NUTANIX, INC. COMERICA BANK LOAN AND SECURITY AGREEMENT

Exhibit 10.18

NUTANIX, INC.

COMERICA BANK

LOAN AND SECURITY AGREEMENT

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This LOAN AND SECURITY AGREEMENT (as amended, restated, modified or otherwise supplemented from time to time, this “Agreement”) is entered into as of November 26, 2013, by and between Comerica Bank (“Bank”) and NUTANIX, INC., a Delaware corporation (“Borrower”).

RECITALS

Borrower wishes to obtain credit from time to time from Bank, and Bank desires to extend credit to Borrower. This Agreement sets forth the terms on which Bank will advance credit to Borrower, and Borrower will repay the amounts owing to Bank.

AGREEMENT

The parties agree as follows:

1. DEFINITIONS AND CONSTRUCTION.

1.1 Definitions. As used in this Agreement, all capitalized terms shall have the definitions set forth on Exhibit A. Any term used in the Code and not defined herein shall have the meaning given to the term in the Code.

1.2 Accounting Terms. Any accounting term not specifically defined on Exhibit A shall be construed in accordance with GAAP and all calculations shall be made in accordance with GAAP. The term “financial statements” shall include the accompanying notes and schedules.

2. LOAN AND TERMS OF PAYMENT.

2.1 Credit Extensions.

(a) Promise to Pay. Borrower promises to pay to Bank, in lawful money of the United States of America, the aggregate unpaid principal amount of all Credit Extensions made by Bank to Borrower, together with interest on the unpaid principal amount of such Credit Extensions at rates in accordance with the terms hereof.

(b) Advances Under Revolving Line.

(i) Amount. Subject to and upon the terms and conditions of this Agreement Borrower may request Advances in an aggregate outstanding amount not to exceed the lesser of (A) the Revolving Line or (B) the sum of the Borrowing Base plus Seven Million Five Hundred Thousand Dollars ($7,500,000). Except as set forth in the Pricing Addendum, Advances may be repaid and reborrowed at any time without penalty or premium prior to the Revolving Maturity Date, at which time all Advances shall be immediately due and payable.

(ii) Form of Request. Whenever Borrower desires an Advance, Borrower will notify Bank by facsimile transmission or telephone no later than 3:00 p.m. Pacific Time (12:00 p.m. Pacific Time for wire transfers), on the Business Day that the Advance is to be made. Each such notification shall be promptly confirmed by a Payment/Advance Form in substantially the form of Exhibit C. Bank is authorized to make Advances under this Agreement, based upon instructions received from a Responsible Officer, or without instructions if in Bank’s discretion such Advances are necessary to meet Obligations which have become due and remain unpaid. Bank shall be entitled to rely on any facsimile or telephonic notice given by a person who Bank reasonably believes to be a Responsible Officer, and Borrower shall indemnify and hold Bank harmless for any damages or loss suffered by Bank as a result of such reliance. Bank will credit the amount of Advances made under this Section to Borrower’s deposit account at Bank or as otherwise provided in written instructions from Borrower.

 

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2.2 Overadvances. If the aggregate principal amount of the outstanding Advances exceeds the lesser of (i) the Revolving Line or (ii) the Borrowing Base plus $7,500,000 at any time, Borrower shall immediately pay to Bank, in cash, the amount of such excess.

2.3 Interest Rates, Payments, and Calculations.

(a) Interest Rates. The Advances shall bear interest, on the outstanding daily balance thereof, on the terms set forth in the Prime Referenced Rate Addendum attached hereto as Exhibit F.

(b) Payments. Bank shall, at its option, charge such interest, all Bank Expenses, and all Periodic Payments against any of Borrower’s deposit accounts or against the Revolving Line, in which case if charged against the Revolving Line those amounts shall thereafter accrue interest at the rate then applicable hereunder. Any interest not paid when due shall be compounded by becoming a part of the Obligations, and such interest shall thereafter accrue interest at the rate then applicable hereunder.

2.4 Crediting Payments. So long as no Event of Default has occurred and is continuing, Bank shall credit a wire transfer of funds, check or other item of payment to such deposit account or Obligation as Borrower specifies. After the occurrence and during the continuance of an Event of Default, Bank shall have the right, in its sole discretion, to immediately apply any wire transfer of funds, check, or other item of payment Bank may receive to conditionally reduce Obligations, but such applications of funds shall not be considered a payment on account unless such payment is of immediately available federal funds or unless and until such check or other item of payment is honored when presented for payment. Notwithstanding anything to the contrary contained herein, any wire transfer or payment received by Bank after 12:00 noon Pacific Time shall be deemed to have been received by Bank as of the opening of business on the immediately following Business Day. Whenever any payment to Bank under the Loan Documents would otherwise be due (except by reason of acceleration) on a date that is not a Business Day, such payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for the period of such extension.

2.5 Fees. Borrower shall pay to Bank the following:

(a) Facility Fee. None; and

(b) Bank Expenses. On the Closing Date, all Bank Expenses incurred through the Closing Date, and, after the Closing Date, all Bank Expenses, as and when they become due.

2.6 Term. This Agreement shall become effective on the Closing Date and, subject to Section 13.8, shall continue in full force and effect for so long as any Obligations (other than inchoate indemnity obligations) remain outstanding or Bank has any obligation to make Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank shall have the right to terminate its obligation to make Credit Extensions under this Agreement immediately and with notice to Borrower upon the occurrence and during the continuance of an Event of Default.

2.7 Termination. Borrower may terminate the Revolving Line prior to the Revolving Maturity Date by written notice by Borrower to Bank. Such termination shall be effective on the date specified in Borrower’s notice to Bank, which date must be at least three (3) Business Days after the date such written notice of termination is given to Bank. The notice of termination may state that such notice is conditioned upon the occurrence of one or more events specified therein and may be revoked by Borrower (by written notice to Bank) if such condition is not satisfied. As a condition to the effectiveness of any such termination, Borrower shall repay the outstanding Obligations (other than inchoate indemnity obligations), and Bank’s Lien on the Collateral shall remain in place until such repayment.

 

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3. CONDITIONS OF CREDIT EXTENSIONS.

3.1 Conditions Precedent to Initial Credit Extension. The obligation of Bank to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, the following:

(a) this Agreement;

(b) an officer’s certificate of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Agreement;

(c) the Pricing Addendum;

(d) a financing statement (Form UCC-1);

(e) an agreement to furnish insurance;

(f) payment of the fees and Bank Expenses then due specified in Section 2.5;

(g) current SOS Reports indicating that except for Permitted Liens, there are no other security interests or Liens of record in the Collateral other than Liens that will be released in connection with the closing of this Agreement;

(h) (i) audited statements for Borrower’s most recently ended fiscal year, together with an unqualified opinion, (ii) company prepared consolidated balance sheets and income statements for the most recently ended month in accordance with Section 6.2, and (iii) such other updated financial information as Bank may reasonably request;

(i) a Warrant;

(j) a Collateral Information Certificate;

(k) a payoff letter from ▇▇▇▇▇ Fargo Bank;

(l) an Automatic Loan Payment Authorization; and

(m) such other documents or certificates, and completion of such other matters, as Bank may reasonably request.

3.2 Conditions Precedent to all Credit Extensions. The obligation of Bank to make each Credit Extension, including the initial Credit Extension, is further subject to the following conditions:

(a) timely receipt by Bank of the Payment/Advance Form as provided in Section 2.1; and

(b) the representations and warranties contained in Article 5 shall be true and correct in all material respects on and as of the date of such Payment/Advance Form and on the effective date of each Credit Extension as though made at and as of each such date, and no Event of Default shall have occurred and be continuing, or would exist after giving effect to such Credit Extension (provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of such date). The making of each Credit Extension shall be deemed to be a representation and warranty by Borrower on the date of such Credit Extension as to the accuracy of the facts referred to in this Section 3.2.

 

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4. CREATION OF SECURITY INTEREST.

4.1 Grant of Security Interest. Borrower grants and pledges to Bank a continuing security interest in the Collateral to secure prompt repayment of any and all Obligations and to secure prompt performance by Borrower of each of its covenants and duties under the Loan Documents. Except as set forth in the Schedule and for Permitted Liens, such security interest constitutes a valid, first priority security interest in the presently existing Collateral to the extent that such security interest can be perfected by the taking of the actions required by Bank pursuant to Section 4.2. Borrower also hereby agrees not to sell, transfer, assign, mortgage, pledge, lease, grant a security interest in, or encumber any of its Intellectual Property, except in connection with Permitted Liens and Permitted Transfers. Notwithstanding any termination of this Agreement, Bank’s Lien on the Collateral shall remain in effect for so long as any Obligations (other than inchoate indemnity obligations) are outstanding.

4.2 Perfection of Security Interest. Borrower authorizes Bank to file at any time financing statements, continuation statements, and amendments thereto that (i) either specifically describe the Collateral or describe the Collateral as all assets of Borrower of the kind pledged hereunder, and (ii) contain any other information required by the Code for the sufficiency of filing office acceptance of any financing statement, continuation statement, or amendment, including whether Borrower is an organization, the type of organization and any organizational identification number issued to Borrower, if applicable. Any such financing statements may be filed by Bank at any time in any jurisdiction whether or not Division 9 of the Code is then in effect in that jurisdiction. Borrower shall from time to time endorse and deliver to Bank, at the request of Bank, all Negotiable Collateral and other documents having a value in excess of $100,000 that Bank may reasonably request, in form reasonably satisfactory to Bank, to perfect and continue perfection of Bank’s security interests in the Collateral and in order to fully consummate all of the transactions contemplated under the Loan Documents. Borrower shall have possession of the Collateral, except where expressly otherwise provided in this Agreement or where Bank chooses to perfect its security interest by possession in addition to the filing of a financing statement. Where Collateral is in possession of a third party bailee, Borrower shall take such steps as Bank reasonably requests for Bank to (i) if required pursuant to Section 7.10 obtain an acknowledgment, in form and substance reasonably satisfactory to Bank, of the bailee that the bailee holds such Collateral for the benefit of Bank, (ii) obtain “control” of any Collateral consisting of investment property, deposit accounts, securities accounts, letter-of-credit rights or electronic chattel paper (as such items and the term “control” are defined in Division 9 of the Code) by causing the securities intermediary or depositary institution or issuing bank to execute a control agreement in form and substance reasonably satisfactory to Bank. Borrower will not create any chattel paper in which Borrower is a lessor without placing a legend on the chattel paper reasonably acceptable to Bank indicating that Bank has a security interest in the chattel paper. Borrower from time to time may deposit with Bank specific cash collateral to secure specific Obligations; Borrower authorizes Bank to hold such specific balances in pledge and to decline to honor any drafts thereon or any request by Borrower or any other Person to pay or otherwise transfer any part of such balances for so long as the specific Obligations are outstanding.

4.3 Right to Inspect. Bank (through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to time during Borrower’s usual business hours but no more than twice a year (unless an Event of Default has occurred and is continuing), to inspect Borrower’s Books and to make copies thereof and to check, test, and appraise the Collateral in order to verify Borrower’s financial condition or the amount, condition of, or any other matter relating to, the Collateral. Bank shall receive a Collateral audit in form and substance reasonably acceptable to Bank within sixty (60) days after the Closing Date.

5. REPRESENTATIONS AND WARRANTIES.

Borrower represents and warrants as follows:

5.1 Due Organization and Qualification. Borrower and each Subsidiary is an entity duly existing under the laws of the jurisdiction in which it is organized and qualified and, if applicable, is licensed to do business in any state in which the conduct of its business or its ownership of property requires that it be so qualified, except where the failure to do so could not reasonably be expected to cause a Material Adverse Effect.

