Exhibit 10.50
THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
     THIS THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
“Agreement”) dated as of June 26, 2009 (the “Effective Date”) by and among (a)
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 One Newton Executive Park, Suite 200, 2221
Washington Street, Newton, Massachusetts 02462 (“Bank”), and (b)
TELECOMMUNICATION SYSTEMS, INC., a Maryland corporation (“TCS”) and LONGHORN
ACQUISITION, LLC, a Delaware limited liability company (“Longhorn”, and together
with TCS, jointly and severally, individually and collectively, referred to as
“Borrower”) each with a principal place of business located at 275 West Street,
Suite 400, Annapolis, Maryland 21401, amends and restates a certain Second
Amended and Restated Loan and Security Agreement by and among TCS and Bank dated
as of October 14, 2005, as amended by a certain First Amendment to Second
Amended and Restated Loan and Security Agreement, dated as of December 30, 2005,
as further amended by a certain Second Amendment to Second Amended and Restated
Loan and Security Agreement, dated as of March 10, 2006, as further amended by a
certain Third Amendment to Second Amended and Restated Loan and Security
Agreement, dated as of November 14, 2006, and as further amended by a certain
Fourth Amendment to Second Amended and Restated Loan and Security Agreement,
dated as of June 27, 2007 (collectively, the “Prior Loan Agreement”), and
provides the terms on which Bank shall lend to Borrower and Borrower shall repay
Bank. The parties agree as follows:
     1 ACCOUNTING AND OTHER TERMS
     Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP.
Notwithstanding the foregoing, all financial covenant calculations shall be
computed with respect to the Borrower only, and not on a consolidated basis.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Section 13. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meaning provided by the Code to the
extent such terms are defined therein.
     2 LOAN AND TERMS OF PAYMENT
     2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank
the outstanding principal amount of all Credit Extensions and accrued and unpaid
interest thereon as and when due in accordance with this Agreement.
     2.1.1 Revolving Advances.
          (a) Availability. Subject to the terms and conditions of this
Agreement and to deduction of Reserves, Bank shall make Advances not exceeding
the Availability Amount. Amounts borrowed under the Revolving Line may be
repaid, and prior to the Revolving Line Maturity Date, reborrowed, subject to
the applicable terms and conditions precedent herein.
          (b) Termination; Repayment. The Revolving Line terminates on the
Revolving Line Maturity Date, when the principal amount of all Advances, the
unpaid interest thereon, and all other Obligations relating to the Revolving
Line shall be immediately due and payable.
     2.1.2 Letters of Credit Sublimit.
          (a) As part of the Revolving Line and subject to deduction of
Reserves, Bank shall issue or have issued Letters of Credit denominated in
Dollars or a Foreign Currency for Borrower’s account. The aggregate Dollar
Equivalent amount utilized for the issuance of Letters of Credit shall at all
times reduce the amount otherwise available for Advances under the Revolving
Line. The aggregate Dollar Equivalent of the face amount of outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve) may not exceed the lesser of (A) Ten Million Dollars
($10,000,000), minus (i) the sum of all amounts used for Cash Management
Services, and minus (ii) the FX Reduction Amount, or (B) the lesser of the
Revolving Line or the Borrowing Base, minus (i) the sum of all outstanding
principal amounts of any Advances (including any amounts used for Cash
Management Services), and minus (ii) the FX Reduction Amount.
          (b) If, on the Revolving Line Maturity Date (or the effective date of
any termination of this Agreement), there are any outstanding Letters of Credit,
then on such date Borrower shall provide to Bank cash

 

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collateral in an amount equal to 110% of the Dollar Equivalent of the face
amount of all such Letters of Credit plus all interest, fees, and costs due or
to become due in connection therewith (as estimated by Bank in its good faith
business judgment), to secure all of the Obligations relating to such Letters of
Credit. All Letters of Credit shall be in form and substance acceptable to Bank
in its sole discretion and shall be subject to the terms and conditions of
Bank’s standard Application and Letter of Credit Agreement (the “Letter of
Credit Application”). Borrower agrees to execute any further documentation in
connection with the Letters of Credit as Bank may reasonably request. Borrower
further agrees to be bound by the regulations and interpretations of the issuer
of any Letters of Credit guarantied by Bank and opened for Borrower’s account or
by Bank’s interpretations of any Letter of Credit issued by Bank for Borrower’s
account, and Borrower understands and agrees that Bank shall not be liable for
any error, negligence, or mistake, whether of omission or commission, in
following Borrower’s instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto.
          (c) The obligation of Borrower to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute, unconditional, and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, such Letters of Credit, and the Letter of Credit Application.
          (d) Borrower may request that Bank issue a Letter of Credit payable in
a Foreign Currency. If a demand for payment is made under any such Letter of
Credit, Bank shall treat such demand as an Advance to Borrower of the Dollar
Equivalent of the amount thereof (plus fees and charges in connection therewith
such as wire, cable, SWIFT or similar charges).
          (e) To guard against fluctuations in currency exchange rates, upon the
issuance of any Letter of Credit payable in a Foreign Currency, Bank shall
create a reserve (the “Letter of Credit Reserve”) under the Revolving Line in an
amount equal to ten percent (10%) of the face amount of such Letter of Credit.
The amount of the Letter of Credit Reserve may be adjusted by Bank from time to
time to account for fluctuations in the exchange rate. The availability of funds
under the Revolving Line shall be reduced by the amount of such Letter of Credit
Reserve for as long as such Letter of Credit remains outstanding.
     2.1.3 Foreign Exchange Sublimit. As part of the Revolving Line, Borrower
may enter into foreign exchange contracts with Bank under which Borrower commits
to purchase from or sell to Bank a specific amount of Foreign Currency (each, a
“FX Forward Contract”) on a specified date (the “Settlement Date”). FX Forward
Contracts shall have a Settlement Date of at least one (1) FX Business Day after
the contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract (the “FX Reserve”). The aggregate amount of FX
Forward Contracts at any one time may not exceed ten (10) times the lesser of
(A) Ten Million Dollars ($10,000,000), minus (i) the sum of all amounts used for
Cash Management Services, and minus (ii) the Dollar Equivalent of the face
amount of any outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve), or (B) the lesser of
Revolving Line or the Borrowing Base, minus (i) the sum of all outstanding
principal amounts of any Advances (including any amounts used for Cash
Management Services), and minus (ii) the Dollar Equivalent of the face amount of
any outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve). The amount otherwise available for
Credit Extensions under the Revolving Line shall be reduced by an amount equal
to ten percent (10%) of each outstanding FX Forward Contract (the “FX Reduction
Amount”). Any amounts needed to fully reimburse Bank for any amounts not paid by
Borrower in connection with FX Forward Contracts will be treated as Advances
under the Revolving Line and will accrue interest at the interest rate
applicable to Advances.
     2.1.4 Cash Management Services Sublimit. Borrower may use the Revolving
Line for Bank’s cash management services, which may include merchant services,
direct deposit of payroll, business credit card, and check cashing services
identified in Bank’s various cash management services agreements (collectively,
the “Cash Management Services”), in an aggregate amount not to exceed the lesser
of Ten Million Dollars ($10,000,000), minus (i) the sum of all outstanding
principal amounts of any Advances, minus (ii) the Dollar Equivalent of the face
amount of any outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve), and minus (iii) the FX
Reduction Amount. Any amounts Bank pays on behalf of Borrower for any Cash
Management Services will be treated as Advances under the Revolving Line and
will accrue interest at the interest rate applicable to Advances.
     2.1.5 Term Loan.

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          (a) Availability. Bank shall make one (1) term loan (the “Term Loan”)
available to Borrower in an amount up to the Term Loan Amount on the Effective
Date subject to the satisfaction of the terms and conditions of this Agreement.
          (b) Use of Proceeds — Term Loan. Borrower acknowledges that it is
indebted to Bank pursuant to certain term loans made pursuant to a prior loan
arrangement with Bank with an original maturity date of July 1, 2012 and with a
current outstanding principal balance of Six Thousand Five Hundred Dollars
($6,500) (the “Prior Loan Agreement”) . Borrower acknowledges and agrees that a
portion of the proceeds of the Term Loan hereunder shall be used to immediately
repay in full all remaining outstand principal and accrued and unpaid interest
on the Prior Term Loan, together with any additional fees associated therewith.
          (c) Repayment. In addition to the monthly payments of interest, as set
forth in Section 2.3(a)(ii) below, Borrower shall repay the Term Loan in sixty
(60) equal installments of principal (the “Term Loan Payment”), beginning on
July 31, 2009. Each Term Loan Payment shall be payable on the last Business Day
of each month. Borrower’s final Term Loan Payment, due on the Term Loan Maturity
Date, shall include all outstanding principal and accrued and unpaid interest
under the Term Loan. Once repaid, the Term Loan may not be reborrowed.
          (d) Prepayment. Subject to the provisions of Section 12.1 hereof, the
Term Loan may be prepaid prior to the Term Loan Maturity Date.
     2.2 Overadvances. If, at any time, the sum of (a) the outstanding principal
amount of any Advances (including any amounts used for Cash Management
Services); plus (b) the face amount of any outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve); plus (c) the FX Reduction Amount exceeds the lesser of either the
Revolving Line or the Borrowing Base (such excess amount being an
“Overadvance”), Borrower shall immediately pay to Bank in cash such Overadvance.
Without limiting Borrower’s obligation to repay Bank any amount of the
Overadvance, Borrower agrees to pay Bank interest on the outstanding amount of
any Overadvance, on demand, at the Default Rate.
     2.3 Payment of Interest on the Credit Extensions.
     (a) Interest Rate.
               (i) Advances. Subject to Section 2.3(b), the principal amount
outstanding under the Revolving Line shall accrue interest at a floating per
annum rate equal to the Prime Rate, which interest shall be payable monthly, in
arrears, in accordance with Section 2.3(f) below.
               (ii) Term Loan. Subject to Section 2.3(b), the principal amount
outstanding under the Term Loan shall accrue interest at a floating per annum
rate equal to one-half of one percentage point (0.50%) above the Prime Rate,
which interest shall be payable monthly.
          (b) Default Rate. Immediately upon the occurrence and during the
continuance of an Event of Default, Obligations shall bear interest at a rate
per annum which is four percentage points (4.00%) above the rate that is
otherwise applicable thereto (the “Default Rate”) unless Bank otherwise elects
from time to time in its sole discretion to impose a smaller increase. Fees and
expenses which are required to be paid by Borrower pursuant to the Loan
Documents (including, without limitation, Bank Expenses) but are not paid when
due shall bear interest until paid at a rate equal to the highest rate
applicable to the Obligations. Payment or acceptance of the increased interest
rate provided in this Section 2.3(b) is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Bank.
          (c) Adjustment to Interest Rate. Changes to the interest rate of any
Credit Extension based on changes to the Prime Rate shall be effective on the
effective date of any change to the Prime Rate and to the extent of any such
change.
          (d) Computation; 360-Day Year. In computing interest, the date of the
making of any Credit Extension shall be included and the date of payment shall
be excluded; provided, however, that if any Credit Extension is repaid on the
same day on which it is made, such day shall be included in computing interest
on such Credit Extension. Interest shall be computed on the basis of a 360-day
year for the actual number of days elapsed.
          (e) Debit of Accounts. Bank may debit any of Borrower’s deposit
accounts, including the Designated

