Exhibit 10.1

 

THIRD LOAN MODIFICATION AGREEMENT

 

This Third Loan Modification Agreement (this “Loan Modification Agreement”) is
entered into as of February 6, 2018, by and between SILICON VALLEY BANK, a
California corporation, with its principal place of business at 3003 Tasman
Drive, Santa Clara, California 95054 and with a loan production office located
at 2755 East Cottonwood Parkway, Suite 540, Salt Lake City, Utah 84121 (“Bank”)
and CONTROL4 CORPORATION, a Delaware corporation with its chief executive office
located at 11734 S. Election Road, Suite 200, Draper, Utah 84020 (“Borrower”)
and modifies the Loan Agreement (as defined below) as set forth below.

 

1.                                      DESCRIPTION OF EXISTING INDEBTEDNESS AND
OBLIGATIONS. Among other indebtedness and obligations which may be owing by
Borrower to Bank, Borrower is obligated to Bank pursuant to a loan arrangement
dated as of June 26, 2013, evidenced by, among other documents, a certain
Amended and Restated Loan and Security Agreement dated as of June 26, 2013,
between Borrower and Bank, as amended by that certain First Loan Modification
Agreement dated as of October 7, 2013, between Borrower and Bank, and as further
amended by that certain Second Loan Modification Agreement dated as of
January 29, 2016, between Borrower and Bank (as amended, the “Loan Agreement”). 
Capitalized terms used but not otherwise defined herein shall have the same
meanings as in the Loan Agreement.

 

2.                                      DESCRIPTION OF COLLATERAL.  Repayment of
the Obligations is secured by the Collateral as described in the Loan Agreement
(together with any other collateral security granted to Bank, the “Security
Documents”). Hereinafter, the Security Documents, together with all other
documents evidencing or securing the Obligations shall be referred to as the
“Existing Loan Documents”.

 

3.                                      DESCRIPTION OF CHANGE IN TERMS.

 

A.                                    Modifications to Loan Agreement.

 

1                                         The Loan Agreement shall be amended by
deleting the following Section 6.2(d) (“Compliance Certificate”) thereof, in its
entirety:

 

“                                          (d)                                
Compliance Certificate.  Within (i) thirty (30) days after the last day of each
month during which a Testing Period was in effect at any point, and
(ii) forty-five (45) days after the last day of each quarter, a duly completed
Compliance Certificate signed by a Responsible Officer, certifying that as of
the end of such month or quarter, as applicable, Borrower was in full compliance
with all of the terms and conditions of this Agreement, and setting forth
calculations showing compliance with the financial covenants set forth in this
Agreement and such other information as Bank may reasonably request;”

 

and inserting in lieu thereof the following:

 

“                                          (d)                                
Compliance Certificate.  Within forty-five (45) days after the last day of each
quarter, a duly completed Compliance Certificate signed by a Responsible
Officer, certifying that as of the end of such quarter, Borrower was in full
compliance with all of the terms and conditions of this Agreement, and setting
forth calculations showing compliance with the financial covenants set forth in
this Agreement and such other information as Bank may reasonably request;”

 

2                                         The Loan Agreement shall be amended by
deleting the following Section 6.7 (“Financial Covenants”) thereof, in its
entirety:

 

“6.7                         Financial Covenants.  Maintain, on a consolidated
basis with respect to Borrower and its Subsidiaries:

 

--------------------------------------------------------------------------------

 

(a)                                 Liquidity Coverage.  During any Testing
Period, to be tested as of the beginning of each Testing Period and as of the
last day of each month during which a Testing Period was in effect, a ratio of
(i) Borrower’s unrestricted and unencumbered cash at Bank plus net billed
accounts receivable to (ii) the aggregate amount of outstanding Obligations of
Borrower to Bank, of at least 1.50:1.0.

 

(b)                                 Intentionally Omitted.

 

(c)                                  Interest Coverage Ratio.  To be tested as
of the last day of each quarter, an Interest Coverage Ratio of at least
2.0:1.0.”