5.2 Due Authorization; No Conflict. The execution, delivery, and performance by Borrower of the Loan Documents are within Borrower’s corporate powers, have been duly authorized by Borrower, and are not in conflict with nor constitute a breach of any provision contained in Borrower’s organizational documents, nor will they constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement by which it is bound, except to the extent such default would not reasonably be expected to cause a Material Adverse Effect.

 

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5.3 Collateral. Borrower has rights in or the power to transfer the Collateral, and its title to the Collateral is free and clear of Liens, adverse claims, and restrictions on transfer or pledge except for (a) Permitted Liens and (b) restrictions on transfer or pledge in connection with (i) Permitted Liens, (ii) inbound license agreements, (iii) Permitted Transfers and (iv) restrictions permitted by Section 7.5. Other than (i) goods in transit and (ii) test equipment being used by customers or potential customers, as of the date hereof all Collateral is located solely in the Collateral States. The Eligible Accounts are bona fide existing obligations. The property or services giving rise to such Eligible Accounts has been delivered or rendered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor. Borrower has not received notice of actual or imminent Insolvency Proceeding of any account debtor whose accounts are included in any Borrowing Base Certificate as an Eligible Account. No licenses or agreements giving rise to such Eligible Accounts is with any Prohibited Territory or with any Person organized under or doing business in a Prohibited Territory. All Inventory is in all material respects of good and merchantable quality, free from all material defects, except for Inventory for which adequate reserves have been made. Except as set forth in the Schedule, as of the date hereof none of the Collateral constituting deposit accounts or securities accounts is maintained or invested with a Person other than Bank or Bank’s Affiliates.

5.4 Intellectual Property. Borrower is the sole owner of the Intellectual Property, except for non-exclusive licenses granted by Borrower to its customers in the ordinary course of business and subject to Permitted Liens. To Borrower’s knowledge, each of the Copyrights, Trademarks and Patents owned by Borrower and material to Borrower’s business is valid and enforceable, and no part of the Intellectual Property that is material to Borrower’s business has been judged invalid or unenforceable, in whole or in part, and no claim has been made in writing to Borrower that any part of the Intellectual Property material to Borrower’s business violates the rights of any third party except to the extent such claim could not reasonably be expected to cause a Material Adverse Effect.

5.5 Name; Location of Chief Executive Office; Location of Inventory and Equipment. Except as disclosed in the Schedule or to the extent Borrower has notified Bank pursuant to Section 7.2 hereof, within the five years prior to the date hereof, Borrower has not done business under any name other than that specified on the signature page hereof, and its exact legal name is as set forth in the first paragraph of this Agreement. The chief executive office of Borrower is located in the Chief Executive Office State at the address indicated in Section 10 hereof, or in such other State and at such other address as Borrower has given notice of in accordance with Section 7.2 hereof. Except as disclosed in the Schedule, all inventory and equipment of Borrower is located at the address indicated in Section 10 hereof or such other address as Borrower has given notice of in accordance with Section 7.2 hereof.

5.6 Actions, Suits, Litigation, or Proceedings. Except as set forth in the Schedule, there are no actions, suits, litigation or proceedings, at law or in equity, pending against Borrower or any Subsidiary before any court, administrative agency, or arbitrator in which could reasonably be expected to have a Material Adverse Effect.

5.7 No Material Adverse Change in Financial Statements. All consolidated and, if available, consolidating financial statements of Borrower and its Subsidiaries that are delivered by Borrower to Bank fairly present in all material respects Borrower’s consolidated and, if available, consolidating financial condition as of the date thereof and Borrower’s consolidated and, if available, consolidating results of operations for the period then ended. There has not been a material adverse change in the consolidated financial condition of Borrower and its Subsidiaries since the date of the most recent of such financial statements submitted to Bank.

5.8 Solvency, Payment of Debts. Borrower is able to pay its debts (including trade debts) generally as they mature; the fair saleable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; and Borrower is not left with unreasonably small capital after the transactions contemplated by this Agreement.

 

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5.9 Compliance with Laws and Regulations. Borrower and each Subsidiary have met the minimum funding requirements of ERISA with respect to any employee benefit plans of Borrower or such Subsidiary subject to ERISA. No event has occurred resulting from Borrower’s failure to comply with ERISA that is reasonably likely to result in Borrower’s incurring any liability that could reasonably be expected to have a Material Adverse Effect. Borrower is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940. Borrower is not engaged principally, or as one of the important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T, U, and X of the Board of Governors of the Federal Reserve System). Borrower has complied in all material respects with all the provisions of the Federal Fair Labor Standards Act. Borrower is in compliance with all environmental laws, regulations and ordinances applicable to it except where the failure to comply is not reasonably likely to have a Material Adverse Effect. Borrower has not violated any statutes, laws, ordinances or rules applicable to it, the violation of which could reasonably be expected to have a Material Adverse Effect. Borrower and each Subsidiary have filed or caused to be filed all tax returns required to be filed by them, and have paid, or have made adequate provision for the payment of, all taxes reflected therein except those being contested in good faith with adequate reserves under GAAP or where the failure to file such returns or pay such taxes could not reasonably be expected to have a Material Adverse Effect.

5.10 Subsidiaries. Borrower does not own any stock, partnership interest or other equity securities of any Person, except for Permitted Investments.

5.11 Government Consents. Borrower and each Subsidiary have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all governmental authorities that are necessary for the continued operation of Borrower’s business as currently conducted, except where the failure to do so would not reasonably be expected to cause a Material Adverse Effect.

5.12 Inbound Licenses. Except as disclosed on the Schedule, Borrower is not a party to, nor is bound by, any material inbound license the failure, breach, or termination of which could reasonably be expected to cause a Material Adverse Effect, or that prohibits or otherwise restricts, in a manner enforceable under applicable law, Borrower from granting a security interest in Borrower’s interest in such material inbound license.

5.13 Full Disclosure. No representation, warranty or other statement made by Borrower in any certificate or written statement furnished to Bank, taken together with all such certificates and written statements furnished to Bank, when furnished contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in such 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 to be viewed as facts and that actual results during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results.

6. AFFIRMATIVE COVENANTS.

Borrower covenants that, until payment in full of all outstanding Obligations (other than inchoate indemnity obligations), and for so long as Bank may have any commitment to make a Credit Extension hereunder, Borrower shall do all of the following:

6.1 Good Standing and Government Compliance. Borrower shall maintain its and each of its Subsidiaries’ organizational existence and (if applicable) good standing in its jurisdiction of formation, shall maintain qualification to do business and good standing (if applicable) in each other jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Effect, and shall furnish to Bank the organizational identification number issued to Borrower by the authorities of the jurisdiction in which Borrower is organized, if applicable. Borrower shall meet, and shall cause each Subsidiary to meet, the minimum funding requirements of ERISA with respect to any employee benefit plans of Borrower of such Subsidiary subject to ERISA. Borrower shall comply in all material respects with all applicable Environmental Laws, and maintain all material permits, licenses and approvals required thereunder where the failure to do so could reasonably be expected to have a Material Adverse Effect. Borrower shall comply, and shall cause each Subsidiary to comply, with all statutes, laws, ordinances and government rules and regulations to which it is subject, and shall maintain, and shall cause each of its Subsidiaries to maintain, in force all licenses, approvals and agreements, in each case the loss of which or failure to comply with which would reasonably be expected to have a Material Adverse Effect.

 

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6.2 Financial Statements, Reports, Certificates. Borrower shall deliver to Bank: (i) as soon as available, but in any event within thirty (30) days after the end of each calendar month, a company prepared consolidated and, if prepared, consolidating balance sheet and income statement covering Borrower’s operations during such period, certified by a Responsible Officer; (ii) as soon as available, but in any event within one hundred eighty (180) days after the end of Borrower’s fiscal year (beginning fiscal year 2013), audited consolidated financial statements of Borrower prepared in accordance with GAAP, consistently applied, together with an opinion which is unqualified (including no going concern comment or qualification for liquidity) or otherwise consented to in writing by Bank on such financial statements of an independent certified public accounting firm reasonably acceptable to Bank; (iii) if applicable, copies of all statements, reports and notices sent or made available generally by Borrower to its security holders and all reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission; (iv) promptly upon receipt of notice thereof, a report of any legal actions pending or threatened in writing against Borrower or any Subsidiary that could reasonably be expected to result in damages or costs to Borrower or any Subsidiary of Five Hundred Thousand Dollars ($500,000) or more; (v) promptly upon receipt, each management letter prepared by Borrower’s independent certified public accounting firm regarding Borrower’s management control systems; (vi) as soon as available, but in any event not later than January 30 of each calendar year, Borrower’s financial and business projections and budget for that year, with evidence of approval thereof by Borrower’s board of directors; and (vii) such budgets, sales projections, operating plans or other financial information generally prepared by Borrower in the ordinary course of business as Bank may reasonably request from time to time.

(a) Within twenty-five (25) days after the last day of each month, Borrower shall deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in substantially the form of Exhibit D hereto, together with aged listings by invoice date of accounts receivable and accounts payable.

(b) Within thirty (30) days after the last day of each month, Borrower shall deliver to Bank with the monthly financial statements a Compliance Certificate certified as of the last day of the applicable month and signed by a Responsible Officer in substantially the form of Exhibit E hereto.

(c) As soon as possible and in any event within three (30) Business Days becoming aware of the occurrence or existence of an Event of Default hereunder, a written statement of a Responsible Officer setting forth details of the Event of Default, and the action which Borrower has taken or proposes to take with respect thereto.

(d) Bank shall have a right from time to time hereafter to audit Borrower’s Accounts and appraise Collateral at Borrower’s expense, provided that such audits will be conducted no more often than every six (6) months unless an Event of Default has occurred and is continuing.

Borrower may deliver to Bank on an electronic basis any certificates, reports or information required pursuant to this Section 6.2, and Bank shall be entitled to rely on the information contained in the electronic files, provided that Bank in good faith believes that the files were delivered by a Responsible Officer. If Borrower delivers this information electronically, it shall also deliver to Bank by U.S. Mail, reputable overnight courier service, hand delivery, facsimile or .pdf file within five (5) Business Days of submission of the unsigned electronic copy the certification of monthly financial statements, the intellectual property report, the Borrowing Base Certificate and the Compliance Certificate, each bearing the physical signature of the Responsible Officer.

6.3 Inventory; Returns. Borrower shall keep all Inventory in good and merchantable condition, free from all material defects except for Inventory for which adequate reserves have been made. Returns and allowances, if any, as between Borrower and its account debtors shall be on the same basis and in accordance with the usual customary practices of Borrower, as Borrower may change such practices from time to time in its business judgment. Borrower shall promptly notify Bank of all returns and recoveries and of all disputes and claims involving more than Five Hundred Thousand Dollars ($500,000).

6.4 Taxes. Borrower shall make, and cause each Subsidiary to make, due and timely payment or deposit of all material federal, state, and local taxes, assessments, or contributions required of it by applicable law, including, but not limited to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and state disability, and will execute and deliver to Bank, on demand, proof reasonably satisfactory to Bank indicating that

 

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Borrower or a Subsidiary has made such payments or deposits and any appropriate certificates attesting to the payment or deposit thereof; provided that Borrower or a Subsidiary need not make any payment if the amount or validity of such payment is contested in good faith by appropriate proceedings and is reserved against (to the extent required by GAAP) by Borrower or its Subsidiary, as applicable.

6.5 Insurance.

(a) Borrower, at its expense, shall keep the Collateral insured against loss or damage by fire, theft, explosion and sprinklers, in such amounts, as ordinarily insured against by other owners in similar businesses conducted in the locations where Borrower’s business is conducted on the date hereof. Borrower shall also maintain liability and other insurance in amounts and of a type that are customary to businesses similar to Borrower’s.