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Deposit Account, for principal and interest payments or any other amounts
Borrower owes Bank when due. These debits shall not constitute a set-off.
          (f) Interest Payment Date. Unless otherwise provided, interest is
payable monthly on the last calendar day of each month.
          (g) Payment; Interest Computation; Float Charge. Interest is payable
monthly on the last calendar day of each month. In computing interest on the
Obligations, all Payments received after 12:00 p.m. Pacific time on any day
shall be deemed received on the next Business Day. All wire transfers shall be
deemed applied on account of the Obligations on the date of receipt thereof by
Bank, and Bank shall be entitled to charge Borrower a “float” charge in an
amount equal to two (2) Business Days interest, at the interest rate applicable
to the Advances, on all Payments consisting of checks and/or other items of
Payment other than wire transfers received by Bank. Said float charge is not
included in interest for purposes of computing Minimum Monthly Interest (if any)
under this Agreement. The float charge for each month shall be payable on the
last day of the month. Bank shall not, however, be required to credit Borrower’s
account for the amount of any item of payment which is unsatisfactory to Bank in
its good faith business judgment, and Bank may charge Borrower’s Designated
Deposit Account for the amount of any item of payment which is returned to Bank
unpaid.
     2.4 Fees. Borrower shall pay to Bank:
          (a) Commitment Fee. (i) a fully earned, non-refundable Term Loan
commitment fee of One Hundred Twenty Five Thousand Dollars ($125,000), on the
Effective Date and (ii) a fully earned, non-refundable Revolving Line Commitment
Fee, payable as follows: (X) One Hundred Fifty Thousand Dollars ($150,000) on
the Effective Date; (Y) One Hundred Fifty Thousand Dollars ($150,000) the first
anniversary of the Effective Date; and (Z); One Hundred Fifty Thousand Dollars
($150,000) on the second anniversary of the Effective Date.
          (b) Letter of Credit Fee. Bank’s customary fees and expenses for the
issuance or renewal of Letters of Credit, upon the issuance of such Letter of
Credit, each anniversary of the issuance during the term of such Letter of
Credit, and upon the renewal of such Letter of Credit by Bank;
          (c) Termination Fee. As provided in Section 12.1, a termination fee;
          (d) Unused Revolving Line Facility Fee. A fee (the “Unused Revolving
Line Facility Fee”), payable monthly, in arrears, on a calendar year basis, in
an amount equal to one-quarter percent (0.25%) per annum of the average unused
portion of the Revolving Line, as determined by Bank. The unused portion of the
Revolving Line, for the purposes of this calculation, shall include amounts
reserved for products provided in connection with Cash Management Services, FX
Forward Contracts and Letter of Credit usage. Borrower shall not be entitled to
any credit, rebate or repayment of any Unused Revolving Line Facility Fee
previously earned by Bank pursuant to this Section notwithstanding any
termination of the Agreement or the suspension or termination of Bank’s
obligation to make loans and advances hereunder;
          (e) Collateral Monitoring Fee. A monthly collateral monitoring fee of
Five Hundred Dollars ($500), payable in arrears on the last day of each month
(prorated for any partial month at the beginning and upon termination of this
Agreement); and
          (f) Bank Expenses. All Bank Expenses (including reasonable attorneys’
fees and expenses for documentation and negotiation of this Agreement incurred
through and after the Effective Date, when due.
     2.5 Payments; Application of Payments.
          (a) All payments (including prepayments) to be made by Borrower under
any Loan Document shall be made in immediately available funds in U.S. Dollars,
without setoff or counterclaim, before 12:00 p.m. Eastern time on the date when
due. Payments of principal and/or interest received after 12:00 p.m. Eastern
time are considered received at the opening of business on the next Business
Day. When a payment is due on a day that is not a Business Day, the payment
shall be due the next Business Day, and additional fees or interest, as
applicable, shall continue to accrue until paid.
          (b) Bank shall apply the whole or any part of collected funds against
the Revolving Line or credit such collected funds to a depository account of
Borrower with Bank (or an account maintained by an Affiliate of Bank), the order
and method of such application to be in the sole discretion of Bank. Borrower
shall have no right to specify the order or the accounts to which Bank shall
allocate or apply any payments required to be made by Borrower to Bank or
otherwise received by Bank under this Agreement when any such allocation or
application is not specified elsewhere in this Agreement.

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     3 CONDITIONS OF LOANS
     3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to
make the initial Credit Extension is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, such
documents, and completion of such other matters, as Bank may reasonably deem
necessary or appropriate, including, without limitation:
          (a) duly executed original signatures to the Loan Documents;
          (b) [Intentionally Omitted];
          (c) Borrower’s Operating Documents and a good standing certificate of
Borrower certified by the Secretary of State of each applicable jurisdiction as
of a date no earlier than thirty (30) days prior to the Effective Date;
          (d) duly executed original signatures to the Secretary’s Certificate
with completed Borrowing Resolutions for Borrower;
          (e) certified copies, dated as of a recent date, of financing
statement searches, as Bank shall request, accompanied by written evidence
(including any UCC termination statements) that the Liens indicated in any such
financing statements either constitute Permitted Liens or have been or, in
connection with the initial Credit Extension, will be terminated or released;
          (f) the Perfection Certificate of Borrower together with the duly
executed original signatures thereto;
          (g) a landlord’s consent in favor of Bank for the following locations
by the respective landlord thereof, together with the duly executed original
signatures thereto;

  A.   275 West Street, Annapolis, Maryland 21401     B.   2024 West Street,
Annapolis, Maryland 21401     C.   2401 Elliot Avenue, 2nd Floor, Seattle,
Washington 98121     D.   206 Kelsey Lane, Tampa, Florida 33619

          (h) a bailee’s/warehouseman’s waiver executed by each bailee, if any,
of Borrower as required by Bank, in favor of Bank;
          (i) a legal opinion of Borrower’s counsel, in form and substance
acceptable to Bank, in its reasonable discretion, dated as of the Effective Date
together with the duly executed original signature thereto;
          (j) evidence satisfactory to Bank that the insurance policies required
by Section 6.7 hereof are in full force and effect, together with appropriate
evidence showing lender loss payable and/or additional insured clauses or
endorsements in favor of Bank;
          (k) payment of the fees and Bank Expenses then due as specified in
Section 2.4 hereof;
          (l) evidence that the capital structure of Borrower and its
Subsidiaries is acceptable to Bank, in its sole discretion; and
          (m) such other documents, certificates and agreements in respect of
Borrower and its Subsidiaries as Bank may request, in its sole discretion.
     3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to
make each Credit Extension, including the initial Credit Extension, is subject
to the following conditions precedent:
          (a) except as otherwise provided in Section 3.4(a), timely receipt of
an executed Transaction Report;

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          (b) the representations and warranties in this Agreement shall be
true, accurate, and complete in all material respects on the date of the
Transaction Report and on the Funding Date of each Credit Extension; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no
Default or Event of Default shall have occurred and be continuing or result from
the Credit Extension. Each Credit Extension is Borrower’s representation and
warranty on that date that the representations and warranties in this Agreement
remain true, accurate, and complete in all material respects; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date; and
          (c) in Bank’s reasonable discretion, after consultation with Borrower,
there has not been (a) a material impairment in the perfection or priority of
Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material
adverse change in the business, operations, or condition (financial or
otherwise) of Borrower; or (c) a material impairment of the prospect of
repayment of any portion of the Obligations.
     3.3 Covenant to Deliver. Borrower agrees to deliver to Bank each item
required to be delivered to Bank under this Agreement as a condition precedent
to any Credit Extension. Borrower expressly agrees that a Credit Extension made
prior to the receipt by Bank of any such item shall not constitute a waiver by
Bank of Borrower’s obligation to deliver such item, and the making of any Credit
Extension in the absence of a required item shall be in Bank’s sole discretion.
     3.4 Procedures for Borrowing.
          (a) Advances. Subject to the prior satisfaction of all other
applicable conditions to the making of an Advance set forth in this Agreement,
to obtain an Advance other than Advances under Sections 2.1.2 or 2.1.4),
Borrower shall notify Bank (which notice shall be irrevocable) by electronic
mail, facsimile, or telephone by 12:00 p.m. Eastern time on the Funding Date of
the Advance. Together with any such electronic or facsimile notification,
Borrower shall deliver to Bank by electronic mail or facsimile a completed
Transaction Report executed by a Responsible Officer or his or her designee.
Bank may rely on any telephone notice given by a person whom Bank believes is a
Responsible Officer or designee. Bank shall credit Advances to the Designated
Deposit Account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due.
          (b) Term Loan. Subject to the prior satisfaction of all other
applicable conditions to the making of the Term Loan set forth in this
Agreement, if any portion of the proceeds of the Term Loan shall be used to
refinance outstanding Indebtedness of the Borrower, Borrower shall deliver to
Bank by electronic mail or facsimile a copy of the payoff letter stating the
payoff amount invoice for the refinancing of such existing Indebtedness and the
request for the Term Loan.
     4 CREATION OF SECURITY INTEREST
     4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations, a continuing security
interest in, and pledges to Bank, the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products thereof.
     4.2 Priority of Security Interest. Borrower represents, warrants, and
covenants that the security interest granted herein is and shall at all times
continue to be a first priority perfected security interest in the Collateral
(subject only to Permitted Liens that may have superior priority to Bank’s Lien
under this Agreement). If Borrower shall acquire a commercial tort claim,
Borrower shall promptly notify Bank in a writing signed by Borrower of the
general details thereof and grant to Bank in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance reasonably satisfactory to Bank.
     If this Agreement is terminated, Bank’s Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations and at
such time as Bank’s obligation to make Credit Extensions has terminated, Bank
shall, at Borrower’s sole cost and expense, release its Liens in the Collateral
and all rights therein shall revert to Borrower.

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     4.3 Authorization to File Financing Statements. Borrower hereby authorizes
Bank to file financing statements, without notice to Borrower, with any
necessary jurisdictions to perfect or protect Bank’s interest or rights
hereunder, including an appropriate notice that any disposition of certain of
the Collateral, by either Borrower or any other Person, shall be deemed to
violate the rights of Bank under the Code. Such financing statements may
indicate the Collateral as “all assets of the Debtor” or words of similar
effect, or as being of an equal or lesser scope, or with greater detail, all in
Bank’s discretion.
     5 REPRESENTATIONS AND WARRANTIES
     Borrower represents and warrants as follows:
     5.1 Due Organization; Authorization; Power and Authority. Borrower and each
of its Subsidiaries are duly existing and in good standing as a Registered
Organization in its jurisdiction of formation and each is qualified and licensed
to do business and each is in good standing in any jurisdiction in which the
conduct of each of its business or its ownership of property requires that it be
qualified except where the failure to do so could not reasonably be expected to
have a material adverse effect on Borrower’s business. In connection with this
Agreement, Borrower has delivered to Bank a completed certificate signed by
Borrower, entitled “Perfection Certificate”. Borrower represents and warrants to
Bank that (a) Borrower’s exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof; (b) Borrower is an organization of
the type and is organized in the jurisdiction set forth in the Perfection
Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s
organizational identification number or accurately states that Borrower has
none; (d) the Perfection Certificate accurately sets forth Borrower’s place of
business, or, if more than one, its chief executive office as well as Borrower’s
mailing address (if different than its chief executive office); (e) Borrower
(and each of its predecessors) has not, in the past five (5) years, changed its
jurisdiction of formation, organizational structure or type, or any
organizational number assigned by its jurisdiction; and (f) all other
information set forth on the Perfection Certificate pertaining to Borrower and
each of its Subsidiaries is accurate and complete (it being understood and
agreed that Borrower may from time to time update certain information in the
Perfection Certificate after the Effective Date to the extent permitted by one
or more specific provisions in this Agreement). If Borrower is not now a
Registered Organization but later becomes one, Borrower shall promptly notify
Bank of such occurrence and provide Bank with Borrower’s organizational
identification number.
     The execution, delivery and performance by Borrower of the Loan Documents
to which it is a party have been duly authorized, and do not (i) conflict with
any of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any of its Subsidiaries or any of their property or assets may
be bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effect or (v) constitute an event of default under any material
agreement by which Borrower is bound. Borrower is not in default under any
agreement to which it is a party or by which it is bound in which the default
could reasonably be expected to have a material adverse effect on Borrower’s
business.
     5.2 Collateral. Borrower has good title to, has rights in, and the power to
transfer each item of the Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted Liens. Borrower
has no deposit accounts other than the deposit accounts with Bank, the deposit
accounts, if any described in the Perfection Certificate delivered to Bank in
connection herewith, or of which Borrower has given Bank notice and taken such
actions as are necessary to give Bank a perfected security interest therein. The
Accounts are bona fide, existing obligations of the Account Debtors.
     The Collateral is not in the possession of any third party bailee (such as
a warehouse) except as otherwise provided in the Perfection Certificate. None of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as permitted pursuant to Section 7.2.
In the event that Borrower, after the date hereof, intends to store or otherwise
deliver any portion of the Collateral to a bailee, then Borrower will first
receive the written consent of Bank and such bailee must execute and deliver a
bailee agreement in form and substance satisfactory to Bank in its sole
discretion.
     All Inventory included in Borrower’s Books and intended for sale to its
customers is in all material respects of good and marketable quality, free from
material defects.