 

and inserting in lieu thereof the following:

 

“6.7                         Financial Covenants.  Maintain, on a consolidated
basis with respect to Borrower and its Subsidiaries:

 

(a)                                 Leverage Ratio.  To be tested as of the last
day of each quarter, a Leverage Ratio not to exceed (i) 3.0:1.0 for the quarters
ending March 31, 2018, June 30, 2018 and September 30, 2018, (ii) 2.75:1.0 for
the quarters ending December 31, 2018, March 31, 2019 and June 30, 2019, and
(iii) 2.50:1.0 for the quarter ending September 30, 2019 and each quarter
thereafter.

 

(b)                                 Liquidity.  To be tested as of the last day
of each quarter, (i) unrestricted and unencumbered cash and Cash Equivalents in
accounts with Bank or Bank’s Affiliates, plus (ii) without duplication of (i),
amounts held in securities/investment accounts with Bank’s Affiliates that are
subject to a Control Agreement, plus (iii) the unused Availability Amount on the
2016 Revolving Line, in an amount of at least Fifteen Million Dollars
($15,000,000.00).

 

(c)                                  Interest Coverage Ratio.  To be tested as
of the last day of each quarter, an Interest Coverage Ratio of at least
2.0:1.0.”

 

3                                         The Loan Agreement shall be amended by
deleting the following definitions appearing in Section 13.1 thereof:

 

“                                          “2016 Revolving Line” is an aggregate
principal amount equal to Thirty Million Dollars ($30,000,000.00).”

 

“                                          “2016 Revolving Line Maturity Date”
is January 29, 2018.”

 

“                                              “Permitted Acquisitions” means
the acquisition by Borrower of all or substantially all of the assets of another
company or companies (collectively, the “Target”), provided that (a) Target is
engaged in a similar line of business as Borrower both prior to and after giving
effect to such acquisition, (b) such acquisition is non-hostile in nature,
(c) no Event of Default has occurred and is continuing or would exist after
giving effect to such acquisition, (d) Borrower provides evidence to Bank
acceptable to Bank in its sole and absolute discretion that Borrower is and
shall be in compliance with the terms of this Agreement both prior to and after
giving effect to such acquisition, (e) such acquisition is consummated within a
reasonable amount of time, as determined by Bank in its sole and absolute
discretion, (f) Borrower shall provide evidence to Bank, acceptable to Bank in
its sole and absolute discretion, that immediately after giving effect to such
acquisition, that Borrower shall have (i) unrestricted and

 

2

--------------------------------------------------------------------------------

 

unencumbered cash and Cash Equivalents in accounts with Bank or Bank’s
Affiliates, plus (ii) without duplication of (i), amounts held in
securities/investment accounts with Bank’s Affiliates that are subject to a
Control Agreement, plus (iii) the unused Availability Amount on the 2016
Revolving Line, in an amount of at least Thirty Million Dollars ($30,000,000.00)
(without taking into account the amount of any potential earn-out payments
pursuant to such acquisition), (g) within thirty (30) days after giving effect
to such acquisition, upon request of Bank, Borrower shall (i) cause Target to
become a co-borrower hereunder and provide to Bank such appropriate financing
statements and/or Control Agreements, all in form and substance satisfactory to
Bank (including being sufficient to grant Bank a first priority Lien (subject to
Permitted Liens) in and to the assets of Target), (ii) provide to Bank
appropriate certificates and powers and financing statements, pledging all of
the direct or beneficial ownership interest in Target, in form and substance
satisfactory to Bank, and (iii) provide to Bank all other documentation in form
and substance satisfactory to Bank, including one or more opinions of counsel
satisfactory to Bank, which in its opinion is appropriate with respect to the
execution and delivery of the applicable documentation referred to above,
(h) Borrower remains a separate legal entity following the transactions in
connection with and contemplated by such acquisition, (i) prior to the
consummation of such acquisition, Borrower delivers to Bank evidence that the
assets of Target are free and clear of all Liens, and (j) no Indebtedness, other
than Permitted Indebtedness, shall be assumed or incurred by Borrower in
connection with such acquisition.”

 

and inserting in lieu thereof the following:

 

“                                          “2016 Revolving Line” is an aggregate
principal amount equal to Forty Million Dollars ($40,000,000.00).”

 

“                                          “2016 Revolving Line Maturity Date”
is January 29, 2020.”