(b) All such policies of insurance shall be in such form, with such companies, and in such amounts as reasonably satisfactory to Bank. All policies of property insurance shall contain a lender’s loss payable endorsement, in a form satisfactory to Bank, showing Bank as an additional loss payee, and all liability insurance policies shall show Bank as an additional insured and specify that the insurer must give at least thirty (30) days notice to Bank before canceling its policy for any reason. Upon Bank’s request, Borrower shall deliver to Bank evidence of all premium payments. If no Event of Default has occurred and is continuing, proceeds payable under any casualty policy will, at Borrower’s option, be payable to Borrower to replace the property subject to the claim or otherwise acquire property useful to the business of Borrower, provided that if such property constituted Collateral, any such replacement property shall be deemed Collateral in which Bank has been granted a first priority security interest, subject to Permitted Liens. If an Event of Default has occurred and is continuing, and to the extent such proceeds constitute Collateral, all proceeds payable under any such policy shall, at Bank’s option, be payable to Bank to be applied on account of the Obligations.

6.6 Accounts. From and after thirty (30) days after the Closing Date, Borrower shall maintain its primary depository and operating accounts with Bank and its investment accounts with Bank or Bank’s Affiliates (covered by satisfactory control agreements), to include all funds not being used in Borrower’s operations, provided Borrower may maintain accounts with ▇▇▇▇▇ Fargo Bank for the day-to-day conduct of business of Borrower and its Subsidiaries, including disbursements and collection of accounts receivable.

6.7 Liquidity Ratio. At all times after the Equity Event, Borrower shall maintain a Liquidity Ratio of at least 1.25 to 1.00.

6.8 Registration of Intellectual Property Rights.

(a) Borrower shall promptly register or cause to be registered (to the extent not already registered) with the United States Patent and Trademark Office or the United States Copyright Office, as the case may be, those registrable material intellectual property rights now owned or hereafter developed or acquired by Borrower, to the extent that Borrower, in its reasonable business judgment, deems it appropriate to so protect such intellectual property rights.

(b) Borrower shall, upon the request of Bank, promptly give Bank a list of any applications or registrations of intellectual property rights filed with the United States Patent and Trademark Office and United States Copyright Office, including the date of such filing and the registration or application numbers, if any.

(c) Borrower shall, upon the request of Bank, give Bank prompt written notice of the filing of any applications or registrations with the United States Copyright Office, including the title of such intellectual property rights to be registered, as such title will appear on such applications or registrations, and the date such applications or registrations will be filed.

 

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(d) Borrower shall use commercially reasonable efforts to (i) protect, defend and maintain the validity and enforceability of the Trademarks, Patents, Copyrights, and trade secrets that are material to the conduct of the business of Borrower, (ii) promptly upon knowledge thereof, notify Bank of any material infringements of the Trademarks, Patents and Copyrights that are material to the conduct of the business of Borrower and (iii) not allow any material Trademarks, Patents or Copyrights that are material to the conduct of the business of Borrower to be abandoned, forfeited or dedicated to the public without the written consent of Bank, which shall not be unreasonably withheld.

6.9 Further Assurances. At any time and from time to time Borrower shall execute and deliver such further instruments and take such further action as may reasonably be requested by Bank to effect the purposes of this Agreement.

7. NEGATIVE COVENANTS.

Borrower covenants and agrees that, so long as any credit hereunder shall be available and until the outstanding Obligations (other than inchoate indemnity obligations) are paid in full or for so long as Bank may have any commitment to make any Credit Extensions, Borrower will not do any of the following without Bank’s prior written consent:

7.1 Dispositions. Convey, sell, lease, license, transfer or otherwise dispose of (collectively, to “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, or subject to Section 6.6 and Section 7.5 of the Agreement, move cash balances of Borrower on deposit with Bank to accounts opened at another financial institution, in each case other than Permitted Transfers.

7.2 Change in Name, Location, Executive Office, or Executive Management; Change in Business; Change in Fiscal Year; Change in Control. Change its name or the Borrower State or relocate its chief executive office without five (5) days prior written notification to Bank; replace its chief executive officer or chief financial officer without prompt written notification to Bank; engage in any line of business, or permit any of its Subsidiaries to engage in any line of business, other than the lines businesses carried on by Borrower and its Subsidiaries on the date hereof and such other lines of business reasonably related or incidental thereto; change its fiscal year end; have a Change in Control.

7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business organization (other than mergers or consolidations of a Subsidiary into another Subsidiary or into Borrower or with another Person in connection with an acquisition permitted by this Section 7.3), or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person, except where (i) cash consideration in such transactions does not in the aggregate exceed Ten Million Dollars ($10,000,000) during any fiscal year, (ii) no Event of Default has occurred, is continuing or would exist after giving effect to such transactions, (iii) such transactions do not result in a Change in Control, and (iv) Borrower, if a party to such transaction, is the surviving entity or, if not, provision is made for satisfaction of all Obligations as a condition to consummation of any such transaction.

7.4 Indebtedness. Create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness, or voluntarily prepay any Subordinated Indebtedness or take any actions which impose on Borrower an obligation to voluntarily prepay any Subordinated Indebtedness, except conversion of any of its convertible securities (including warrants) into other securities pursuant to the terms of such convertible securities.

7.5 Encumbrances. Create, incur, assume or allow any Lien with respect to any of its property, or assign or otherwise convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries so to do, except for Permitted Liens and Permitted Transfers, or covenant to any other Person that Borrower in the future will refrain from creating, incurring, assuming or allowing any Lien with respect to any of Borrower’s property, except for (i) covenants with respect to property subject to any Lien that constitutes a “Permitted Lien” herein, (ii) covenants in connection with in-licensed property, (iii) covenants in connection with Permitted Transfers, (iv) covenants in connection with Subordinated Debt, (v) covenants in connection with acquisition agreements solely to the extent such prohibitions are in effect pending the consummation of the applicable transaction, (vi) customary provisions in leases, licenses and other contracts prohibiting the assignment or encumbrance thereof and (vii) restrictions and conditions imposed by law, rule, regulation or court order.

 

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7.6 Distributions. Pay any dividends or make any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock, except that Borrower may (i) repurchase the stock of employees, former employees, officers, directors or consultants pursuant to stock repurchase agreements as long as an Event of Default does not exist prior to such repurchase or would not exist after giving effect to such repurchase, and (ii) repurchase the stock of former employees pursuant to stock repurchase agreements by the cancellation of indebtedness owed by such employees, former employees, officers, directors or consultants to Borrower regardless of whether an Event of Default exists, (iii) pay dividends in equity securities, (iv) convert any of its convertible securities (including warrants) into other securities pursuant to the terms of such convertible securities, (v) make cash payments in lieu of the issuance of fractional shares, (vi) distribute securities to employees, officers or directors on the exercise of their options and (vii) other dividends, distributions, redemptions, retirements or repurchases in an aggregate amount not to exceed Five Hundred Thousand Dollars ($500,000.

7.7 Investments. Directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries to do so, other than Permitted Investments, or maintain or invest any of its property consisting of deposit accounts with a Person other than Bank or Bank’s Affiliates unless such Person has entered into a control agreement with Bank, in form and reasonable substance satisfactory to Bank, or suffer or permit any Subsidiary to be a party to, or be bound by, an agreement that restricts such Subsidiary from paying dividends or otherwise distributing property to Borrower. Further, Borrower shall not enter into any license or agreement with any Prohibited Territory or with any Person organized under or doing business in a Prohibited Territory. Notwithstanding the foregoing, Borrower shall have thirty (30) days from the date hereof to provide such control agreements with respect to deposit accounts maintained by Borrower with a Person other than Bank or Bank’s Affiliates.

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except (i) for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person other than equity and bridge financings with existing investors of Borrower which does not result in a Change in Control and the terms of such equity or bridge financing do not conflict or violate the terms of this Agreement, (ii) transactions with Subsidiaries that are not otherwise prohibited by Section 7.7 of this Agreement, (iii) employment or compensation arrangements and employee benefit plans approved by Borrower’s Board of Directors and entered into in the ordinary course of Borrower’s business, and (iv) transactions between Borrower and any of its Subsidiaries or between or among Subsidiaries.

7.9 Subordinated Debt. Make any payment in respect of any Subordinated Debt, or permit any of its Subsidiaries to make any such payment, except in compliance with the terms of such Subordinated Debt and the terms of the subordination agreement relating to such Subordinated Debt, or amend any provision of any document evidencing such Subordinated Debt, except in compliance with the terms of the subordination agreement relating to such Subordinated Debt, or amend any provision contained in any documentation relating to the Subordinated Debt that has the effect of increasing the interest rate thereon or shortening the maturity thereof without Bank’s prior written consent.

7.10 Inventory and Equipment. Except for test products provided to customers or potential customers in the ordinary course of business, store the Inventory or the Equipment of a book value in excess of Two Hundred Fifty Thousand Dollars ($250,000) with a bailee, warehouseman, or similar third party unless the third party has been notified of Bank’s security interest and Bank (a) has received an acknowledgment from the third party that it is holding or will hold the Inventory or Equipment for Bank’s benefit or (b) is in possession of the warehouse receipt, where negotiable, covering such Inventory or Equipment; provided that Borrower shall have forty-five (45) days after the date hereof to satisfy the foregoing requirement. Except for Inventory sold in the ordinary course of business, test products and movable items of personal property such as laptop computers and except for such other locations as Borrower may give written notice to Bank, Borrower shall keep the Inventory and Equipment only at the location set forth in Section 10, the current Schedule, and such other locations of which Borrower gives Bank prior written notice.

7.11 No Investment Company; Margin Regulation. Become or be controlled by an “investment company,” within the meaning of the Investment Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the business of extending credit for the purpose of purchasing or carrying margin stock, or use the proceeds of any Credit Extension for such purpose.

 

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8. EVENTS OF DEFAULT.

Any one or more of the following events shall constitute an “Event of Default” by Borrower under this Agreement:

8.1 Payment Default. If Borrower fails to pay (i) any principal amount of, or interest on, the Obligations when due or (ii) any other Obligations when due and such failure continues unremedied for five (5) Business Days;

8.2 Covenant Default.

(a) If Borrower fails to perform any obligation under Sections 6.2, 6.4, 6.5, 6.6 or 6.7, or violates any of the covenants contained in Article 7 of this Agreement; or

(b) If Borrower fails or neglects to perform or observe any other material term, provision, condition, covenant contained in this Agreement or in any of the Loan Documents, or in any other present or future agreement between Borrower and Bank, and as to any default under such other term, provision, condition or covenant that can be cured, has failed to cure such default within fifteen (15) days after Borrower receives notice thereof or any Responsible Officer of Borrower becomes aware thereof; provided, however, that if the default cannot by its nature be cured within the fifteen (15) day period or cannot after diligent attempts by Borrower be cured within such fifteen (15) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not without Bank’s consent exceed thirty (30) days) to attempt to cure such default, so long as Borrower continues to diligently attempt to cure such default, and within such thirty (30) day period (or longer period agreed by Bank) the failure to have cured such default shall not be deemed an Event of Default but no Credit Extensions will be made;

8.3 Investor Support. If Bank determines, based on indications from Borrower’s existing investors that such investors no longer intend to provide capital to Borrower in amounts and at times sufficient to enable Borrower to satisfy its obligations including but not limited to all Obligations owing from Borrower to Bank, and Borrower fails to have other investors willing to provide such capital.