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     Except as noted on the Perfection Certificate, Borrower is not a party to,
nor is it bound by, any Restricted License.
     5.3 Accounts Receivable; Inventory. For any Eligible Account in any
Borrowing Base Certificate, all statements made and all unpaid balances
appearing in all invoices, instruments and other documents evidencing such
Eligible Accounts are and shall be true and correct and all such invoices,
instruments and other documents, and all of Borrower’s Books are genuine and in
all respects what they purport to be. Whether or not an Event of Default has
occurred and is continuing, Bank may notify any Account Debtor owing Borrower
money of Bank’s security interest in such funds and verify the amount of such
Eligible Account. All sales and other transactions underlying or giving rise to
each Eligible Account shall comply in all material respects with all applicable
laws and governmental rules and regulations. Borrower has no knowledge of any
actual or imminent Insolvency Proceeding of any Account Debtor whose accounts
are Eligible Accounts in any Borrowing Base Certificate. To the best of
Borrower’s knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Eligible Accounts are genuine, and
all such documents, instruments and agreements are legally enforceable in
accordance with their terms.
     5.4 Litigation. Except as set forth on the Perfection Certificate, there
are no actions or proceedings pending or, to the knowledge of the Responsible
Officers, threatened in writing by or against Borrower or any of its
Subsidiaries involving any individual claim in excess of Fifty Thousand Dollars
($50,000) or two or more claims involving One Hundred Thousand Dollars
($100,000) in the aggregate.
     5.5 Financial Condition. All consolidated financial statements for Borrower
and any of its Subsidiaries delivered to Bank fairly present in all material
respects Borrower’s consolidated financial condition and Borrower’s consolidated
results of operations as of the dates and for the periods indicated therein.
There has not been any material deterioration in Borrower’s consolidated
financial condition since the date of the most recent financial statements
submitted to Bank.
     5.6 Solvency. The fair salable value of Borrower’s assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities;
Borrower is not left with unreasonably small capital after the transactions in
this Agreement; and Borrower is able to pay its debts (including trade debts) as
they mature.
     5.7 Regulatory Compliance. Borrower is not an “investment company” or a
company “controlled” by an “investment company” under the Investment Company Act
of 1940, as amended. Borrower is not engaged as one of its important activities
in extending credit for margin stock (under Regulations X, T and U of the
Federal Reserve Board of Governors). Borrower has complied in all material
respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of
its Subsidiaries is a “holding company” or an “affiliate” of a “holding company”
or a “subsidiary company” of a “holding company” as each term is defined and
used in the Public Utility Holding Company Act of 2005. Borrower has not
violated any laws, ordinances or rules, the violation of which could reasonably
be expected to have a material adverse effect on its business. None of
Borrower’s or any of its Subsidiaries’ properties or assets has been used by
Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous
Persons, in disposing, producing, storing, treating, or transporting any
hazardous substance other than legally. Borrower and each of its Subsidiaries
have obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all Government
Authorities that are necessary to continue their respective businesses as
currently conducted.
     5.8 Subsidiaries; Investments. Except as set forth in the Perfection
Certificate, Borrower does not own any stock, partnership interest or other
equity securities except for Permitted Investments.
     5.9 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed all required tax returns and reports, and Borrower has timely paid all
foreign, federal, state and local taxes, assessments, deposits and contributions
owed by Borrower, other than those that are not yet delinquent, or that are
contested in good faith as to which adequate reserves have been provided to the
extent required by law and in accordance with GAAP. Borrower may defer payment
of any contested taxes, provided that Borrower (a) in good faith contests its
obligation to pay the taxes by appropriate proceedings promptly and diligently
instituted and conducted, (b) notifies Bank in writing of the commencement of,
and any material development in, the proceedings, (c) posts bonds or takes any
other steps required to prevent the governmental authority levying such
contested taxes from obtaining a Lien upon any of the Collateral that is other
than a “Permitted Lien”. Borrower is unaware of any claims or adjustments
proposed for any of Borrower’s prior tax years which could result in additional
taxes becoming due and payable by Borrower. Borrower has paid all amounts
necessary to fund all present pension, profit sharing and deferred

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compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, and has not permitted partial or complete
termination of, or permitted the occurrence of any other event with respect to,
any such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.
     5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit
Extensions solely to pay off the outstanding term balance owed under the Prior
Loan Agreement, as working capital and to fund its general business requirements
and not for personal, family, household or agricultural purposes.
     5.11 Full Disclosure. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank, as
of the date such representation, warranty, or other statement was made, taken
together with all such written certificates and written statements given to
Bank, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).
     5.12 Definition of “Knowledge.” For purposes of the Loan Documents,
whenever a representation or warranty is made to Borrower’s knowledge or
awareness, to the “best of” Borrower’s knowledge, or with a similar
qualification, knowledge or awareness means the actual knowledge, after
reasonable investigation, of the Responsible Officers.
     6 AFFIRMATIVE COVENANTS
     Borrower shall do all of the following:
     6.1 Government Compliance. Maintain its and all its Subsidiaries’ legal
existence and good standing in their respective jurisdictions of formation and
maintain qualification in each jurisdiction in which the failure to so qualify
would reasonably be expected to have a material adverse effect on Borrower’s
business or operations. Borrower shall comply, and have each Subsidiary comply,
with all laws, ordinances and regulations to which it is subject, the
noncompliance with which could have a material adverse effect on Borrower’s
business.
     6.2 Financial Statements, Reports, Certificates.
          (a) Borrower shall provide Bank with the following:
               (i) (A) weekly, and (B) upon each request for a Credit Extension,
a Transaction Report;
               (ii) within fifteen (15) days after the end of each month,
(A) monthly accounts receivable agings, aged by invoice date, (B) monthly
accounts payable agings, aged by invoice date, and outstanding or held check
registers, if any, and (C) monthly reconciliations of accounts receivable agings
(aged by invoice date), transaction reports, deferred revenue report and general
ledger,
               (iii) as soon as available, and in any event within thirty
(30) days after the end of each month, monthly management prepared unaudited
financial statements;
               (iv) within thirty (30) days after the end of each month a
monthly Compliance Certificate signed by a Responsible Officer, certifying that
as of the end of such month, Borrower was in full compliance with all of the
terms and conditions of this Agreement, and setting forth calculations showing
compliance with the financial covenants set forth in this Agreement and such
other information as Bank shall reasonably request, including, without
limitation, a statement that at the end of such month there were no held checks;
               (v) as soon as available, and in any event within forty-five
(45) days after the end of each fiscal quarter of Borrower, quarterly
consolidated and consolidating management prepared unaudited financial
statements;
               (vi) within sixty (60) days prior to the end of each fiscal year
of Borrower, annual financial projections for the following fiscal year (on a
quarterly basis), together with any related business forecasts used in the
preparation of such annual financial projections; and within sixty (60) days
after the end of each fiscal year of Borrower, annual operating budgets
(including income statements, balance sheets

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and cash flow statements, by month) for the current fiscal year of Borrower as
approved by Borrower’s board of directors;
               (vii) as soon as available, and in any event within one hundred
twenty (120) days following the end of Borrower’s fiscal year, annual
consolidated and consolidating financial statements certified by, and with an
unqualified opinion of, independent certified public accountants acceptable to
Bank;
               (viii) within five (5) days of delivery, copies of all
statements, reports and notices, if any, made available to Borrower’s security
holders or to any holders of Subordinated Debt;
               (ix) a prompt report of any legal actions pending or threatened
in writing against Borrower or any of its Subsidiaries that could result in
damages or costs to Borrower or any of its Subsidiaries of, individually or in
the aggregate, Five Hundred Thousand Dollars ($500,000) or more;
               Notwithstanding the foregoing, provided no Event of Default has
occurred and is continuing, Borrower shall be required to provide Bank with the
reports and schedules required pursuant to clause (a)(i) (A) above monthly,
within thirty (30) days after the end of each month.
          (b) Within five (5) days after filing, all reports on Form 10-K, 10-Q
and 8-K filed with the SEC or a link thereto on Borrower’s or another website on
the Internet.
     6.3 Accounts Receivable.
          (a) Schedules and Documents Relating to Accounts. Borrower shall
deliver to Bank transaction reports and schedules of collections, as provided in
Section 6.2, on Bank’s standard forms; provided, however, that Borrower’s
failure to execute and deliver the same shall not affect or limit Bank’s Lien
and other rights in all of Borrower’s Accounts, nor shall Bank’s failure to
advance or lend against a specific Account affect or limit Bank’s Lien and other
rights therein. If requested by Bank, Borrower shall furnish Bank with copies
(or, at Bank’s request, originals) of all contracts, orders, invoices, and other
similar documents, and all shipping instructions, delivery receipts, bills of
lading, and other evidence of delivery, for any goods the sale or disposition of
which gave rise to such Accounts. In addition, Borrower shall deliver to Bank,
on its request, the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Accounts, in the same form as received, with all necessary endorsements, and
copies of all credit memos.
          (b) Disputes. Borrower shall promptly notify Bank of all disputes or
claims relating to Accounts (i) in excess of an aggregate amount for any Account
Debtor in excess One Hundred Thousand Dollars ($100,000) and (ii) in excess of
an aggregate amount for all Account Debtors of Five Hundred Thousand Dollars
($500,000). Borrower may forgive (completely or partially), compromise, or
settle any Account for less than payment in full, or agree to do any of the
foregoing so long as (i) Borrower does so in good faith, in a commercially
reasonable manner, in the ordinary course of business, in arm’s-length
transactions, and reports the same to Bank in the regular reports provided to
Bank; (ii) no Default or Event of Default has occurred and is continuing; and
(iii) after taking into account all such discounts, settlements and forgiveness,
the total outstanding Advances will not exceed the Availability Amount.
          (c) Collection of Accounts. Borrower shall have the right to collect
all Accounts, unless and until a Default or an Event of Default has occurred and
is continuing. All payments on, and proceeds of, Accounts shall be deposited
directly by the applicable Account Debtor into a lockbox account, or such other
“blocked account” as Bank may specify, pursuant to a blocked account agreement
in form and substance satisfactory to Bank in its sole discretion. Whether or
not an Event of Default has occurred and is continuing, Borrower shall hold all
payments on, and proceeds of, Accounts in trust for Bank, and Borrower shall
promptly deliver all such payments and proceeds to Bank in their original form,
duly endorsed, to be applied to the Obligations pursuant to the terms of
Section 9.4 hereof.
          (d) Returns. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower, Borrower
shall promptly (i) determine the reason for such return, (ii) issue a credit
memorandum to the Account Debtor in the appropriate amount, and (iii) provide a
copy of such credit memorandum to Bank, upon request from Bank. In the event any
attempted return occurs after the occurrence and during the continuance of any
Event of Default, Borrower shall hold the returned Inventory in trust for Bank,
and immediately notify Bank of the return of the Inventory.

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          (e) Verification. Bank may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Accounts, either in the name of Borrower or Bank or such other name as
Bank may choose.
          (f) No Liability. Bank shall not be responsible or liable for any
shortage or discrepancy in, damage to, or loss or destruction of, any goods, the
sale or other disposition of which gives rise to an Account, or for any error,
act, omission, or delay of any kind occurring in the settlement, failure to
settle, collection or failure to collect any Account, or for settling any
Account in good faith for less than the full amount thereof, nor shall Bank be
deemed to be responsible for any of Borrower’s obligations under any contract or
agreement giving rise to an Account. Nothing herein shall, however, relieve Bank
from liability for its own gross negligence or willful misconduct.
     6.4 Remittance of Proceeds. Except as otherwise provided in Section 6.3(c),
deliver, in kind, all proceeds arising from the disposition of any Collateral to
Bank in the original form in which received by Borrower not later than the
following Business Day after receipt by Borrower, to be applied to the
Obligations pursuant to the terms of Section 9.4 hereof; provided that, if no
Default or Event of Default has occurred and is continuing, Borrower shall not
be obligated to remit to Bank the proceeds of the sale of worn out or obsolete
Equipment disposed of by Borrower in good faith in an arm’s length transaction
for an aggregate purchase price of $25,000 or less (for all such transactions in
any fiscal year). Borrower agrees that it will not commingle proceeds of
Collateral with any of Borrower’s other funds or property, but will hold such
proceeds separate and apart from such other funds and property and in an express
trust for Bank. Nothing in this Section limits the restrictions on disposition
of Collateral set forth elsewhere in this Agreement.
     6.5 Taxes; Pensions; Withholding. Timely file, and require each of its
Subsidiaries to timely file, all required tax returns and reports and timely
pay, and require each of its Subsidiaries to timely pay, all foreign, federal,
state and local taxes, assessments, deposits and contributions owed by Borrower
and each of its Subsidiaries, except for deferred payment of any taxes contested
pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on
demand, appropriate certificates attesting to such payments, and pay all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms.
     6.6 Access to Collateral; Books and Records. At reasonable times, on one
(1) Business Day’s notice (provided no notice is required if an Event of Default
has occurred and is continuing), Bank, or its agents, shall have the right, on
an annual basis (or more frequently at Bank’s sole discretion after a Default or
an Event of Default has occurred), to inspect the Collateral and the right to
audit and copy Borrower’s Books. The foregoing inspections and audits shall be
at Borrower’s expense, and the charge therefor shall be $850 per person per day
(or such higher amount as shall represent Bank’s then-current standard charge
for the same), plus reasonable out-of-pocket expenses; provided, however, that
the cost of such inspections and audits will not exceed Fifteen Thousand Dollars
($15,000) in any twelve (12) month period (excluding the cost of inspections and
audits conducted after the occurrence of an Event of Default). In the event
Borrower and Bank schedule an audit more than ten (10) days in advance, and
Borrower cancels or seeks to reschedules the audit with less than ten (10) days
written notice to Bank, then (without limiting any of Bank’s rights or
remedies), Borrower shall pay Bank a fee of $1,000 plus any out-of-pocket
expenses incurred by Bank to compensate Bank for the anticipated costs and
expenses of the cancellation or rescheduling.
     6.7 Insurance. Keep its business and the Collateral insured for risks and
in amounts standard for companies in Borrower’s industry and location and as
Bank may reasonably request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to Bank. All property policies
shall have a lender’s loss payable endorsement showing Bank as an additional
lender loss payee and waive subrogation against Bank and shall provide that the
insurer must give Bank at least twenty (20) days notice before canceling,
amending, or declining to renew its policy. All liability policies shall show,
or have endorsements showing, Bank as an additional insured, and all such
policies (or the loss payable and additional insured endorsements) shall provide
that the insurer shall give Bank at least twenty (20) days notice before
canceling, amending, or declining to renew its policy. At Bank’s request,
Borrower shall deliver certified copies of policies and evidence of all premium
payments. Proceeds payable under any policy shall, at Bank’s option, be payable
to Bank on account of the Obligations. Notwithstanding the foregoing, (a) so
long as no Event of Default has occurred and is continuing, Borrower shall have
the option of applying the proceeds of any casualty policy up to Fifty Thousand
Dollars ($50,000) with respect to any loss, but in any event not exceeding One
Hundred Thousand Dollars ($100,000) in the aggregate for all losses under all
casualty policies in any one year, toward the replacement or repair of destroyed
or damaged property; provided that any such replaced or repaired property (i)
shall be of equal or like value as the replaced or repaired Collateral and
(ii) shall be