 

“                                          “Permitted Acquisitions” means the
acquisition by Borrower of all or substantially all of the assets of another
company or companies (collectively, the “Target”), provided that (a) Target is
engaged in a similar line of business as Borrower both prior to and after giving
effect to such acquisition, (b) such acquisition is non-hostile in nature,
(c) no Event of Default has occurred and is continuing or would exist after
giving effect to such acquisition, (d) Borrower provides evidence to Bank
acceptable to Bank in its sole and absolute discretion that Borrower is and
shall be in compliance with the terms of this Agreement both prior to and after
giving effect to such acquisition, (e) such acquisition is consummated within a
reasonable amount of time, as determined by Bank in its sole and absolute
discretion, (f) Borrower shall provide evidence to Bank, acceptable to Bank in
its sole and absolute discretion, that immediately after giving effect to such
acquisition, that Borrower shall have (i) unrestricted and unencumbered cash and
Cash Equivalents in accounts with Bank or Bank’s Affiliates, plus (ii) without
duplication of (i), amounts held in securities/investment accounts with Bank’s
Affiliates that are subject to a Control Agreement, plus (iii) the unused
Availability Amount on the 2016 Revolving Line, in an amount of at least Forty
Million Dollars ($40,000,000.00) (without taking into account the amount of any
potential earn-out payments pursuant to such acquisition), (g) within thirty
(30) days after giving effect to such acquisition, upon request of Bank,
Borrower shall (i) cause Target to become a co-borrower hereunder and provide to
Bank such appropriate financing statements and/or Control Agreements, all in
form and substance satisfactory to Bank (including being sufficient to grant
Bank a first priority

 

3

--------------------------------------------------------------------------------

 

Lien (subject to Permitted Liens) in and to the assets of Target), (ii) provide
to Bank appropriate certificates and powers and financing statements, pledging
all of the direct or beneficial ownership interest in Target, in form and
substance satisfactory to Bank, and (iii) provide to Bank all other
documentation in form and substance satisfactory to Bank, including one or more
opinions of counsel satisfactory to Bank, which in its opinion is appropriate
with respect to the execution and delivery of the applicable documentation
referred to above, (h) Borrower remains a separate legal entity following the
transactions in connection with and contemplated by such acquisition, (i) prior
to the consummation of such acquisition, Borrower delivers to Bank evidence that
the assets of Target are free and clear of all Liens, and (j) no Indebtedness,
other than Permitted Indebtedness, shall be assumed or incurred by Borrower in
connection with such acquisition.”

 

4                                         The Loan Agreement shall be amended by
deleting the following definition appearing in Section 13.1 thereof:

 

“                                          “Testing Period” is any time that the
sum of Borrower’s (i) unrestricted and unencumbered cash and Cash Equivalents at
Bank, plus (ii) without duplication of (i), amounts held in
securities/investment accounts with Bank’s Affiliates that are subject to a
Control Agreement, is less than Thirty Million Dollars ($30,000,000.00).”

 

5                                         The Compliance Certificate appearing
as Exhibit E to the Loan Agreement is hereby replaced with the Compliance
Certificate attached as Schedule 1 hereto.

 

4.                                      FEES.  Borrower shall pay to Bank a
commitment fee equal to One Hundred Thousand Dollars ($100,000.00), which fee
shall be due on the date hereof and shall be deemed fully earned as of the date
hereof.  Borrower shall also reimburse Bank for all legal fees and expenses
incurred in connection with this amendment to the Existing Loan Documents.

 

5.                                      RATIFICATION OF PERFECTION CERTIFICATE. 
Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms
and disclosures contained in a certain Perfection Certificate dated as of
January 29, 2016 delivered by Borrower to Bank, and acknowledges, confirms and
agrees the disclosures and information Borrower provided to Bank in the
Perfection Certificate has not changed, as of the date hereof.

 

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

 

7.                                      RATIFICATION OF LOAN DOCUMENTS. 
Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of
all security or other collateral granted to the Bank, and confirms that the
indebtedness secured thereby includes, without limitation, the Obligations.