8.4 Attachment. If any material portion of Borrower’s assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any trustee, receiver or person acting in a similar capacity and such attachment, seizure, writ or distress warrant or levy has not been removed, discharged or rescinded within thirty (30) days, or if Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, or if a judgment or other claim becomes a lien or encumbrance upon any material portion of Borrower’s assets, or if a notice of lien, levy, or assessment is filed of record with respect to any of Borrower’s assets by the United States Government, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, in each case other than a Permitted Lien, and the same is not paid within thirty (30) days after Borrower receives notice thereof, provided that none of the foregoing shall constitute an Event of Default where such action or event is stayed or an adequate bond has been posted pending a good faith contest by Borrower (provided that no Credit Extensions will be made during such cure period);

8.5 Insolvency. If Borrower is insolvent, or if an Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced against Borrower and is not dismissed or stayed within forty-five (45) days (provided that no Credit Extensions will be made prior to the dismissal of such Insolvency Proceeding);

8.6 Other Agreements. If there is a default or other failure to perform in any agreement to which Borrower is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Five Hundred Thousand Dollars ($500,000);

 

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8.7 Subordinated Debt. If Borrower makes any payment on account of Subordinated Debt, except to the extent the payment is allowed under any subordination agreement entered into with Bank;

8.8 Judgments. If one or more judgments, orders, decrees or arbitration awards requiring the Borrower to pay an aggregate amount of Five Hundred Thousand Dollars ($500,000) or greater that is not covered by insurance by a solvent insurance carrier that has confirmed coverage in writing shall be rendered against Borrower and/or its Subsidiaries and the same shall not have been discharged, satisfied, vacated or stayed within thirty (30) days thereafter (provided that no Credit Extensions will be made prior to such matter being discharged, vacated or stayed).

8.9 Misrepresentations. If any material misrepresentation or material misstatement exists when made or deemed made in any warranty or representation set forth herein or in any certificate delivered to Bank by any Responsible Officer pursuant to this Agreement or to induce Bank to enter into this Agreement or any other Loan Document.

9. BANK’S RIGHTS AND REMEDIES.

9.1 Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, Bank may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Borrower:

(a) Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable (provided that upon the occurrence of an Event of Default described in Section 8.5 (insolvency), all Obligations shall become immediately due and payable without any action by Bank);

(b) Cease advancing money or extending credit to or for the benefit of Borrower under this Agreement or under any other agreement between Borrower and Bank;

(c) Settle or adjust disputes and claims directly with account debtors for amounts, upon terms and in whatever order that Bank reasonably considers advisable;

(d) Make such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral. Borrower agrees to assemble the Collateral if Bank so requires, and to make the Collateral available to Bank as Bank may designate. Borrower authorizes Bank to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Bank’s determination appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect to any of Borrower’s owned premises, Borrower hereby grants Bank a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of Bank’s rights or remedies provided herein, at law, in equity, or otherwise;

(e) Set off and apply to the Obligations any and all (i) balances and deposits of Borrower held by Bank, and (ii) indebtedness at any time owing to or for the credit or the account of Borrower held by Bank;

(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral. Bank is hereby granted a license or other right, solely pursuant to the provisions of this Section 9.1, to use, without charge, Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral (subject, in the case of trademarks, to sufficient rights to quality control and inspection in favor of Borrower and, in the case of trade secrets, to an obligation of Bank to take

 

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reasonable steps under the circumstances to keep the trade secrets confidential), in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section 9.1, Borrower’s rights under all licenses and all franchise agreements shall inure to Bank’s benefit to the extent permitted by the terms of such licenses and agreements;

(g) Sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrower’s premises) as Bank determines is commercially reasonable, and apply any proceeds to the Obligations in whatever manner or order Bank deems appropriate. Bank may sell the Collateral without giving any warranties as to the Collateral. Bank may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If Bank sells any of the Collateral upon credit, Borrower will be credited only with payments actually made by the purchaser, received by Bank, and applied to the indebtedness of the purchaser. If the purchaser fails to pay for the Collateral, Bank may resell the Collateral and Borrower shall be credited with the proceeds of the sale;

(h) Bank may credit bid and purchase at any public sale;

(i) Apply for the appointment of a receiver, trustee, liquidator or conservator of the Collateral, without notice and without regard to the adequacy of the security for the Obligations and without regard to the solvency of Borrower, any guarantor or any other Person liable for any of the Obligations; and

(j) Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrower.

Bank may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.

9.2 Power of Attorney. Effective only upon the occurrence and during the continuance of an Event of Default, Borrower hereby irrevocably appoints Bank (and any of Bank’s designated officers, or employees) as Borrower’s true and lawful attorney to: (a) send requests for verification of Accounts or notify account debtors of Bank’s security interest in the Accounts; (b) endorse Borrower’s name on any checks or other forms of payment or security that may come into Bank’s possession; (c) sign Borrower’s name on any invoice or ▇▇▇▇ of lading relating to any Account, drafts against account debtors, schedules and assignments of Accounts, verifications of Accounts, and notices to account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims under and decisions with respect to Borrower’s policies of insurance; (f) settle and adjust disputes and claims respecting the accounts directly with account debtors, for amounts and upon terms which Bank determines to be reasonable; and (g) file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of Borrower where permitted by law; provided Bank may exercise such power of attorney to sign the name of Borrower on any of the documents described in clause (g) above, regardless of whether an Event of Default has occurred. The appointment of Bank as Borrower’s attorney in fact, and each and every one of Bank’s rights and powers, being coupled with an interest, is irrevocable until all of the Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and Bank’s obligation to provide advances hereunder is terminated.

9.3 Accounts Collection. At any time after the occurrence and during the continuation of an Event of Default, Bank may notify any Person owing funds to Borrower of Bank’s security interest in such funds and verify the amount of such Account. Borrower shall collect all amounts owing to Borrower for Bank, receive in trust all payments as Bank’s trustee, and immediately deliver such payments to Bank in their original form as received from the account debtor, with proper endorsements for deposit.

9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as required under the terms of this Agreement, then Bank may do any or all of the following after reasonable notice to Borrower: (a) make payment of the same or any part thereof; (b) set up such reserves under the Revolving Line as Bank deems necessary to protect Bank from the exposure created by such failure; or (c) obtain and maintain insurance policies of the type discussed in Section 6.5 of this Agreement, and take

 

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any action with respect to such policies as Bank deems prudent. Any amounts so paid or deposited by Bank shall constitute Bank Expenses, shall be immediately due and payable, and shall bear interest at the then applicable rate hereinabove provided, and shall be secured by the Collateral. Any payments made by Bank shall not constitute an agreement by Bank to make similar payments in the future or a waiver by Bank of any Event of Default under this Agreement.

9.5 Bank’s Liability for Collateral. Bank has no obligation to clean up or otherwise prepare the Collateral for sale. All risk of loss, damage or destruction of the Collateral shall be borne by Borrower.

9.6 No Obligation to Pursue Others. Bank has no obligation to attempt to satisfy the Obligations by collecting them from any other Person liable for them and Bank may release, modify or waive any collateral provided by any other Person to secure any of the Obligations, all without affecting Bank’s rights against Borrower. Borrower waives any right it may have to require Bank to pursue any other Person for any of the Obligations.

9.7 Remedies Cumulative. Bank’s rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative. Bank shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on Borrower’s part shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be effective unless made in a written document signed on behalf of Bank and then shall be effective only in the specific instance and for the specific purpose for which it was given. Borrower expressly agrees that this Section 9.7 may not be waived or modified by Bank by course of performance, conduct, estoppel or otherwise.

9.8 Demand; Protest. Except as otherwise provided in this Agreement, Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment and any other notices relating to the Obligations.

10. NOTICES.

Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by a recognized overnight delivery service, certified mail, postage prepaid, return receipt requested, or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses set forth below:

 

 

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The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other.

11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of California, without regard to principles of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive jurisdiction of the State and Federal courts located in the State of California. THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE UNDERSIGNED PARTIES.

12. REFERENCE PROVISION.

12.1 In the event the Jury Trial Waiver set forth above is not enforceable, the parties elect to proceed under this Judicial Reference Provision.

12.2 With the exception of the items specified in Section 12.3, below, any controversy, dispute or claim (each, a “Claim”) between the parties arising out of or relating to this Agreement or any other Loan Document (collectively in this Section, the “Comerica Documents”), will be resolved by a reference proceeding in California in accordance with the provisions of Sections 638 et seq. of the California Code of Civil Procedure (“CCP”), or their successor sections, which shall constitute the exclusive remedy for the resolution of any Claim, including whether the Claim is subject to the reference proceeding. Except as otherwise provided in the Comerica Documents, venue for the reference proceeding will be in the Superior Court in the County where the real property involved in the action, if any, is located or in a County where venue is otherwise appropriate under applicable law (the “Court”).

12.3 The matters that shall not be subject to a reference are the following: (i) foreclosure of any security interests in real or personal property, (ii) exercise of self-help remedies (including, without limitation, set-off), (iii) appointment of a receiver and (iv) temporary, provisional or ancillary remedies (including, without limitation, writs of attachment, writs of possession, temporary restraining orders or preliminary injunctions). This Agreement does not limit the right of any party to exercise or oppose any of the rights and remedies described in clauses (i) and (ii) or to seek or oppose from a court of competent jurisdiction any of the items described in clauses (iii) and (iv). The exercise of, or opposition to, any of those items does not waive the right of any party to a reference pursuant to this Agreement.

12.4 The referee shall be a retired Judge or Justice selected by mutual written agreement of the parties. If the parties do not agree within ten (10) days of a written request to do so by any party, then, upon request of any party, the referee shall be selected by the Presiding Judge of the Court (or his or her representative). A request for appointment of a referee may be heard on an ex parte or expedited basis, and the parties agree that irreparable harm would result if ex parte relief is not granted.

12.5 The parties agree that time is of the essence in conducting the reference proceedings. Accordingly, the referee shall be requested, subject to change in the time periods specified herein for good cause shown, to (i) set the matter for a status and trial-setting conference within fifteen (15) days after the date of selection of the referee, (ii) if practicable, try all issues of law or fact within one hundred twenty (120) days after the date of the conference and (iii) report a statement of decision within twenty (20) days after the matter has been submitted for decision.

 

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12.6 The referee will have power to expand or limit the amount and duration of discovery. The referee may set or extend discovery deadlines or cutoffs for good cause, including a party’s failure to provide requested discovery for any reason whatsoever. Unless otherwise ordered based upon good cause shown, no party shall be entitled to “priority” in conducting discovery, depositions may be taken by either party upon seven (7) days written notice, and all other discovery shall be responded to within fifteen (15) days after service. All disputes relating to discovery which cannot be resolved by the parties shall be submitted to the referee whose decision shall be final and binding.

12.7 Except as expressly set forth in this Agreement, the referee shall determine the manner in which the reference proceeding is conducted including the time and place of hearings, the order of presentation of evidence, and all other questions that arise with respect to the course of the reference proceeding. All proceedings and hearings conducted before the referee, except for trial, shall be conducted without a court reporter, except that when any party so requests, a court reporter will be used at any hearing conducted before the referee, and the referee will be provided a courtesy copy of the transcript. The party making such a request shall have the obligation to arrange for and pay the court reporter. Subject to the referee’s power to award costs to the prevailing party, the parties will equally share the cost of the referee and the court reporter at trial.

12.8 The referee shall be required to determine all issues in accordance with existing case law and the statutory laws of the State of California. The rules of evidence applicable to proceedings at law in the State of California will be applicable to the reference proceeding. The referee shall be empowered to enter equitable as well as legal relief, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a court proceeding, including without limitation motions for summary judgment or summary adjudication. The referee shall issue a decision at the close of the reference proceeding which disposes of all claims of the parties that are the subject of the reference. Pursuant to CCP § 644, such decision shall be entered by the Court as a judgment or an order in the same manner as if the action had been tried by the Court and any such decision will be final, binding and conclusive. The parties reserve the right to appeal from the final judgment or order or from any appealable decision or order entered by the referee. The parties reserve the right to findings of fact, conclusions of laws, a written statement of decision, and the right to move for a new trial or a different judgment, which new trial, if granted, is also to be a reference proceeding under this provision.

