Exhibit 10.1

FIRST Amendment

to

SECOND AMENDED AND RESTATED Loan and security agreement

 

This First Amendment to Second Amended and Restated Loan and Security Agreement
(this “Amendment”) is entered into this 25th day of March, 2016, by and between
(a)  SILICON VALLEY BANK, a California corporation with a loan production office
located at 380 Interlocken Crescent, Suite 600, Broomfield, Colorado 80021
(“Bank”), and (b) (i) MATTERSIGHT CORPORATION, a Delaware corporation
(“Mattersight Corporation”), (ii) MATTERSIGHT EUROPE HOLDING CORPORATION, a
Delaware corporation (“Mattersight Europe”), and (iii) MATTERSIGHT INTERNATIONAL
HOLDING, INC., an Illinois corporation (“Mattersight International”; and
together with Mattersight Corporation and Mattersight Europe, jointly and
severally, individually and collectively, “Borrower”).

Recitals

A.Bank and Borrower have entered into that certain Second Amended and Restated
Loan and Security Agreement dated as of March 10, 2015 (as the same may from
time to time be further amended, modified, supplemented or restated, the “Loan
Agreement”).  

B.Bank has extended credit to Borrower for the purposes permitted in the Loan
Agreement.  

C.Borrower has requested that Bank amend the Loan Agreement to (i) extend the
Revolving Line Maturity Date, (ii) revise the financial covenants, (iii) provide
for the Term Loan 2016, as described below, and (iv) make certain other
revisions to the Loan Agreement as more fully set forth herein.

D.Bank has agreed to so amend certain provisions of the Loan Agreement, but only
to the extent, in accordance with the terms, subject to the conditions and in
reliance upon the representations and warranties set forth below.

Agreement

Now, Therefore, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:

1.Definitions.  Capitalized terms used but not defined in this Amendment shall
have the meanings given to them in the Loan Agreement.

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2.Amendments to Loan Agreement. 

2.1Section 2.1.2 (Term Loan 2016).  The following new Section 2.1.2 shall be
inserted immediately following Section 2.1.1 thereof:

 

“2.1.2Term Loan 2016.

 

(a)Availability.  Bank shall make one (1) term loan available to Borrower on the
First Amendment Effective Date, in an amount equal to Six Million Dollars
($6,000,000), subject to the satisfaction of the terms and conditions of this
Agreement.

 

(b)Repayment.  Borrower shall make monthly payments of interest with respect to
the Term Loan 2016 commencing on the first day of the month following the month
in which the Funding Date occurs, and thereafter on the first day of each
successive calendar month until the Term Loan 2016 is paid in full.  Borrower
shall repay the principal amount of the Term Loan 2016 in thirty-six (36) equal
installments of principal, based on a thirty-six (36) month amortization
schedule (each payment of principal and/or interest being a “Term Loan 2016
Payment”) commencing on the first day of the month that is twelve (12) months
after the Funding Date of the Term Loan 2016 and thereafter on the first day of
each successive calendar month.  Borrower’s final Term Loan 2016 Payment, due on
the Term Loan 2016 Maturity Date, shall include all outstanding principal and
accrued and unpaid interest under the Term Loan 2016.  Once repaid, the Term
Loan 2016 may not be reborrowed.

 

(c)Prepayment.  The Borrower may prepay all or any portion, of the Term Loan
2016 prior to the Term Loan 2016 Maturity Date, effective three (3) Business
Days after written notice of such prepayment is given to Bank.  Notwithstanding
any such prepayment, Bank’s lien and security interest in the Collateral shall
continue until Borrower fully satisfies its Obligations.  Such prepayments shall
be in a minimum amount of Five Hundred Thousand Dollars ($500,000) and
increments of Five Hundred Thousand ($500,000) in excess thereof (or, if less,
the then-remaining outstanding principal amount of the Term Loan 2016).  If any
such prepayment is at Borrower’s election or at Bank’s election due to the
occurrence and continuance of an Event of Default, Borrower shall pay to Bank,
in addition to the payment of any other expenses or fees then-owing, a
prepayment premium in an amount equal to (i) one percent (1.00%) of the
principal amount of the Term Loan 2016 so prepaid on or prior to the first
anniversary of the First Amendment Effective Date; (ii) one-half of one percent
(0.50%) of the principal amount of the Term Loan 2016 so prepaid after the first
anniversary of the First Amendment Effective Date, but on or before the second
anniversary of the First Amendment Effective Date; and (iii) zero percent
(0.00%) of the principal amount of the Term Loan 2016 so prepaid after the
second anniversary of the First Amendment Effective Date; provided that no
prepayment premium shall be charged if the Term Loan 2016 is replaced with a new
facility from Bank.

