Blueprint





  Exhibit 10.4











 



LOAN AND SECURITY MODIFICATION AGREEMENT


 


This
Loan and Security Modification Agreement is entered into as of
April 30, 2018 by and between SHARPSPRING, INC., QUATTRO HOSTING
LLC, and SHARPSPRING TECHNOLOGIES, INC. (each, a
“Borrower”) and WESTERN ALLIANCE BANK
(“Bank”), and effective as of March 21,
2018.


 

1. DESCRIPTION OF EXISTING
INDEBTEDNESS: Among other indebtedness which may be owing by
Borrowers to Bank, Borrowers are indebted to Bank pursuant to,
among other documents, a Loan and Security Agreement by and between
Borrowers and Bank, dated as of March 21, 2016 and as may be
amended from time to time (the “Loan and Security
Agreement”). Capitalized terms used without definition herein
shall have the meanings assigned to them in the Loan and Security
Agreement.

 

2. CONSENT TO SUBORDINATED DEBT.
Bank hereby consents to Borrower’s incurrence of $8,000,000
in Indebtedness owing to SHSP Holdings, Inc., and in accordance
with that certain Subordination Agreement between Bank and SHSP
Holdings, Inc., such Indebtedness constitutes Permitted
Indebtedness under the Loan and Security Agreement as Subordinated
Debt.

 

3. MODIFICATION(S) TO LOAN AND SECURITY
AGREEMENT.

 




A.

The following
definitions in Section 1.1 are amended and restated in their
entirety to read as follows:






 


“Prime
Rate” means the greater of four and three quarters percent
(4.75%) or the Prime Rate published in the Money Rates section of
the Western Edition of The Wall Street Journal, or such other rate
of interest publicly announced from time to time by Bank as its
Prime Rate.


 


“Revolving
Maturity Date” means March 21, 2020.


 




B.

Section 6.9(c) is
amended and restated in its entirety to read as
follows:






 



(c)            

Minimum Adjusted
EBITDA. Parent’s and its Subsidiaries’ quarterly
Adjusted EBITDA shall be at least 75% of its projected Adjusted
EBITDA for such period as set forth in Borrowers’ Financial
Plan if Borrowers’ projected Adjusted EBITDA is above zero
for such period, or at least 125% of its projected Adjusted EBITDA
for such period as set forth in Borrowers’ Financial Plan if
Borrowers’ projected Adjusted EBITDA is below zero for such
period. Based on Borrowers’ Financial Plan for 2018 provided
by Borrowers which has been deemed acceptable by Bank, the maximum
Adjusted EBITDA loss for the quarters listed below are set forth
below:






 


	

Quarter
Ending

	

Maximum
Adjusted EBITDA Loss


	

March
31, 2018

	

($2,519,000)


	

June
30, 2018

	

($2,194,000)


	

September
30, 2018

	

($1,858,000)


	

December
31, 2018

	

($1,488,000)







 




C.

Exhibit D to the
Agreement is replaced in its entirety with Exhibit D attached
hereto.






 

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

 




 








 






 

5. NO DEFENSES OF BORROWER/GENERAL
RELEASE. Each Borrower agrees that, as of this date, it has
no defenses against the obligations to pay any amounts under Loan
Documents. Each Borrower and its affiliates (each, a
“Releasing Party”) acknowledges that Bank would not
enter into this Loan and Security Modification Agreement without
Releasing Party’s assurance that it has no claims against
Bank or any of Bank’s officers, directors, employees or
agents. Except for the obligations arising hereafter under this
Loan and Security Modification Agreement, each Releasing Party
releases Bank and each of Bank’s officers, directors and
employees from any known or unknown claims that Releasing Party now
has against Bank of any nature, including any claims that Releasing
Party, its successors, counsel, and advisors may in the future
discover they would have now had if they had known facts not now
known to them, whether founded in contract, in tort or pursuant to
any other theory of liability, including but not limited to any
claims arising out of or related to the Loan and Security Agreement
or the transactions contemplated thereby. Releasing Party waives
the provisions of California Civil Code section 1542, which
states:

 


A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER, MUST HAVE
MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE
DEBTOR.

 


The
provisions, waivers and releases set forth in this section are
binding upon each Releasing Party and its shareholders, agents,
employees, assigns and successors in interest. The provisions,
waivers and releases of this section shall inure to the benefit of
Bank and its agents, employees, officers, directors, assigns and
successors in interest. The provisions of this section shall
survive payment in full of the Obligations, full performance of all
the terms of this Loan and Security Modification Agreement and the
other Loan Documents, and/or Bank’s actions to exercise any
remedy available under the Loan Documents or
otherwise.

 

6. CONTINUING VALIDITY. Each
Borrower understands and agrees that in modifying the existing Loan
Documents, Bank is relying upon each Borrower's representations,
warranties, and agreements, as set forth in the Loan Documents.
Each Borrower represents and warrants that the representations and
warranties contained in the Loan and Security Agreement are true
and correct as of the date of this Loan and Security Modification
Agreement, and that no Event of Default has occurred and is
continuing. Except as expressly modified pursuant to this Loan and
Security Modification Agreement, the terms of the Loan Documents
remain unchanged and in full force and effect. Bank's agreement to
modifications to the existing Loan Documents pursuant to this Loan
and Security Modification Agreement in no way shall obligate Bank
to make any future modifications to the Loan Documents. Nothing in
this Loan and Security Modification Agreement shall constitute a
satisfaction of the Obligations. It is the intention of Bank and
Borrowers to retain as liable parties all makers and endorsers of
Loan Documents, unless the party is expressly released by Bank in
writing. No maker, endorser, or guarantor will be released by
virtue of this Loan and Security Modification Agreement. The terms
of this paragraph apply not only to this Loan and Security
Modification Agreement, but also to any subsequent loan and
security modification agreements.