12.9 If the enabling legislation which provides for appointment of a referee is repealed (and no successor statute is enacted), any dispute between the parties that would otherwise be determined by reference procedure will be resolved and determined by arbitration. The arbitration will be conducted by a retired judge or Justice, in accordance with the California Arbitration Act §1280 through §1294.2 of the CCP as amended from time to time. The limitations with respect to discovery set forth above shall apply to any such arbitration proceeding.

12.10 THE PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES AND CLAIMS RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY CONTROVERSY, DISPUTE OR CLAIM BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE OTHER COMERICA DOCUMENTS.

13. GENERAL PROVISIONS.

13.1 Successors and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties and shall bind all persons who become bound as a debtor to this Agreement; provided, however, that neither this Agreement nor any rights hereunder may be assigned by Borrower without Bank’s prior written consent, which consent may be granted or withheld in Bank’s sole discretion. Bank shall have the right without the consent of or notice to Borrower to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights and benefits hereunder.

13.2 Indemnification. Borrower shall defend, indemnify and hold harmless Bank and its officers, employees, and agents (each, an “Indemnified Person”) against: (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this Agreement and/or the Loan Documents; and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank, its

 

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officers, employees and agents as a result of or in any way arising out of, following, or consequential to transactions between Bank and Borrower under this Agreement and/or the other Loan Documents (including without limitation reasonable and documented attorneys fees and expenses), except for losses caused by an Indemnified Person’s bad faith, gross negligence or willful misconduct.

13.3 Time of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement.

13.4 Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

13.5 Correction of Loan Documents. Upon reasonable prior notice to Borrower, Bank may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties.

13.6 Amendments in Writing, Integration. All amendments to or terminations of this Agreement or the other Loan Documents must be in writing signed by the parties. All prior agreements, understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of this Agreement and the other Loan Documents, if any, are merged into this Agreement and the Loan Documents.

13.7 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, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement.

13.8 Survival. All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any Obligations (other than inchoate indemnity obligations) remain outstanding or Bank has any obligation to make any Credit Extension to Borrower. The obligations of Borrower to indemnify Bank with respect to the expenses, damages, losses, costs and liabilities described in Section 13.2 shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Bank have run.

13.9 Confidentiality. In handling any confidential information, Bank and all employees and agents of Bank shall exercise the same degree of care that Bank exercises with respect to its own proprietary information of the same types to maintain the confidentiality of any non-public information thereby received or received pursuant to this Agreement except that disclosure of such information may be made (i) to the subsidiaries or Affiliates of Bank in connection with their present or prospective business relations with Borrower, (ii) to prospective transferees, participants, or purchasers of any interest in the Obligations so long as prior to such disclosure such prospective transferees or purchasers have agreed to confidentiality terms similar in scope and content to those contained in this Section, (iii) as required by law, regulations, rule or order, subpoena, judicial order or similar order, (iv) as may be required in connection with the examination, audit or similar investigation of Bank, (v) to Bank’s accountants, auditors and regulators, and (vi) as Bank may determine in connection with the enforcement of any remedies hereunder. Confidential information hereunder shall not include information that either: (a) is in the public domain or in the knowledge or possession of Bank when disclosed to Bank, or becomes part of the public domain after disclosure to Bank through no fault of Bank; or (b) is disclosed to Bank by a third party, provided Bank does not have actual knowledge that such third party is prohibited from disclosing such information.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.

 

 

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EXHIBIT A

DEFINITIONS

“Accounts” means all presently existing and hereafter arising accounts, contract rights, payment intangibles and all other forms of obligations owing to Borrower arising out of the sale or lease of goods (including, without limitation, the licensing of software and other technology) or the rendering of services by Borrower and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower’s Books relating to any of the foregoing.

“Advance” or “Advances” means a cash advance or cash advances under the Revolving Line.

“Affiliate” means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person, and each of such Person’s senior executive officers, directors, and partners.

“Bank Expenses” means all costs or expenses of Bank, or any other holder or owner of the Loan Documents (including, without limit, court costs, legal expenses and reasonable attorneys’ fees and expenses, whether generated in-house or by outside counsel, whether or not suit is instituted, and, if suit is instituted, whether at trial court level, appellate court level, in a bankruptcy, probate or administrative proceeding or otherwise) incurred in connection with the preparation, negotiation, execution, delivery, amendment, administration, and performance, or incurred in collecting, attempting to collect under the Loan Documents or the Obligations, or incurred in defending the Loan Documents, or incurred in any other matter or proceeding relating to the Loan Documents or the Obligations; and reasonable Collateral audit fees.

“Borrower State” means Delaware, the state under whose laws Borrower is organized.

“Borrower’s Books” means all of Borrower’s books and records including: ledgers; records concerning Borrower’s assets or liabilities, the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment, containing such information.

“Borrowing Base” means an amount equal to eighty percent (80%) of Eligible Accounts, as determined by Bank with reference to the most recent Borrowing Base Certificate delivered by Borrower.

“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks in the State of California are authorized or required to close.

“Cash” means unrestricted cash on deposit with Bank.

“Change in Control” shall mean any transaction or series of related transactions in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), other than pursuant to a bona fide equity financing with participation of Borrower’s existing investors or an Initial Public Offering, directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of Borrower, who did not have such power before such transaction.

“Chief Executive Office State” means California, where Borrower’s chief executive office is located.

“Closing Date” means the date of this Agreement.

“Code” means the California Uniform Commercial Code as amended or supplemented from time to time.

 

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“Collateral” means the property described on Exhibit B attached hereto and all Negotiable Collateral to the extent not described on Exhibit B, except to the extent any such property (i) is nonassignable by its terms without the consent of the licensor thereof or another party (but only to the extent such prohibition on transfer is enforceable under applicable law, including, without limitation, Sections 9406 and 9408 of the Code), (ii) the granting of a security interest therein is contrary to applicable law, provided that upon the cessation of any such restriction or prohibition, such property shall automatically become part of the Collateral, (iii) constitutes the capital stock of a controlled foreign corporation (as defined in the IRC) or any US Holdco, in excess of sixty-five percent (65%) of the voting power of all classes of capital stock of such controlled foreign corporation or US Holdco entitled to vote, or (iv) any such property is subject to a lien described in clause (c) of the definition of Permitted Liens in which the granting of a security interest in such property is prohibited by or would constitute a default under any agreement or document governing such property, provided that upon the termination or lapsing of any such prohibition, such property shall automatically be part of the Collateral.

“Collateral State” means the state or states where the Collateral is located, which is California.

“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designed to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of business or customary indemnification obligations. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.

“Copyrights” means 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, now or hereafter existing, created, acquired or held.

“Credit Extension” means each Advance or any other extension of credit by Bank to or for the benefit of Borrower hereunder.

“Domestic Subsidiary” means a Subsidiary organized under the laws of the United States or any state or territory thereof or the District of Columbia.

“Eligible Accounts” means those Accounts that arise in the ordinary course of Borrower’s business that comply with all of Borrower’s representations and warranties to Bank set forth in Section 5.3. Unless otherwise agreed to by Bank, Eligible Accounts shall not include the following:

 

(a)	Accounts that the account debtor has failed to pay in full within ninety (90) days of invoice date;

 

(b)	Credit balances over ninety (90) days;

 

(c)	Accounts with respect to an account debtor, twenty-five percent (25%) of whose Accounts the account debtor has failed to pay within ninety (90) days of invoice date;

 

(d)

Accounts with respect to an account debtor, including Subsidiaries and Affiliates, whose total obligations to Borrower exceed twenty-five percent (25%) of all Accounts, to the extent such obligations exceed the aforementioned percentage, except the concentration limit shall be up to forty-five percent (45%) for select re-sellers as approved in writing by Bank on a case-by-case basis (Bank approves CDW and CDWG combined, Carahsoft, and SHI);

 

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(e)	Accounts with respect to which the account debtor does not have its principal place of business in the United States, except for Eligible Foreign Accounts;

 

(f)

Accounts with respect to which the account debtor is the United States or any department, agency, or instrumentality of the United States, except for Accounts of the United States if the payee has assigned its payment rights to Bank and the assignment has been acknowledged under the Assignment of Claims Act of 1940 (31 U.S.C. 3727);

 

(g)	Accounts with respect to which Borrower is liable to the account debtor for goods sold or services rendered by the account debtor to Borrower, but only to the extent of any amounts owing to the account debtor against amounts owed to Borrower;

 

(h)	Accounts with respect to which goods are placed on consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold, demo or promotional, or other terms by reason of which the payment by the account debtor may be conditional;

 

(i)	Accounts with respect to which the account debtor is an individual, officer, employee, agent or Affiliate of Borrower;

 

(j)	Accounts that have not yet been billed to the account debtor or that relate to deposits (such as good faith deposits) or other property of the account debtor held by Borrower for the performance of services or delivery of goods which Borrower has not yet performed or delivered;

 

(k)

Accounts with respect to which the account debtor disputes liability or makes any claim with respect thereto as to which Bank believes, in its sole discretion, that there may be a basis for dispute (but only to the extent of the amount subject to such dispute or claim), or is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of business;

 

(l)	Accounts the collection of which Bank reasonably determines after inquiry and consultation with Borrower to be doubtful; and

 

(m)	Retentions and hold-backs.

“Eligible Foreign Accounts” means Accounts with respect to which the account debtor does not have its principal place of business in the United States and is not located in an OFAC sanctioned country and that are (i) supported by one or more letters of credit in an amount and of a tenor, and issued, advised and/or confirmed by a financial institution, acceptable to Bank, (ii) insured by the Export Import Bank of the United States, (iii) generated by an account debtor with its principal place of business in Canada, provided that the Bank has perfected its security interest in the appropriate Canadian province, or (iv) approved by Bank on a case-by-case basis. All Eligible Foreign Accounts must be calculated in U.S. Dollars.

“Environmental Laws” means all laws, rules, regulations, orders and the like issued by any federal state, local foreign or other governmental or quasi-governmental authority or any agency pertaining to the environment or to any hazardous materials or wastes, toxic substances, flammable, explosive or radioactive materials, asbestos or other similar materials.

“Equipment” means all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest.

“Equity Event” means the sale or issuance by Borrower after the Closing Date of its equity securities.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.

“Event of Default” has the meaning assigned in Article 8.

 

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“GAAP” means generally accepted accounting principles, consistently applied, as in effect from time to time in the United States of America.

“Indebtedness” means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations and (d) all Contingent Obligations of Borrower related to Indebtedness of the types described in clauses (a) through (c) above.

“Initial Public Offering” means the initial underwritten public offering of Borrower’s capital stock pursuant to an effective registration statement under the Securities Act of 1933, as amended.

“Insolvency Proceeding” means any proceeding commenced by or against any Person or entity under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension 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)	Copyrights, Trademarks and Patents;

 

(b)	Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held;

 

(c)	Any and all design rights which may be available to Borrower now or hereafter existing, created, acquired or held;

 

(d)	Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to ▇▇▇ for and collect such damages for said use or infringement of the intellectual property rights identified above;

 

(e)	All licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such use to the extent permitted by such license or rights; and

 

(f)	All amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.

“Internal Restructuring” means the internal restructuring of Borrower’s Subsidiaries as described in the Restructuring Step Plan provided by Borrower to Bank, with such changes thereto as Borrower may deem appropriate in its reasonable business judgment.

“Inventory” means all present and future inventory in which Borrower has any interest.

“Investment” means any beneficial ownership of (including stock, partnership or limited liability company interest or other securities) any Person, or any loan, advance or capital contribution to any Person.

