Exhibit
10.12
LOAN
AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of August 20, 2010 (the “Effective
Date”) between SILICON VALLEY BANK, a California corporation
(“Bank”), and CORNERSTONE ONDEMAND, 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:
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. Capitalized terms
not otherwise defined in this Agreement shall have the meanings set forth in
Section 13. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein.
2
LOAN AND
TERMS OF PAYMENT
2.1
Promise to Pay. Borrower hereby
unconditionally promises to pay Bank the outstanding principal amount of all
Credit Extensions and accrued and unpaid interest thereon as and when due in
accordance with this Agreement.
2.1.1
Revolving
Advances.
(a) Availability. Subject
to the terms and conditions of this Agreement, Bank shall make Advances not
exceeding the Availability Amount. Amounts borrowed hereunder 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 (other than inchoate indemnity obligations) relating
to the Revolving Line shall be immediately due and payable.
2.1.2
Letters of Credit Sublimit.
(a) As
part of the Revolving Line, Bank shall issue or have issued Letters of Credit
denominated in Dollars or a Foreign Currency for Borrower’s account. The
aggregate Dollar Equivalent amount utilized for the issuance of Letters of
Credit shall at all times reduce the amount otherwise available for Advances
under the Revolving Line. The aggregate Dollar Equivalent of the face amount of
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) may not exceed the lesser of (A) One
Million Dollars ($1,000,000), minus (i) the sum of all amounts used for Cash
Management Services, and minus (ii) the FX Reduction Amount, or (B) the lesser
of Revolving Line or the Borrowing Base, minus (i) the sum of all outstanding
principal amounts of any Advances (including any amounts used for Cash
Management Services), and minus (ii) the FX Reduction Amount.
(b) If,
on the Revolving Line Maturity Date (or the effective date of any termination of
this Agreement), there are any outstanding Letters of Credit, then on such date
Borrower shall provide to Bank cash collateral in an amount equal to one hundred
ten percent (110%) of the Dollar Equivalent of the face amount of all such
Letters of Credit plus all interest, fees, and costs due or to become due in
connection therewith (as estimated by Bank in its good faith business judgment),
to secure all of the Obligations relating to such Letters of Credit. All Letters
of Credit shall be in form and substance acceptable to Bank in its sole
discretion and shall be subject to the terms and conditions of Bank’s standard
Application and Letter of Credit Agreement (the “Letter of Credit Application”).
Borrower agrees to execute any further documentation in connection with the
Letters of Credit as Bank may reasonably request. Borrower further agrees to be
bound by the regulations and interpretations of the issuer of any Letters of
Credit guarantied by Bank and opened for Borrower’s account or by Bank’s
interpretations of any Letter of Credit issued by Bank for Borrower’s account,
and Borrower understands and agrees that Bank shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following
Borrower’s instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto.
(c) The
obligation of Borrower to immediately reimburse Bank for drawings made under
Letters of Credit shall be absolute, unconditional, and irrevocable, and shall
be performed strictly in accordance with the terms of this Agreement, such
Letters of Credit, and the Letter of Credit Application.
(d) Borrower
may request that Bank issue a Letter of Credit payable in a Foreign Currency. If
a demand for payment is made under any Letter of Credit, Bank shall treat such
demand as an Advance to Borrower of the Dollar Equivalent of the amount thereof
(plus fees and charges in connection therewith such as wire, cable, SWIFT or
similar charges).
(e) To
guard against fluctuations in currency exchange rates, upon the issuance of any
Letter of Credit payable in a Foreign Currency, Bank shall create a reserve (the
“Letter
of Credit Reserve”) under the Revolving Line in an amount equal
to ten percent (10%) of the face amount of such Letter of Credit. The amount of
the Letter of Credit Reserve may be adjusted by Bank from time to time to
account for fluctuations in the exchange rate. The availability of funds under
the Revolving Line shall be reduced by the amount of such Letter of Credit
Reserve for as long as such Letter of Credit remains outstanding.
2.1.3
Foreign Exchange
Sublimit. As part of the Revolving Line, Borrower may enter into foreign
exchange contracts with Bank under which Borrower commits to purchase from or
sell to Bank a specific amount of Foreign Currency (each, a “FX Forward
Contract”) on a specified date
(the “Settlement Date”). FX Forward Contracts shall have a
Settlement Date of at least one (1) FX Business Day after the contract date and
shall be subject to a reserve of ten percent (10%) of each outstanding FX
Forward Contract (the “FX Reserve”). The aggregate amount of FX Forward
Contracts at any one time may not exceed ten (10) times the lesser of (A) One
Million Dollars ($1,000,000), minus (i) the sum of all amounts used for Cash
Management Services, and minus (ii) the Dollar Equivalent of the face amount of
any outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve), or (B) the lesser of Revolving Line or
the Borrowing Base, minus (i) the sum of all outstanding principal amounts of
any Advances (including any amounts used for Cash Management Services), and
minus (ii) the Dollar Equivalent of the face amount of any outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any
Letter of Credit Reserve). The amount otherwise available for Credit Extensions
under the Revolving Line shall be reduced by an amount equal to ten percent
(10%) of each outstanding FX Forward Contract (the “FX Reduction
Amount”). Any amounts needed to fully reimburse Bank
for any amounts not paid by Borrower in connection with FX Forward Contracts
will be treated as Advances under the Revolving Line and will accrue interest at
the interest rate applicable to Advances.
2.1.4 Cash Management Services
Sublimit. Borrower may use the Revolving Line for Bank’s cash management
services, which may include merchant services, direct deposit of payroll,
business credit card, and check cashing services identified in Bank’s various
cash management services agreements (collectively, the “Cash
Management Services”), in an aggregate amount not to exceed the
lesser of (A) One Million Dollars ($1,000,000), minus (i) the Dollar Equivalent
of the face amount of any outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve), and minus (ii)
the FX Reduction Amount, or (B) the lesser of Revolving Line or the Borrowing
Base, minus (i) the sum of all outstanding principal amounts of any Advances,
minus the Dollar Equivalent of the face amount of any outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve), and minus (iii) the FX Reduction Amount. Any amounts Bank pays
on behalf of Borrower for any Cash Management Services will be treated as
Advances under the Revolving Line and will accrue interest at the interest rate
applicable to Advances.
2.2
Overadvances. If, at any
time, the sum of (a) the outstanding principal amount of any Advances (including
any amounts used for Cash Management Services), plus (b) the face amount of any
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve), plus (c) the FX Reduction Amount
exceeds the lesser of either the Revolving Line or the Borrowing Base, Borrower
shall immediately pay to Bank in cash such excess.
2.3
Payment of Interest on the Credit Extensions.
(a) Interest Rate for
Advances. Subject to Section 2.3(b), the principal amount outstanding
under the Revolving Line shall accrue interest at a floating per annum rate
equal to (i) one and one half percentage points (1.50%) above the Prime Rate at
all times when Borrower’s Indebtedness to Bank under this Agreement is less than
or equal to Five Million Dollars ($5,000,000) or (ii) two and one half
percentage points (2.50%) above the Prime Rate at all times when Borrower’s
Indebtedness to Bank under this Agreement is greater than Five Million Dollars
($5,000,000) which interest shall, in either case, be payable monthly in
accordance with Section 2.3(f) below.
(b) Default Rate.
Immediately upon the occurrence and during the continuance of an Event of
Default. Obligations shall bear interest at a rate per annum which is three
percentage points (3.00%) above the rate that is otherwise applicable thereto
(the “Default Rate”) unless Bank otherwise elects from
time to time in its sole discretion to impose a smaller increase. Fees and
expenses which are required to be paid by Borrower pursuant to the Loan
Documents (including, without limitation, Bank Expenses) but are not paid when
due shall bear interest until paid at a rate equal to the highest rate
applicable to the Obligations. Payment or acceptance of the increased interest
rate provided in this Section 2.3(b) is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Bank.
(c) Adjustment to Interest
Rate. Changes to the interest rate of any Credit Extension based on
changes to the Prime Rate shall be effective on the effective date of any change
to the Prime Rate and to the extent of any such change.
(d) Computation; 360-Day
Year. In computing interest, the date of the making of any Credit
Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit
Extension is repaid on the same day on which it is made, such day shall be
included in computing interest on such Credit Extension. Interest shall be
computed on the basis of a 360-day year for the actual number of days
elapsed.
(e) Debit of Accounts.
Bank may debit any of Borrower’s deposit accounts, including the Designated
Deposit Account, for principal and interest payments or any other amounts
Borrower owes Bank when due. These debits shall not constitute a
set-off.
(f) Interest Payment
Date. Unless otherwise provided, interest is payable monthly on the first
calendar day of each month.
2.4
Fees. Borrower shall pay to
Bank:
(a) Commitment Fee. A
fully earned, non-refundable commitment fee of Thirty Seven Thousand Five
Hundred Dollars ($37,500) on the Effective Date and the six (6) month
anniversary of the Effective Date; and
(b) Bank Expenses. All
Bank Expenses (including reasonable attorneys’ fees and expenses for
documentation and negotiation of this Agreement) incurred through and after the
Effective Date, when due.
2.5
Payments; Application of Payments.
(a) All
payments (including prepayments) to be made by Borrower under any Loan Document
shall be made in immediately available funds in U.S. Dollars, without setoff or
counterclaim, before 12:00 p.m. 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) Borrower
shall direct each Account Debtor to remit payments with respect to the Accounts
to a lockbox account established with Bank or to wire transfer payments to a
cash collateral account that Bank controls (collectively, the “Lockbox”).
Provided no Event of Default has occurred and is continuing, within one (1)
Business Day of receipt of such amounts by Bank. Bank will turn over to Borrower
the proceeds of the Accounts to Borrower. All Accounts and the proceeds thereof
are Collateral and if an Event of Default occurs and is continuing. Bank may
apply the proceeds of such Accounts to the Obligations, the order and method of
such application to be in the sole discretion of Bank.
