amount of any such Indebtedness so assumed in any fiscal year does not exceed Five Hundred Thousand Dollars ($500,000);
(l) customer deposits and advance payments received in the ordinary course of business; and
(m) subject to compliance with the criteria for a Permitted Acquisition including, without limitation, the limits set forth in clause (d) of the definition thereof, Indebtedness consisting of earn-outs, obligations with respect to purchase price adjustments, and other deferred payments of a similar nature and customary indemnification and similar obligations arising under agreements entered into in connection with a Permitted Acquisition;
(n) other Indebtedness not otherwise permitted by Section 7.4 in an aggregate principal amount not to exceed Five Hundred Thousand Dollars ($500,000) outstanding at any time; and
(o) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (n) 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 (including, without limitation, Subsidiaries) existing on the Effective Date which are shown on the Perfection Certificate;
(b) Investments consisting of cash and Cash Equivalents and any Investments permitted by Borrowers investment policy, as amended from time to time, provided that such investment policy (and any such amendment thereto) has been approved in writing by Bank;
(c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;
(d) Investments consisting of deposit accounts (but only to the extent that Borrower is permitted to maintain such accounts pursuant to Section 6.8 of this Agreement) in which Bank has a first priority perfected security interest to the extent required under Section 6.8(b);
(e) Investments in joint ventures or strategic alliances in the ordinary course of Borrowers or any Subsidiarys business, provided that (i) the value of any cash and non-cash investments by Borrower or such Subsidiary (excluding stock) do not exceed in the aggregate in any fiscal year (x) Five Million Dollars ($5,000,000) if the Increased Cap Requirement is not satisfied at any time, or (y) Fifteen Million Dollars ($15,000,000) if the Increased Cap Requirement is satisfied immediately after such Investment, and (ii) any licenses in connection therewith comply with the requirements of clause (g) of Permitted Liens;
(f) Investments accepted in connection with Transfers permitted by Section 7.1;
(g) Investments consisting of the creation of a Subsidiary for the purpose of consummating a merger transaction permitted by Section 7.3 of this Agreement, which is otherwise a Permitted Investment;
(h) 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 the Board;
(i) 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;
(j) 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 (j) shall not apply to Investments of Borrower in any Subsidiary;
(k) Permitted Acquisitions;
(l) (i) Investments by Borrower or any Subsidiary in any Borrower or Guarantor; and (ii) Investments by Borrower or any Subsidiary in any Subsidiary that is not a Guarantor, provided that any such Investments made by Borrower shall not exceed (x) Five Million Dollars ($5,000,000) if the Increased Cap Requirement is not satisfied at any time, or (y) Seven Million Five Hundred Thousand Dollars ($7,500,000) if the Increased Cap Requirement is satisfied immediately after such Investment, for all Subsidiaries in the aggregate, in each case, in any fiscal year of Borrower;
(m) deposits made to secure the performance of leases, licenses or contracts in the ordinary course of business;
(n) Investments of any Person that becomes a Subsidiary after the date hereof, provided that (i) such Investments exist at the time such Person becomes a Subsidiary and were not made in anticipation of such Person becoming a Subsidiary and (ii) the aggregate amount of any such Investments so assumed in any fiscal year does not exceed (x) Five Hundred Thousand Dollars ($500,000) if the Increased Cap Requirement is not satisfied at any time, or (y) Ten Million Dollars ($10,000,000) if the Increased Cap Requirement is satisfied immediately after such Investment; and
(o) other Investments not otherwise permitted by Section 7.7 in an aggregate amount not to exceed (i) One Million Dollars ($1,000,000) outstanding at any time if the Increased Cap Requirement is not satisfied at any time, or (ii) Ten Million Dollars ($10,000,000) outstanding at any time if the Increased Cap Requirement is satisfied immediately after such Investment.