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(d)Use of Proceeds.   Proceeds of the Term Loan 2016 will be utilized by
Borrower as working capital, to fund its general business requirements and not
for personal, family, household or agricultural purposes.”

 

2.2Section 2.3(a) (Interest Rate).  Section 2.3(a) is amended in its entirety
and replaced with the following:

 

“(a)Interest Rate.

 

(i)Revolving Line.  Subject to Section 2.3(b), the principal amount outstanding
under the Revolving Line shall accrue interest at a floating per annum rate
equal to the Prime Rate plus one and one-quarter percent (1.25%), which interest
shall be payable monthly in accordance with Section 2.3(f) below.

 

(ii)Term Loan 2016.  Subject to Section 2.3(b), the principal amount outstanding
under the Term Loan 2016 shall accrue interest at a floating per annum rate
equal to the Prime Rate plus one and one-half percent (1.50%), which interest
shall be payable monthly.”

2.3Section 2.4 (b) and Section 2.4(c) (Termination Fee).  Section 2.4(b) and
Section 2.4(c) are each amended in their entirety and replaced with the
following:

 

“(b)[Reserved];

 

(c)Termination Fee.  Upon termination of the Revolving Line for any reason prior
to the Revolving Line Maturity Date, in addition to the payment of any other
amounts then-owing, a termination fee in an amount equal to (i) one percent
(1.00%) of the Revolving Line (i.e. One Hundred Fifty Thousand Dollars
($150,000.00)) if such termination occurs on or prior to the first anniversary
of the First Amendment Effective Date; or (ii) one-quarter of one percent
(0.25%) of the Revolving Line (i.e. Thirty Seven Thousand Five Hundred Dollars
($37,500.00)) if such termination occurs at any time after the first anniversary
of the First Amendment Effective Date but prior to the Revolving Line Maturity
Date; provided that no termination fee shall be charged if the credit facility
hereunder is replaced with a new facility from Bank;”

 

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2.4Section 6.7 (Financial Covenants).  Section 6.7 is amended in its entirety
and replaced with the following: 

 

“6.7Financial Covenants.

 

Maintain at all times, subject to periodic reporting as of the last day of each
month, unless otherwise noted, on a consolidated basis with respect to Borrower:

 

(a)Free Cash Flow.  Achieve Free Cash Flow (negative Free Cash Flow), measured
quarterly, on a trailing three month basis, of not less than (no worse than) the
following for the quarterly compliance periods indicated below:

 

Quarterly Period Ending

 

Minimum Adjusted Free Cash Flow
(negative Free Cash Flow no worse than)

March 31, 2016

($4,300,000)

June 30, 2016

($5,200,000)

September 30, 2016

($3,350,000)

December 31, 2016

($1,350,000)

March 31, 2017

($2,100,000)

June 30, 2017

($1,550,000)

September 30, 2017

($750,000)

December 31, 2017

$0.00

 

For the quarterly periods ending March 31, 2018 and thereafter, the quarterly
Free Cash Flow requirements shall be determined by Bank, based on the annual
projections delivered by Borrower to Bank in accordance with Section 6.2(i);
provided, that in any event such quarterly requirements will not be less than
$0.00 for any such quarterly period.

 

(b)Liquidity.  Maintain at all times, to be certified by Borrower as of the last
day of each month, the sum of (i) unrestricted cash at Bank plus (ii) the unused
Availability Amount, in an amount equal to or greater than Seventeen Million
Dollars ($17,000,000).”

 

2.5Section 8.1 (Payment Default).  Section 8.1 is amended in its entirety and
replaced with the following:

 

“8.1Payment Default.  Borrower fails to (a) make any payment of principal or
interest on any Credit Extension on its due date, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable (which three (3) Business Day cure period shall not apply to payments
due on the Revolving Line Maturity Date and/or the Term Loan 2016 Maturity
Date).  During the cure period, the failure to make or pay any payment specified
under clause (a) or (b) hereunder is not an Event of Default (but no Credit
Extension will be made during the cure period);”

 

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2.6Section 13 (Definitions).  The following new terms and their respective
definitions are hereby inserted in Section 13.1 thereof, each in its applicable
alphabetical order: 

 

“Capital Expenditures” means, with respect to any Person for any period, the sum
of (a) the aggregate of all expenditures by such Person and its Subsidiaries
during such period that are capital expenditures as determined in accordance
with GAAP, whether such expenditures are paid in cash or financed, plus (b) to
the extent not covered by clause (a), the aggregate of all expenditures by such
Person and its Subsidiaries during such period to acquire by purchase or
otherwise the business or capitalized assets or the capital stock of any other
Person.