3
CONDITIONS OF
LOANS
3.1
Conditions Precedent to Initial
Credit Extension. Bank’s obligation to make the initial Credit Extension
is subject to the condition precedent that Bank shall have received, in form and
substance satisfactory to Bank, such documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate, including,
without limitation:
(a) duly
executed original signatures to the Loan Documents, including but not limited to
the UK Share Pledge Documents;
(b) duly
executed original signatures to the Control Agreements, if any;
(c) Borrower’s
Operating Documents and a good standing certificate of Borrower certified by the
Secretary of State of the State of Delaware as of a date no earlier than thirty
(30) days prior to the Effective Date;
(d) duly
executed original signatures to the completed Borrowing Resolutions for
Borrower, in the form attached hereto;
(e) the
Subordination Agreement by Ironwood Equity Fund LP in favor Bank, together with
the duly executed original signatures thereto;
(f)
a duly executed payoff letter from Comerica Bank;
(g) certified
copies, dated as of a recent date, of financing statement searches, as Bank
shall request, accompanied by written evidence (including any UCC termination
statements) that the Liens indicated in any such financing statements either
constitute Permitted Liens or have been or, in connection with the initial
Credit Extension, will be terminated or released;
(h) the
Perfection Certificate of Borrower, together with the duly executed original
signature thereto;
(i)
a landlord’s consent in favor of Bank for Borrower’s Santa Monica location by
the respective landlord thereof, together with the duly executed original
signatures thereto;
(j)
evidence satisfactory to Bank that the insurance policies required by Section
6.5 hereof are in full force and effect, together with appropriate evidence
showing lender loss payable and/or additional insured clauses or endorsements in
favor of Bank; and
(k) payment
of the fees and Bank Expenses then due as specified in Section 2.4
hereof.
3.2 Conditions Precedent to all Credit
Extensions. Bank’s obligations to make each Credit
Extension, including the initial Credit Extension, is subject to the following
conditions precedent:
(a) except
as otherwise provided in Section 3.5, timely receipt of an executed
Payment/Advance Form;
(b) the
representations and warranties in this Agreement shall be true and accurate in
all material respects on the date of the Payment/Advance Form 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 and accurate 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 Borrower’s
representation and warranty on that date that the representations and warranties
in this Agreement remain true and accurate 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 and accurate in all material respects as of such date; and
(c) in
Bank’s sole discretion, there has not been a Material Adverse
Change.
3.3
Post-Closing Conditions.
Within 30 days after the Effective Date, Bank shall have received, in form and
substance satisfactory to Bank, the results of the Initial Audit.
3.4 Covenant to Deliver. Except as
otherwise provided in Section 3.3, Borrower agrees to deliver to Bank each item
required to be delivered to Bank under this Agreement as a condition precedent
to any Credit Extension. Borrower expressly agrees that a Credit Extension made
prior to the receipt by Bank of any such item shall not constitute a waiver by
Bank of Borrower’s obligation to deliver such item, and the making of any Credit
Extension in the absence of a required item shall be in Bank’s sole
discretion.
3.5
Procedures for
Borrowing. Subject to the prior satisfaction of all other applicable
conditions to the making of an Advance set forth in this Agreement, to obtain an
Advance (other than Advances under Sections 2.1.2 or 2.1.4). Borrower shall
notify Bank (which notice shall be irrevocable) by electronic mail, facsimile,
or telephone by 12:00 p.m. Pacific time on the Funding Date of the Advance.
Together with any such electronic or facsimile notification. Borrower shall
deliver to Bank by electronic mail or facsimile a completed Payment/Advance Form
executed by a Responsible Officer or his or her designee. Bank may rely on any
telephone notice given by a person whom Bank believes is a Responsible Officer
or designee. Bank shall credit Advances to the Designated Deposit Account. Bank
may make Advances under this Agreement based on instructions from a Responsible
Officer or his or her designee or without instructions if the Advances are
necessary to meet Obligations which have become due.
4
CREATION OF SECURITY
INTEREST
4.1 Grant of Security Interest.
Borrower hereby grants Bank, to secure the payment and performance in full of
all of the Obligations, a continuing security interest in, and pledges to Bank,
the Collateral, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof.
4.2
Priority of Security
Interest. Borrower represents, warrants, and covenants that the security
interest granted herein is and shall at all times continue to be a first
priority perfected security interest in the Collateral (subject only to
Permitted Liens that may have superior priority to Bank’s Lien under this
Agreement). If Borrower shall acquire a commercial tort claim. Borrower shall
promptly notify Bank in a writing signed by Borrower of the general details
thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance reasonably satisfactory to Bank.
If this
Agreement is terminated. Bank’s Lien in the Collateral shall continue until the
Obligations (other than inchoate indemnity obligations) are repaid in full in
cash. Upon payment in full in cash of the Obligations and at such time as Bank’s
obligation to make Credit Extensions has terminated. Bank shall, at Borrower’s
sole cost and expense, release its Liens in the Collateral and all rights
therein shall revert to Borrower and Bank shall execute such documents as are
reasonably requested by Borrower to evidence the release of such
Liens.
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 Bank’s interest or rights hereunder,
including a notice that any disposition of the Collateral, by either Borrower or
any other Person, shall be deemed to violate the rights of Bank under the Code.
Such financing statements may indicate the Collateral as “all assets of the
Debtor” or words of similar effect, or as being of an equal or lesser scope, or
with greater detail, all in Bank’s discretion.
5
REPRESENTATIONS AND
WARRANTIES
Borrower
represents and warrants as follows:
5.1
Due Organization,
Authorization; Power and Authority. Borrower 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 Borrower’s business.
In connection with this Agreement, Borrower has delivered to Bank a completed
certificate signed by Borrower, entitled “Perfection Certificate”. Borrower
represents and warrants to Bank that (a) Borrower’s exact legal name is that
indicated on the Perfection Certificate and on the signature page hereof; (b)
Borrower is an organization of the type and is organized in the jurisdiction set
forth in the Perfection Certificate; (c) the Perfection Certificate accurately
sets forth Borrower’s organizational identification number or accurately states
that Borrower has none: (d) the Perfection Certificate accurately sets forth
Borrower’s place of business, or, if more than one, its chief executive office
as well as Borrower’s mailing address (if different than its chief executive
office); (e) Borrower (and each of its predecessors) has not, in the past five
(5) years, changed its jurisdiction of formation, organizational structure or
type, or any organizational number assigned by its jurisdiction; and (f) all
other information set forth on the Perfection Certificate pertaining to Borrower
and each of its Subsidiaries is accurate and complete (it being understood and
agreed that Borrower may from time to time update certain information in the
Perfection Certificate after the Effective Date to the extent permitted by one
or more specific provisions in this Agreement). If Borrower is not now a
Registered Organization but later becomes one. Borrower shall promptly notify
Bank of such occurrence and provide Bank with Borrower’s organizational
identification number.
The
execution, delivery and performance by Borrower of the Loan Documents to which
it is a party have been duly authorized, and do not (i) conflict with any of
Borrower’s organizational documents, (ii) contravene, conflict with, constitute
a default under or violate any material Requirement of Law, (iii) contravene,
conflict or violate any applicable order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority by which Borrower or any of
its Subsidiaries or any of their property or assets may be bound or affected,
(iv) require any action by, filing, registration, or qualification with, or
Governmental Approval from, any Governmental Authority (except such Governmental
Approvals which have already been obtained and are in full force and effect) or
(v) constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which it is
a party or by which it is bound in which the default could reasonably be
expected to have a material adverse effect on Borrower’s business.
5.2
Collateral. Borrower has
good title to, has rights in, and the power to grant a Lien on 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 deposit accounts other
than the deposit accounts with Bank, the deposit accounts, if any, described in
the Perfection Certificate delivered to Bank in connection herewith, or of which
Borrower has given Bank notice and taken such actions as are necessary to give
Bank a perfected security interest therein. The Accounts and all Eligible
Recurring Revenue Contracts are bona fide, existing obligations of the Account
Debtors.
The
Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate. None of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as permitted pursuant to Section
7.2.
Borrower
is the sole owner of the Intellectual Property which it owns or purports to own
except for (a) non-exclusive licenses granted to its customers in the ordinary
course of business, (b) over-the-counter software that is commercially available
to the public, and (c) material Intellectual Property licensed to Borrower and
noted on the Perfection Certificate. No part of the Intellectual Property which
Borrower owns or purports to own and which is material to Borrower’s business
has been judged invalid or unenforceable, in whole or in part. To the best of
Borrower’s knowledge, no claim has been made that any part of the Intellectual
Property violates the rights of any third party except to the extent such claim
would not reasonably be expected to have a material adverse effect on Borrower’s
business.
Except as
noted on the Perfection Certificate. Borrower is not a party to, nor is it bound
by, any Restricted License.
5.3
Eligible Recurring Revenue
Contracts. For any Eligible Recurring Revenue Contract in any Borrowing
Base Certificate, all statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing such Eligible Recurring
Revenue Contracts are and shall be, to the best of Borrower’s knowledge, true
and correct and all such invoices, instruments and other documents, and all of
Borrower’s Books are genuine and in all respects what they purport to be.
Whether or not an Event of Default has occurred and is continuing, Bank may
verify the amount of Borrower’s accounts receivable, if any. After the
occurrence and during the continuance of an Event of Default, Bank may notify
any Account Debtor owing Borrower money of Bank’s security interest in such
funds. All sales and other transactions underlying or giving rise to each
Eligible Recurring Revenue Contract shall comply in all material respects with
all applicable laws and governmental rules and regulations, except to the extent
that the failure to so comply could not reasonably be expected to have a
material adverse effect on Borrower’s business. Borrower has no knowledge of any
actual or imminent Insolvency Proceeding of any Account Debtor whose accounts
are Eligible Recurring Revenue Contracts in any Borrowing Base Certificate. To
the best of Borrower’s knowledge, all signatures and endorsements on all
documents, instruments, and agreements relating to all Eligible Recurring
Revenue Contracts are genuine, and all such documents, instruments and
agreements are legally enforceable in accordance with their terms, subject to
bankruptcy, insolvency, reorganization or similar laws of general application
affecting the rights and remedies of creditors, and to general equity
principles.
5.4
Litigation. There are no
actions or proceedings pending or, to the knowledge of the Responsible Officers,
threatened in writing by or against Borrower or any of its Subsidiaries
involving more than, individually or in the aggregate, Two Hundred Fifty
Thousand Dollars ($250,000).
5.5
Financial Statements; Financial
Condition. All consolidated financial statements for Borrower and any of
its Subsidiaries delivered to Bank fairly present in all material respects
Borrower’s consolidated financial condition and Borrower’s consolidated results
of operations. There has not been any material deterioration in Borrower’s
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.6
Solvency. The fair
salable value of Borrower’s assets (including goodwill minus disposition costs)
exceeds the fair value of its liabilities; Borrower is not left with
unreasonably small capital after the transactions in this Agreement; and
Borrower is able to pay its debts (including trade debts) as they
mature.
5.7
Regulatory Compliance.
Borrower is not an “investment company” or a company “controlled” by an
“investment company” under the Investment Company Act of 1940, as amended.