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deemed Collateral in which Bank has been granted a first priority security
interest, and (b) after the occurrence and during the continuance of an Event of
Default, all proceeds payable under such casualty policy shall, at the option of
Bank, be payable to Bank on account of the Obligations. If Borrower fails to
obtain insurance as required under this Section 6.7 or to pay any amount or
furnish any required proof of payment to third persons and Bank, Bank may make
all or part of such payment or obtain such insurance policies required in this
Section 6.7 and take any action under the policies Bank deems prudent.
     6.8 Operating Accounts.
          (a) Maintain its and its Subsidiaries’ primary depository, operating
accounts and securities accounts with Bank and Bank’s affiliates with all excess
funds maintained at or invested through Bank or an affiliate of Bank, which
accounts shall represent at least seventy percent (70%) of the dollar value of
Borrower’s and such Subsidiaries accounts at all financial institutions,
excluding cash collateral held at other financial institutions used to secure
letters of credit or cash held as lease deposits; and
          (b) Monthly, within thirty (30) days after the end of each month,
provide Bank written notice of any Collateral Account established at or with any
bank or financial institution other than Bank or Bank’s Affiliates. For any
Collateral Account that Borrower at any time maintains, Borrower shall, after
the occurrence of an Event of Default, upon the written request by Bank, in its
sole discretion, either (i) cause the applicable bank or financial institution
(other than Bank) at or with which any Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Bank’s Lien in such Collateral
Account in accordance with the terms hereunder, which Control Agreement may not
be terminated without the prior written consent of Bank; or (ii) close such
Collateral Account and transfer the proceeds of such Collateral Account to a
Collateral Account of Borrower maintained at Bank or Bank’s Affiliates. The
provisions of the previous sentence shall not apply to deposit accounts
exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of Borrower’s employees and identified to Bank by
Borrower as such.
     6.9 Financial Covenants.
          Maintain as of the last day of each month, unless otherwise noted, on
a consolidated basis with respect to Borrower and its Subsidiaries:
          (a) Adjusted Quick Ratio. (i) for each monthly period beginning with
the monthly period ending April 30, 2009 through and including August 31, 2009,
an Adjusted Quick Ratio of not less than 1.65:1.00; and (ii) for each monthly
period beginning with the monthly period ending September 30, 2009 and as of the
last day of each monthly period thereafter, an Adjusted Quick Ratio of not less
than 1.75:1.00.
          (b) Fixed Charge Coverage Ratio. Maintain, as of the last day of each
fiscal quarter, a Fixed Charge Coverage Ratio of not less than 1.50:1.00.
     6.10 Protection of Intellectual Property Rights.
          (a) Protect, defend and maintain the validity and enforceability of
its material Intellectual Property; (ii) promptly advise Bank in writing of
material infringements of its material Intellectual Property; and (iii) not
allow any Intellectual Property material to Borrower’s business, to be
abandoned, forfeited or dedicated to the public without Bank’s prior written
consent, such consent not to be unreasonably withheld.
          (b) Provide written notice to Bank within thirty (30) days of entering
or becoming bound by any Restricted License (other than over-the-counter
software that is commercially available to the public). Borrower shall take such
steps as Bank requests to obtain the consent of, or waiver by, any person whose
consent or waiver is necessary for (i) any Restricted License to be deemed
“Collateral” and for Bank to have a security interest in it that might otherwise
be restricted or prohibited by law or by the terms of any such Restricted
License, whether now existing or entered into in the future, and (ii) Bank to
have the ability in the event of a liquidation of any Collateral to dispose of
such Collateral in accordance with Bank’s rights and remedies under this
Agreement and the other Loan Documents.
     6.11 Litigation Cooperation. From the date hereof and continuing through
the termination of this Agreement, make available to Bank, without expense to
Bank, Borrower and its officers, employees and agents and

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Borrower’s Books, to the extent that Bank may deem them reasonably necessary to
prosecute or defend any third-party suit or proceeding instituted by or against
Bank with respect to any Collateral or relating to Borrower.
     6.12 Creation/Acquisition of Subsidiaries. Notwithstanding and without
limiting the negative covenant contained in Section 7.3 hereof, in the event
Borrower or any Subsidiary creates or acquires any Subsidiary, Borrower and such
Subsidiary shall promptly notify Bank of the creation or acquisition of such new
Subsidiary and, at Bank’s request, in its sole discretion, take all such action
as may be reasonably required by Bank to cause each such Subsidiary to, in
Bank’s sole discretion, become a co-Borrower or guarantor under the Loan
Documents and grant a continuing pledge and security interest in and to the
assets of such Subsidiary (substantially as described on Exhibit A hereto); and
Borrower shall, at Bank’s request, grant and pledge to Bank a perfected security
interest in the stock, units or other evidence of ownership of each Subsidiary.
     6.13 Further Assurances. Execute any further instruments and take further
action as Bank reasonably requests to perfect or continue Bank’s Lien in the
Collateral or to effect the purposes of this Agreement, and deliver to Bank,
within five (5) days after the same are sent or received, copies of all
correspondence, reports, documents and other filings with any Governmental
Authority regarding compliance with or maintenance of Governmental Approvals or
Requirements of Law or that could reasonably be expected to have a material
adverse effect on any of the Governmental Approvals or otherwise on the
operations of Borrower or any of its Subsidiaries.
     7 NEGATIVE COVENANTS
     Borrower shall not do any of the following without Bank’s prior written
consent:
     7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise
dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, except for Transfers
(a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete
Equipment; (c) in connection with Permitted Liens and Permitted Investments; and
(d) of non-exclusive licenses for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business and licenses that could not
result in a legal transfer of title of the licensed property but that may be
exclusive in respects other than territory and that may be exclusive as to
territory only as to discreet geographical areas outside of the United States.
     7.2 Changes in Business, Control, or Business Locations. (a) Engage in or
permit any of its Subsidiaries to engage in any business other than the
businesses currently engaged in by Borrower and such Subsidiary, as applicable,
or reasonably related thereto; (b) liquidate or dissolve; or (c) permit or
suffer any Change in Control.
     Borrower shall not, without at least thirty (30) days prior written notice
to Bank: (1) add any new offices or business locations, including warehouses
(unless such new offices or business locations contain less than Fifty Thousand
Dollars ($50,000) in Borrower’s assets or property at any one location and not
more than Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate at all
such locations) or deliver any portion of the Collateral valued, individually or
in the aggregate, in excess of Fifty Thousand Dollars ($50,000) to a bailee at a
location other than to a bailee and at a location already disclosed in the
Perfection Certificate, (2) change its jurisdiction of organization, (3) change
its organizational structure or type, (4) change its legal name, or (5) change
any organizational number (if any) assigned by its jurisdiction of organization.
If Borrower intends to deliver any portion of the Collateral valued in excess of
Fifty Thousand Dollars ($50,000) to a bailee that has not executed and delivered
a bailee agreement with Bank, such bailee shall execute and deliver a bailee
agreement in form and substance satisfactory to Bank in its sole discretion.
     7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person in an acquisition or acquisitions in
which the aggregate consideration paid for all such acquisitions exceeds Two
Million Dollars ($2,000,000) (a “Permitted Acquisition”); provided, however,
that no Default or Event of Default shall exist immediately prior to or
immediately after giving effect to such Permitted Acquisition. A Subsidiary may
merge or consolidate into another Subsidiary or into Borrower, and a Borrower
may merge or consolidate into TCS.
     7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness,
or permit any Subsidiary to do so, other than Permitted Indebtedness.

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     7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, permit any Collateral not to be subject to the first priority security
interest granted herein, or enter into any agreement, document, instrument or
other arrangement (except with or in favor of Bank) with any Person which
directly or indirectly prohibits or has the effect of prohibiting Borrower or
any Subsidiary from assigning, mortgaging, pledging, granting a security
interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s
Intellectual Property, except as is otherwise permitted in Section 7.1 hereof
and the definition of “Permitted Liens” herein.
     7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account
except pursuant to the terms of Section 6.8(b) hereof.
     7.7 Distributions; Investments. (a) Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital stock; or
(b) directly or indirectly make any Investment other than Permitted Investments,
or permit any of its Subsidiaries to do so.
     7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower, except
for transactions between one Borrower and another Borrower or with any
Subsidiary of a Borrower that is a party to the Loan Documents, or 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 and transactions permitted pursuant to
the terms of Section 7.2 or Section 7.3 hereof.
     7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated
Debt, except under the terms of the subordination, intercreditor, or other
similar agreement to which such Subordinated Debt is subject, or (b) amend any
provision in any document relating to the Subordinated Debt which would increase
the amount thereof or adversely affect the subordination thereof to Obligations
owed to Bank.
     7.10 Compliance. Become an “investment company” or a company controlled by
an “investment company”, under the Investment Company Act of 1940, as amended,
or undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or non-exempt Prohibited Transaction, as defined in ERISA, to
occur; fail to comply with the Federal Fair Labor Standards Act or violate any
other law or regulation, if the violation could reasonably be expected to have a
material adverse effect on Borrower’s business, or permit any of its
Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from
participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any present pension, profit
sharing and deferred compensation plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental agency.
     7.11 Subsidiary Limitations. Permit any Subsidiary that is not a Borrower
to maintain assets in an aggregate amount for all such Subsidiaries in excess of
One Million Dollars ($1,000,000) outstanding at any time.
     8 EVENTS OF DEFAULT
     Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:
     8.1 Payment Default. Borrower fails to (a) make any payment of principal or
interest on any Credit Extension on its due date, or (b) pay any other
Obligations within five (5) Business Days after such Obligations are due and
payable (which five (5) Business Day cure period shall not apply to payments due
on the Revolving Line Maturity Date or the Term Loan Maturity Date). During the
cure period, the failure to make or pay any payment specified under clause
(a) or (b) hereunder is not an Event of Default (but no Credit Extension will be
made during the cure period);
     8.2 Covenant Default.

