Document:

ex10-4.htm

Exhibit 10.4

 

Amended and Restated Security Agreement

 

This Amended and Restated Security Agreement, dated as of December 27, 2016 (this “Security Agreement”), is made by and among Determine, Inc., a Delaware corporation formerly known as Selectica, Inc. (“Grantor”), Lloyd I. Miller, III as “Lenders’ Agent,” and the parties listed on the signature pages hereto (each a “Lender” or “Secured Party” and, collectively, the “Lenders” or “Secured Parties”). 

 

Recitals

 

A.     Certain of the Secured Parties (the “Existing Lenders”) are parties to that certain Amended and Restated Security Agreement, dated as of December 16, 2015 (the “Prior Agreement”), with Grantor, entered into in connection with the sale and issuance by Grantor of Junior Secured Convertible Promissory Notes, dated March 11, 2015 and December 16, 2015, each as amended, to the Existing Lenders in the aggregate principal amount of $5.5 million (the “Existing Loans”).

 

B.     Certain of the Secured Parties has agreed to make certain additional loans to Grantor pursuant to that certain Junior Secured Convertible Note Purchase Agreement, dated as of December 27, 2016, by and among Grantor and such Secured Parties (as the same may from time to time be amended, modified or supplemented or restated, the “December 2016 Purchase Agreement”), such advances and financial accommodation being referred to herein as the “Additional Loans” and, together with the Existing Loans, the “Loans.”

 

C.     In order to induce the Secured Parties to make the Additional Loans under the December 2016 Purchase Agreement, the Company and the Existing Lenders desire to amend and restate the Prior Agreement to add such Additional Loans as secured obligations hereunder, as more fully set forth below.

 

D.     Each Secured Party acknowledges that the security interest granted hereunder will, upon perfection thereof, be a second priority lien on the subject assets and that the rights of the Lenders’ Agent and Secured Parties will in all respects be subject to the first priority security position granted to Western Alliance Bank, as successor in interest to Bridge Bank, National Association (“Bank”) under that certain Amended and Restated Business Financing Agreement, dated as of July 25, 2014, as amended (the “Senior Credit Facility”), between Grantor and Bank, and the Second Amended and Restated Subordination Agreement to be executed and delivered by Lenders’ Agent in favor of Bank.

 

E.     Each Secured Party is willing to make the Additional Loans to Grantor, and consents to execution and delivery by Lenders’ Agent of the Second Amended and Restated Subordination Agreement, but only upon the condition, among others, that Grantor shall have granted the security interest set forth herein and executed and delivered to such Secured Party this Security Agreement.

 

Agreement

 

Now, Therefore, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and in order to induce the Secured Parties to make the Additional Loans under the Additional Purchase Agreement, the Prior Agreement is hereby amended and restated as set forth herein, and the parties hereby represent, warrant, covenant and agree as follows:

 

1.     Defined Terms. When used in this Security Agreement the following terms shall have the meanings set forth below (such meanings being equally applicable to both the singular and plural forms of the terms defined). Any other capitalized term used in this Security Agreement but not defined herein shall have the meaning ascribed to it under the Purchase Agreements.

 

 

 

 

“Bankruptcy Code” means Title XI of the United States Code.

 

“Collateral” shall have the meaning assigned to such term in Section 2 of this Security Agreement.

 

“Contracts” means all contracts (including any customer, vendor, supplier, service or maintenance contract), leases, licenses, undertakings, purchase orders, permits, franchise agreements or other agreements (other than any right evidenced by Chattel Paper, Documents or Instruments), whether in written or electronic form, in or under which Grantor now holds or hereafter acquires any right, title or interest, including, without limitation, with respect to an Account, any agreement relating to the terms of payment or the terms of performance thereof.

 

“Copyright License” means any agreement, whether in written or electronic form, in which Grantor now holds or hereafter acquires any interest, granting any right in or to any Copyright or Copyright registration (whether Grantor is the licensee or the licensor thereunder) including, without limitation, licenses pursuant to which Grantor has obtained the exclusive right to use a copyright owned by a third party.