Borrower is not engaged as one of its important activities in extending credit
for margin stock (under Regulations X, T and U of the Federal Reserve Board of
Governors). Borrower has complied in all material respects with the Federal Fair
Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding
company” or an “affiliate” of a “holding company” or a “subsidiary company” of a
“holding company” as each term is defined and used in the Public Utility Holding
Company Act of 2005. Borrower has not violated any laws, ordinances or rules,
the violation of which could reasonably be expected to have a material adverse
effect on its business. None of Borrower’s or any of its Subsidiaries’
properties or assets has been used by Borrower or any Subsidiary or, to the best
of Borrower’s knowledge, by previous Persons, in disposing, producing, storing,
treating, or transporting any hazardous substance other than legally. Borrower
and each of its Subsidiaries have obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all Government Authorities that are necessary to continue their respective
businesses as currently conducted except to the extent that such failure could
reasonably be expected to have a material adverse effect on Borrower’s
business.
5.8
Subsidiaries;
Investments. Borrower does not own any stock, partnership interest or
other equity securities except for Permitted Investments.
5.9
Tax Returns and Payments;
Pension Contributions. Borrower has timely filed all required tax returns
and reports, and Borrower has timely paid all foreign, federal, state and local
taxes, assessments, deposits and contributions (individually or in the
aggregate, in excess of $10,000) owed by Borrower except as otherwise provided
in this Section 5.9. Borrower may defer payment of any contested taxes, provided
that Borrower (a) in good faith contests its obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted, (b)
notifies Bank in writing of the commencement of, and any material development
in, the proceedings, (c) posts bonds or takes any other steps required to
prevent the governmental authority levying such contested taxes from obtaining a
Lien upon any of the Collateral that is other than a “Permitted Lien”. Borrower
is unaware of any claims or adjustments proposed for any of Borrower’s prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid all amounts necessary to fund all present pension,
profit sharing and deferred compensation plans in accordance with their terms,
and Borrower has not withdrawn from participation in, and has not permitted
partial or complete termination of, or permitted the occurrence of any other
event with respect to, any such plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental
agency.
5.10 Use of Proceeds. Borrower
shall use the proceeds of the Credit Extensions solely as working capital and to
fund its general business requirements and not for personal, family, household
or agricultural purposes.
5.11 Full Disclosure. No written
representation, warranty or other statement of Borrower in any certificate or
written statement given to Bank, as of the date such representation, warranty,
or other statement was made, taken together with all such written certificates
and written statements given to Bank, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained in the certificates or statements not misleading (it being recognized
by Bank that the projections and forecasts provided by Borrower in good faith
and based upon reasonable assumptions are not viewed as facts and that actual
results during the period or periods covered by such projections and forecasts
may differ from the projected or forecasted results).
5.12 Definition of “Knowledge.” For purposes of the Loan Documents,
whenever a representation or warranty is made to Borrower’s knowledge or
awareness, to the “best of” Borrower’s
knowledge, or with a similar qualification, knowledge or awareness means the
actual knowledge, after reasonable investigation, of the Responsible
Officers.
6 AFFIRMATIVE
COVENANTS
Borrower
shall do all of the following:
6.1
Government Compliance.
(a) Maintain
its and all its Subsidiaries’ legal existence and good standing in their
respective jurisdictions of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
have a material adverse effect on Borrower’s business or operations. Borrower
shall comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, non-compliance with which could have a
material adverse effect on Borrower’s 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 the Collateral. Borrower shall promptly provide
copies of any such obtained Governmental Approvals to Bank.
6.2
Financial Statements, Reports,
Certificates. Deliver to Bank:
(a) Borrowing Base
Reports. Within thirty (30) days after the last day of each month (or, if
Borrower has completed the IPO, the last day of each calendar quarter), aged
listings of accounts receivable and accounts payable (by invoice date) (the
“Borrowing Base Reports”);
(b) Borrowing Base
Certificate. Within thirty (30) days after the last day of each month
(or, if Borrower has completed the IPO, the last day of each calendar quarter),
a duly completed Borrowing Base Certificate signed by a Responsible
Officer;
(c) Monthly Milestone
Reporting. Within thirty (30) days after the last day of each month,
monthly milestone reporting of the type shared with Borrower’s board of
directors, including, but not limited to a report of billings, CMRR and Dollar
Renewal Rates;
(d) Monthly Financial
Statements. At all times prior to Borrower completing the IPO, as soon as
available, but no later than thirty (30) days after the last day of each month,
a company prepared consolidated and consolidating balance sheet and income
statement covering Borrower’s and each of its Subsidiary’s operations for such
month certified by a Responsible Officer and in a form acceptable to
Bank;
(e) Annual Audited Financial
Statements. Prior to Borrower completing the IPO, as soon as available,
but no later than one hundred eighty (180) days after the last day of Borrower’s
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 acceptable to
Bank in its reasonable discretion; provided however for Borrower’s fiscal year
ending December 31, 2009, such audited financial statements shall be delivered
to Bank no later than September 30, 2010;
(f) SEC Filings. Within
five (5) days of filing, copies of all periodic and other reports, proxy
statements and other materials filed by Borrower 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) shall be deemed to have been delivered if such documents are publicly
available at the SEC’s Electronic Data-Gathering, Analysis, and Retrieval system
(or any successor to such system) or if Borrower posts such documents, or
provides a link thereto, on Borrower’s website on the Internet at Borrower’s
then-current website address;
(g) Compliance
Certificates. Concurrently with the delivery of any financial statements
or filings pursuant to clauses (d) or (e), a duly completed Compliance
Certificate signed by a Responsible Officer, certifying that as of the end of
such period, Borrower was in full compliance with all of the terms and
conditions of this Agreement, and setting forth calculations showing compliance
with the financial covenants set forth in this Agreement and such other
information as Bank shall reasonably request;
(h) Other Statements.
Within five (5) days of delivery, copies of all statements, reports and notices
made available to Borrower’s security holders or to any holders of Subordinated
Debt;
(i)
Annual Financial
Projections. Within 30 days after the earlier of (a) the end of each
fiscal year or (b) approval by Borrower’s board of directors, annual financial
projections commensurate with those provided to Borrower’s investors for the
following fiscal year as approved by Borrower’s board of directors, together
with any related business forecasts used in the preparation of such annual
financial projections and any period updates thereto within thirty (30)
days;
(j)
Asset/Contract Value
Reports. Within 30 days after the end of each calendar quarter, a report
of (i) the value of Borrower’s and all its Subsidiaries’ assets, (ii) Borrower’s
and all its Subsidiaries’ cash and Cash Equivalents and (iii) the value of all
recurring revenue contracts executed by Borrower and all its
Subsidiaries.
(k) Legal Action Notice.
A prompt report of any legal actions pending or threatened in writing against
Borrower or any of its Subsidiaries that could result in damages or costs to
Borrower or any of its Subsidiaries of, individually or in the aggregate, Two
Hundred Fifty Thousand Dollars ($250,000) or more;
(l)
Intellectual Property
Notice. (i) Prompt written notice of any material change in the
composition of the material Intellectual Property, (ii) Within thirty (30) days
after the last day of each month, notice of the registration of any copyright,
including any subsequent ownership right of Borrower in or to any copyright,
patent or trademark not shown in the IP Security Agreement (other than
non-exclusive licenses granted or received in the ordinary course of business)
or previously disclosed in writing to Bank, and (iii) Prompt written notice of
Borrower’s knowledge of an event that could reasonably be expected to materially
and adversely affect the value of the Intellectual Property; and
(m) Other Financial
Information. Budgets, sales projections, operating plans and other
financial information reasonably requested by Bank.
(n) Material Non-Public
Information. Except with respect to information required to be delivered
pursuant to this Section 6.2, after completion of Borrower’s IPO, in no event
shall Borrower be required to deliver any information to Bank that would
constitute material non-public information at the time of delivery.
6.3
Intentionally Omitted.
6.4
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 (individually or in the
aggregate, in excess of $10,000) owed by Borrower
and each of its Subsidiaries, except for deferred payment of any taxes contested
pursuant to the terms of Section
5.9 hereof, and shall deliver to Bank, on demand, appropriate certificates
attesting to such payments, and pay all
amounts necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with
their terms.
In the
event any payments are received by Bank from Borrower pursuant to this
Agreement, such payments will be made subject to applicable withholding for any
taxes, levies, fees, deductions, withholding, restrictions or conditions of any
nature whatsoever. Notwithstanding the foregoing, if at any time any
Governmental Authority, applicable law, regulation or international agreement
requires Borrower to make any such deduction or withholding from any such
payment or other sum payment hereunder to Bank, 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 deduction
or withholding, Bank receives a net sum equal to the sum which it would have
received had no deductions or withholding been required, and Borrower shall pay
the full amount deducted or withheld 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
proceedings and as to which payment in full is bonded or reserved against by
Borrower. The agreements and obligations of Borrower contained in this provision
shall survive the termination of this Agreement.
6.5 Insurance. Keep its business and the Collateral
insured for risks and in amounts standard for companies in Borrower’s industry
and location and as Bank may reasonably request. Insurance policies shall be in
a form, with companies, and in amounts that are reasonably satisfactory to Bank.
All property policies shall have a lender’s loss payable endorsement showing
Bank as lender loss payee and waive subrogation against Bank. All liability
policies shall show, or have endorsements showing, Bank as an additional
insured. All policies (or the loss payable and additional insured endorsements)
shall provide that the insurer shall endeavor to give Bank at least twenty (20)
days notice before canceling, amending, or declining to renew its policy. At
Bank’s request, Borrower shall deliver certified copies of policies and evidence
of all premium payments. After the occurrence and during the continuance of an
Event of Default, proceeds payable under any policy shall, at Bank’s option, be
payable to Bank on account of the Obligations. 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 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 (subject to Permitted Liens). If Borrower fails to obtain insurance as
required under this Section 6.5 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 6.5, and take
any action under the policies Bank deems prudent.
6.6
Operating Accounts.
(a) No
later than sixty (60) days after the Effective Date, and at all times
thereafter, maintain its primary operating and other deposit accounts and
securities accounts with Bank and Bank’s Affiliates which accounts shall
represent at least eighty five percent (85%) of the dollar value of Borrower’s
and such Subsidiaries accounts at all financial institutions.