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          (a) Borrower fails or neglects to perform any obligation in
Sections 6.2, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, or 6.11, or violates any
covenant in Section 7; or
          (b) Borrower fails or neglects to perform, keep, or observe any other
term, provision, condition, covenant or agreement contained in this Agreement or
any Loan Documents, and as to any default (other than those specified in this
Section 8) under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure the default within fifteen (15) days after
the occurrence 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 in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure
to cure the default shall not be deemed an Event of Default (but no Credit
Extensions shall be made during such cure period). Cure periods provided under
this section shall not apply, among other things, to financial covenants or any
other covenants set forth in clause (a) above;
     8.3 Material Adverse Change; Change in Control. A Material Adverse Change
or a Change in Control occurs;
     8.4 Attachment; Levy; Restraint on Business.
     (a) (i) The service of process seeking to attach, by trustee or similar
process, any funds of Borrower or of any entity under the control of Borrower
(including a Subsidiary) on deposit or otherwise maintained with Bank or any
Bank Affiliate, or (ii) a notice of lien or levy is filed against any of
Borrower’s assets with a fair market value of Five Hundred Thousand Dollars
($500,000) or more, individually or in the aggregate by any government agency,
and the same under subclauses (i) and (ii) hereof are not, within ten (10) days
after the occurrence thereof, discharged or stayed (whether through the posting
of a bond or otherwise); provided, however, no Credit Extensions shall be made
during any ten (10) day cure period; or
          (b) (i) any material portion of Borrower’s assets is attached, seized,
levied on, or comes into possession of a trustee or receiver, or (ii) any court
order enjoins, restrains, or prevents Borrower from conducting any material part
of its business;
     8.5 Insolvency. (a) Borrower is unable to pay its debts (including trade
debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an
Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower
and not dismissed or stayed within thirty (30) days (but no Credit Extensions
shall be made while of any of the conditions described in clause (a) exist
and/or until any Insolvency Proceeding is dismissed);
     8.6 Other Agreements. There is, under any agreement to which Borrower is a
party with a third party or parties, (a) any default resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount individually or in the aggregate in
excess of Five Hundred Thousand Dollars ($500,000); or (b) any default by
Borrower, the result of which could have a material adverse effect on Borrower’s
business;
     8.7 Judgments. One or more final judgments, orders, or decrees for the
payment of money in an amount, individually or in the aggregate, of at least
Five Hundred Thousand Dollars ($500,000) (not covered by independent third-party
insurance as to which liability has been accepted by such insurance carrier)
shall be rendered against Borrower and the same are not, within ten (10) days
after the entry thereof, discharged or execution thereof stayed or bonded
pending appeal, or such judgments are not discharged prior to the expiration of
any such stay (provided that no Credit Extensions will be made prior to the
discharge, stay, or bonding of such judgment, order, or decree);
     8.8 Misrepresentations. Borrower or any Person acting for Borrower makes
any representation, warranty, or other statement now or later in this Agreement,
any Loan Document or in any writing delivered to Bank or to induce Bank to enter
this Agreement or any Loan Document, and such representation, warranty, or other
statement is incorrect in any material respect when made;
     8.9 Subordinated Debt. Any document, instrument, or agreement evidencing
any Subordinated Debt shall for any reason be revoked or invalidated or
otherwise cease to be in full force and effect, any Person shall be in breach
thereof or contest in any manner the validity or enforceability thereof or deny
that it has any further liability

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or obligation thereunder, or the Obligations shall for any reason be
subordinated or shall not have the priority contemplated by this Agreement or
the Subordination Agreement; or
     8.10 Governmental Approvals. Any Governmental Approval shall have been
(a) revoked, rescinded, suspended, modified in an adverse manner or not renewed
in the ordinary course for a full term or (b) subject to any decision by a
Governmental Authority that designates a hearing with respect to any
applications for renewal of any of such Governmental Approval or that could
result in the Governmental Authority taking any of the actions described in
clause (a) above, and such decision or such revocation, rescission, suspension,
modification or non-renewal (i) has, or could reasonably be expected to have, a
Material Adverse Change, or (ii) materially adversely affects the legal
qualifications of Borrower or any of its Subsidiaries to hold such Governmental
Approval in any applicable jurisdiction and such revocation, rescission,
suspension, modification or non-renewal could reasonably be expected to have a
material adverse effect on the status of or legal qualifications of Borrower or
any of its Subsidiaries to hold any Governmental Approval in any other
jurisdiction.
     9 BANK’S RIGHTS AND REMEDIES
     9.1 Rights and Remedies. While an Event of Default occurs and continues
Bank may, without notice or demand, do any or all of the following:
          (a) declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
          (b) stop advancing money or extending credit for Borrower’s benefit
under this Agreement or under any other agreement between Borrower and Bank;
          (c) demand that Borrower (i) deposit cash with Bank in an amount equal
110% of the Dollar Equivalent of the aggregate face amount of all Letters of
Credit remaining undrawn (plus all interest, fees, and costs due or to become
due in connection therewith (as estimated by Bank in its good faith business
judgment)), to secure all of the Obligations relating to such Letters of Credit,
as collateral security for the repayment of any future drawings under such
Letters of Credit, and Borrower shall forthwith deposit and pay such amounts,
and (ii) pay in advance all letter of credit fees scheduled to be paid or
payable over the remaining term of any Letters of Credit;
          (d) terminate any FX Forward Contracts;
          (e) settle or adjust disputes and claims directly with Account Debtors
for amounts on terms and in any order that Bank considers advisable, notify any
Person owing Borrower money of Bank’s security interest in such funds, and
verify the amount of such account;
          (f) make any payments and do any acts it considers necessary or
reasonable to protect the Collateral and/or its security interest in the
Collateral. Borrower shall assemble the Collateral if Bank requests and make it
available as Bank designates. Bank may enter premises where the Collateral is
located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior
to its security interest and pay all expenses incurred. Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise any
of Bank’s rights or remedies;
          (g) apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
          (h) ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name,
trade secrets, trade names, Trademarks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section, Borrower’s rights under all licenses
and all franchise agreements inure to Bank’s benefit;
          (i) place a “hold” on any account maintained with Bank and/or deliver
a notice of exclusive control, any entitlement order, or other directions or
instructions pursuant to any Control Agreement or similar agreements providing
control of any Collateral;

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          (j) demand and receive possession of Borrower’s Books; and
          (k) exercise all rights and remedies available to Bank under the Loan
Documents or at law or equity, including all remedies provided under the Code
(including disposal of the Collateral pursuant to the terms thereof).
     9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower’s name on any
checks or other forms of payment or security; (b) sign Borrower’s name on any
invoice or bill of lading for any Account or drafts against Account Debtors;
(c) settle and adjust disputes and claims about the Accounts directly with
Account Debtors, for amounts and on terms Bank determines reasonable; (d) make,
settle, and adjust all claims under Borrower’s insurance policies; (e) pay,
contest or settle any Lien, charge, encumbrance, security interest, and adverse
claim in or to the Collateral, or any judgment based thereon, or otherwise take
any action to terminate or discharge the same; and (f) transfer the Collateral
into the name of Bank or a third party as the Code permits. Borrower hereby
appoints Bank as its lawful attorney-in-fact to sign Borrower’s name on any
documents necessary to perfect or continue the perfection of Bank’s security
interest in the Collateral regardless of whether an Event of Default has
occurred until all Obligations have been satisfied in full and Bank is under no
further obligation to make Credit Extensions hereunder. Bank’s foregoing
appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank’s obligation to provide Credit Extensions
terminates.
     9.3 Protective Payments. If Borrower fails to obtain the insurance called
for by Section 6.7 or fails to pay any premium thereon or fails to pay any other
amount which Borrower is obligated to pay under this Agreement or any other Loan
Document, Bank may obtain such insurance or make such payment, and all amounts
so paid by Bank are Bank Expenses and immediately due and payable, bearing
interest at the then highest rate applicable to the Obligations, and secured by
the Collateral. Bank will make reasonable efforts to provide Borrower with
notice of Bank obtaining such insurance at the time it is obtained or within a
reasonable time thereafter. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank’s waiver of any Event of Default.
     9.4 Application of Payments and Proceeds. Unless an Event of Default has
occurred and is continuing, Bank may apply any funds in its possession, whether
from Borrower account balances, payments, or proceeds realized as the result of
any collection of Accounts or other disposition of the Collateral, first, to
Bank Expenses, including without limitation, the reasonable costs, expenses,
liabilities, obligations and attorneys’ fees incurred by Bank in the exercise of
its rights under this Agreement; second, to the interest due upon any of the
Obligations; and third, to the principal of the Obligations and any applicable
fees and other charges, in such order as Bank shall determine in its sole
discretion. Any surplus shall be paid to Borrower or other Persons legally
entitled thereto; Borrower shall remain liable to Bank for any deficiency. If an
Event of Default has occurred and is continuing, Bank may apply any funds in its
possession, whether from Borrower account balances, payments, proceeds realized
as the result of any collection of Accounts or other disposition of the
Collateral, or otherwise, to the Obligations in such order as Bank shall
determine in its sole discretion. Any surplus shall be paid to Borrower or to
other Persons legally entitled thereto; Borrower shall remain liable to Bank for
any deficiency. If Bank, in its good faith business judgment, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Bank shall have the option, exercisable at
any time, of either reducing the Obligations by the principal amount of the
purchase price or deferring the reduction of the Obligations until the actual
receipt by Bank of cash therefor.
     9.5 Bank’s Liability for Collateral. So long as Bank complies with
reasonable banking practices regarding the safekeeping of the Collateral in the
possession or under the control of Bank, Bank shall not be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person. Borrower bears
all risk of loss, damage or destruction of the Collateral.
     9.6 No Waiver; Remedies Cumulative. Bank’s failure, at any time or times,
to require strict performance by Borrower of any provision of this Agreement or
any other Loan Document shall not waive, affect, or diminish any right of Bank
thereafter to demand strict performance and compliance herewith or therewith. No
waiver hereunder shall be effective unless signed by the party granting the
waiver and then is only effective for the specific instance and purpose for
which it is given. Bank’s rights and remedies under this Agreement and the other
Loan Documents are cumulative. Bank has all rights and remedies provided under
the Code, by law, or in equity.

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Bank’s exercise of one right or remedy is not an election and shall not preclude
Bank from exercising any other remedy under this Agreement or other remedy
available at law or in equity, and Bank’s waiver of any Event
of            Default is not a continuing waiver. Bank’s delay in exercising any
remedy is not a waiver, election, or acquiescence.
     9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
     9.8 Borrower Liability. Any Borrower may, acting singly, request Advances
hereunder. Each Borrower hereby appoints the other as agent for the other for
all purposes hereunder, including with respect to requesting Advances/Credit
Extensions hereunder. Each Borrower hereunder shall be jointly and severally
obligated to repay all Advances/Credit Extensions made hereunder, regardless of
which Borrower actually receives said Advance/Credit Extension, as if each
Borrower hereunder directly received all Advances/Credit Extensions. Each
Borrower waives (a) any suretyship defenses available to it under the Code or
any other applicable law, and (b) any right to require Bank to: (i) proceed
against any Borrower or any other person; (ii) proceed against or exhaust any
security; or (iii) pursue any other remedy. Bank may exercise or not exercise
any right or remedy it has against any Borrower or any security it holds
(including the right to foreclose by judicial or non-judicial sale) without
affecting any Borrower’s liability. Notwithstanding any other provision of this
Agreement or other related document, until the Obligations have been
indefeasibly paid in full, each Borrower irrevocably waives all rights that it
may have at law or in equity (including, without limitation, any law subrogating
Borrower to the rights of Bank under this Agreement) to seek contribution,
indemnification or any other form of reimbursement from any other Borrower, or
any other Person now or hereafter primarily or secondarily liable for any of the
Obligations, for any payment made by Borrower with respect to the Obligations in
connection with this Agreement or otherwise and all rights that it might have to
benefit from, or to participate in, any security for the Obligations as a result
of any payment made by Borrower with respect to the Obligations in connection
with this Agreement or otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this Section shall be
null and void. If any payment is made to a Borrower in contravention of this
Section, such Borrower shall hold such payment in trust for Bank and such
payment shall be promptly delivered to Bank for application to the Obligations,
whether matured or unmatured.
     10 NOTICES
     All notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”), other than Advance requests made pursuant to
Section 3.4, by any party to this Agreement or any other Loan Document must be
in writing and be delivered or sent by facsimile at the addresses or facsimile
numbers listed below. Bank or Borrower may change its notice address by giving
the other party written notice thereof. Each such Communication shall be deemed
to have been validly served, given, or delivered: (a) upon the earlier of actual
receipt and three (3) Business Days after deposit in the U.S. mail, registered
or certified mail, return receipt requested, with proper postage prepaid;
(b) upon transmission, when sent by facsimile transmission (with such facsimile
promptly confirmed by delivery of a copy by personal delivery or United States
mail as otherwise provided in this Section 10); (c) one (1) Business Day after
deposit with a reputable overnight courier with all charges prepaid; or (d) when
delivered, if hand-delivered by messenger, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
below. Advance requests made pursuant to Section 3.4 must be in writing and may
be in the form of electronic mail, delivered to Bank by Borrower at the e-mail
address of Bank provided below and shall be deemed to have been validly served,
given, or delivered when sent (with such electronic mail promptly confirmed by
delivery of a copy by personal delivery or United States mail as otherwise
provided in this Section 10). Bank or Borrower may change its address, facsimile
number, or electronic mail address by giving the other party written notice
thereof in accordance with the terms of this Section 10.

