Loan and Security Modification Agreement dated April 30, 2018, by and amongSharpSpring, Inc., Quattro Hosting LLC, SharpSpring Technologies, Inc. and Western Alliance Bank

1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing by Borrowers to Bank, Borrowers are indebted to Bank pursuant to, among other documents, a Loan and Security Agreement by and between Borrowers and Bank, dated as of March 21, 2016 and as may be amended from time to time (the “Loan and Security Agreement”). Capitalized terms used without definition herein shall have the meanings assigned to them in the Loan and Security Agreement.

 

2. CONSENT TO SUBORDINATED DEBT. Bank hereby consents to Borrower’s incurrence of $8,000,000 in Indebtedness owing to SHSP Holdings, Inc., and in accordance with that certain Subordination Agreement between Bank and SHSP Holdings, Inc., such Indebtedness constitutes Permitted Indebtedness under the Loan and Security Agreement as Subordinated Debt.

 

3. MODIFICATION(S) TO LOAN AND SECURITY AGREEMENT.

 

Quarter Ending	Maximum Adjusted EBITDA Loss
March 31, 2018	($2,519,000)
June 30, 2018	($2,194,000)
September 30, 2018	($1,858,000)
December 31, 2018	($1,488,000)

4. CONSISTENT CHANGES. The Loan Documents are each hereby amended wherever necessary to reflect the changes described above.

 

5. NO DEFENSES OF BORROWER/GENERAL RELEASE. Each Borrower agrees that, as of this date, it has no defenses against the obligations to pay any amounts under Loan Documents. Each Borrower and its affiliates (each, a “Releasing Party”) acknowledges that Bank would not enter into this Loan and Security Modification Agreement without Releasing Party’s assurance that it has no claims against Bank or any of Bank’s officers, directors, employees or agents. Except for the obligations arising hereafter under this Loan and Security Modification Agreement, each Releasing Party releases Bank and each of Bank’s officers, directors and employees from any known or unknown claims that Releasing Party now has against Bank of any nature, including any claims that Releasing Party, its successors, counsel, and advisors may in the future discover they would have now had if they had known facts not now known to them, whether founded in contract, in tort or pursuant to any other theory of liability, including but not limited to any claims arising out of or related to the Loan and Security Agreement or the transactions contemplated thereby. Releasing Party waives the provisions of California Civil Code section 1542, which states:

 

 

 

6. CONTINUING VALIDITY. Each Borrower understands and agrees that in modifying the existing Loan Documents, Bank is relying upon each Borrower's representations, warranties, and agreements, as set forth in the Loan Documents. Each Borrower represents and warrants that the representations and warranties contained in the Loan and Security Agreement are true and correct as of the date of this Loan and Security Modification Agreement, and that no Event of Default has occurred and is continuing. Except as expressly modified pursuant to this Loan and Security Modification Agreement, the terms of the Loan Documents remain unchanged and in full force and effect. Bank's agreement to modifications to the existing Loan Documents pursuant to this Loan and Security Modification Agreement in no way shall obligate Bank to make any future modifications to the Loan Documents. Nothing in this Loan and Security Modification Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrowers to retain as liable parties all makers and endorsers of Loan Documents, unless the party is expressly released by Bank in writing. No maker, endorser, or guarantor will be released by virtue of this Loan and Security Modification Agreement. The terms of this paragraph apply not only to this Loan and Security Modification Agreement, but also to any subsequent loan and security modification agreements.

 

7. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; REFERENCE PROVISION. This Loan and Security Modification Agreement constitutes a “Loan Document” as defined and set forth in the Loan and Security Agreement, and is subject to Sections 11 and 12 of the Loan and Security Agreement, which are incorporated by reference herein.

 

8. CONDITIONS PRECEDENT. As a condition to the effectiveness of this Loan and Security Modification Agreement, Bank shall have received, in form and substance satisfactory to Bank, the following:

 

(a) corporate resolutions and incumbency certificates;

 

(b) payment of the facility fee set forth in Section 2.5(a) of the Agreement that was previously due and payable on March 21, 2018, plus all Bank Expenses incurred through the date hereof; and

 

(c) such other documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate.

 

9. COUNTERSIGNATURE. This Loan and Security Modification Agreement shall become effective only when executed by Bank and Borrowers.

 

QUATTRO HOSTING LLC     By: /s/ Edward Lawton Name: Edward Lawton Title: CFO

SHARPSPRING TECHNOLOGIES, INC. By: /s/ Edward Lawton Name: Edward Lawton Title: CFO

 

 

 

Reporting Covenant	Required	Complies
A/R & A/P Agings	Monthly within 30 days	Yes	No
Borrowing Base Certificate	Monthly within 30 days	Yes	No
Monthly Recurring Revenue report for prior 12 months	Monthly within 30 days	Yes	No
Monthly consolidated financial statements	Monthly within 30 days	Yes	No
Monthly consolidating financial statements	Monthly within 30 days	Yes	No
Compliance Certificate	Monthly within 30 days	Yes	No
Annual audited financial statements	FYE within 180 days	Yes	No
Annual operating budget, sales projections and operating plans approved by board of directors	Annually no later than 30 days following the beginning of each fiscal year	Yes	No
A/R and Collateral Audit	Initial and Annual	Yes	No
Deposit balances with Bank	$ ___________________
Deposit balance outside Bank	$ ___________________

Financial Covenant	Required	Actual	Complies
Minimum Cash at Bank + Availability on Revolving Facility	$1,500,000	$_________	Yes	No
Minimum MRR Retention Rate (monthly)	At least 90%	________%	Yes	No
Minimum Adjusted EBITDA (quarterly)	3/31/18: ($2,519,000)	$_________	Yes	No
Negative deviation not to exceed 25% of Financial Plan	6/30/18: ($2,194,000)	____%
	9/30/18: ($1,858,000)
	12/31/18: ($1,488,000)

Comments Regarding Exceptions: See Attached.
Sincerely,
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