(b) Provide
Bank five (5) days prior written notice before establishing any Collateral
Account at or with any bank or financial institution other than Bank or Bank’s
Affiliates. For each Collateral Account that Borrower at any time maintains,
Borrower shall cause the applicable bank or financial institution (other than
Bank) at or with which any Collateral Account is maintained to execute and
deliver a Control Agreement or other appropriate instrument with respect to such
Collateral Account to perfect Bank’s Lien in such Collateral Account in
accordance with the terms hereunder which Control Agreement may not be
terminated without the prior written consent of Bank. The provisions of the
previous sentence shall not apply to deposit accounts exclusively used for
payroll, payroll taxes and other employee wage and benefit payments to or for
the benefit of Borrower’s employees and identified to Bank by Borrower as
such.
6.7
Financial Covenants. Maintain at all times, to be tested
as of the last day of each month, unless otherwise noted, on a consolidated
basis with respect to Borrower:
(a) Liquidity. At all
times prior to Borrower completing a Qualified IPO, Borrower’s unrestricted cash
at Bank or Bank’s Affiliates shall be at least Four Million Five Hundred
Thousand Dollars ($4,500,000).
(b) Liquidity Coverage.
At all times after Borrower completes a Qualified IPO, a ratio of unrestricted
cash and Cash Equivalents at Bank plus net accounts receivable to Current
Liabilities less Deferred Revenue of not less than 1.25:1.00.
(c) Performance to Plan.
As of the last day of each month, Borrower’s ending CMRR balance, averaged on a
trailing three (3) month basis, shall be at least seventy five percent (75%) of
Borrower’s projected performance averaged for the same respective period as
outlined in Borrower’s Forecast_Model_vl50.xlsx received by Bank on August 20,
2010 that has been approved by Bank and is attached hereto as Exhibit
F.
6.8
Protection and Registration of Intellectual Property Rights.
(a) (i)
Protect, defend and maintain the validity and enforceability of its material
Intellectual Property; (ii) promptly advise Bank in writing of known material
infringements of its Intellectual Property; and (iii) not allow any Intellectual
Property material to Borrower’s business to be abandoned, forfeited or dedicated
to the public without Bank’s written consent.
(b) If
Borrower (i) obtains any material Patent, registered Trademark, registered
Copyright, registered mask work, or any pending application for any of the
foregoing, whether as owner, licensee or otherwise, or (ii) applies for any
material Patent or the registration of any material Trademark, then Borrower
shall immediately provide written notice thereof to Bank (in accordance with
Section 6.2(1) with respect to Copyrights) and shall execute such intellectual
property security agreements and other documents and take such other actions as
Bank shall request in its good faith business judgment to perfect and maintain a
first priority perfected security interest (subject to Permitted Liens) in favor
of Bank in such property. Borrower shall promptly provide to Bank copies of all
applications that it files for Patents or for the registration of Trademarks.
Copyrights or mask works, together with evidence of the recording of the
intellectual property security agreement necessary for Bank to perfect and
maintain a first priority perfected security interest in such property (subject
to Permitted Liens).
(c) 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 its commercially
reasonable efforts 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 enforceable terms of any such
Restricted License, whether now existing or entered into in the future, and (ii)
Bank to have the ability in the event of a liquidation of any Collateral to
dispose of such Collateral in accordance with Bank’s rights and remedies under
this Agreement and the other Loan Documents.
6.9 Litigation Cooperation. From the date hereof and continuing
through the termination of this Agreement, make available to Bank, without
expense to Bank, Borrower and its officers, employees and agents and Borrower’s
books and records, to the extent that Bank may deem them reasonably necessary to
prosecute or defend any third-party suit or proceeding instituted by or against
Bank with respect to any Collateral or relating to Borrower.
6.10 Access to Collateral; Books and
Records. Allow Bank, or its
agents, at reasonable times, on one (1) Business Day’s notice (provided no
notice is required if an Event of Default has occurred and is continuing), to
inspect the Collateral and audit and copy Borrower’s Books. After the Initial
Audit, such inspections or audits shall be conducted no more often than once
every twelve (12) months unless an Event of Default has occurred and is
continuing. The foregoing inspections and audits shall be at Borrower’s expense,
and the charge therefor shall be $850 per person per day (or such higher amount
as shall represent Bank’s then-current standard charge for the same), plus
reasonable out-of-pocket expenses. In the event Borrower and Bank schedule an
audit more than ten (10) days in advance, and Borrower cancels or seeks to
reschedule the audit with less than ten (10) days written notice to Bank, then
(without limiting any of Bank’s rights or remedies). Borrower shall pay Bank a
fee of $1,000 plus any out-of-pocket expenses incurred by Bank to compensate
Bank for the anticipated costs and expenses of the cancellation or
rescheduling.
6.11 Formation or Acquisition of Foreign
Subsidiaries. If at any time
after the Effective Date either (I) an Event of Default has occurred and is
continuing or (II) Borrower’s Foreign Subsidiaries, in the aggregate either (i)
have assets representing more than thirty percent (30%) of Borrower’s and all
its Subsidiaries aggregate assets, (ii) have cash and/or Cash Equivalents
representing more than thirty percent (30%) of Borrower’s and all its
Subsidiaries cash and/or Cash Equivalents, or (iii) have executed recurring
revenue contracts representing more than thirty percent (30%) of Borrower’s and
all its Subsidiaries recurring revenue contracts. Borrower shall, within thirty
(30) days of Bank’s request therefor, cause such Foreign Subsidiaries to (a)
execute a guaranty and such other security documents as Bank may request, all in
form and substance satisfactory to Bank, to grant Bank a first priority Lien
(subject to Permitted Liens) in and to the assets of such Foreign Subsidiaries,
(b) provide to Bank appropriate certificates and powers and financing
statements, pledging all of the direct or beneficial ownership interest in such
Foreign Subsidiaries, in form and substance satisfactory to Bank, and (c)
provide to Bank all other documentation in form and substance satisfactory to
Bank, which in its opinion is appropriate with respect to the execution and
delivery of the applicable documentation referred to above effective under the
laws of the jurisdiction(s) where such Foreign Subsidiaries are organized. Any
document, agreement, or instrument executed or issued pursuant to this Section
6.11 shall be a Loan Document.
6.12 Formation or Acquisition of Domestic
Subsidiaries. At the time that
Borrower forms any direct or indirect Domestic Subsidiary or acquires any direct
or indirect Domestic Subsidiary after the Effective Date, Borrower shall (a)
cause such new Subsidiary to provide to Bank a joinder to this Agreement or
execute a guaranty and such other security documents as Bank may request
together with such appropriate financing statements. Control Agreements or other
necessary documents or filings, all in form and substance 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 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 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 6.12 shall
be a Loan Document.
6.13 Further Assurances. Execute any further instruments and
take further action as Bank reasonably requests to perfect or continue Bank’s
Lien in the Collateral or to effect the purposes of this Agreement. 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 Bank’s prior written
consent:
7.1
Dispositions. Convey, sell, lease, transfer,
assign, or otherwise dispose of (collectively, “Transfer”),or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, except for:
(a)
Transfers in the ordinary course of business for reasonably equivalent
consideration;
(c) Transfers
of property in connection with sale-leaseback transactions, provided that the
book value of all such property so Transferred shall not exceed Two Hundred
Fifty Thousand Dollars ($250,000) in any fiscal year;
(d) Transfers
of property to the extent such property is exchanged for credit against, or
proceeds are promptly applied to, the purchase price of other property used or
useful in the business of Borrower or its Subsidiaries;
(e) Transfers
constituting non-exclusive licenses and similar arrangements for the use of the
property of Borrower or its Subsidiaries in the ordinary course of business and
other non-perpetual licenses that could not result in a legal transfer of title
of the licensed property but that may be exclusive in respects other than
territory and that may be exclusive as to territory only as to discreet
geographical areas outside of the United States;
(f)
Transfers otherwise permitted by the Loan Documents;
(g) sales
or discounting of delinquent accounts in the ordinary course of
business;
(h)
Transfers associated with the making or disposition of a Permitted
Investment;
(i)
Transfers in connection with an acquisition permitted by this Agreement of a
portion of the assets or rights acquired for reasonably equivalent
consideration; and
(j)
other Transfers that do not exceed Two Hundred Fifty Thousand ($250,000) at any
time during the term hereof.
7.2 Changes in Business; Change in
Control; Jurisdiction of Formation.Engage in any material line of
business other than those lines of business conducted by Borrower and its
Subsidiaries on the date hereof and any businesses reasonably related,
complementary or incidental thereto or reasonable extensions thereof; or permit
or suffer any Change in Control, other than in connection with an IPO. Borrower
will not, without prior written notice to Bank: (i) change its jurisdiction of
organization, (ii) change its organizational structure or type, (iii) change its
legal name, (iv) change any organizational number (if any) assigned by its
jurisdiction of organization, or add any new offices or business locations,
including warehouses (unless such new offices or business locations contain less
than Two Hundred Fifty Thousand Dollars ($250,000) in Borrower’s assets or
property) or deliver any portion of the Collateral valued, individually or in
the aggregate, in excess of Two Hundred Fifty Thousand Dollars ($250,000) to a
bailee at a location other than to a bailee and at a location already disclosed
in the Perfection Certificate. If Borrower intends to deliver any portion of the
Collateral valued, individually or in the aggregate, in excess of Two Hundred
Fifty Thousand Dollars ($250,000) to a bailee, and Bank and such bailee are not
already parties to a bailee agreement governing both the Collateral and the
location to which Borrower intends to deliver the Collateral, then Borrower will
first receive the written consent of Bank, and such bailee shall execute and
deliver a bailee agreement in form and substance satisfactory to Bank in its
sole discretion.
7.3
Mergers or Acquisitions. Merge or consolidate, or permit
any of its Subsidiaries to merge or consolidate, with any
Person, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of a Person, except where no
Event of Default has occurred and is continuing or would result from such action
during the term of this Agreement and cash consideration in connection with such
acquisitions does not exceed (x) prior to a Qualified IPO, Two Hundred Fifty
Thousand Dollars ($250,000) and (y) after a Qualified IPO, an unlimited amount
so long as Borrower’s unrestricted cash at Bank does not fall below Twenty
Million Dollars ($20,000,000) at any time:
(a) any
Subsidiary may merge or consolidate with (i) Borrower provided that Borrower is
the surviving entity, and (ii) one or more other Subsidiaries;
(b) Borrower
or any Subsidiary may acquire, all or substantially all of the capital stock or
property of another Subsidiary; or
(c) such
merger, consolidation or acquisition is a Transfer otherwise permitted pursuant
to Section 7.1.