“IRC” means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

“Lien” means any mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance.

“Liquidity Ratio” means (i) the sum of Cash plus Eligible Accounts, divided by (ii) the outstanding principal amount of the Obligations owing by Borrower to Bank.

“Loan Documents” means, collectively, this Agreement, any note or notes executed by Borrower pursuant to this Agreement, and any other document, instrument or agreement entered into in connection with this Agreement, all as amended, restated, modified, supplemented or extended from time to time.

 

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“Material Adverse Effect” means (i) a material adverse change in the business or financial condition of Borrower and its Subsidiaries, taken as a whole,, or (ii) a material impairment in the prospect of repayment of all or any portion of the Obligations or in otherwise performing Borrower’s obligations under the Loan Documents, (iii) a material impairment in the perfection or priority of Bank’s security interests in the Collateral.

“Negotiable Collateral” means all of Borrower’s present and future letters of credit of which it is a beneficiary, drafts, instruments (including promissory notes), securities, documents of title, and chattel paper, and Borrower’s Books relating to any of the foregoing.

“Obligations” means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement or any Loan Document, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from Borrower to others that Bank may have obtained by assignment or otherwise. Notwithstanding the foregoing, the term “Obligations” shall not include any of Borrower’s obligations under any warrants issued to Bank.

“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.

“Periodic Payments” means all installments or similar recurring payments that Borrower may now or hereafter become obligated to pay to Bank pursuant to the terms and provisions of any instrument, or agreement now or hereafter in existence between Borrower and Bank.

“Permitted Indebtedness” means:

 

(a)	Indebtedness of Borrower in favor of Bank arising under this Agreement or any other Loan Document;

 

(b)	Indebtedness existing on the Closing Date and disclosed in the Schedule;

 

(c)

Indebtedness not to exceed Five Hundred Thousand Dollars ($500,000) in the aggregate in any fiscal year of Borrower secured by a lien described in clause (c) of the defined term “Permitted Liens,” provided such Indebtedness does not exceed the lesser of the cost or fair market value of the equipment financed with such Indebtedness;

 

(d)	Subordinated Debt;

 

(e)	Indebtedness to trade creditors incurred in the ordinary course of business, including any Indebtedness incurred with corporate credit cards in the ordinary course of business;

 

(f)	Indebtedness that constitutes a Permitted Investment;

 

(g)	Indebtedness consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business;

 

(h)	Indebtedness with respect to surety, indemnity or appeal bonds and similar obligations in the ordinary course of business;

 

(i)	Indebtedness arising in connection with customary treasury and cash management services;

 

(j)	all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designed to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices;

 

(k)	intercompany payables arising in the ordinary course of business, not to exceed Fifteen Million Dollars ($15,000,000) outstanding at any time;

 

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(l)	customer deposits and advance payments received in the ordinary course of business;

 

(m)

reimbursement obligations in respect of letters of credit and bank guarantees obtained in connection with (i) the lease of Borrower’s chief executive office or (ii) other leases of real property so long as, in the case of this clause (ii), the aggregate face amount of such letters of credit and bank guarantees at any time outstanding does not exceed Two Hundred Fifty Thousand Dollars ($250,000) prior to the Initial Public Offering and Five Hundred Thousand Dollars ($500,000) after the Initial Public Offering;

 

(n)	Contingent Obligations in respect of any Permitted Indebtedness;

 

(o)	other unsecured Indebtedness not to exceed Five Hundred Thousand Dollars ($500,000) in the aggregate principal amount at any time;

 

(p)	earn-outs or similar purchase price adjustment mechanisms contemplated by the definitive documentation in respect of any acquisition permitted by Section 7.3; and

 

(q)	Extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the principal amount is not increased or the terms modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.

“Permitted Investment” means:

 

(a)	Investments existing on the Closing Date disclosed in the Schedule;

 

(b)

(i) Marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one (1) year from the date of acquisition thereof, (ii) commercial paper maturing no more than one (1) year from the date of creation thereof and currently having rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or ▇▇▇▇▇’▇ Investors Service, (iii) Bank’s certificates of deposit maturing no more than one (1) year from the date of investment therein, and (iv) Bank’s money market accounts;

 

(c)	Investments accepted in connection with Permitted Transfers;

 

(d)	(i) Investments of Subsidiaries in or to other Subsidiaries or Borrower and (ii) Investments by Borrower in Subsidiaries in the case of this clause (ii) not to exceed One Hundred Thousand Dollars ($100,000) in the aggregate in any calendar month;

 

(e)

Investments not to exceed Two Hundred Thousand Dollars ($200,000) in the aggregate in any fiscal year consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plan agreements approved by Borrower’s Board of Directors;

 

(f)	Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of Borrower’s business;

 

(g)	Investments consisting of intercompany payables arising in the ordinary course of business, not to exceed Fifteen Million Dollars ($15,000,000) outstanding at any time;

 

(h)

Investments consisting of accounts receivable or notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business, provided that this subparagraph (h) shall not apply to Investments of Borrower in any Subsidiary;

 

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(i)

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, provided that any cash Investments by Borrower do not exceed One Hundred Thousand Dollars ($100,000) in the aggregate in any fiscal year;

 

(j)	Investments permitted by Section 7.3 hereof;

 

(k)	Investments constituting cash or cash equivalents on a balance sheet prepared in accordance with GAAP;

 

(l)	Investments to or in any Subsidiary to pay for operating expenses of such Subsidiary in the ordinary course of business, not in any case to exceed Three Million Dollars ($3,000,000) per month;

 

(m)	Investments made in connection with the Internal Restructuring;

 

(n)	Contingent Obligations in respect of Permitted Indebtedness or other obligations not constituting Indebtedness; and

 

(o)	other Investments in an aggregate amount not to exceed One Million Dollars ($1,000,000) in any fiscal year.

“Permitted Liens” means the following:

 

(a)	Any Liens existing on the Closing Date and disclosed in the Schedule (excluding Liens to be satisfied with the proceeds of the Advances) or arising under this Agreement or the other Loan Documents;

 

(b)

Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings and for which Borrower maintains adequate reserves in accordance with GAAP, provided the same have no priority over any of Bank’s security interests;

 

(c)

Liens not to exceed Five Hundred Thousand Dollars ($500,000) in the aggregate at any time outstanding (i) upon or in any Equipment acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such Equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such Equipment, or (ii) existing on such Equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon and additions, attachments and accessions thereto, any related software, any related security deposit, and the proceeds of such Equipment;

 

(d)

Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (a) through (c) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase;

 

(e)	Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Sections 8.4 (attachment) or 8.8 (judgments);

 

(f)

Liens in favor of other financial institutions arising in connection with Borrower’s deposit or investment accounts held at such institutions to secured standard fees for services charged by, but not financing made available by such institutions, provided that Bank has a perfected security interest in such investment accounts;

 

(g)

carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

 

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(h)

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;

 

(i)	statutory and common law rights of set-off and other similar rights;

 

(j)	Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation of goods;

 

(k)	Liens securing Subordinated Debt;

 

(l)	deposits under workers’ compensation, unemployment insurance, social security and obligations under similar laws or to secure statutory obligations (other than Liens arising under ERISA or Environmental Laws);

 

(m)	Liens on insurance proceeds in favor of insurance companies granted solely as security for financed premiums;

 

(n)	Liens securing overdraft and related liabilities from treasury, depository or cash management or automated clearing house transfer of funds in the ordinary course of business;

 

(o)	Liens on cash or cash equivalents securing letters of credit permitted under clause (m) of the defined term “Permitted Indebtedness”;

 

(p)	Liens representing the interest or title of a lessor, licensor, sublicensor or sublessor;

 

(q)	Liens securing Indebtedness or other obligations in an aggregate principal amount at any time outstanding not to exceed $250,000;

 

(r)

easements, zoning, restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the effected property or interfere with the ordinary conduct of Borrower’s or its Subsidiaries’ business; and

 

(s)	Licenses permitted under clause (b) of the defined term “Permitted Transfer”.

“Permitted Transfer” means the conveyance, sale, lease, transfer or disposition by Borrower or any Subsidiary of:

 

(a)	Inventory in the ordinary course of business;

 

(b)

Non-exclusive licenses or nonperpetual licenses with respect to geographic area, fields of and customized products for specific customers that would not result in a transfer of title of the licensed property under applicable law, and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business;

 

(c)	Transfers that constitute (i) Permitted Liens, (ii) Permitted Investments, (iii) any dividend, distribution, payment, redemption, retirement or purchase permitted by Section 7.6, or (iv) any transaction, merger or consolidation permitted by Section 7.3;

 

(d)	Transfers from a Subsidiary to Borrower or any other Subsidiary;

 

(e)	Worn-out, defective, damaged or obsolete Equipment;

 

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(f)	the use, transfer or disposition of cash and cash equivalents in the ordinary course of business and in a manner that is not prohibited by the terms of this Agreement;

 

(g)	Transfers of accounts receivable and other rights of payment for collection purposes in the ordinary course of business;

 

(h)	Transfers contemplated by the Internal Restructuring;

 

(i)	the use by customers or potential customers of test products in the ordinary course of business;

 

(j)	the Transfer of test boxes between or among the Borrower and its Subsidiaries in the ordinary course of business; and

 

(k)	other assets of Borrower or its Subsidiaries that do not in the aggregate exceed One Million Dollars ($1,000,000) during any fiscal year.

“Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency.

“Pricing Addendum” means the Prime Referenced Rate Addendum attached hereto.

“Prohibited Territory” means any person or country listed by the Office of Foreign Assets Control of the United States Department of Treasury as to which transactions between a United States Person and that territory are prohibited.

“Responsible Officer” means each of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the Vice President, Accounting and the Controller of Borrower.

“Revolving Line” means one or more Credit Extensions in an aggregate principal amount of up to Fifteen Million Dollars ($15,000,000).

“Revolving Maturity Date” means the second anniversary of the Closing Date.

“Schedule” means the schedule of exceptions attached hereto and approved by Bank, if any, which may be updated from time to time with Bank’s prior written consent.

“SOS Reports” means the official reports from the Secretaries of State of each Collateral State, Chief Executive Office State and the Borrower State and other applicable federal, state or local government offices identifying all current security interests filed in the Collateral and Liens of record as of the date of such report.

“Subordinated Debt” means any debt incurred by Borrower that is subordinated in writing to the debt owing by Borrower to Bank on terms reasonably acceptable to Bank (and identified as being such by Borrower and Bank).

“Subsidiary” means any corporation, partnership or limited liability company or joint venture in which (i) any general partnership interest or (ii) more than fifty percent (50%) of the stock, limited liability company interest or joint venture of which by the terms thereof ordinary voting power to elect the Board of Directors, managers or trustees of the entity, at the time as of which any determination is being made, is owned by Borrower, either directly or through an Affiliate.

“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. “Schedule” means the schedule of exceptions attached hereto and approved by Bank, if any.

 

Comerica Bank - Loan and Security Agreement		Page 9		November 26, 2013

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“U.S. Holdco” means any Domestic Subsidiary of Borrower, or any entity that is disregarded as an entity separate from a Domestic Subsidiary for U.S. federal income tax purposes, the sole assets (other than immaterial assets) of which consist of equity interests in controlled foreign corporations (as such term is defined in Section 957of the IRC).

“Warrant” means that certain Warrant to Purchase Stock issued on the Closing Date by Borrower to Bank.