 

“Copyrights” means all of the following now owned or hereafter acquired or created (as a work for hire for the benefit of Grantor) by Grantor or in which Grantor now holds or hereafter acquires or receives any right or interest, in whole or in part: (a) all copyrights, whether registered or unregistered, held pursuant to the laws of the United States, Australia, any State or Province thereof or any other country; (b) registrations, applications, recordings and proceedings in the United States Copyright Office or in any similar office or agency of the United States or any other country; (c) any continuations, renewals or extensions thereof; (d) any registrations to be issued in any pending applications, and shall include any right or interest in and to work protectable by any of the foregoing which are presently or in the future owned, created or authorized (as a work for hire for the benefit of Grantor) or acquired by Grantor, in whole or in part; (e) prior versions of works covered by copyright and all works based upon, derived from or incorporating such works; (f) income, royalties, damages, claims and payments now and hereafter due and/or payable with respect to copyrights, including, without limitation, damages, claims and recoveries for past, present or future infringement; (g) rights to sue for past, present and future infringements of any copyright; and (h) any other rights corresponding to any of the foregoing rights throughout the world.

 

“Event of Default” has the meaning set forth in the Notes.

 

“Intellectual Property” means any intellectual property, in any medium, of any kind or nature whatsoever, now or hereafter owned or acquired or received by Grantor or in which Grantor now holds or hereafter acquires or receives any right or interest, and shall include, in any event, any Copyright, Trademark, Patent, trade secret, customer list, internet domain name (including any right related to the registration thereof), proprietary or confidential information, mask work, source, object or other programming code, invention (whether or not patented or patentable), technical information, procedure, design, knowledge, know-how, software, data base, data, skill, expertise, recipe, experience, process, model, drawing, material or record.

 

“Lenders’ Agent” means Lloyd I. Miller, III.

 

“License” means any Copyright License, Patent License, Trademark License or other license of rights or interests, whether in-bound or out-bound, whether in written or electronic form, now or hereafter owned or acquired or received by Grantor or in which Grantor now holds or hereafter acquires or receives any right or interest, and shall include any renewals or extensions of any of the foregoing thereof.

 

 

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“Lien” has the meaning set forth in the Purchase Agreements.

 

“Loan Documents” means the Purchase Agreements, the Notes, this Security Agreement and the Subordination Agreement.

 

“Loans” means the Existing Loans and the Additional Loans.

 

“Notes” means, collectively, the Junior Secured Convertible Promissory Notes issued under the Purchase Agreements evidencing the Loans.

 

“Patent License” means any agreement, whether in written or electronic form, in which Grantor now holds or hereafter acquires any interest, granting any right with respect to any invention on which a Patent is in existence (whether Grantor is the licensee or the licensor thereunder).

 

“Patents” means all of the following in which Grantor now holds or hereafter acquires any interest: (a) all letters patent of the United States, Australia or any other country, all registrations and recordings thereof and all applications for letters patent of the United States, Australia or any other country, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state or any other country; (b) all reissues, divisions, continuations, renewals, continuations-in-part or extensions thereof; (c) all petty patents, divisionals and patents of addition; (d) all patents to issue in any such applications; (e) income, royalties, damages, claims and payments now and hereafter due and/or payable with respect to patents, including, without limitation, damages, claims and recoveries for past, present or future infringement; and (f) rights to sue for past, present and future infringements of any patent.

 