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 the Collateral, 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 (subject to Permitted Liens) granted herein, or enter into any
agreement, document, instrument or other arrangement (except with or in favor of
Bank) with any Person which directly or indirectly prohibits or has the effect
of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging,
granting a security interest in or upon, or encumbering any of Borrower’s or any
Subsidiary’s Intellectual Property, except as is otherwise permitted in Section
7.1 hereof and the definition of “Permitted Liens” herein.
7.6 Maintenance of Collateral
Accounts. Maintain any
Collateral Account except pursuant to the terms of Section 6.6(b)
hereof.
7.7 Distributions; Investments. (a) Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital
stock other than Permitted Distributions; or (b) directly or indirectly acquire
or own any Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so.
7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower, except
for (a) transactions that are in the ordinary course of Borrower’s business,
upon fair and reasonable terms (when viewed in the context of any series of
transactions of which it may be a part, if applicable) that are no less favorable to Borrower than would
be obtained in
an arm’s length
transaction with a non-affiliated Person; or (b) transactions among Borrower and
its Subsidiaries and among Borrower’s Subsidiaries so long as no Event of
Default exists or could result therefrom.
7.9 Subordinated Debt. Make or permit any payment on or
amendments of any Subordinated Debt, except (a) payments pursuant to the terms
of the Subordinated Debt; (b) payments made with Borrower’s capital stock or
other Subordinated Debt; or (c) amendments to Subordinated Debt so long as such
Subordinated Debt remains subordinated in right of payment to this Agreement and
any Liens securing such Subordinated Debt remain subordinate in priority to
Bank’s Lien hereunder to the same extent as originally contemplated by
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 Borrower’s business, or permit any of its Subsidiaries to do
so; withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any present pension, profit sharing and deferred compensation
plan which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.
8
EVENTS OF
DEFAULT
Any one
of the following shall constitute an event of default (an “Event of Default”) under this Agreement:
8.1
Payment Default. Borrower fails to (a) make any
payment of principal or interest on any Credit Extension on its due date, or (b)
pay any other Obligations within three (3) Business Days after such Obligations
are due and payable (which three (3) Business Day cure period shall not apply to
payments due on the Revolving Line Maturity Date). During the cure period, the
failure to make or pay any payment specified under clause (a) or (b) hereunder
is not an Event of Default (but no Credit Extension will be made during the cure
period);
8.2
Covenant Default.
(a) Borrower
fails or neglects to perform any obligation in Sections 6.4, 6.5, 6.6, 6.7,
6.8(c), 6.11 or 6.12 or violates any covenant in Section 7; or
(b) Borrower
fails or neglects to perform any obligation in Section 6.2 and has failed to
cure the default within five (5) Business Days after Bank provides notice to
Borrower thereof, provided however such 5 day notice/cure period shall only be
available to Borrower two (2) times during the term of this
Agreement;
(c) 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) Business Days after the
occurrence thereof; provided, however, that if the default cannot by its nature
be cured within the ten (10) Business Day period or cannot after diligent
attempts by Borrower be cured within such ten (10) Business 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) Business
Days) to attempt to cure such default, and within such reasonable time period
the failure to cure the default shall not be deemed an Event of Default (but no
Credit Extensions shall be made during such cure period). Cure periods provided
under this section shall not apply, among other things, to financial covenants
or any other covenants set forth in clause (a) above;
8.3
Material Adverse Change. A Material Adverse Change
occurs.
8.4
Attachment; Levy; Restraint on Business.
(a) (i)
The service of process seeking to attach, by trustee or similar process, any
funds of Borrower or of any entity under the control of Borrower (including a
Subsidiary) on deposit or otherwise maintained with Bank or any Bank Affiliate,
or (ii) a notice of lien or levy is filed against any of Borrower’s assets by
any government agency, and the same under subclauses (i) and (ii) hereof are
not, within ten (10) Business 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) Business Day cure period;
or
(b) (i)
any material portion of Borrower’s assets is attached, seized, levied on, or
comes into possession of a trustee or receiver, or (ii) any court order enjoins,
restrains, or prevents Borrower from conducting any material part of its
business;
8.5
Insolvency (a) Borrower is
unable to pay its debts (including trade debts) as they become due or otherwise
becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an
Insolvency Proceeding is begun against Borrower and not dismissed or stayed
within forty-five (45) days (but no Credit Extensions shall be made while of any
of the conditions described in clause (a) exist and/or until any Insolvency
Proceeding is dismissed);
8.6
Other
Agreements. If (a) Borrower
fails to (i) make any payment that is due and payable with respect to any
Material Indebtedness and such failure continues after the applicable grace or
notice period, if any, specified in the agreement or instrument relating
thereto, or (ii) perform or observe any other condition or covenant, or any
other event shall occur or condition exist under any agreement or instrument
relating to any Material Indebtedness, and such failure continues after the
applicable grace or notice period, if any, specified in the agreement or
instrument relating thereto and the effect of such failure, event or
condition is to cause, or to permit (whether or not exercised), the holder or
holders of such Material Indebtedness to accelerate the maturity of such
Material Indebtedness or cause, or permit (whether or not exercised), the
mandatory repurchase of any Material Indebtedness; or (b) there is a default in
any Material Contract that could have a material adverse effect on Borrower’s
business;
8.7
Judgments. One or more final judgments, orders,
or decrees for the payment of money in an amount, individually or in the
aggregate, of at least Two Hundred Fifty Thousand ($250,000) (not covered by
independent third-party insurance as to which liability has been accepted by
such insurance carrier) shall be rendered against Borrower and the same are not,
within ten (10) Business Days after the entry thereof, discharged or execution
thereof stayed or bonded pending appeal, or such judgments are not discharged
prior to the expiration of any such stay (provided that no Credit Extensions
will be made prior to the discharge, stay, or bonding of such judgment, order,
or decree);
8.8
Misrepresentations. Borrower or any Person acting for
Borrower makes any representation, warranty, or other statement now or later in
this Agreement, any Loan Document or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document, and such
representation, warranty, or other statement is incorrect in any material
respect when made;
8.9
Subordinated Debt.
Any document, instrument, or agreement evidencing any Subordinated Debt shall
for any reason be revoked or invalidated or otherwise cease to be in full force
and effect (other than by repayment of such Subordinated Debt pursuant to the
terms thereof), 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 for any reason be
subordinated or shall not have the priority contemplated by this Agreement or
the applicable Subordination Agreement; or
8.10 Governmental Approvals. Any Governmental Approval shall have
been (a) revoked, rescinded, suspended, modified in an adverse manner or not
renewed in the ordinary course for a full term or (b) subject to any decision by
a Governmental Authority that designates a hearing with respect to any
applications for renewal of any of such Governmental Approval or that could
result in the Governmental Authority taking any of the actions described in
clause (a) above, and such decision or such revocation, rescission, suspension,
modification or non-renewal has, or could reasonably be expected to have, a
Material Adverse Change.
9
BANK’S RIGHTS AND
REMEDIES
9.1
Rights and Remedies. While an
Event of Default occurs and continues Bank may, without notice or demand, do any
or all of the following:
(a) declare
all Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 occurs all Obligations are immediately due and payable
without any action by Bank);
(b) stop
advancing money or extending credit for Borrower’s benefit under this Agreement
or under any other agreement between Borrower and Bank;
(c) demand
that Borrower (i) deposit cash with Bank in an amount equal to one hundred ten
percent (110%) of the Dollar Equivalent of the aggregate face amount of all
Letters of Credit remaining undrawn (plus all interest, fees, and costs due or
to become due in connection therewith (as estimated by Bank in its good faith
business judgment)), to secure all of the Obligations relating to such Letters
of Credit, as collateral security for the repayment of any future drawings under
such Letters of Credit, and Borrower shall forthwith deposit and pay such
amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid
or payable over the remaining term of any Letters of Credit;
(e) settle
or adjust disputes and claims directly with Account Debtors for amounts on terms
and in any order that Bank considers advisable, notify any Person owing Borrower
money of Bank’s security interest in such funds, and verify the amount of such
account;
(f)
make any payments and do any acts it considers necessary or reasonable to
protect the Collateral and/or its security interest in the Collateral. Borrower
shall assemble the Collateral if Bank requests and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank’s rights
or remedies;
(g) apply
to the Obligations any (i) balances and deposits of Borrower it holds, or (ii)
any amount held by Bank owing to or for the credit or the account of
Borrower;
(h) ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell the Collateral. Bank is hereby granted a non-exclusive,
royalty-free license or other right to use, without charge. Borrower’s labels,
Patents, Copyrights, mask works, rights of use of any name, trade secrets, trade
names, Trademarks, and advertising matter, or any similar property as it
pertains to the Collateral, in completing production of, advertising for sale,
and selling any Collateral and, in connection with Bank’s exercise of its rights
under this Section, Borrower’s rights under all licenses and all franchise
agreements inure to Bank’s benefit;
(i)
place a “hold” on any account maintained
with Bank and/or deliver a notice of exclusive control, any entitlement order,
or other directions or instructions pursuant to any Control Agreement or similar
agreements providing control of any Collateral:
(j)
receive access to Borrower’s Books; and
(k) exercise
all rights and remedies available to Bank under the Loan Documents or at law or
equity, including all remedies provided under the Code (including disposal of
the Collateral pursuant to the terms thereof).
9.2
Power of Attorney. Borrower hereby
irrevocably appoints Bank as its lawful attorney-in-fact, exercisable upon the
occurrence and during the continuance of an Event of Default, to: (a) endorse
Borrower’s name on any checks or other forms of payment or security; (b) sign
Borrower’s name on any invoice or bill of lading for any Account or drafts
against Account Debtors; (c) settle and adjust disputes and claims about the
Accounts directly with Account Debtors, for amounts and on terms Bank determines
reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance
policies; (e) pay, contest or settle any Lien, charge, encumbrance, security
interest, and adverse claim in or to the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; and
(f) transfer the Collateral into the name of Bank or a third party as the Code
permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign
Borrower’s name on any documents necessary to perfect or continue the perfection
of Bank’s security interest in the Collateral regardless of whether an Event of
Default has occurred until all Obligations have been satisfied in full and Bank
is under no further obligation to make Credit Extensions hereunder. Bank’s
foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights
and powers, coupled with an interest, are irrevocable until all Obligations have
been fully repaid and performed and Bank’s obligation to provide Credit
Extensions terminates.