 

“Free Cash Flow” is, on any date of measurement, is (a) the sum of (i) Net
Income, plus (ii) Interest Expense, plus (iii) income tax expense, plus (iv) to
the extent deducted from the calculation of Net Income, depreciation and
amortization expense, plus (v) non-cash stock compensation expense; minus (b)
Capital Expenditures.

 

“First Amendment” is that certain First Amendment to Second Amended and Restated
Loan and Security Agreement, dated as of the First Amendment Effective Date, by
and between Bank and Borrower.

 

“First Amendment Effective Date” is March 25, 2016.

 

“Interest Expense” means for any fiscal period, interest expense (whether cash
or non-cash) determined in accordance with GAAP for the relevant period ending
on such date, including, in any event, interest expense with respect to any
Credit Extension and other Indebtedness of Borrower and its Subsidiaries,
including, without limitation or duplication, all commissions, discounts, or
related amortization and other fees and charges with respect to letters of
credit and bankers’ acceptance financing and the net costs associated with
interest rate swap, cap, and similar arrangements, and the interest portion of
any deferred payment obligation (including leases of all types).

 

“Net Income” means, as calculated on a consolidated basis for Borrower and its
Subsidiaries for any period as at any date of determination, the net profit (or
loss), after provision for taxes, of Borrower and its Subsidiaries for such
period taken as a single accounting period.

 

“Term Loan 2016” is a loan made by Bank pursuant to the terms of Section 2.1.2
hereof.

 

“Term Loan 2016 Maturity Date” is March 1, 2020 (i.e. the first day of the month
that is forty-eight (48) months after the First Amendment Effective Date).

 

“Term Loan 2016 Payment” is defined in Section 2.1.2(b).

 

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2.7Section 13 (Definitions).  The following terms and their respective
definitions set forth in Section 13.1 are amended in their entirety and replaced
with the following:  

 

“Credit Extension” is any Advance, the Term Loan 2016 or any other extension of
credit by Bank for Borrower’s benefit under this Agreement.

 

“Revolving Line Maturity Date” is March 31, 2018.

 

2.8Section 13 (Definitions).  The following terms and their respective
definition are hereby deleted in their entirety:

 

“Tangible Net Worth” is, on any date, the consolidated total assets of Borrower
and its Subsidiaries minus (a) any amounts attributable to (i) goodwill, (ii)
intangible items including unamortized debt discount and expense, Patents,
Trademarks, Copyrights, and research and development expenses except prepaid
expenses, (iii) notes, accounts receivable and other obligations owing to
Borrower from its officers or other Affiliates, and (iv) reserves not already
deducted from assets, minus (b) Total Liabilities, plus (c) Subordinated Debt.

 

“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower’s consolidated balance sheet, including
all Indebtedness.

 

2.9Exhibit A (Compliance Certificate).  The Compliance Certificate is amended in
its entirety and replaced with the Compliance Certificate in the form of Exhibit
A attached hereto.

 

3.Limitation of Amendments.

3.1The amendments set forth in Section 2, above, are effective for the purposes
set forth herein and shall be limited precisely as written and shall not be
deemed to (a) be a consent to any amendment, waiver or modification of any other
term or condition of any Loan Document, or (b) otherwise prejudice any right or
remedy which Bank may now have or may have in the future under or in connection
with any Loan Document.

3.2This Amendment shall be construed in connection with and as part of the Loan
Documents and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Loan Documents, except as herein amended, are hereby
ratified and confirmed and shall remain in full force and effect.