 

8.                                      NO DEFENSES OF BORROWER.  Borrower
hereby acknowledges and agrees that Borrower has no offsets, defenses, claims,
or counterclaims against Bank with respect to the Obligations, or otherwise, and
that if Borrower now has, or ever did have, any offsets, defenses, claims, or
counterclaims against Bank, whether known or unknown, at law or in equity, all
of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any
liability thereunder.

 

9.                                      CONTINUING VALIDITY.  Borrower
understands and agrees that in modifying the existing Obligations, Bank is
relying upon Borrower’s representations, warranties, and agreements, as set
forth in the Existing Loan Documents.  Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect.  Bank’s agreement to
modifications to the existing Obligations pursuant to this  Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Obligations.  Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the

 

4

--------------------------------------------------------------------------------

 

Obligations.  It is the intention of Bank and Borrower to retain as liable
parties all makers of Existing Loan Documents, unless the party is expressly
released by Bank in writing.  No maker will be released by virtue of this Loan
Modification Agreement.

 

10.                               COUNTERSIGNATURE.  This Loan Modification
Agreement shall become effective only when it shall have been executed by
Borrower and Bank.

 

[The remainder of this page is intentionally left blank]

 

5

--------------------------------------------------------------------------------

 

This Loan Modification Agreement is executed as of the date first written above.

 

BORROWER:

 

BANK:

 

 

 

CONTROL4 CORPORATION

 

SILICON VALLEY BANK

 

 

 

By:

 

 

By:

 

 

 

 

 

 

Name:

 

 

Name:

 

 

 

 

 

 

Title:

 

 

Title:

 

 

--------------------------------------------------------------------------------

 

Schedule 1

 

EXHIBIT E

 

COMPLIANCE CERTIFICATE

 

TO:

SILICON VALLEY BANK

Date:

                                                                   

FROM:

CONTROL4 CORPORATION

 

 

The undersigned authorized officer of CONTROL4 CORPORATION (“Borrower”)
certifies that under the terms and conditions of the Amended and Restated Loan
and Security Agreement between Borrower and Bank (the “Agreement”):

 

(1) Borrower is in complete compliance for the period ending                
with all required covenants except as noted below; (2) there are no Events of
Default; (3) all representations and warranties in the Agreement are true and
correct in all material respects on this date except as noted below; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date;
(4) Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state
and local taxes, assessments, deposits and contributions owed by Borrower except
as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement;
and (5) no Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Bank.

 

Attached are the required documents supporting the certification.  The
undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.  The undersigned acknowledges that no
borrowings may be requested at any time or date of determination that Borrower
is not in compliance with any of the terms of the Agreement, and that compliance
is determined not just at the date this certificate is delivered.  Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.

 

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

 

Reporting Covenants

 

Required

 

Complies

 

 

 

 

 

Quarterly financial statements

 

Quarterly within 45 days

 

Yes   No

Compliance Certificate

 

Quarterly within 45 days

 

Yes   No

Annual financial statement (CPA Audited)

 

FYE within 90 days

 

Yes   No

10-Q, 10-K and 8-K

 

Within 5 days after filing with SEC

 

Yes   No

Board-approved projections

 

Within 30 days prior to FYE

 

Yes   No

 

Financial Covenants

 

Required

 

Actual

 

Complies

 

 

 

 

 

 

 

Maintain (tested quarterly)

 

 

 

 

 

 

Leverage Ratio

 

            :1.0

*

          :1.0

 

Yes   No

Liquidity

 

$

15,000,000

 

$

          

 

Yes   No

Interest Coverage Ratio

 

2.0:1.0

 

          :1.0

 

Yes   No

 

--------------------------------------------------------------------------------

*as set forth in Section 6.7(a)

 

1

--------------------------------------------------------------------------------

 

Performance Pricing

 

 

 

LIBOR Advance

 

Primate Rate Advance

 

Applies

Leverage Ratio > 2.0:1.0 at any time during such period

 

LIBOR Rate plus 2.75%

 

Prime Rate plus 0.25%

 

Yes   No

Leverage Ratio < 2.0:1.0 at all times during such period

 

LIBOR Rate plus 2.50%

 

Prime Rate plus 0.0%

 

Yes   No

 

The following financial covenant analyses and information set forth in Schedule
1 attached hereto are true and accurate as of the date of this Certificate.