9.3
Protective Payments. If Borrower fails to
obtain the insurance called for by Section 6.5 or fails to pay any premium
thereon or fails to pay any other amount which Borrower is obligated to pay
under this Agreement or any other Loan Document. Bank may obtain such insurance
or make such payment, and all amounts so paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then highest rate
applicable to the Obligations, and secured by the Collateral. Bank will make
reasonable efforts to provide Borrower with notice of Bank obtaining such
insurance at the time it is obtained or within a reasonable time thereafter. No
payments by Bank are deemed an agreement to make similar payments in the future
or Bank’s waiver of any Event of Default.
9.4
Application of Payments and
Proceeds Upon Default. If an Event of
Default has occurred and is continuing, Bank may apply any funds in its
possession, whether from Borrower account balances, payments, proceeds realized
as the result of any collection of Accounts or other disposition of the
Collateral, or otherwise, to the Obligations in such order as Bank shall
determine in its sole discretion. Any surplus shall be paid to Borrower or other
Persons legally entitled thereto: Borrower shall remain liable to Bank for any
deficiency. If Bank, in its good faith business judgment, directly or indirectly
enters into a deferred payment or other credit transaction with any purchaser at
any sale of Collateral. Bank shall have the option, exercisable at any time, of
either reducing the Obligations by the principal amount of the purchase price or
deferring the reduction of the Obligations until the actual receipt by Bank of
cash therefor.
9.5
Bank’s Liability for
Collateral. So long as Bank
complies with applicable law and reasonable banking practices regarding the
safekeeping of the Collateral in the possession or under the control of Bank,
Bank shall not be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral: (c) any diminution in the
value of the Collateral: or (d) any act or default of any carrier, warehouseman,
bailee, or other Person. Borrower bears all risk of loss, damage or destruction
of the Collateral.
9.6
No Waiver; Remedies Cumulative. Bank’s failure, at
any time or times, to require strict performance by Borrower of any provision of
this Agreement or any other Loan Document shall not waive, affect, or diminish
any right of Bank thereafter to demand strict performance and compliance
herewith or therewith. No waiver hereunder shall be effective unless signed by
the party granting the waiver and then is only effective for the specific
instance and purpose for which it is given. Bank’s rights and remedies under
this Agreement and the other Loan Documents are cumulative. Bank has all rights
and remedies provided under the Code, by law, or in equity. Bank’s exercise of
one right or remedy is not an election and shall not preclude Bank from
exercising any other remedy under this Agreement or other remedy available at
law or in equity, and Bank’s waiver of any Event of Default is not a continuing
waiver. Bank’s delay in exercising any remedy is not a waiver, election, or
acquiescence.
9.7
Demand Waiver. Borrower waives demand,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees held
by Bank on which Borrower is liable.
10
NOTICES
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.
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If to Borrower:
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Cornerstone
OnDemand, Inc.
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1601
Cloverfield Blvd. #620
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Attn:
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Fax:
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Email:
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If to Bank:
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Silicon
Valley Bank
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15260 Ventura Boulevard Suite 980
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Attn:
Stephen Hughes – Senior Relationship Manage
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11
CHOICE OF LAW, VENUE,
JURY TRIAL WAIVER, AND JUDICIAL REFERENCE
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 Borrower’s 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 §§ 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
§ 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.
12
GENERAL
PROVISIONS
12.1 Successors and Assigns. This Agreement
binds and is for the benefit of the successors and permitted assigns of each
party. Borrower may not assign this Agreement or any rights or obligations under
it without Bank’s prior written consent (which may be granted or withheld in
Bank’s discretion). Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, assign, negotiate, or grant participation in all or
any part of, or any interest in, Bank’s obligations, rights, and benefits under
this Agreement and the other Loan Documents (other than the Warrant, as to which
assignment, transfer and other such actions are governed by the
Warrant).
12.2 Indemnification. Borrower agrees to indemnify, defend
and hold Bank and its directors, officers, employees, agents, attorneys, or any
other Person affiliated with or representing Bank (each, an “Indemnified Person”)harmless against: (a) all
obligations, demands, claims, and liabilities (collectively, “Claims”) claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or expenses (including Bank Expenses) in any way suffered,
incurred, or paid by such Indemnified Person as a result of, following from,
consequential to, or arising from transactions between Bank and Borrower
(including reasonable attorneys’ fees and expenses), except for Claims and/or
losses directly caused by such Indemnified Person’s gross negligence or willful
misconduct.
12.3 Time of Essence. Time is of the essence for the
performance of all Obligations in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
12.5 Correction of Loan Documents. Bank may correct patent errors and
fill in any blanks in the Loan Documents consistent with the agreement of the
parties so long as Bank provides Borrower with written notice of such correction
and allows Borrower at least ten (10) days to object to such correction. In the
event of such objection, such correction shall not be made except by an
amendment signed by both Bank and Borrower.
12.6 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.
12.7 Counterparts. This Agreement may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, is an original, and all taken
together, constitute one Agreement.
12.8 Survival. All covenants, representations and
warranties made in this Agreement continue in full force until this Agreement
has terminated pursuant to its terms and all Obligations (other than inchoate
indemnity obligations and any other obligations which, by their terms, are to
survive the termination of this Agreement) have been paid in full and satisfied.
The obligation of Borrower in Section 12.2 to indemnify Bank shall survive until
the statute of limitations with respect to such claim or cause of action shall
have run.
12.9 Confidentiality. In handling any confidential
information, Bank shall exercise the same degree of care that it exercises for
its own proprietary information, but disclosure of information may be made: (a)
to Bank’s Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together
with Bank, collectively, “Bank Entities”); (b) to prospective transferees or
purchasers of any interest in the Credit Extensions (provided, however, that any
prospective transferee or purchaser shall have entered into an agreement
containing provisions substantially the same as those in this Section); (c) as
required by law, regulation, subpoena, or other order; (d) to Bank’s regulators
or as otherwise required in connection with Bank’s examination or audit; (e) as
Bank considers appropriate in exercising remedies under the Loan Documents; and
(f) to third-party service providers of Bank so long as such service providers
have executed a confidentiality agreement with Bank with terms no less
restrictive than those contained herein. Confidential information does not
include information that is either: (i) in the public domain or in Bank’s
possession when disclosed to Bank, or becomes part of the public domain after
disclosure to Bank; or (ii) disclosed to Bank by a third party if Bank does not
know that the third party is prohibited from disclosing the
information.
Bank
Entities may use confidential information for reporting purposes and the
development and distribution of databases and market analyses so long as such
confidential information is aggregated and anonymized prior to distribution
unless otherwise expressly permitted by Borrower. The provisions of the
immediately preceding sentence shall survive the termination of this
Agreement.
12.10 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 Captions. The headings used in this Agreement
are for convenience only and shall not affect the interpretation of this
Agreement.
12.13 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.
12.14 Relationship. The relationship of the parties to
this Agreement is determined solely by the provisions of this Agreement. The
parties do not intend to create any agency, partnership, joint venture, trust,
fiduciary or other relationship with duties or incidents different from those of
parties to an arm’s-length contract.
12.15 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.
13
DEFINITIONS
13.1 Definitions. As used in the Loan Documents, the
word “shall” is mandatory, the word “may” is permissive, the word “or” is not
exclusive, the words “includes” and “including” are not limiting, the singular
includes the plural, and numbers denoting amounts that are set off in brackets
are negative. As used in this Agreement, the following capitalized terms have
the following meanings:
“Account” is any “account” as defined in the
Code with such additions to such term as may hereafter be made, and includes,
without limitation, all accounts receivable and other sums owing to
Borrower.
“Account Debtor” is any
“account debtor” as defined in the Code with such additions to such term as may
hereafter be made.
“Advance” or “Advances” means an advance
(or advances) under the Revolving Line.
“Affiliate” is, with respect
to any Person, each other Person that owns or controls directly or indirectly
the Person, any Person that controls or is controlled by or is under common
control with the Person, and each of that Person’s senior executive officers,
directors, partners and, for any Person that is a limited liability company,
that Person’s managers and members.
“Agreement” is defined in the
preamble hereof.
“Applicable CMRR Multiplier”
is (a) three (3) at all times when the trailing twelve (12) month Dollar
Renewal Rate is ninety two and one half percent (92.5%) or higher or (b) two and
one half (2.50) at all times when the trailing twelve (12) month Dollar Renewal
Rate is less than ninety two and one half percent (92.5%).
“Applicable Non-Formula Amount”
is (i) Five Million Dollars ($5,000,000) from the Effective Date through
December 31, 2010, (ii) Two Million Five Hundred Thousand Dollars ($2,500,000)
from January 1, 2011 through June 30, 2011 and (iii) Zero Dollars ($0) at all
times beginning on July 1, 2011.
“Availability Amount” is (a)
the lesser of (i) the Revolving Line or (ii) the amount available under the
Borrowing Base minus (b) the Dollar Equivalent amount of all outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit) plus an amount
equal to the Letter of Credit Reserve, minus (c) the FX Reduction Amount, minus
(d) any amounts used for Cash Management Services, and minus (e) the outstanding
principal balance of any Advances.
“Bank” is defined in the
preamble hereof.
“Bank 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.
“Base CMRR” is Borrower’s CMRR
for its existing Eligible Recurring Revenue Contracts that are up for renewal
measured as of the first day of the applicable Monitoring Window.
“Borrower” is defined in the
preamble hereof.
“Borrower’s Books” are all
Borrower’s books and records including ledgers, federal and state tax returns,
records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition, and all computer programs or storage or any
equipment containing such information.
“Borrowing Base” is (i)
Borrower’s current forward one (1) month CMRR multiplied by the Applicable CMRR
Multiplier, as determined by Bank from Borrower’s most recent Borrowing Base
Certificate plus (ii) the Applicable Non-Formula Amount.
“Borrowing Base Certificate”
is that certain certificate in the form attached hereto as Exhibit
C.
“Borrowing Base Report” is
defined in Section 6.2(a).
“Borrowing Resolutions” are,
with respect to any Person, those resolutions substantially in the form attached
hereto as Exhibit
D
“Business Day” is any day that
is not a Saturday, Sunday or a day on which Bank is closed.
“Cash Equivalents” means (a)
marketable direct obligations issued or unconditionally guaranteed by the United
States or any agency or any State thereof having maturities of not more than one
(1) year from the date of acquisition; (b) commercial paper maturing no more
than one (1) year after its creation and having the highest rating from either
Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; (c)
Bank’s certificates of deposit issued maturing no more than one (1) year after
issue; and (d) money market funds at least ninety-five percent (95%) of the
assets of which constitute Cash Equivalents of the kinds described in clauses
(a) through (c) of this definition.
”Cash Management Services” is
defined in Section 2.1.4.