 

Comerica Bank - Loan and Security Agreement		Page 10		November 26, 2013

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DEBTOR:		NUTANIX, INC.
SECURED PARTY:		COMERICA BANK

EXHIBIT B

COLLATERAL DESCRIPTION ATTACHMENT TO LOAN AND SECURITY AGREEMENT

All personal property of Debtor of every kind, whether presently existing or hereafter created or acquired, and wherever located, including but not limited to: (a) all accounts (including health-care-insurance receivables), chattel paper (including tangible and electronic chattel paper), deposit accounts, documents (including negotiable documents), equipment (including all accessions and additions thereto), general intangibles (including payment intangibles), goods (including fixtures), instruments (including promissory notes), inventory (including all goods held for sale or lease or to be furnished under a contract of service, and including returns and repossessions), investment property (including securities and securities entitlements), letter of credit rights, money, and all of Debtor’s books and records with respect to any of the foregoing, and the computers and equipment containing said books and records; and (b) any and all cash proceeds and/or noncash proceeds thereof, including, without limitation, insurance proceeds, and all supporting obligations and the security therefor or for any right to payment. All terms above have the meanings given to them in the California Uniform Commercial Code, as amended or supplemented from time to time.

Notwithstanding the foregoing, the Collateral shall not include (i) any Intellectual Property; provided, however, that the Collateral shall include all accounts and general intangibles that consist of rights to payment from the sale, licensing or disposition of all or any part of, or rights in, the Intellectual Property (the “Rights to Payment”); (ii) any property that is nonassignable by its terms without the consent of the licensor thereof or another party (but only to the extent such prohibition on transfer is enforceable under applicable law, including, without limitation, Sections 9406 and 9408 of the Code), (iii) any property where the granting of a security interest therein is contrary to applicable law, provided that upon the cessation of any such restriction or prohibition, such property shall automatically become part of the Collateral; provided that in no case shall the definition of “Collateral” exclude any Accounts, proceeds of the disposition of any property, or general intangibles consisting of rights to payment; (iv) any property that constitutes the capital stock of a controlled foreign corporation (as defined in the IRC) or US Holdco, in excess of 65% of the voting power of all classes of capital stock of such controlled foreign corporation or US Holdco entitled to vote, (v) intent-to-use trademarks at all times prior to the first use thereof, whether by the actual use thereof in commerce, the recording of a statement of use with the United States Patent and Trademark Office or otherwise, but only to the extent that granting of a security interest in such intent-to-use trademarks would be contrary to applicable law, or (vi) any property subject to a Lien described in clause (c) of the definition of Permitted Liens in which the granting of a security interest therein is prohibited by or would constitute a default under any agreement or document governing such property (but only to the extent such prohibition is enforceable under applicable law); provided that upon the termination or lapsing of any such prohibition, such property shall automatically be part of the Collateral. Notwithstanding the foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest in the Rights to Payment, then the Collateral shall automatically, and effective as of November 26, 2013, include the Intellectual Property to the extent necessary to permit perfection of Bank’s security interest in the Rights to Payment.

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EXHIBIT C

TECHNOLOGY & LIFE SCIENCES DIVISION

LOAN ANALYSIS

LOAN ADVANCE/PAYDOWN REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS 3:00* P.M, Pacific Time

DEADLINE FOR WIRE TRANSFERS IS 1.30 P.M, Pacific Time

*At month end and the day before a holiday, the cut off time is 1:30 P.M., Pacific Time.

 

TO: Loan Analysis		DATE:		TIME:
FAX #: (▇▇▇) ▇▇▇-▇▇▇▇

 

FROM:		NUTANIX, INC.				TELEPHONE REQUEST (For Bank Use Only):
		Borrower’s Name
FROM:						The following person is authorized to request the loan payment transfer/loan advance on the designated account and is known to me.
		Authorized Signer’s Name
FROM:
		Authorized Signature (Borrower)						Authorized Requester & Phone #
PHONE #:
								Received by (Bank) & Phone #
FROM ACCOUNT#:
(please include Note number, if applicable)
TO ACCOUNT #:								Authorized Signature (Bank)
(please include Note number, if applicable)

 

REQUESTED TRANSACTION TYPE		REQUESTED DOLLAR AMOUNT				For Bank Use Only
PRINCIPAL INCREASE* (ADVANCE)		$				Date Rec’d:
PRINCIPAL PAYMENT (ONLY)		$				Time:
						Comp. Status:		YES		NO
OTHER INSTRUCTIONS:						Status Date:
						Time:
						Approval:

All representations and warranties of Borrower stated in the Loan and Security Agreement are true and correct in all material respects as of the date of the telephone request for an advance confirmed by this Borrowing Certificate, provided, however, that those representations and warranties expressly referring to another date shall be true and correct in all material respects as of such date.

*IS THERE A WIRE REQUEST TIED TO THIS LOAN ADVANCE? (PLEASE CIRCLE ONE) YES             NO

If YES, the Outgoing Wire Transfer Instructions must be completed below.

 

OUTGOING WIRE TRANSFER INSTRUCTIONS				Fed Reference Number		Bank Transfer Number
The items marked with an asterisk (*) are required to be completed.
*Beneficiary Name
*Beneficiary Account Number
*Beneficiary Address
Currency Type				US DOLLARS ONLY
*ABA Routing Number (9 Digits)
*Receiving Institution Name
*Receiving Institution Address
*Wire Amount		$

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EXHIBIT D

Instructions for the Borrowing Base Report of Accounts Receivable and Inventory

Customers reporting on a daily, weekly, monthly or quarterly basis (DOF/NDOF) must complete a Report of Accounts Receivable and Inventory. Listed below is a line by line instruction on how to complete the Report of Accounts Receivable and Inventory.

The “Blue Tinted cells” indicate the fields to which you must provide the numbers and information.

The “Black Tinted cells” indicate the presents of formulas and should only be changed, as necessary, to fit your specific line of credit.

 

Line 1		Accounts Receivable Balance:
		The amount entered on this line should be the ending balance of the accounts receivable as reported on the prior period’s
		aging and tie to the New Accounts Receivable Balance on the prior period’s Report of Accounts Receivable and Inventory.
Line 2		Charges Billed This Period to Date (Debit to A/R):
		The amount entered on this line is the cumulative amount of invoices issued for this period’s reporting.
Line 3		Credits Period to Date (CR to A/R):
		A) Payments: The input to this line is the cumulative amount of collections received for this period’s reporting. The amount should reflect the original total amount of the Invoices being paid.
		B) Adjustments: The input to this line is the cumulative amount of any adjustments to the Invoices paid for this period’s reporting. This amount is the aggregate of the difference between the original invoice amounts and collected amounts for the period.
Line 4		New Accounts Receivable Balance:
		The amount listed on this line must balance to the General Ledger amount on the Balance Sheet for the date listed on the right side column.
Line 5		Ineligible Accounts:
		The line automatically populates from the Ineligible AR Summary. These amounts will be verified by the Bank.
Line 6		Net Eligible Accounts Receivable: The amount on this line is automatically calculated.
Line 7		Accounts Receivable Loan Formula:
		The amount of net eligible accounts receivable times the loan formula advance rate. Enter the advance rate and the Formula automatically calculates.
Line 8		Total Collateral Loan Formula and Maximum Loan Amount:
		A) Total Loan Formula (A/R + $7,500,000). This amount represents the combination of the Accounts Receivable Loan Formula plus $7,500,000. The combined total cannot exceed the Maximum Loan Amount.
		B) Enter the Maximum Loan Amount of the Line of Credit.
Line 9		Loan Balance
		The amount on this line is based on the last report. Enter the date and bring the last balance forward.
Line 10		Loan Payments: Enter the total loan payments made since the last report on this line.
Line 11		Sub Total: Enter the result of Line 9, Less Line 10, on this Line or allow calculation by formula.
Line 12		Advances and Other Obligations:
		A. Enter a summary of all advances since the last report, on this line.
		B.		If you are requesting a current Advance enter it on this line.
		C.		Enter Other Obligations on this line.
Line 13		Current Loan Balance: Enter your Current Loan Balance on this line or allow calculation by formula.
Line 14		Net Loan Availability: Enter the lesser of sum of Line 8 A or 8 B, less Line 13, on this Line.

 

								BANK USE ONLY
						Rec’d By:
						Date:
						Reviewed By:
						Date:
Authorized Signer

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EXHIBIT E

COMPLIANCE CERTIFICATE

 

Please send all Required Reporting to:				Comerica Bank
				Technology & Life Sciences Division
				Loan Analysis Department
				▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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				▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
				Phone: (▇▇▇) ▇▇▇-▇▇▇▇
				Fax: (▇▇▇) ▇▇▇-▇▇▇▇
FROM:		NUTANIX, INC.

The undersigned authorized Officer of Nutanix, Inc. (“Borrower”), in his or her capacity as an officer of Borrower and not in any individual capacity, hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement, dated             , 2013, between Borrower and Bank (as amended, restated, modified or otherwise supplemented, the “Agreement”) Borrower is in material compliance for the period ending             with all required covenants, except as noted below, and all representations and warranties of Borrower stated in the Agreement are true and correct in all material respects as of the date hereof except as noted below; provided, however, that those representations and warranties expressly referring to another date shall be true and correct in all material respects as of such date. Attached herewith are the required documents supporting the above certification. The Officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes and with respect to unaudited financial statements, for the absence of footnotes and subject to year-end adjustments.

Please indicate compliance status by circling Yes/No under “Complies” or “Applicable” column.

 

REPORTING COVENANTS		REQUIRED				COMPLIES
Company Prepared Monthly F/S		Monthly, within 30 days				YES		NO
Compliance Certificate		Monthly, within 30 days				YES		NO
CPA Audited, Unqualified F/S		Annually, within 180 days of FYE				YES		NO
Borrowing Base Cert., A/R & A/P Agings		Monthly, within 25 days				YES		NO
Annual Business Plan (incl. operating budget)		As soon as available after board approval				YES		NO
Audit		Semi-annual				YES		NO
If Public:
10-Q		Quarterly, within 5 days of SEC filing (50 days)				YES		NO
10-K		Annually, within 5 days of SEC filing (95 days)				YES		NO
Total amount of Borrower’s cash and investments		Amount: $				YES		NO
Total amount of Borrower’s cash and investments maintained with Bank		Amount: $				YES		NO
		DESCRIPTION				APPLICABLE
Legal Action > $500,000 (Sect. 6.2(iv))		Notify promptly upon notice				YES		NO
Inventory Disputes > $500,000 (Sect. 6.3)		Notify promptly upon notice				YES		NO
Mergers & Acquisitions > consideration $             (Sect. 7.3)		Notify promptly upon notice				YES		NO
Cross default with other agreements>$500,000 (Sect. 8.7)		Notify promptly upon notice				YES		NO
Judgments > $500,000 (Sect. 8.9)		Notify promptly upon notice				YES		NO
FINANCIAL COVENANTS		REQUIRED		ACTUAL		COMPLIES
TO BE TESTED MONTHLY, UNLESS OTHERWISE NOTED:
Minimum Liquidity Ratio (after Equity Event)		1.25:1.00		:1.00		YES		NO
OTHER COVENANTS		REQUIRED		ACTUAL		COMPLIES
Permitted Indebtedness for equipment leases		<$100,000				YES		NO
Permitted Investments for stock repurchase		<$100,000				YES		NO
Permitted Investments for subsidiaries		<$100,000				YES		NO
Permitted Investments for employee loans		<$100,000				YES		NO
Permitted Investments for joint ventures		<$100,000				YES		NO
Permitted Liens for equipment leases		<$100,000				YES		NO
Permitted Transfers		<$100,000				YES		NO

Please Enter Below Comments Regarding Violations:

The Officer further acknowledges that at any time Borrower is not in compliance with all the terms set forth in the Agreement, including, without limitation, the financial covenants, no credit extensions will be made.