Permitted Liens are:
(a) Liens existing on the Effective Date which are shown on the Perfection Certificate or arising under this Agreement or 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 Borrowers Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;
(c) purchase money Liens or capital leases (i) on Equipment or software acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than Five Hundred Thousand Dollars ($500,000) of such Equipment or software (and any accessions, attachments, replacements, or improvements thereon and proceeds thereof), or indebtedness (including capital leases) incurred for the purpose of financing the acquisition of such Equipment or software (and any accessions, attachments replacements, or improvements thereon or proceeds thereof), or (ii) existing on Equipment or software (and any accessions, attachments, replacements, or improvements thereon and proceeds thereof) when acquired, if the Lien is confined to the property and any accessions, attachments, replacements, or improvements thereon or proceeds of the Equipment or software;
(d) Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;
(e) Liens (including pledges and deposits) to secure payment of workers compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);
(f) leases or subleases of real property granted in the ordinary course of Borrowers business (or, if referring to another Person, in the ordinary course of such Persons business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrowers business (or, if referring to another Person, in the ordinary course of such Persons business), if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest therein;
(g) non-exclusive licenses of Intellectual Property granted to third parties in the ordinary course of business, and licenses of Intellectual Property that could not result in a legal transfer of title of the licensed property 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;
(h) Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and 8.7;
(i) Liens in favor of other financial institutions arising in connection with Borrowers deposit and/or securities accounts held at such institutions, provided that Bank has a first priority perfected security interest in the amounts held in such deposit and/or securities accounts if required under Section 6.8;
(j) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature in the ordinary course of business;
(k) Liens (i) in connection with Borrower securing liabilities arising from automated clearinghouse funds transfers and (ii) in connection with a Foreign Subsidiary securing overdraft and related liabilities arising from treasury, cash management, or depository services or automated clearinghouse funds transfers provided (x) the aggregate amount of (i) and (ii) shall not exceed Two Hundred Fifty Thousand Dollars ($250,000) or (y) such Liens are not removed within five (5) Business Days;
(l) purported Liens evidenced by the filing of precautionary Uniform Commercial Code financing statements relating solely to operating leases of personal property and analogous filings under applicable law outside of the United States;
(m) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in an amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of Borrower or any Subsidiary;
(n) Liens securing Indebtedness permitted under clauses (g) and (h) of the defined term Permitted Indebtedness;
(o) Liens on insurance proceeds in favor of insurance companies granted solely as a security for financed premiums to the extent the Indebtedness secured thereby is permitted under clause (j) of Permitted Indebtedness; and
(p) Liens incurred in the extension, renewal or refinancing of the Indebtedness secured by Liens described in (a) through (o), 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.
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 rate of interest per annum from time to time published in the money rates section of The Wall Street Journal or any successor publication thereto as the prime rate then in effect; provided that, in the event such rate of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement; and provided further that if such rate of interest, as set forth from time to time in the money rates section of The Wall Street Journal, becomes unavailable for any reason as determined by Bank, the Prime Rate shall mean the rate of interest per annum announced by Bank as its prime rate in effect at its principal office in the State of California (such Bank announced Prime Rate not being intended to be the lowest rate of interest charged by Bank in connection with extensions of credit to debtors); provided that, in the event such rate of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
Prior Loan Agreement is defined in Recital A.
Quarterly Financial Statements is defined in Section 6.2(b).
Quick Assets is Borrowers (i) unrestricted and unencumbered (other than Liens in favor of Bank or Banks Affiliates (except for cash collateral securing Bank Services)) cash, Cash Equivalents and marketable securities maintained with Bank, plus (ii) net accounts receivable.
Recurring Revenue for the applicable Measurement Period is the difference of (a) Borrowers committed recurring revenue attributable to services, software licenses and any other recurring services earned during the prior month pursuant to a binding, written agreements which arise in the ordinary course of Borrowers business that meet all of Borrowers representations and warranties described in Section 5.3, minus (b) any discounts, credits, reserves for bad debt, customer adjustments, or other offsets; provided that Bank reserves the right with five (5) Business Days prior written notice to Borrower (unless an Event of Default is continuing in which case no notice shall be required) to exclude and/or remove any Account, or portion thereof, from the definition of Recurring Revenue, in its sole discretion.
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 its good faith business judgment, reducing the amount of Advances and other financial accommodations which would otherwise be available to Borrower (a) to reflect events, conditions, contingencies or risks which, as determined by Bank in its good faith business judgment, do or may adversely 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, business or prospects 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 Banks reasonable 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 constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default, after notice to Borrower (unless an Event of Default is continuing in which case no notice shall be required).
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 similar agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrowers interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with Banks right to sell any Collateral.
Revolving Line is an aggregate principal amount equal to Fifty Million Dollars ($50,000,000).
Revolving Line Maturity Date is October 23, 2020.
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 Borrowers 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.
Target is defined in Section 7.3.
Term Loan Amortization Date is, for each Existing Term Loan Advance, May 1, 2019.
Term Loan Maturity Date is October 1, 2021.
Termination Fee is defined in Section 2.8(b).
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.