 

7. CHOICE OF
LAW AND VENUE; JURY TRIAL WAIVER; REFERENCE PROVISION. This
Loan and Security Modification Agreement constitutes a “Loan
Document” as defined and set forth in the Loan and Security
Agreement, and is subject to Sections 11 and 12 of the Loan and
Security Agreement, which are incorporated by reference
herein.

 

8. CONDITIONS PRECEDENT. As a
condition to the effectiveness of this Loan and Security
Modification Agreement, Bank shall have received, in form and
substance satisfactory to Bank, the following:

 

(a) corporate
resolutions and incumbency certificates;

 

(b) payment of the
facility fee set forth in Section 2.5(a) of the Agreement that was
previously due and payable on March 21, 2018, plus all Bank
Expenses incurred through the date hereof; and

 

(c) such other
documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate.

 



[signature page follows]


 




 








 






 

9. COUNTERSIGNATURE. This Loan and
Security Modification Agreement shall become effective only when
executed by Bank and Borrowers.

 



BORROWERS:                                             



BANK:






 



SHARPSPRING,
INC.                                       



WESTERN ALLIANCE
BANK






 



By: /s/ Edward
Lawton                                             



by: /s/ Guy
Simpson






 



Name: Edward
Lawton                                     



Name: Guy
Simpson






 



Title:
CFO                                                                 

Title: SVP and
Business Line Manager






 


	

QUATTRO
HOSTING LLC


 


 


By: /s/
Edward Lawton


Name:
Edward Lawton


Title:
CFO


 


 


	

SHARPSPRING
TECHNOLOGIES, INC.


By: /s/
Edward Lawton


Name:
Edward Lawton


Title:
CFO


 







 


 




 








 






 



EXHIBIT D



COMPLIANCE CERTIFICATE

 



TO: 

WESTERN ALLIANCE
BANK





 



FROM:                                 

SHARPSPRING, INC.,
QUATTRO HOSTING LLC, and SHARPSPRING TECHNOLOGIES,
INC.






 


The
undersigned authorized officer of SHARPSPRING, INC., on behalf of
itself and all other Borrowers, hereby certifies that in
accordance with the terms and conditions of the Loan and Security
Agreement between Borrowers and Bank (the “Agreement”),
(i) each Borrower is in complete compliance for the period ending
_______________ with all required covenants except as noted below
and (ii) all representations and warranties of Borrowers stated in
the Agreement are true and correct as of the date hereof. Attached
herewith are the required documents supporting the above
certification. The Officer further certifies that these are
prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to
the next except as explained in an accompanying letter or
footnotes.


 



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

 


	


Reporting Covenant

	


Required

	

Complies  


	
 

	
 

	
 

	
 
 
 


	

A/R
& A/P Agings

	

Monthly
within 30 days

	

Yes

	
No


	

Borrowing
Base Certificate

	

Monthly
within 30 days

	

Yes

	
No



	

Monthly
Recurring Revenue report for prior 12 months

	

Monthly
within 30 days

	

Yes

	

No


	

Monthly
consolidated financial statements

	

Monthly
within 30 days

	

 Yes

	

No


	

Monthly
consolidating financial statements

	

Monthly
within 30 days

	

Yes

	
No


	

Compliance
Certificate

	

Monthly
within 30 days

	

Yes

	
No


	

Annual
audited financial statements

	

FYE
within 180 days

	

Yes

	
No



	

Annual
operating budget, sales projections and operating plans approved by
board of directors

	

Annually
no later than 30 days following the beginning of each fiscal
year

	

Yes

	
No


	
 

	
 

	
 

	
 
 
 


	

A/R and
Collateral Audit

	

Initial
and Annual

	

Yes

	
No


	
 

	
 

	
 

	
 
 
 


	

Deposit
balances with Bank

	

$
___________________

	
 

	
 
 
 


	

Deposit
balance outside Bank

	

$
___________________

	
 

	
 
 
 







 


	


Financial Covenant

	


Required

	


Actual

	


Complies


	
 

	
 

	
 

	
 

	
 


	

Minimum
Cash at Bank + Availability on Revolving Facility

	

$1,500,000

	

$_________

	

Yes

	

No


	

Minimum
MRR Retention Rate (monthly)

	

At
least 90%

	

________%

	

Yes

	

No


	

Minimum
Adjusted EBITDA (quarterly)

	

3/31/18:
($2,519,000)

	

$_________

	

Yes

	

No


	

Negative
deviation not to exceed 25% of Financial Plan

	

6/30/18:
($2,194,000)

	

____%

	
 

	
 


	
 

	

9/30/18:
($1,858,000)

	
 

	
 

	
 


	
 

	

12/31/18:
($1,488,000)

	
 

	
 

	
 







	


Comments Regarding Exceptions: See Attached.

	
 


	
 

	
 


	

Sincerely,

	
 


	
 

	
 


	
 

	
 


	

_________________________________________

	
 


	

SIGNATURE

	
 


	
 

	
 


	

_________________________________________

	
 


	

TITLE

	
 


	
 

	
 

	
 


	

_________________________________________

	
 


	

DATE