 

Very truly yours,

Authorized Signer

Name:

Title:

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SCHEDULE OF EXCEPTIONS

TO LOAN AND SECURITY AGREEMENT

Permitted Indebtedness (Exhibit A)

 

•

None.

Permitted Investments (Exhibit A)

 

•

Investments consisting of equity interests in subsidiaries existing on the date hereof.

Permitted Liens (Exhibit A)

 

•

None.

Bank Accounts (Section 5.3)

 

•

▇▇▇▇▇ Fargo Bank Account ending in -4089.

Prior Names (Section 5.5)

 

•

None.

Inventory or Equipment Locations (Section 5.5)

 

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▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇.

 

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▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.

 

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▇▇▇▇ ▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇

 

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Park Forty Plaza, ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

 

•

Proof of concept hardware systems are located throughout the world for potential customers’ evaluation of Borrower’s products.

Litigation (Section 5.6)

 

•

None.

Inbound Licenses (Section 5.12)

 

•

None.

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		Corporation Resolutions and Incumbency Certification Authority to Procure Loans

I certify that I am the duly elected and qualified Secretary of Nutanix, Inc., a Delaware corporation (the “Corporation”), and the keeper of the corporate records of the Corporation; that the following is a true and correct copy of resolutions duly adopted by the Board of Directors of the Corporation in accordance with its bylaws and applicable statutes.

Copy of Resolutions:

Be it Resolved, That:

 

1.	Any (insert number required to sign) (            )                      of the following (insert titles only)                      of the Corporation are/is authorized, for, on behalf of, and in the name of the Corporation to:

 

(a)

Negotiate and procure loans, letters of credit and other credit or financial accommodations from Comerica Bank (the “Bank”), a Texas banking association, from time to time, including without limitation that certain Loan and Security Agreement dated as of November 26, 2013, as may be subsequently amended from time to time;

 

(b)

Discount with the Bank, commercial or other business paper belonging to the Corporation made or drawn by or upon third parties, without limit as to amount;

 

(c)

Purchase, sell, exchange, assign, endorse for transfer and/or deliver certificates and/or instruments representing stocks, bonds, evidences of Indebtedness or other securities owned by the Corporation, whether or not registered in the name of the Corporation;

 

(d)

Give security for any liabilities of the Corporation to the Bank by grant, security interest, assignment, lien, deed of trust or mortgage upon any real or personal property, tangible or intangible of the Corporation; and

 

(e)

Issue and/or execute one or more warrants for the purchase of the Corporation’s capital stock to Bank; and

 

(f)

Execute and deliver in form and content as may be required by the Bank any and all notes, evidences of Indebtedness, applications for letters of credit, guaranties, subordination agreements, loan and security agreements, financing statements, assignments, liens, deeds of trust, mortgages, trust receipts and other agreements, instruments or documents to carry out the purposes of these Resolutions, and any and all amendments or modifications thereto, any or all of which may relate to all or to substantially all of the Corporation’s property and assets.

 

2.

Said Bank be and it is authorized and directed to pay the proceeds of any such loans or discounts as directed by the persons so authorized to sign, whether so payable to the order of any of said persons in their individual capacities or not, and whether such proceeds are deposited to the individual credit of any of said persons or not;

 

3.	Any and all agreements, instruments and documents previously executed and acts and things previously done to carry out the purposes of these Resolutions are ratified, confirmed and approved as the act or acts of the Corporation.

 

4.

These Resolutions shall continue in force, and the Bank may consider the holders of said offices and their signatures to be and continue to be as set forth in a certified copy of these Resolutions delivered to the Bank, until notice to the contrary in writing is duly served on the Bank (such notice to have no effect on any action previously taken by the Bank in reliance on these Resolutions).

 

5.	Any person, corporation or other legal entity dealing with the Bank may rely upon a certificate signed by an officer of the Bank to effect that these Resolutions and any agreement, instrument or document executed pursuant to them are still in full force and effect and binding upon the Corporation.

 

6.	The Bank may consider the holders of the offices of the Corporation and their signatures, respectively, to be and continue to be as set forth in the Certificate of the Secretary of the Corporation until notice to the contrary in writing is duly served on the Bank.

I further certify that the above Resolutions are in full force and effect as of the date of this Certificate; that these Resolutions and any borrowings or financial accommodations under these Resolutions have been properly noted in the corporate books and records, and have not been rescinded, annulled, revoked or modified; that neither the foregoing Resolutions nor any actions to be taken pursuant to them are or will be in contravention of any provision of the articles of incorporation or bylaws of the Corporation or of any agreement, indenture or other instrument to which the Corporation is a party or by which it is bound; and that neither the articles of incorporation nor bylaws of the Corporation nor any agreement, indenture or other instrument to which the Corporation is a party or by which it is bound require the vote or consent of shareholders of the Corporation to authorize any act, matter or thing described in the foregoing Resolutions.

I further certify that the following named persons have been duly elected to the offices set opposite their respective names, that they continue to hold these offices at the present time, and that the signatures which appear below are the genuine, original signatures of each respectively:

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(PLEASE SUPPLY GENUINE SIGNATURES OF AUTHORIZED SIGNERS BELOW)

 

NAME (Type or Print)		TITLE		SIGNATURE

In Witness Whereof, I have affixed my name as Secretary and have caused the corporate seal of said Corporation to be affixed on November 26, 2013.

 

 

The Above Statements are Correct.
SIGNATURE OF OFFICER OR DIRECTOR OR, IF NONE, A SHAREHOLDER OTHER THAN SECRETARY WHEN SECRETARY IS AUTHORIZED TO SIGN ALONE
Failure to complete the above when the Secretary is authorized to sign alone shall constitute a certification by the Secretary that the Secretary is the sole Shareholder, Director and Officer of the Corporation.

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COMERICA BANK

Member FDIC

ITEMIZATION OF AMOUNT FINANCED

DISBURSEMENT INSTRUCTIONS

(Revolver)

 

Name(s): NUTANIX, INC.		Date: November 26, 2013

 

$	credited to deposit account No.                  when Advances are requested or disbursed to Borrower by cashiers check or wire transfer

Amounts paid to others on your behalf:

 

$	to Comerica Bank for Loan Fee

 

$	to Comerica Bank for Document Fee

 

$	to Comerica Bank for accounts receivable audit (estimate)

 

$	to Bank counsel fees and expenses

 

$

to

 

$

to

 

$	TOTAL (AMOUNT FINANCED)

Upon consummation of this transaction, this document will also serve as the authorization for Comerica Bank to disburse the loan proceeds as stated above.

 

Signature				Signature

 

1

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USA PATRIOT ACT

NOTICE

OF

CUSTOMER IDENTIFICATION

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.

WHAT THIS MEANS FOR YOU: when you open an account, we will ask your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

 

2

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		Agreement to Furnish Insurance to Loan and Security Agreement

(Herein called “Bank”)

[Please check the appropriate boxes below and enter any additional category in “Other” before sending it for execution.]

Borrower(s): Nutanix, Inc.

I understand that the Security Agreement or Deed of Trust which I executed in connection with this transaction requires me to provide a physical damage insurance policy including a Lenders Loss Payable Endorsement in favor of the Bank as shown below, within ten (10) days from the date of this agreement.

The following minimum insurance must be provided according to the terms of the security documents.

 

¨ AUTOMOBILES, TRUCKS, RECREATIONAL VEHICLES PROPERTY		x MACHINERY & EQUIPMENT: MISCELLANEOUS PERSONAL
Comprehensive & Collision		Fire & Extended Coverage
Lender’s Loss Payable Endorsement		Lender’s Loss Payable Endorsement
		¨ Breach of Warranty Endorsement
¨ BOATS		¨ AIRCRAFT
All Risk Hull Insurance		All Risk Ground & Flight Insurance
Lender’s Loss Payable Endorsement		Lender’s Loss Payable Endorsement
¨ Breach of Warranty Endorsement		¨ Breach of Warranty Endorsement
¨ MOBILE HOMES		¨ REAL PROPERTY
Fire, Theft & Combined Additional Coverage		Fire & Extended Coverage
Lender’s Loss Payable Endorsement		Lender’s Loss Payable Endorsement
¨ Earthquake		¨ All Risk Coverage
		¨ Special Form Risk Coverage
		¨ ¨ Earthquake
x INVENTORY		¨ Other

¨ Other

I may obtain the required insurance from any company that is acceptable to the Bank, and will deliver proof of such coverage with an effective date of                                                               or earlier.

I understand and agree that if I fail to deliver proof of insurance to the Bank at the address below, or upon the lapse or cancellation of such insurance, the Bank may procure Lender’s Single Interest Insurance or other similar coverage on the property. If the Bank procures insurance to protect its interest in the property described in the security documents, the cost for the insurance will be added to my indebtedness as provided in the security documents. Lender’s Single Interest Insurance shall cover only the Bank’s interest as a secured party, and shall become effective at the earlier of the funding date of this transaction or the date my insurance was canceled or expired. I UNDERSTAND THAT LENDER’S SINGLE INTEREST INSURANCE WILL PROVIDE ME WITH ONLY LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN, HOWEVER, MY EQUITY IN THE PROPERTY WILL NOT BE INSURED. FURTHER, THE INSURANCE WILL NOT PROVIDE MINIMUM PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND DOES NOT MEET THE REQUIREMENTS OF THE FINANCIAL RESPONSIBILITY LAW.

CALIFORNIA CIVIL CODE SECTION 2955.5. HAZARD INSURANCE DISCLOSURE: No lender shall require a borrower, as a condition of receiving or maintaining a loan secured by real property, to provide hazard insurance coverage against risks to the improvements on that real property in an amount exceeding the replacement value of the improvements on the property.

Bank Address for Insurance Documents:

Comerica Bank

Insurance Service Center

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▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

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I acknowledge having read the provisions of this agreement, and agree to its terms. I authorize the Bank to provide to any person (including any insurance agent or company) any information necessary to obtain the insurance coverage required.

 

OWNER(S) OF COLLATERAL:				DATED:
NUTANIX, INC.

 

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		AUTOMATIC LOAN PAYMENT AUTHORIZATION

 

				Date: November 26, 2013
Obligor Name:		NUTANIX, INC.
Obligor Number:				Lender’s Cost Center #:

Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇

The undersigned hereby authorizes Comerica Bank (“Bank”) to charge the account designated below for the payments due on the loan(s) as designated below and all renewals, extensions, modifications and/or substitutions thereof. This authorization will remain in effect unless the undersigned requests a modification that is agreed to by the Bank in writing. The undersigned remains fully responsible for all amounts outstanding to Bank if the designated account is insufficient for repayment.

 

¨	Automatic Payment Authorization for all payments on all current and future borrowings, as and when such payments come due (which payments include, without limitation, principal, interest, fees, costs, and expenses).

 

¨	Automatic Payment Authorization for all payments on only the specific borrowing identified below, as and when such payments come due (which payments include, without limitation, principal, interest, fees, costs, and expenses).

Specific Obligation Number:                                                                                                                                                                                                               

 

¨	Automatic Payment Authorization for less than all payments on only the specific borrowing indentified below, as and when such payments come due.

Specific Obligation Number:                                                                                                                                                                                                               

 

¨

Principal and Interest payments only

 

¨

Principal payments only

 

¨

Interest payments only

 

¨

SPECIAL INSTRUCTIONS/IRREGULAR PAYMENT INSTRUCTIONS

 

 

 

 

Payment Due Date: Your loan payments will be charged to your account as indicated above on the dates such payments become due (or on a date thereafter when there are available funds) unless that day is a Saturday, Sunday, or Bank holiday in which case such payments will be charged on the following business day, with interest to accrue during this extension as provided under the loan documents.

 

Account to be Charged:

Account No.

Transit No.

Number of lead days to issue billing.

(Charges to account are withdrawals pursuant to account resolution)