Transfer is defined in Section 7.1.
Unused Revolving Line Facility Fee is defined in Section 2.8(c).
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
|PROCORE TECHNOLOGIES, INC.|
|Name: Craig Courtemanche|
|SILICON VALLEY BANK|
|Name: Andy Riggs|
|Title: Vice President|
[Signature Page to Amended and Restated Loan and Security Agreement]
EXHIBIT A - COLLATERAL DESCRIPTION
The Collateral consists of all of Borrowers 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, certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and
All Borrowers 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 property (i) that is a license which is non-assignable by its terms without the consent of the licensor thereof or any other party (but only to the extent such prohibition on transfer is enforceable under applicable law, including without limitation, Section 9-406 and 9-408 of the Code), (ii) that constitutes the capital stock of a controlled foreign corporation (as defined in the Internal Revenue Code of 1986, as amended) in excess of sixty-five percent (65%) of the voting power of all classes of capital stock of such controlled foreign corporation entitled to vote, (iii) any such property is subject to a lien described in (and permitted under) clause (c) of the definition of Permitted Liens in which the granting of a security interest in such property is prohibited by or would constitute a default under any agreement or document governing such property, provided that upon termination or lapsing of any such prohibition, such property shall automatically be part of the Collateral, and (iv) 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 October 23, 2018, include the Intellectual Property to the extent necessary to permit perfection of Banks security interest in such Accounts and such other property of Borrower that are proceeds of the Intellectual Property.
Pursuant to the terms of a certain negative pledge arrangement with Bank, Borrower has agreed not to encumber any of its Intellectual Property without Banks prior written consent.
|TO:||SILICON VALLEY BANK||Date:|
|FROM:||PROCORE TECHNOLOGIES, INC.|
Under the terms and conditions of the Amended and Restated Loan and Security Agreement between Borrower and Bank (the Agreement), Borrower is in complete compliance for the period ending with all required covenants except as noted below. Attached are the required documents evidencing such compliance, setting forth calculations prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. 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.|
|Quarterly financial statements with |
|Quarterly within 45 days||Yes No|
|Annual financial statements (CPA Audited)||FYE within 180 days||Yes No|
|10-Q, 10-K and 8-K|| |
Within 5 days after filing with
|Borrowing Base Reports and SaaS Metrics||Quarterly within 45 days||Yes No|
|Board approved projections||FYE within 60 days and as amended/updated||Yes No|
|409(a) Valuation||Within 30 days of completion||Yes no|
|The following Intellectual Property was registered after the Effective Date (if no registrations, state None)|
|Maintain as indicated:|
|Minimum Annual Recurring Revenue||See attached schedule||See attached schedule||Yes No|
|Minimum Liquidity Ratio*||1.25:100||_____:1.0||Yes No|
Tested as of the last day of each month where the aggregate amount of outstanding Advances was greater than or equal to sixty percent (60%) of the lesser of (i) the Borrowing Base, or (ii) the Revolving Line.
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.)
Schedule 1 to Compliance Statement
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Agreement, the terms of the Agreement shall govern.
I. Annual Recurring Revenue (Section 6.9(a))
Required: Tested as of the last day of each fiscal quarter of Borrower, Annual Recurring Revenue of at least the following amounts at the following times:
|Annual Recurring Revenue|
December 31, 2019
March 31, 2020
June 30, 2020
September 30, 2020
|Borrowers total ARR at the beginning of such period||$|
|Expansion and New Logo ARR for such period||$|
|Churned, Downsell and Debooked ARR for such period||$|
|Annual Recurring Revenue (line A, plus line B minus line C)||$|
Is line D equal to or greater than the amount required above?
No, not in compliance
|Yes, in compliance|
Liquidity Ratio (Section 6.9(b))
Required: Tested as of the last day of each month where (i) the sum of the outstanding principal amount of Advances and Existing Term Loan Advances, plus the face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), was greater than or equal to (ii) sixty percent (60%) of the lesser of the Borrowing Base or the Revolving Line, a Liquidity Ratio of at least 1.25 to 1.00.
|Aggregate value of the unrestricted and unencumbered cash of Borrower at Bank||$|
|Aggregate value of net accounts receivable of Borrower||$|
|Quick Assets (the sum of lines A and B)||$|
|Aggregate value of obligations and liabilities to Bank||$|
|Liquidity Ratio (line C divided by line D)|
Is line E equal to or greater than 1.25:1:00?
No, not in compliance
|Yes, in compliance|