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If to Borrower:
  TELECOMMUNICATION SYSTEMS, INC.
LONGHORN ACQUISITION, LLC
c/o TELECOMMUNICATION SYSTEMS, INC.
275 West Street, Suite 400
Annapolis, Maryland 21401
Attn: Thomas M. Brandt, Jr., Chief Financial Officer
Fax: (410) 280-1048
Email: tbrandt@telecomsys.com
 
   
with a copy to:
  TELECOMMUNICATION SYSTEMS, INC.
275 West Street, Suite 400
Annapolis, Maryland 21401
Attn: Bruce White, Vice President and General Counsel
Fax: (410) 280-1048
Email: bwhite@telecomsys.com
 
   
If to Bank:
  Silicon Valley Bank
One Newton Executive Park, Suite 200
2221 Washington Street, Newton, MA 02462
Attn: Mr. Ryan Ravenscroft
Fax: (617) 969-5962
Email: rravenscroft@svb.com
 
   
with a copy to:
  Riemer & Braunstein LLP
Three Center Plaza
Boston, Massachusetts 02108
Attn: Charles W. Stavros, Esquire
Fax: (617) 880-3456
Email: cstavros@riemerlaw.com

     11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE
     New York law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in New York; provided, however, that nothing in
this Agreement shall be deemed to operate to preclude Bank from bringing suit or
taking other legal action in any other jurisdiction to realize on the Collateral
or any other security for the Obligations, or to enforce a judgment or other
court order in favor of Bank. Borrower expressly submits and consents in advance
to such jurisdiction in any action or suit commenced in any such court, and
Borrower hereby waives any objection that it may have based upon lack of
personal jurisdiction, improper venue, or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in
Section 10 of this Agreement and that service so made shall be deemed completed
upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days
after deposit in the U.S. mails, proper postage prepaid. NOTWITHSTANDING
ANYTHING TO THE CONTRARY SET FORTH HEREINABOVE, BANK SHALL SPECIFICALLY HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS NECESSARY OR APPROPRIATE IN
ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE BANK’S RIGHTS AGAINST
BORROWER OR ITS PROPERTY.
TO THE FULLESTEXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE
THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
     12 GENERAL PROVISIONS

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     12.1 Termination Prior to Maturity Date. (a) Term Loan. The Term Loan may
be prepaid in full or terminated prior to the Term Loan Maturity Date by
Borrower, effective three (3) Business Days after written notice of termination
is given to Bank. Notwithstanding any such prepayment or termination, Bank’s
lien and security interest in the Collateral shall continue until Borrower fully
satisfies its Obligations. If such prepayment or termination is at Borrower’s
election (regardless of the existence of any Event of Default), 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 termination fee in an amount equal to (i) if prepaid or terminated
at any time prior to the first anniversary of the Effective Date, an amount
equal to two percent (2.00%) of amount of the Term Loan Amount prepaid; (ii) if
prepaid or terminated on or at any time after the first anniversary of the
Effective Date but prior to the second anniversary of the Effective Date, an
amount equal to one and one half percent (1.50%) of the amount of the Term Loan
Amount prepaid; (iii) if prepaid or terminated on or at any time after the
second anniversary of the Effective Date but prior to the third anniversary of
the Effective Date, one percent (1.00%) of the amount of the Term Loan Amount
prepaid; (iv) if prepaid or terminated on or at any time after the third
anniversary of the Effective Date but prior to the fourth anniversary of the
Effective Date, one-half of one percent (0.50%) of the amount of the Term Loan
Prepaid; and (v) from the fourth anniversary of the Effective Date and
thereafter, Zero Dollars ($0.00); provided that no termination fee shall be
charged if the credit facility hereunder is replaced with a new facility from
another division of Silicon Valley Bank. Amounts so prepaid or terminated cannot
be reborrowed. Upon payment in full of the Obligations and at such time as
Bank’s obligation to make Credit Extensions has terminated, Bank shall release
its liens and security interests in the Collateral and all rights therein shall
revert to Borrower.
     (b) Revolving Line. Subject in any event to the provisions of Section 12.9
hereof, the Revolving Line commitment may be terminated prior to the Revolving
Line Maturity Date by Borrower, effective three (3) Business Days after written
notice of termination is given to Bank. Notwithstanding any such termination,
Bank’s lien and security interest in the Collateral shall continue until
Borrower fully satisfies all of its Obligations to Bank. Amounts so terminated
cannot be reborrowed. Upon payment in full of the Obligations and at such time
as Bank’s obligation to make Credit Extensions has terminated, Bank shall
release its liens and security interests in the Collateral and all rights
therein shall revert to Borrower.
     12.2 Successors and Assigns. This Agreement binds and is for the benefit of
the successors and permitted assigns of each party. Borrower may not assign this
Agreement or any rights or obligations under it without Bank’s prior written
consent (which may be granted or withheld in Bank’s discretion). Bank has the
right, without the consent of or notice to Borrower, to sell, transfer, assign,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights, and benefits under this Agreement and the other Loan
Documents.
     12.3 Indemnification. Borrower agrees to indemnify, defend and hold Bank
and its directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank (each, an “Indemnified Person”) harmless
against: (a) all obligations, demands, claims, and liabilities (collectively,
“Claims”) claimed or asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or expenses
(including Bank Expenses) in any way suffered, incurred, or paid by such
Indemnified Person as a result of, following from, consequential to, or arising
from transactions between Bank and Borrower (including reasonable attorneys’
fees and expenses), except for Claims and/or losses directly caused by such
Indemnified Person’s gross negligence or willful misconduct.
     12.4 Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.
     12.5 Correction of Loan Documents. Bank may correct patent errors and fill
in any blanks in the Loan Documents consistent with the agreement of the parties
so long as Bank provides Borrower with written notice of such correction and
allows Borrower at least ten (10) days to object to such correction. In the
event of such objection, such correction shall not be made except by an
amendment signed by both Bank and Borrower.
     12.6 Severability of Provisions. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
     12.7 Amendments in Writing; Waiver; Integration. No purported amendment or
modification of any Loan Document, or waiver, discharge or termination of any
obligation under any Loan Document, shall be enforceable or admissible unless,
and only to the extent, expressly set forth in a writing signed by the party
against

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which enforcement or admission is sought. Without limiting the generality of the
foregoing, no oral promise or statement, nor any action, inaction, delay,
failure to require performance or course of conduct shall operate as, or
evidence, an amendment, supplement or waiver or have any other effect on any
Loan Document. Any waiver granted shall be limited to the specific circumstance
expressly described in it, and shall not apply to any subsequent or other
circumstance, whether similar or dissimilar, or give rise to, or evidence, any
obligation or commitment to grant any further waiver. The Loan Documents
represent the entire agreement about this subject matter and supersede prior
negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter the Loan Documents merge into the Loan Documents.
     12.8 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, is an original, and all taken together, constitute
one Agreement.
     12.9 Survival. All covenants, representations and warranties made in this
Agreement continue in full force until this Agreement has terminated pursuant to
its terms and all Obligations (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement) have been paid in full and satisfied. The obligation of Borrower in
Section 12.3 to indemnify Bank shall survive until the statute of limitations
with respect to such claim or cause of action shall have run.
     12.10 Confidentiality. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank’s
Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts to obtain any prospective transferee’s or
purchaser’s agreement to the terms of this provision that any prospective
transferee or purchaser shall have entered into an agreement containing
provisions substantially the same as those in this Section); (c) as required by
law, regulation, subpoena, or other order; (d) to Bank’s regulators or as
otherwise required in connection with Bank’s examination or audit; (e) as Bank
considers appropriate in exercising remedies under the Loan Documents; and
(f) to third-party service providers of Bank so long as such service providers
have executed a confidentiality agreement with Bank with terms no less
restrictive than those contained herein. Confidential information does not
include information that is either: (i) in the public domain or in Bank’s
possession when disclosed to Bank, or becomes part of the public domain after
disclosure to Bank; or (ii) disclosed to Bank by a third party if Bank does not
know that the third party is prohibited from disclosing the information.
     Bank may use confidential information for the development of databases,
reporting purposes, and market analysis so long as such confidential information
is aggregated and anonymized prior to distribution unless otherwise expressly
permitted by Borrower. The provisions of the immediately preceding sentence
shall survive the termination of this Agreement.
     12.11 Attorneys’ Fees, Costs and Expenses. In any action or proceeding
between Borrower and Bank arising out of or relating to the Loan Documents, Bank
shall be entitled to recover its reasonable attorneys’ fees and other costs and
expenses incurred, in addition to any other relief to which it may be entitled.
     12.12 Right of Set Off. Borrower hereby grants to Bank, a lien, security
interest and right of set off as security for all Obligations to Bank, whether
now existing or hereafter arising upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of Bank
(including a Bank subsidiary) or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower even though unmatured and regardless of
the adequacy of any other collateral securing the Obligations. ANY AND ALL
RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY
OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
     12.13 Electronic Execution of Documents. The words “execution,” “signed,”
“signature” and words of like import in any Loan Document shall be deemed to
include electronic signatures or the keeping of records in electronic form, each
of which shall be of the same legal effect, validity and enforceability as a
manually executed signature or the use of a paper-based recordkeeping systems,
as the case may be, to the extent and as provided for in any applicable law,
including, without limitation, any state law based on the Uniform Electronic
Transactions Act.

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     12.14 Captions. The headings used in this Agreement are for convenience
only and shall not affect the interpretation of this Agreement.
     12.15 Construction of Agreement. The parties mutually acknowledge that they
and their attorneys have participated in the preparation and negotiation of this
Agreement. In cases of uncertainty this Agreement shall be construed without
regard to which of the parties caused the uncertainty to exist.
     12.16 Relationship. The relationship of the parties to this Agreement is
determined solely by the provisions of this Agreement. The parties do not intend
to create any agency, partnership, joint venture, trust, fiduciary or other
relationship with duties or incidents different from those of parties to an
arm’s-length contract.
     12.17 Third Parties. Nothing in this Agreement, whether express or implied,
is intended to: (a) confer any benefits, rights or remedies under or by reason
of this Agreement on any persons other than the express parties to it and their
respective permitted successors and assigns; (b) relieve or discharge the
obligation or liability of any person not an express party to this Agreement; or
(c) give any person not an express party to this Agreement any right of
subrogation or action against any party to this Agreement.
     12.18 Amended and Restated Loan and Security Agreement. This Agreement
amends and restates in its entirety a certain Second Amended and Restated Loan
and Security Agreement by and among TCS and Bank dated as of October 14, 2005,
as amended by a certain first Amendment to Second Amended and Restated Loan and
Security Agreement, dated as of December 30, 2005, as further amended by a
certain Second Amendment to Second Amended and Restated Loan and Security
Agreement, dated as of March 10, 2006, as further amended by a certain Third
Amendment to Second Amended and Restated Loan and Security Agreement, dated as
of November 14, 2006, and as further amended by a certain Fourth Amendment to
Second Amended and Restated Loan and Security Agreement, dated as of June 27,
2007.
     13 DEFINITIONS
     13.1 Definitions. As used in the Loan Documents, the word “shall” is
mandatory, the word “may” is permissive, the word “or” is not exclusive, the
words “includes” and “including” are not limiting, the singular includes the
plural, and numbers denoting amounts that are set off in brackets are negative.
As used in this Agreement, the following capitalized terms have the following
meanings:
     “Account” is any “account” as defined in the Code with such additions to
such term as may hereafter be made, and includes, without limitation, all
accounts receivable and other sums owing to Borrower.
     “Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.
     “Adjusted Quick Ratio” shall mean the ratio of (A) Borrower’s domestic
unrestricted cash and domestic unrestricted Cash Equivalents plus the aggregate
value of Borrower’s net billed accounts receivable divided by (B) Borrower’s
Current Liabilities (including, without limitation, all Indebtedness owed to
Bank and any Reserves established by Bank), less the current portion of
Borrower’s Deferred Revenue.
     “Advance” or “Advances” means an advance (or advances) under the Revolving
Line.
     “Affiliate” is, with respect to any Person, each other Person that owns or
controls directly or indirectly the Person, any Person that controls or is
controlled by or is under common control with the Person, and each of that
Person’s senior executive officers, directors, partners and, for any Person that
is a limited liability company, that Person’s managers and members.
     “Agreement” is defined in the preamble hereof.
     “Availability Amount” is (a) the lesser of (i) the Revolving Line or
(ii) the amount available under the Borrowing Base minus (b) the Dollar
Equivalent amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit plus an amount equal to the Letter of Credit
Reserve), minus (c) the FX Reduction Amount, minus (d) any amounts used for Cash
Management Services, and minus (e) the outstanding principal balance of any
Advances.