“Change in Control” means any
event, transaction, or occurrence as a result of which (a) any “person” (as such
term is defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act
of 1934, as an amended (the “Exchange Act”)), other than a trustee or other
fiduciary holding securities under an employee benefit plan of Borrower, is or
becomes a beneficial owner (within the meaning Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of Borrower, representing
twenty-five percent (25%) or more of the combined voting power of Borrower’s
then outstanding securities; or (b) during any period of twelve consecutive
calendar months, individuals who at the beginning of such period constituted the
Board of Directors of Borrower (together with any new directors whose nomination
for election by the Board of Directors of Borrower was approved by a vote of at
least a majority of the directors then still in office who either were directors
at the beginning of such period or whose election or nomination for election was
previously so approved, in each case, either by specific vote or by approval of
a proxy statement issued by Borrower on behalf of its entire Board of Directors
in which such individual is named as nominee for director) cease for any reason
other than death or disability to constitute a majority of the directors then in
office.
“CMRR” means aggregate total
contract value pursuant to Eligible Recurring Revenue Contracts less
non-recurring support, service, and maintenance fees smoothed for billing
purposes on a monthly basis over the duration of the aggregate contract(s) less
accounts that have churned.
“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, Bank’s 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 Certificate” is that certain
certificate in the form attached hereto as Exhibit
E.
“Contingent Obligation” is,
for any Person, any direct or indirect liability, contingent or not, of that
Person for (a) any indebtedness, lease, dividend, letter of credit or other
obligation of another such as an obligation, in each case, directly or
indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (b) any
obligations for undrawn letters of credit for the account of that Person;
and (c) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but “Contingent Obligation”
does not include endorsements in the ordinary course of business. The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
any guarantee or other support arrangement.
“Control Agreement” is any
control agreement entered into among the depository institution at which
Borrower maintains a Deposit Account or the securities intermediary or commodity
intermediary at which Borrower maintains a Securities Account or a Commodity
Account. Borrower, and Bank pursuant to which Bank obtains control (within the
meaning of the Code) over such Deposit Account, Securities Account, or Commodity
Account.
“Copyrights” are any and all
copyright rights, copyright applications, copyright registrations and like
protections in each work or authorship and derivative work thereof, whether
published or unpublished and whether or not the same also constitutes a trade
secret.
“Credit Extension” is any
Advance, Letter of Credit, FX Forward Contract, amount utilized for Cash
Management Services, or any other extension of credit by Bank for Borrower’s
benefit.
“Current Liabilities” are all
obligations and liabilities of Borrower to Bank, plus, without duplication, the
aggregate amount of Borrower’s Total Liabilities that mature within one (1)
year.
“Default Rate” is defined in
Section 2.3(b).
“Deferred Revenue” is all
amounts received or invoiced in advance of performance under contracts and not
yet recognized as revenue.
“Deposit Account” is any
“deposit account” as defined in the Code with such additions to such term as may
hereafter be made.
“Designated Deposit Account”
is Borrower’s deposit account, account number ,
maintained with Bank.
“Dollars,” “dollars” or use of the sign “$” means only lawful money of the
United States and not any other currency, regardless of whether that currency
uses the “$” sign to denote its currency or may be readily converted into
lawful money of the
United States.
“Dollar Renewal Rate” is for
any Monitoring Window (i) Borrower’s Base CMRR as of the first day of such
Monitoring Window plus Borrower’s Net Upsell Churn during such Monitoring Window
divided by (ii) Borrower’s Base CMRR as of the first day of such Monitoring
Window.
“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.
“Eligible Recurring Revenue
Contracts” means executed, enforceable contracts with Borrower’s or its Subsidiaries’ Account
Debtors which arise in the ordinary course of Borrower’s or its Subsidiaries’
business that meet all
Borrower’s representations and warranties in Section 5.3 and that give rise to
CMRR.
“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.
”Foreign Currency” means
lawful money of a country other than the United States.
“Foreign Subsidiary” means any
Subsidiary which is not a Domestic Subsidiary.
“Funding Date” is any date on
which a Credit Extension is made to or for the account of Borrower which shall
be a Business Day.
“FX Business Day” is any day
when (a) Bank’s Foreign Exchange Department is conducting its normal business
and (b) the Foreign Currency being purchased or sold by Borrower is available to
Bank from the entity from which Bank shall buy or sell such Foreign
Currency.
“FX Forward Contract” is
defined in Section 2.1.3.
“FX Reduction Amount” is
defined in Section 2.1.3.
“FX Reserve” is defined in
Section 2.1.3.
“GAAP” is generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other Person as may be
approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.
“General Intangibles” is all
“general intangibles” as defined in the Code in effect on the date hereof with
such additions to such term as may hereafter be made, and includes without
limitation, all 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 present or
future guarantor of the Obligations.
“Indebtedness” is (a)
indebtedness for borrowed money or the deferred price of property or services,
such as reimbursement and other obligations for surety bonds and letters of
credit, (b) obligations evidenced by notes, bonds, debentures or similar
instruments, (c) capital lease obligations, and (d) Contingent
Obligations.
“Indemnified Person” is defined in Section
12.2.
“Initial Audit” is Bank’s
inspection of Borrower’s Accounts. Eligible Recurring Revenue Contracts
Borrower’s Books and the other Collateral 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
all of Borrower’s right, title, and interest in and to the
following:
(a) its
Copyrights. Trademarks and Patents;
(b) any
and all trade secrets and trade secret rights, including, without limitation,
any rights to unpatented inventions, know-how, operating manuals;
(c) any
and all source code;
(d) any
and all design rights which may be available to a Borrower;
(e) any
and all claims for damages by way of past, present and future infringement of
any of the foregoing, with the right, but not the obligation, to 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 Borrower’s custody or
possession or in
transit and including any returned goods and any documents of title
representing any of the above.
“Investment”
is any beneficial ownership interest in any Person (including stock,
partnership interest or other securities), and any loan, advance or capital
contribution to any Person.
“IP
Agreement”
is that certain Intellectual Property Security Agreement executed and delivered
by Borrower to Bank dated as of the Effective Date.
“IPO”
means the initial public offering of Borrower’s common
stock.
“Letter
of
Credit” means a standby letter of credit issued by Bank or another
institution based upon an application, guarantee, indemnity or similar agreement
on the part of Bank as set forth in Section 2.1.2.
“Letter
of Credit Application” is defined in Section
2.1.2(b).
“Letter
of Credit Reserve” has the meaning set forth in Section
2.1.2(e).
“Lien”
is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any
property.
“Loan
Documents” are, collectively, this Agreement,
the Warrant, the Perfection Certificate, the IP Agreement, the Subordination
Agreement, the UK
Share Pledge Documents, any note, or notes or guaranties executed by
Borrower or any Guarantor in favor (or for the benefit) of Bank, and any other
present or future agreement between Borrower any Guarantor and/or for the
benefit of Bank in
connection with this Agreement, all as amended, restated, or
otherwise modified.
“Material
Adverse Change” is (a) a material impairment in the
perfection or
priority of Bank’s Lien in the Collateral or in the value of such
Collateral; (b) a material adverse change in the business, operations, or
condition (financial or otherwise) of Borrower; (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
Contract” means (a) any contract or other written agreement
described in the Perfection Certificate (b) any contract or other agreement of
Borrower and any Subsidiary involving monetary
liability of or to
any such Person in an amount in excess of Two Hundred Fifty Thousand
Dollars ($250,000); and (c) any other contract, agreement, permit or license,
written or oral, of Borrower and any Subsidiary as to which the breach,
nonperformance, cancellation of, failure to renew by any party thereto,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on Borrower’s business.
“Material
Indebtedness” is any Indebtedness
the principal amount of
which, individually or in
the aggregate, is equal to or greater than Two Hundred Fifty Thousand
Dollars ($250,000), and in any event, includes the Indebtedness evidenced by the
Indenture.
“Monitoring
Window” means (i) for the August
2010 measuring period, the period of time from October 2009 through July 2010,
(ii) for the September 2010 measuring period, the period of time from October
2009 through August
2010 and (iii) for each subsequent monthly
measuring period,
the trailing (12) months prior to
the start of such monthly measuring
period.
“Net
Upsell Churn” is for any Eligible Recurring Revenue Contracts under
review in any Monitoring Window the CMRR of chum plus the CMRR of additional
“upsells” for such Eligible Recurring Revenue
Contracts.
“Obligations”are
Borrower’s
obligations to
pay when due
any debts, principal, interest. Bank
Expenses and other amounts Borrower owes Bank now or later, whether under
this Agreement, the Loan Documents, or otherwise (other than the warrant being
issued to Bank in connection with this Agreement), including, without
limitation, all obligations relating to letters of credit (including
reimbursement obligations for drawn and undrawn letters of credit), cash
management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and to perform Borrower’s duties under
the Loan
Documents.
“Operating Documents” are, for
any Person, such Person’s formation documents, as certified with the Secretary
of State of such Person’s state of formation on a date that is no earlier than
30 days prior to the Effective Date, and, (a) if such Person is a corporation,
its bylaws in current form, (b) if such Person is a limited liability company,
its limited liability company agreement (or similar agreement), if any, and (c)
if such Person is a partnership, its partnership agreement (or similar
agreement), each of the foregoing with all current amendments or modifications
thereto.
“Patents” means all patents,
patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
“Payment/Advance Form” is that
certain form attached hereto as Exhibit
B.
“Perfection Certificate” is
defined in Section 5.1.
“Permitted Distributions”
are:
(a) purchases
of capital stock from former employees, consultants and directors pursuant to
repurchase
agreements or other similar agreements provided tliat at the time of such
purchase no Event of Default has
occurred and is continuing;
(b) distributions
or dividends consisting solely of Borrower’s capital stock;
(c) purchases
for value of any rights distributed in connection with any stockholder rights
plan;
(d) purchases
of capital stock or options to acquire such capital stock with the proceeds
received
from a substantially concurrent issuance of capital stock or convertible
securities;
(e) purchases
of capital stock pledged as collateral for loans to employees;
(f)
purchases of capital stock in connection with the exercise of stock options or
stock appreciation rights by way of cashless exercise or in connection with the
satisfaction of withholding tax obligations;
(g) purchases
of fractional shares of capital stock arising out of stock dividends, splits or
combinations or business combinations or in connection with the conversion of
any convertible securities of the Borrower into other securities of the
Borrower;
(h) distributions
or dividends paid to Borrower; and
(i)
purchases of capital stock of Borrower not to exceed (i) prior to a Qualified
IPO, Five Hundred
Thousand Dollars ($500,000) or (ii) thereafter, Five Million Dollars
($5,000,000), provided no Event of Default
exists at the time of such purchases or would result after giving effect
thereto.