4.Representations and Warranties.  To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:

4.1Immediately after giving effect to this Amendment (a) the representations and
warranties contained in the Loan Documents are true, accurate and complete in
all material respects as of the date hereof (except to the extent such
representations and

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warranties relate to an earlier date, in which case they are true and correct as
of such date), and (b) no Event of Default has occurred and is continuing; 

4.2Borrower has the power and authority to execute and deliver this Amendment
and to perform its obligations under the Loan Agreement, as amended by this
Amendment;

4.3The organizational documents of Borrower previously delivered to Bank on the
Effective Date remain true, accurate and complete and have not been amended,
supplemented or restated and are and continue to be in full force and effect;

4.4The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, have been duly authorized;

4.5The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not and will not contravene (a) any law or regulation binding on
or affecting Borrower, (b) any contractual restriction with a Person binding on
Borrower, (c) any order, judgment or decree of any court or other governmental
or public body or authority, or subdivision thereof, binding on Borrower, or
(d) the organizational documents of Borrower;

4.6The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not require any order, consent, approval, license, authorization
or validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on
either Borrower, except as already has been obtained or made; and

4.7This Amendment has been duly executed and delivered by Borrower and is the
binding obligation of Borrower, enforceable against Borrower in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium or other similar laws of
general application and equitable principles relating to or affecting creditors’
rights.

5.Updated Perfection Certificate.  In connection with this Amendment, Borrower
has delivered to Bank an updated Perfection Certificate (the “Updated Perfection
Certificate”).  Bank and Borrower acknowledge and agree that from and after the
First Amendment Effective Date, all references in the Loan Agreement or any
other Loan Document to the “Perfection Certificate” shall be deemed to mean the
Updated Perfection Certificate.

6.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.

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7.Integration.  This Amendment and the Loan Documents represent the entire
agreement about this subject matter and supersede prior negotiations or
agreements.  All prior agreements, understandings, representations, warranties,
and negotiations between the parties about the subject matter of this Amendment
and the Loan Documents merge into this Amendment and the Loan Documents. 

8.Counterparts.  This Amendment may be executed in any number of counterparts
and all of such counterparts taken together shall be deemed to constitute one
and the same instrument.

9.Effectiveness.  This Amendment shall be deemed effective upon (a) the due
execution and delivery to Bank of this Amendment by each party hereto;
(b) Borrower’s payment of (i) a Revolving Line commitment fee in an amount equal
to Fifty Six Thousand Two Hundred Fifty Dollars ($56,250.00), (ii) a Term Loan
2016 commitment fee in an amount equal to Sixty Thousand Dollars ($60,000), and
(iii) Bank’s legal fees and expenses incurred in connection with the existing
Loan Documents and this Amendment; (c) Bank’s receipt of the updated Perfection
Certificate, the updated certificates of insurance and the Bank’s Invoice for
Loan Charges, in each case duly authorized and executed (as applicable), and
otherwise in form and substance reasonably acceptable to Bank; (d) a legal
opinion of Borrower’s counsel dated as of the First Amendment Effective Date,
together with the duly executed original signature thereto; and (e) Bank’s
receipt of updated Corporate Borrowing Certificates for each Borrower, including
the applicable attachments in connection therewith.

10.Anniversary Fee.  Borrower shall pay to Bank an anniversary fee of Fifty Six
Thousand Two Hundred Fifty Dollars ($56,250.00), which shall be fully earned,
non-refundable and due and payable on the first anniversary of the First
Amendment Effective Date.

[Signature page follows.]

 

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In Witness Whereof, the parties hereto have caused this Amendment to be duly
executed and delivered as of the date first written above.

 

 

BORROWER:

MATTERSIGHT CORPORATION

By:

/s/ Sheau-ming K. Ross

Name:

Sheau-ming K. Ross

Title:

CFO

MATTERSIGHT EUROPE HOLDING CORPORATION

By:

/s/ Sheau-ming K. Ross

Name:

Sheau-ming K. Ross

Title:

CFO

MATTERSIGHT INTERNATIONAL HOLDING, INC.

By:

/s/ Sheau-ming K. Ross

Name:

Sheau-ming K. Ross

Title:

CFO

BANK:

 

SILICON VALLEY BANK

By:

/s/ Brian Powers

Name:

Brian Powers

Title:

VP

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Exhibit A to First Amendment

EXHIBIT B

 

 

COMPLIANCE CERTIFICATE

 

TO:

 

SILICON VALLEY BANK

Date:

 

FROM:

MATTERSIGHT CORPORATION

 

 

 

MATTERSIGHT EUROPE HOLDING CORPORATION

 

 

 

MATTERSIGHT INTERNATIONAL HOLDING, INC. (jointly and severally, individually and
collectively, the “Borrower”)

 

The undersigned authorized officer of Borrower certifies that under the terms
and conditions of the Second Amended and Restated Loan and Security Agreement
among Borrower and Bank (as amended, 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, except as otherwise permitted pursuant to the terms of
Section 5.8 of the Agreement, 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 5.8 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.