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     “Bank” is defined in the preamble hereof.
     “Bank Expenses” are all audit fees and expenses, costs, and expenses
(including reasonable attorneys’ fees and expenses) for preparing, amending,
negotiating, administering, defending and enforcing the Loan Documents
(including, without limitation, those incurred in connection with appeals or
Insolvency Proceedings) or otherwise incurred with respect to Borrower.
     “Borrower” is defined in the preamble hereof.
     “Borrower’s Books” are all Borrower’s books and records including ledgers,
federal and state tax returns, records regarding Borrower’s assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.
     “Borrowing Base” is (a) eighty-five percent (85%) of Eligible Accounts, as
determined by Bank from Borrower’s most recent Borrowing Base Certificate.
     “Borrowing Base Certificate” is that certain certificate included within
each Transaction Report.
     “Borrowing Resolutions” are, with respect to any Person, those resolutions
adopted by such Person’s Board of Directors or other appropriate body and
delivered by such Person to Bank approving the Loan Documents to which such
Person is a party and the transactions contemplated thereby, together with a
certificate executed by its secretary on behalf of such Person certifying that
(a) such Person has the authority to execute, deliver, and perform its
obligations under each of the Loan Documents to which it is a party, (b) that
attached as Exhibit A to such certificate is a true, correct, and complete copy
of the resolutions then in full force and effect authorizing and ratifying the
execution, delivery, and performance by such Person of the Loan Documents to
which it is a party, (c) the name(s) of the Person(s) authorized to execute the
Loan Documents on behalf of such Person, together with a sample of the true
signature(s) of such Person(s), and (d) that Bank may conclusively rely on such
certificate unless and until such Person shall have delivered to Bank a further
certificate canceling or amending such prior certificate.
     “Business Day” is any day that is not a Saturday, Sunday or a day on which
Bank is closed.
     “Cash Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc., (c) Bank’s certificates of deposit
issued maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.
     “Cash Management Services” is defined in Section 2.1.4.
     “Change in Control” is a transaction in which any “person” or “group”
(within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended), directly or indirectly,
of greater than 35% of the shares of all classes of stock then outstanding of
TCS ordinarily entitled to vote in the election of directors.
     “Code” is the Uniform Commercial Code, as the same may, from time to time,
be enacted and in effect in the State of New York; provided, that, to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial
Code in effect in a jurisdiction other than the State of New York, the term
“Code” shall mean the Uniform Commercial Code as enacted and in effect in such
other jurisdiction solely for purposes of the provisions thereof relating to
such attachment, perfection, priority, or remedies and for purposes of
definitions relating to such provisions.
     “Collateral” is any and all properties, rights and assets of Borrower
described on Exhibit A.
     “Collateral Account” is any Deposit Account, Securities Account, or
Commodity Account.

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     “Commodity Account” is any “commodity account” as defined in the Code with
such additions to such term as may hereafter be made.
     “Communication” is defined in Section 10.
     “Compliance Certificate” is that certain certificate in the form attached
hereto as Exhibit B.
     “Contingent Obligation” is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (a) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation,
in each case directly or indirectly guaranteed, endorsed, co-made, discounted or
sold with recourse by that Person, or for which that Person is directly or
indirectly liable; (b) any obligations for undrawn letters of credit for the
account of that Person; and (c) all obligations from any interest rate, currency
or commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.
     “Control Agreement” is any control agreement entered into among the
depository institution at which Borrower maintains a Deposit Account or the
securities intermediary or commodity intermediary at which Borrower maintains a
Securities Account or a Commodity Account, Borrower, and Bank pursuant to which
Bank obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.
     “Copyrights” are any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret.
     “Credit Extension” is any Advance, Letter of Credit, Term Loan, FX Forward
Contract, amount utilized for Cash Management Services, or any other extension
of credit by Bank for Borrower’s benefit.
     “Current Liabilities” are all obligations and liabilities of Borrower to
Bank, plus, without duplication, the aggregate amount of Borrower’s Total
Liabilities that mature within one (1) year.
     “Default” means any event which with notice or passage of time or both,
would constitute an Event of Default.
     “Default Rate” is defined in Section 2.3(b).
     “Deferred Revenue” is all amounts received or invoiced in advance of
performance under contracts and not yet recognized as revenue.
     “Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.
     “Designated Deposit Account” is Borrower’s deposit account, account number
3300363939, maintained with Bank.
     “Dollars,” “dollars” or use of the sign “$” means only lawful money of the
United States and not any other currency, regardless of whether that currency
uses the “$” sign to denote its currency or may be readily converted into lawful
money of the United States.
     “Dollar Equivalent” is, at any time, (a) with respect to any amount
denominated in Dollars, such amount, and (b) with respect to any amount
denominated in a Foreign Currency, the equivalent amount therefor in Dollars as
determined by Bank at such time on the basis of the then-prevailing rate of
exchange in San Francisco, California, for sales of the Foreign Currency for
transfer to the country issuing such Foreign Currency.
     “EBITDA” shall mean (a) Net Income, plus (b) Interest Expense, plus (c) to
the extent deducted in the calculation of Net Income, depreciation expense and
amortization expense, plus (d) income tax expense, plus (e)

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reasonable add-backs for non-cash deductions from Net Income, including, without
limitation, non-cash stock compensation expense, in each case in this clause
(e) in Bank’s sole discretion, minus (e) capitalized software development
expense.
     “Effective Date” is the date Bank executes this Agreement and as indicated
on the signature page hereof.
     “Eligible Accounts” are Accounts which arise in the ordinary course of
Borrower’s business that meet all Borrower’s representations and warranties in
Section 5.3. Bank reserves the right at any time and from time to time after the
Effective Date upon notice to Borrower, to adjust any of the criteria set forth
below and to establish new criteria in its good faith business judgment. Without
limiting the fact that the determination of which Accounts are eligible for
borrowing is a matter of Bank’s good faith judgment, the following (“Minimum
Eligibility Requirements”) are the minimum requirements for an Account to be an
Eligible Account. Unless Bank agrees otherwise in writing, Eligible Accounts
shall not include:
     (a) Accounts for which the Account Debtor has not been invoiced or where
goods or services have not yet been rendered to the Account Debtor (sometimes
called memo billings or pre-billings);
     (b) Accounts that the Account Debtor has not paid within ninety (90) days
of invoice date, regardless of invoice payment period terms;
     (c) Accounts owing from an Account Debtor, fifty percent (50%) or more of
whose Accounts have not been paid within ninety (90) days of invoice date;
     (d) Accounts billed and/or payable outside the United States;
     (e) Accounts with credit balances over ninety (90) days from invoice date;
     (f) Accounts owing from an Account Debtor, including Affiliates, whose
total obligations to Borrower exceed twenty-five percent (25%) of all Accounts,
for the amounts that exceed that percentage, unless Bank approves in writing;
     (g) Accounts subject to contractual arrangements between Borrower and an
Account Debtor where payments shall be scheduled or due according to completion
or fulfillment requirements where the Account Debtor has a right of offset for
damages suffered as a result of Borrower’s failure to perform in accordance with
the contract (sometimes called contracts accounts receivable, progress billings,
milestone billings, or fulfillment contracts);
     (h) Accounts owing from an Account Debtor the amount of which may be
subject to withholding based on the Account Debtor’s satisfaction of Borrower’s
complete performance (but only to the extent of the amount withheld; sometimes
called retainage billings);
     (i) Accounts owing from an Account Debtor which does not have its principal
place of business in the United States or Canada except for Eligible Foreign
Accounts;
     (i) Accounts owing from the United States or any department, agency, or
instrumentality thereof except for Accounts of the United States if Borrower has
assigned its payment rights to Bank and the assignment has been acknowledged
under the Federal Assignment of Claims Act of 1940, as amended;
     (j) Accounts owing from an Account Debtor to the extent that Borrower is
indebted or obligated in any manner to the Account Debtor (as creditor, lessor,
supplier or otherwise — sometimes called “contra” accounts, accounts payable,
customer deposits or credit accounts), with the exception of customary credits,
adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;
     (k) Accounts for demonstration or promotional equipment, or in which goods
are consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on
approval”, “bill and hold”, or other terms if Account Debtor’s payment may be
conditional;
     (l) Accounts that represent non-trade receivables or that are derived by
means other than in the ordinary course of Borrower’s business;

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     (m) Accounts for which the Account Debtor is Borrower’s Affiliate, officer,
employee, or agent;
     (n) Accounts in which the Account Debtor disputes liability or makes any
claim (but only up to the disputed or claimed amount), or if the Account Debtor
is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of
business;
     (o) Accounts subject to liens in favor of any other Person, including,
without limitation, Tatonka Capital Corporation;
     (p) Accounts subject to chargebacks or other payment deductions taken by an
Account Debtor;
     (q) Accounts for which Bank in its good faith business judgment determines
collection to be doubtful; and
     (r) other Accounts Bank deems ineligible in the exercise of its good faith
business judgment.
     “Eligible Foreign Accounts” are Accounts for which the Account Debtor does
not have its principal place of business in the United States but are otherwise
Eligible Accounts that (a) Bank pre-approves in writing and (b) are supported by
letter(s) of credit acceptable to Bank, in its sole discretion.
     “Equipment” is all “equipment” as defined in the Code with such additions
to such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.
     “ERISA” is the Employee Retirement Income Security Act of 1974, and its
regulations.
     “Event of Default” is defined in Section 8.
     “Fixed Charge Coverage Ratio” means the ratio of (A) (i) Borrower’s EBITDA
for the trailing twelve (12) month period then ending minus (ii) Borrower’s
unfinanced Capital Expenditures (made during such period) minus (iii) taxes and
dividends paid in cash (during such period), divided by (B) Borrower’s Fixed
Charges for the trailing three (3) month period then ended (including, for the
period ending June 30, 2009, an amount equal to three regularly scheduled Term
Loan Payments) multiplied by four (4).
     “Fixed Charges” means the sum of Borrower’s Interest Expense plus all
required principal payments on Indebtedness during the trailing three (3) month
period then ended.
     “Foreign Currency” means lawful money of a country other than the United
States.
     “Funding Date” is any date on which a Credit Extension is made to or for
the account of Borrower which shall be a Business Day.
     “FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is
conducting its normal business and (b) the Foreign Currency being purchased or
sold by Borrower is available to Bank from the entity from which Bank shall buy
or sell such Foreign Currency.
     “FX Forward Contract” is defined in Section 2.1.3.
     “FX Reserve” is defined in Section 2.1.3.
     “FX Reduction Amount” is defined in Section 2.1.3.
     “GAAP” is generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.

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     “General Intangibles” is all “general intangibles” as defined in the Code
in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation, all Intellectual Property, claims,
income and other tax refunds, security and other deposits, payment intangibles,
contract rights, options to purchase or sell real or personal property, rights
in all litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.
     “Governmental Approval” is any consent, authorization, approval, order,
license, franchise, permit, certificate, accreditation, registration, filing or
notice, of, issued by, from or to, or other act by or in respect of, any
Governmental Authority.
     “Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.
     “Indebtedness” is (a) indebtedness for borrowed money or the deferred price
of property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and
(d) Contingent Obligations.
     “Indemnified Person” is defined in Section 12.2.
     “Insolvency Proceeding” is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
     “Intellectual Property” means all of Borrower’s right, title, and interest
in and to the following:
     (a) its Copyrights, Trademarks and Patents, and all related applications;
     (b) any and all trade secrets and trade secret rights, including, without
limitation, any rights to unpatented inventions, know-how, operating manuals;
     (c) any and all source code;
     (d) any and all design rights which may be available to a Borrower;
     (e) any and all claims for damages by way of past, present and future
infringement of any of the foregoing, with the right, but not the obligation, to
sue for and collect such damages for said use or infringement of the
Intellectual Property rights identified above; and
     (f) all amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents.
     “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, 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).
     “Inventory” is all “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.
     “Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person.