 

Other Matters

 

Have there been any amendments of or other changes to the capitalization table
of Borrower and to the Operating Documents of Borrower or any of its
Subsidiaries? If yes, provide copies of any such amendments or changes with this
Compliance Certificate.

Yes

No

 

The following are the exceptions with respect to the certification above:  (If
no exceptions exist, state “No exceptions to note.”)

 

CONTROL4 CORPORATION

BANK USE ONLY

 

 

 

 

 

 

Received by:

 

 

By:

 

 

 

AUTHORIZED SIGNER

 

Name:

 

 

Date:

 

 

Title:

 

 

 

 

 

Verified:

 

 

 

 

AUTHORIZED SIGNER

 

 

Date: 

 

 

 

 

 

 

 

Compliance Status:  

Yes     No

 

 

2

--------------------------------------------------------------------------------

 

Schedule 1 to Compliance Certificate

 

Financial Covenants of Borrower

 

In the event of a conflict between this Schedule and the Loan Agreement, the
terms of the Loan Agreement shall govern.

 

Dated:

_______________

 

 

 

I.                                        Leverage Ratio (Section 6.7(a))

 

Required:

To be tested as of the last day of each quarter, a Leverage Ratio not to exceed
(i) 3.0:1.0 for the quarters ending March 31, 2018, June 30, 2018 and
September 30, 2018, (ii) 2.75:1.0 for the quarters ending December 31, 2018,
March 31, 2019 and June 30, 2019, and (iii) 2.50:1.0 for the quarter ending
September 30, 2019 and each quarter thereafter.

 

 

Actual:

         :1.0

 

A.

Aggregate value of outstanding Obligations of Borrower to Bank as of the last
day of such twelve (12) month period

$              

 

 

 

B.

Adjusted EBITDA (during subject twelve (12) month period)

$              

 

 

 

C.

Leverage Ratio (line A divided by line B)

________

 

Is line C equal to or less than         :1:0?

 

 

 

 

             No, not in compliance

             Yes, in compliance

 

II.                                   Liquidity (Section 6.7(b))

 

Required:

To be tested as of the last day of each quarter, (i) unrestricted and
unencumbered cash and Cash Equivalents in accounts with Bank or Bank’s
Affiliates, plus (ii) without duplication of (i), amounts held in
securities/investment accounts with Bank’s Affiliates that are subject to a
Control Agreement, plus (iii) the unused Availability Amount on the 2016
Revolving Line, in an amount of at least Fifteen Million Dollars
($15,000,000.00).

 

 

Actual:

$                

 

A.

Aggregate value of Borrower’s unrestricted and unencumbered cash and Cash
Equivalents in accounts with Bank or Bank’s Affiliates

$              

 

 

 

B.

Without duplication, amounts held in securities/investment accounts with Bank’s
Affiliates that are subject to a Control Agreement

$              

 

 

 

C.

Unused Availability Amount on the 2016 Revolving Line

$              

 

 

 

D.

Sum of Line A plus Line B plus Line C

$              

 

Is line D equal to or greater than $15,000,000.00?

 

3

--------------------------------------------------------------------------------

 

 

             No, not in compliance

             Yes, in compliance

 

III.                              Interest Coverage Ratio (Section 6.7(c))

 

Required:

To be tested as of the last day of each quarter, an Interest Coverage Ratio of
at least 2.0:1.0.

 

 

Actual:

             :1.0

 

A.

Adjusted EBITDA (during subject twelve (12) month period)

$             

 

 

 

B.

Unfunded capital expenditures (during subject twelve (12) month period)

$             

 

 

 

C.

Cash taxes (during subject twelve (12) month period)

$             

 

 

 

D.

Line A minus Line B minus Line C

$             

 

 

 

E.

Actual interest payments on all outstanding Indebtedness of Borrower (during
subject twelve (12) month period)

$             

 

 

 

F.

Interest Coverage Ratio (line D divided by line E)

_______

 

Is line F equal to or greater than 2.0:1:0?

 

 

             No, not in compliance

             Yes, in compliance

 

4

--------------------------------------------------------------------------------