 

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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 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 Covenant

Required

Complies

 

 

 

Monthly consolidating financial statements with
Compliance Certificate

Monthly within 30 days

Yes   No

Annual consolidating financial statement (CPA Audited)

FYE within 150 days

Yes   No

10‑Q, 10‑K and 8-K

Within 5 days after filing with SEC

Yes   No

A/R, A/P Agings, and Deferred Revenue reports

Monthly within 30 days

Yes   No

Board-approved Projections

FYE within 30 days

Yes   No

Transaction Reports

Monthly within 30 days and
with each request for a Credit Extension

Yes   No

 

Financial Covenant

Required

Actual

Complies

 

 

 

 

Free Cash Flow (tested quarterly)

*

$

Yes   No

Liquidity (at all times, certified monthly)

$17,000,000

$

Yes   No

 

*See Section 6.7(a)

 

The following Intellectual Property not previously disclosed to Bank was
registered after the Effective Date (if no registrations, state “None”):

____________________________________________________________________________

 

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

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

 

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MATTERSIGHT CORPORATION

 

BANK USE ONLY

 

 

 

 

 

 

 

 

 

 

 

 

 

Received by:

 

By:

 

 

authorized signer

 

Name:

 

 

Date:

 

Title:

 

 

 

 

 

 

 

Verified:

 

MATTERSIGHT EUROPE HOLDING CORPORATION

authorized signer

 

 

 

 

Date:

 

 

 

 

 

 

By:

 

 

Compliance Status:

Yes

No

Name:

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

MATTERSIGHT INTERNATIONAL HOLDING, INC.

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

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Schedule 1 to Compliance Certificate

 

 

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

 

Financial Covenant Analysis

 

Dated:____________________

 

I.Free Cash Flow (Section 6.7(a))

 

Required:Achieve Free Cash Flow (negative Free Cash Flow), measured quarterly,
on a trailing three month basis, of not less than (no worse than) the following
for the quarterly compliance periods indicated below:

 

Quarterly Period Ending

 

Minimum Adjusted Free Cash Flow
(negative Free Cash Flow no worse than)

March 31, 2016

($4,300,000)

 

June 30, 2016

($5,200,000)

 

September 30, 2016

($3,350,000)

 

December 31, 2016

($1,350,000)

 

March 31, 2017

($2,100,000)

 

June 30, 2017

($1,550,000)

 

September 30, 2017

($750,000)

 

December 31, 2017

$0.00

 

 

For the quarterly periods ending March 31, 2018 and thereafter, the quarterly
Free Cash Flow requirements shall be determined by Bank, based on the annual
projections delivered by Borrower to Bank in accordance with Section 6.2(i);
provided, that in any event such quarterly requirements will not be less than
$0.00 for any such quarterly period.

 

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Actual: All amounts measured on a trailing three month basis:

 

A.

Net Income

 

$

 

B.

Interest Expense

 

$

 

C.

Income tax expense

 

$

 

D.

To the extent deducted from the calculation of Net Income, depreciation and
amortization expense

 

$

 

E.

Non-cash stock compensation expense

 

$

 

F.

EBITDA (the sum of lines A through E)

 

$

 

G.

Capital Expenditures

 

$

 

H.

FREE CASH FLOW (line F minus line G)

 

$

 

 

Is line H equal to or greater than (loss no worse than) $[__________________]?

 

 

No, not in compliance

 

Yes, in compliance

 

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II.Liquidity (Section 6.7(b)) 

 

Required: Maintain at all times, to be certified by Borrower as of the last day
of each month, the sum of (i) unrestricted cash at Bank plus (ii) the unused
Availability Amount, in an amount equal to or greater than Seventeen Million
Dollars ($17,000,000).

 

Actual:

 

A.

Unrestricted cash at Bank

 

$

 

B.

Unused Availability Amount

 

$

 

C.

LIQUIDITY (line A plus line B)

 

$

 

 

Is line C greater than or equal to $17,000,000?

 

 

No, not in compliance

 

Yes, in compliance

 

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