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     “Letter of Credit” means a standby letter of credit issued by Bank or
another institution based upon an application, guarantee, indemnity or similar
agreement on the part of Bank as set forth in Section 2.1.2.
     “Letter of Credit Application” is defined in Section 2.1.2(a).
     “Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(d).
     “Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.
     “Loan Documents” are, collectively, this Agreement, the Perfection
Certificate, the Subordination Agreement, any note, or notes or guaranties
executed by Borrower or any guarantor, and any other present or future agreement
between Borrower and/or for the benefit of Bank in connection with this
Agreement, all as amended, restated, or otherwise modified.
     “Material Adverse Change” is (a) a material impairment in the perfection or
priority of Bank’s Lien in the Collateral or in the value of such Collateral;
(b) a material adverse change in the business, operations, or condition
(financial or otherwise) of Borrower; or (c) a material impairment of the
prospect of repayment of any portion of the Obligations.
     “Minimum Eligibility Requirements” is defined in the defined term “Eligible
Accounts”.
     “Net Income” means, as calculated on a consolidated basis for Borrower and
its Subsidiaries, if any, 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.
     “Obligations” are Borrower’s obligation to pay when due any debts,
principal, interest, Bank Expenses and other amounts Borrower owes Bank now or
later, whether under this Agreement, the Loan Documents, or otherwise,
including, without limitation, all obligations relating to letters of credit
(including reimbursement obligations for drawn and undrawn letters of credit),
cash management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and to perform Borrower’s duties under
the Loan Documents.
     “Operating Documents” are, for any Person, such Person’s formation
documents, as certified with the Secretary of State of such Person’s state of
formation on a date that is no earlier than 30 days prior to the Effective Date,
and, (a) if such Person is a corporation, its bylaws in current form, (b) if
such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its
partnership agreement (or similar agreement), each of the foregoing with all
current amendments or modifications thereto.
     “Patents” means all patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same.
     “Payment” means all checks, wire transfers and other items of payment
received by Bank (including proceeds of Accounts and payment of all the
Obligations in full) for credit to Borrower’s outstanding Credit Extensions or,
if the balance of the Credit Extensions has been reduced to zero, for credit to
its Deposit Accounts.
     “Perfection Certificate” is defined in Section 5.1.
     “Permitted Acquisition” is defined in Section 7.3.
     “Permitted Indebtedness” is:
     (a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan
Documents;
     (b) Indebtedness existing on the Effective Date and shown on the Perfection
Certificate;
     (c) Subordinated Debt, including, without limitation, Indebtedness owed to
Tatonka Capital corporation pursuant to the terms and conditions of a certain
promissory note, as amended from time to time,

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described in that certain Subordination Document, dated December 28, 2006, by
and between Bank and Tatonka Capital Corporation;
     (d) unsecured Indebtedness to trade creditors incurred in the ordinary
course of business;
     (e) Indebtedness secured by Permitted Liens;
     (f) Indebtedness owed by one Borrower to another Borrower, or, subject to
clause (d) of the definition of “Permitted Investments hereof, Indebtedness owed
by a Subsidiary to a Borrower; and
     (g) extensions, refinancings, modifications, amendments and restatements of
any items of Permitted Indebtedness (a) through (f) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms upon Borrower or its Subsidiary, as the case may
be.
     “Permitted Investments” are:
     (a) Investments shown on the Perfection Certificate and existing on the
Effective Date;
     (b) Cash Equivalents;
     (c) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
Borrower’s business;
     (d) Investments by Borrower in Subsidiaries that are not a Borrower in an
amount not to exceed One Million Dollars ($1,000,000) in the aggregate for all
such Subsidiaries;
     (e) Investments consisting of (i) travel advances and employee relocation
loans and other employee loans and advances in the ordinary course of business,
and (ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s board of 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 business;
     (g) Investments consisting of 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 paragraph (g) shall not
apply to Investments of Borrower in any Subsidiary; and
     (h) Investments in other assets in an amount not to exceed One Million
Dollars ($1,000,000) in the aggregate.
     “Permitted Liens” are:
     (a) Liens existing on the Effective Date and shown on the Perfection
Certificate or arising under this Agreement and the other Loan Documents;
     (b) Liens for taxes, fees, assessments or other government charges or
levies, either (i) not due and payable or (ii) being contested in good faith and
for which Borrower maintains adequate reserves on its Books, that no notice of
any such Lien has been filed or recorded under the Internal Revenue Code of
1986, as amended, and the Treasury Regulations adopted thereunder;
     (c) purchase money Liens (i) on Equipment acquired or held by Borrower
incurred for financing the acquisition of the Equipment securing no more than
Five Hundred Thousand Dollars ($500,000) in the aggregate amount outstanding, or
(ii) existing on Equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the Equipment;
     (d) statutory Liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other Persons imposed without action of
such parties, provided, they have no priority over any of

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Bank’s Lien, such Liens attach only to Inventory and the aggregate amount of the
Indebtedness secured by such Liens does not at any time exceed One Hundred Fifty
Thousand Dollars ($150,000) and is not delinquent or is being contested in good
faith by appropriate proceedings;
     (e) Liens to secure payment of workers’ compensation, employment insurance,
old-age pensions, social security and other like obligations incurred in the
ordinary course of business, provided, they have no priority over any of Bank’s
Liens and the aggregate amount of the Indebtedness secured by such Liens does
not at any time exceed One Hundred Fifty Thousand Dollars ($150,000);
     (f) Liens in favor of customs and revenue authorities securing the payment
of customs duties in connection with the importation of goods in the ordinary
course of Borrower’s business, consistent with past practices;
     (g) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (f), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;
     (h) leases or subleases of real property granted in the ordinary course of
business, and leases, subleases, non-exclusive licenses or sublicenses of
property (other than real property or Intellectual Property) granted in the
ordinary course of Borrower’s business, if the leases, subleases, licenses and
sublicenses do not prohibit granting Bank a security interest;
     (i) non-exclusive license of Intellectual Property granted to third parties
in the ordinary course of business; and
     (j) Liens arising from judgments, decrees or attachments in circumstances
not constituting an Event of Default under Section 8.4 or 8.7.
     “Person” is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
     “Prime Rate” is the greater of (i) four percent (4.00%) per annum, or
(ii) the Bank’s most recently announced “prime rate,” even if it is not Bank’s
lowest rate.
     “Prior Loan Agreement” is defined in the preamble hereof.
     “Prior Term Loan” is defined in Section 2.1.5(b) hereof.
     “Registered Organization” is any “registered organization” as defined in
the Code with such additions to such term as may hereafter be made.
     “Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
     “Reserves” means, as of any date of determination, such amounts as Bank may
from time to time establish and revise in good faith reducing the amount of
Advances, Letters of Credit and other financial accommodations which would
otherwise be available to Borrower under the lending formulas: (a) to reflect
events, conditions, contingencies or risks which, as determined by Bank in good
faith, do or may affect (i) the Collateral or any other property which is
security for the Obligations or its value (including without limitation any
increase in delinquencies of Accounts), (ii) the assets or business of Borrower
or any guarantor, or (iii) the security interests and other rights of Bank in
the Collateral (including the enforceability, perfection and priority thereof);
or (b) to reflect Bank’s good faith belief that any collateral report or
financial information furnished by or on behalf of Borrower or any guarantor to
Bank is or may have been incomplete, inaccurate or misleading in any material
respect; or (c) in respect of any state of facts which Bank determines in good
faith constitutes an Event of Default or may, with notice or passage of time or
both, constitute an Event of Default.

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     “Responsible Officer” is any of the Chief Executive Officer, President,
Chief Financial Officer and Controller of Borrower.
     “Restricted License” is any material license or other agreement with
respect to which Borrower is the licensee (a) that prohibits or otherwise
restricts Borrower from granting a security interest in Borrower’s interest in
such license or agreement or any other property, or (b) for which a default
under or termination of could interfere with the Bank’s right to sell any
Collateral.
     “Revolving Line” is an Advance or Advances in an amount equal to Thirty
Million Dollars ($30,000,000).
     “Revolving Line Maturity Date” is June     , 2012.
     “SEC” shall mean the Securities and Exchange Commission, any successor
thereto, and any analogous Governmental Authority
     “Securities Account” is any “securities account” as defined in the Code
with such additions to such term as may hereafter be made.
     “Subordinated Debt” is indebtedness incurred by Borrower subordinated to
all of Borrower’s now or hereafter indebtedness to Bank (pursuant to a
subordination, intercreditor, or other similar agreement in form and substance
satisfactory to Bank entered into between Bank and the other creditor), on terms
acceptable to Bank.
     “Subsidiary” is, as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless the context otherwise
requires, each reference to a Subsidiary herein shall be a reference to a
Subsidiary of Borrower.
     “Term Loan” is a loan made by Bank pursuant to the terms of Section 2.1.5
hereof.
     “Term Loan Amount” is an aggregate amount equal to Twenty Million Dollars
($20,000,000).
     “Term Loan Maturity Date” is the earliest to occur of (a) June 30, 2014 or
(b) the occurrence of an Event of Default.
     “Term Loan Payment” is defined in Section 2.1.5(c).
     “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.
     “Transaction Report” is the Bank’s standard reporting package provided by
Bank to Borrower.
     “Transfer” is defined in Section 7.1.
     “Unused Revolving Line Facility Fee” is defined in Section 2.4(d).
[Signature page follows.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date.

            BORROWER:

TELECOMMUNICATION SYSTEMS, INC.
      By:   /s/ Thomas M. Brandt, Jr.         Name:   Thomas M. Brandt, Jr.     
  Title:   Sr. Vice President & CFO        LONGHORN ACQUISITION LLC
      By:   /s/ Thomas M. Brandt, Jr.         Name:   Thomas M. Brandt, Jr.     
  Title:   Sr. Vice President & CFO        BANK:

SILICON VALLEY BANK
      By:   /s/ Ryan Ravenscroft         Name:   Ryan Ravenscroft       
Title:   Vice President     

Effective Date: June 26, 2009
[Signature page to Loan and Security Agreement]

 

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EXHIBIT A — COLLATERAL DESCRIPTION
The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:
     All goods, Accounts (including health-care receivables), Equipment,
Inventory, contract rights or rights to payment of money, leases, license
agreements, franchise agreements, General Intangibles (except as provided
below), commercial tort claims, documents, instruments (including any promissory
notes), chattel paper (whether tangible or electronic), cash, deposit accounts,
fixtures, letters of credit rights (whether or not the letter of credit is
evidenced by a writing), securities, and all other investment property,
supporting obligations, and financial assets, whether now owned or hereafter
acquired, wherever located;
     all Borrower’s Books relating to the foregoing, and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
     Notwithstanding the foregoing, the Collateral does not include any
Intellectual Property; provided, however, the Collateral shall include all
Accounts and all proceeds of Intellectual Property. If a judicial authority
(including a U.S. Bankruptcy Court) would hold that a security interest in the
underlying Intellectual Property is necessary to have a security interest in
such Accounts and such property that are proceeds of Intellectual Property, then
the Collateral shall automatically, and effective as of the Effective Date,
include the Intellectual Property to the extent necessary to permit perfection
of Bank’s security interest in such Accounts and such other property of Borrower
that are proceeds of the Intellectual Property.

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EXHIBIT B
COMPLIANCE CERTIFICATE

         
TO:
  SILICON VALLEY BANK   Date:                                        
FROM:
  TELECOMMUNICATION SYSTEMS, INC.
LONGHORN ACQUISITION LLC    

     The undersigned authorized officer of TELECOMMUNICATION SYSTEMS, INC. and
LONGHORN ACQUISITION LLC (individually and collectively, jointly and severally,
the “Borrower”) certifies that under the terms and conditions of the 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, if any, 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 generally 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 Covenant
  Required   Complies  
Monthly financial statements with Compliance Certificate
  Monthly within 30 days   Yes   No
Quarterly consolidated and consolidating financial Statements (management
prepared)
  Quarterly within 45 days   Yes   No
Annual financial statement (CPA Audited) + CC
  FYE within 120 days   Yes   No
10-Q, 10-K and 8-K
  Within 5 days after filing with SEC   Yes   No
A/R & A/P Agings
  Monthly within 15 days   Yes   No
Projections
  60 days prior to FYE and as amended   Yes   No
Transaction Reports
  Weekly (monthly within 30 days if no Event of Default) and with each request
for a Credit Extension   Yes   No

The following Intellectual Property was registered after the Effective Date (if
no registrations, state “None”):
 
The following Collateral Accounts were established after the Effective Date (if
no such Collateral Accounts, state “None”):
 

              Financial Covenant   Required   Actual   Complies
Maintain as indicated:
           
Minimum Adjusted Quick Ratio (Monthly)
  *   ___:1.00   Yes No
Minimum Fixed Charge Coverage Ratio (Quarterly)
  1.50:1.00   ___:1.00   Yes No

 

*   See Section 6.9(a)

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

 

 

            TELECOMMUNICATION SYSTEMS, INC.
LONGHORN ACQUISITION LLC
    BANK USE ONLY       Received by:

      authorized signer   By:       Date:

    Name:       Verified:

    Title:       authorized signer           Date:

           Compliance Status:         Yes           No     

2

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Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
Dated: ____________________
I. Adjusted Quick Ratio (Section 6.9(a))
Required: See Section 6.9(a)
Actual:

     
A. Borrower’s unrestricted cash at Bank and unrestricted Cash Equivalents at
Bank
  $_________
B. Aggregate value of the net billed accounts receivable of Borrower
  $_________
C. Quick Assets (the sum of lines A plus B)
  $_________
D. Borrower’s Current Liabilities (including, without limitation, the current
portion of all Indebtedness owed to Bank and any Reserves established by Bank),
less the current portion of Borrower’s Deferred Revenue
  $_________
E. Adjusted Quick Ratio (line C divided by line D)
  $_________

Is line E equal to or greater than _______:1:00?
     ______ No, not in compliance                           
                                                       
                           ______ Yes, in compliance

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II.Fixed Charge Coverage Ratio (Section 6.9(b))
Required: 1.50:1.00
Actual:

     
A. Borrower’s EBITDA for the trailing twelve (12) month period
  $_________
B. Borrower’s unfinanced Capital Expenditures (made during such period)
  $_________
C. taxes and dividends paid in cash (made during such period)
  $_________
D. Adjusted EBITDA
  $_________
E. Borrower’s Fixed Charges for the trailing three (3) month period (including,
for the period ending June 30, 2009, an amount equal to three regularly
scheduled Term Loan Payments) then ended multiplied by four (4)
  $_________
F Fixed Charge Coverage Ratio (line D divided by line E)
  _________

Is line D greater than or equal to 1.50:1.00?
     ______ No, not in compliance                           
                                                       
                           ______ Yes, in compliance

1