“Permitted Indebtedness”
is:
(a)
Borrower’s Indebtedness to Bank under this Agreement and the other Loan
Documents;
(b)
Indebtedness existing on the Effective Date and shown on the Perfection
Certificate;
(c)
Subordinated Debt;
(d) unsecured
Indebtedness to trade creditors incurred in the ordinary course of
business:
(e) guaranties
of Permitted Indebtedness:
(f)
Indebtedness incurred as a result of endorsing negotiable instruments received
in the ordinary course of business;
(g) Indebtedness
consisting of interest rate, currency, or commodity swap agreements, interest
rate cap or collar agreements or arrangements entered into in the ordinary
course of business and designated to protect Borrower or its Subsidiaries
against fluctuations in interest rates, currency exchange rates, or commodity
prices;
(h) Indebtedness
that constitutes a Permitted Investment;
(i) Indebtedness
with respect to documentary letters of credit;
(j)
capitalized leases and purchase money Indebtedness not to exceed (x) prior to a
Qualified IPO, One Million Dollars ($1,000,000); and (y) thereafter, Two Million
Dollars ($2,000,000); in each case, in the aggregate in any fiscal year secured
by Liens permitted under clause (c) of the definition of “Permitted
Liens”;
(k) Indebtedness
of entities acquired in any permitted merger or acquisition
transaction;
(l)
(i) Indebtedness of
any Subsidiary to the Borrower or another Subsidiary and (ii) Indebtedness of
the Borrower to any Subsidiary; in each case, so long as Borrower complies with
the requirements of Sections 6.11 and 6.12 hereof;
(m) Indebtedness
owing to Bank pursuant to corporate credit cards in the ordinary course of
business;
(n) other
Indebtedness not exceeding Two Hundred Fifty Thousand Dollars ($250,000) in the
aggregate at any time outstanding; and
(o) extensions,
renewals and refinancings of Permitted Indebtedness, provided that the amount of
such Indebtedness is not increased except by an amount equal to a reasonable
premium or other reasonable amount paid in connection with such refinancing and
by an amount equal to any existing, but unutilized, commitment
thereunder.
“Permitted Investments”
are:
(a) Investments
(including, without limitation, Subsidiaries) existing on the Effective
Date;
(b) Investments
consisting of (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agencies or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 2 years
after its creation and having the highest rating from either Standard &
Poor’s Ratings Group or Moody’s Investors Service. Inc., (iii) Bank’s
certificates of deposit maturing no more than 2 years after issue; and (d) money
market funds at least ninety-five percent (95%) of the assets of which
constitute Investments of the kinds described in clauses (i) through (iii) of
this definition;
(c) Investments
approved by Borrower’s Board of Directors or otherwise pursuant to a
Board-approved investment policy;
(d) Investments
by Borrower in Subsidiaries and Investments in Borrower or other Subsidiaries by
Subsidiaries so long as Borrower complies with the requirements of Sections 6.11
and 6.12 hereof
(e)
Investments consisting of Collateral Accounts in the name of Borrower or any
Subsidiary so long as Bank has a first priority, perfected security interest in
such Collateral Accounts;
(f)
Investments consisting of extensions of credit to Borrower’s or its
Subsidiaries’ customers in the nature of accounts receivable, prepaid royalties
or notes receivable in the ordinary course of business arising from the sale or
lease of goods, provision of services or licensing activities of
Borrower;
(g) Investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers arising in the
ordinary course of business;
(h) Investments
consisting of interest rate, currency, or commodity swap agreements, interest
rate cap or collar agreements or arrangements entered into in the ordinary
course of business and designated to protect a Person against fluctuations in
interest rates, currency exchange rates, or commodity prices;
(i) 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 relating to the purchase of equity securities of Borrower or its
Subsidiaries pursuant to employee stock purchase plans or agreements approved by
Borrower’s Board of in an aggregate amount outstanding at any time not to exceed
Two Hundred Fifty Thousand Dollars ($250,000);
(j)
Investments permitted by Section 7.3;
(k)
Investments in connection with a Permitted Distribution;
(1) Other
Investments not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in the
aggregate in any fiscal year; and
(m) Investments
consisting of joint ventures or strategic alliances in the ordinary course of
Borrower’s business consisting of the non-exclusive licensing of technology, the
development of technology or the providing of technical support, in each case,
provided that any cash Investments by Borrower do not exceed (i) prior to a
Qualified IPO, Five Hundred Thousand Dollars ($500,000) or (ii) thereafter, Five
Million Dollars ($5,000,000), in the aggregate at any time
outstanding.
“Permitted Liens”
are:
(a) (i)
Liens securing Indebtedness under clause (b) of the definition of “Permitted
Indebtedness” hereunder, and (ii) Liens arising under this Agreement and the
other Loan Documents
(b) Liens
for taxes, fees, assessments or other government charges or levies, either (i)
not due and payable or (ii) being contested in good faith and for which Borrower
maintains adequate reserves on its Books. provided that no
notice of any such Lien has been filed or recorded under the Internal Revenue
Code of 1986, as amended, and the Treasury Regulations adopted
thereunder;
(c) Liens
(including with respect to capital leases) (i) on property (including
accessions, additions, parts, replacements, fixtures, improvements and
attachments thereto, and the proceeds thereof) acquired or held by Borrower or
its Subsidiaries incurred for financing such property (including accessions,
additions, parts, replacements, fixtures, improvements and attachments thereto,
and the proceeds thereof), other than Accounts, or (ii) existing on property
(and accessions, additions, parts, replacements, fixtures, improvements and
attachments thereto, and the proceeds thereof) when acquired, other than
Accounts, if the Lien is confined to such property (including accessions,
additions, parts, replacements, fixtures, improvements and attachments thereto,
and the proceeds thereof);
(d) Liens
incurred in the extension, renewal or refinancing of the indebtedness secured by
Liens described in (a) through (c), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness it secures may not
increase;
(e) 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, securing liabilities in the aggregate amount not to exceed
Two Hundred Fifty Thousand Dollars ($250,000) 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;
(f) Liens
to secure payment of workers’ compensation, employment insurance, old-age
pensions, social security and other like obligations incurred in the ordinary
course of business (other than Liens imposed by ERISA);
(g) leases
or subleases of real property granted in the ordinary course of Borrower’s
business (or, if referring to another Person, in the ordinary course of such
Person’s business), and leases, subleases, non-exclusive licenses or sublicenses
of personal property (other than Intellectual Property) granted in the ordinary
course of Borrower’s business (or, if referring to another Person, in the
ordinary course of such Person’s business), if the leases, subleases, licenses and
sublicenses do not prohibit granting Bank a security interest
therein;
(h) non-exclusive
license 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;
(i)
Liens in favor of custom and revenue authorities arising as a matter
of law to secure the payment of custom duties in connection with the importation
of goods;
(j)
customary Liens granted in favor of a trustee to secure fees and other amounts
owing to such trustee under an indenture or other similar
agreement;
(k)
Liens on assets acquired in mergers and acquisitions not prohibited by Section 7
of this Agreement;
(l) Liens
consisting of pledges of cash, cash equivalents or government securities to
secure swap or foreign exchange contracts or letters of credit, provided that
the amount of all such Liens does not exceed Two Hundred Fifty Thousand Dollars
($250,000);
(m) Liens
arising from attachments or judgments, orders, or decrees in circumstances not
constituting an Event of Default under Sections 8.4 and 8.7;
(n) Liens
in favor of other financial institutions arising in connection with Borrower’s
deposit and/or securities accounts held at such institutions, provided that Bank
has a perfected security interest in the amounts held in such deposit and/or
securities accounts;
(o) deposits
to secure the performance of bids, trade contracts (other than for borrowed
money), contracts for the purchase of property, leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature, in each case, incurred in the ordinary course of business and not
representing an obligation for borrowed money;
(p) Liens
securing Subordinated Debt; and
(q) Liens
on insurance proceeds securing the payment of financial insurance
premiums.
“Person” is any individual,
sole proprietorship, partnership, limited liability company, joint venture,
company, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate,
entity or government agency.
“Prime Rate” is Bank’s most
recently announced “prime rate,” even if it is not Bank’s lowest
rate.
“Qualified IPO” is an IPO
where Borrower receives net proceeds in excess of Thirty Million Dollars
($30,000,000).
“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.
“Responsible Officer” is any
of the Chief Executive Officer, President, Chief Financial Officer and
Controller of Borrower.
“Restricted License” is any
material license or other agreement with respect to which Borrower is the
licensee (a) that prohibits or otherwise restricts Borrower from granting a
security interest in Borrower’s interest in such license or agreement or any
other property, or (b) for which a default under or termination of could
interfere with the Bank’s right to sell any Collateral.
“Revolving Line” is an Advance
or Advances in an amount equal to Fifteen Million Dollars
($15,000,000).
“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.
“Settlement Date” is defined
in Section 2.1.3.
“Subordinated Debt” (a)
Indebtedness incurred by Borrower subordinated to Borrower’s Indebtedness owed
to Bank and which is reflected in a written agreement in a manner and form
reasonably acceptable to Bank and approved by Bank in writing, (b) to the extent
the terms of subordination do not change adversely to Bank, refinancings,
refundings, renewals, amendments or extensions of any of the
foregoing.
“Subsidiary” is, as to any
Person, a corporation, partnership, limited liability company or other entity of
which shares of stock or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless the context otherwise
requires, each reference to a Subsidiary herein shall be a reference to a
Subsidiary of Borrower or Guarantor.
“Total Liabilities” is on any
day, obligations that should, under GAAP, be classified as liabilities on
Borrower’s consolidated balance sheet, including all Indebtedness.
“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.
“Warrant” is that certain
Warrant to Purchase Stock dated as of the Effective Date executed by Borrower in
favor of Bank.
“UK Share Pledge Documents” is
those certain charge over shares with respect to sixty five percent (65%) of the
voting securities of Cornerstone OnDemand Ltd. and any other document required
to be executed by Borrower in connection therewith.
[Signature
page follows.]
IN
WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed as of the Effective
Date.
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BORROWER:
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CORNERSTONE
ONDEMAND, INC.
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By
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/s/
Adam Miller
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Name:
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Adam
Miller
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Title:
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CEO
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BANK:
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SILICON
VALLEY BANK
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By:
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/s/
Tim Barnes
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Name:
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Tim Barnes, RM
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Title:
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