“Permitted Lien” means: (i) any liens arising under Grantor’s Senior Credit Facility; (ii) purchase money security interests to secure purchase money indebtedness of Grantor, so long as such security interests arise or are created (A) in the ordinary course of business and consistent with past practices and (B) substantially contemporaneously with the purchase or acquisition by Grantor of the respective property or assets to which such security interests relate and the incurrence of the respective purchase money indebtedness which such security interests secure, secure only the respective purchase money indebtedness so incurred by Grantor to enable Grantor to so purchase or acquire such property or assets, and no other indebtedness, and encumber only the respective property or assets so purchased or acquired, and no other property or assets of Grantor; (iii) any liens arising in connection with capital leases or equipment financing arrangements of Grantor; (iv) liens acquired with liabilities assumed by Grantor in connection with acquisitions of existing businesses, business divisions, or assets, in whole or in part after the date hereof; (v) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, processor’s, landlord’s liens or other like liens arising in the ordinary course of business that are not overdue for a period of more than thirty (30) days or which are being contested in good faith by appropriate proceedings; (vi) liens arising in connection with worker’s compensation, unemployment insurance, old age pensions and social security benefits and similar statutory obligations (excluding liens arising under ERISA), provided that no enforcement proceedings in respect of such liens are pending and provisions have been made for the payment of such liens on the books of such person as may be required by generally accepted accounting principles; (vii) liens of an immaterial nature for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings; (viii) licenses or sublicenses granted to others in the ordinary course of business if such are otherwise permitted hereunder and do not interfere in any material respect with Grantor’s business; and (ix) (A) liens incurred in the ordinary course of business to secure the performance of statutory obligations arising in connection with progress payments or advance payments due under contracts with the United States government or any agency thereof entered into in the ordinary course of business and (B) liens incurred or deposits made in the ordinary course of business to secure the performance of statutory obligations, bids, leases, fee and expense arrangements with trustees and fiscal agents, trade contracts, surety and appeal bonds, performance bonds and other similar obligations (exclusive of obligations incurred in connection with the borrowing of money, any lease-purchase arrangements or the payment of the deferred purchase price of property), provided, that in each case full provision for the payment of all such obligations;

 

 

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provided, however, that, notwithstanding the foregoing, and only following the date that all Senior Debt (as defined in the Subordination Agreement) has been paid in full in cash and Bank’s obligation to lend under the Senior Credit Facility has terminated, a Permitted Lien shall not include any lien, encumbrance or other interest which would cause, or could reasonably be expected to cause, a Material Adverse Effect.

 

“Prior Purchase Agreements” means the (i) Junior Secured Convertible Note Purchase Agreement, dated as of March 11, 2015, by and among Grantor and certain of the Existing Lenders and (ii) Junior Secured Convertible Note Purchase Agreement, dated as of December 16, 2015, by and among Grantor and certain of the Existing Lenders.

 

“Pro Rata” means, as to any Secured Party at any time, the percentage equivalent at such time of such Secured Party’s aggregate unpaid principal amount of Loans, divided by the combined aggregate unpaid principal amount of all Loans of all Secured Parties.

 

“Purchase Agreements” means, together, the December 2016 Agreement and the Prior Purchase Agreements.

 

“Secured Obligations” means (a) the obligation of Grantor to repay the Secured Parties all of the unpaid principal amount of, and accrued interest on (including any interest that accrues after the commencement of bankruptcy) the Loans and (b) the obligation of Grantor to pay any fees, costs and expenses of the Secured Parties under Section 6(b) hereof or pursuant to any other provision of a Loan Document.

 

“Trademark License” means any agreement, whether in written or electronic form, in which Grantor now holds or hereafter acquires any interest, granting any right in and to any Trademark or Trademark registration (whether Grantor is the licensee or the licensor thereunder).

 

“Trademarks” means any of the following in which Grantor now holds or hereafter acquires any interest: (a) any trademarks, tradenames, corporate names, company names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof and any applications in connection therewith, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state or any other country (collectively, the “Marks”); (b) any reissues, extensions or renewals thereof; (c) the goodwill of the business symbolized by or associated with the Marks; (d) income, royalties, damages, claims and payments now and hereafter due and/or payable with respect to the Marks, including, without limitation, damages, claims and recoveries for past, present or future infringement; and (e) rights to sue for past, present and future infringements of the Marks.

 

 

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“UCC” means the Uniform Commercial Code as the same may from time to time be in effect in the State of California (and each reference in this Security Agreement to an Article thereof (denoted as a Division of the UCC as adopted and in effect in the State of California) shall refer to that Article (or Division, as applicable) as from time to time in effect, which in the case of Article 9 shall include and refer to Revised Article 9 from and after the date Revised Article 9 became effective in the State of California); provided, however, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of the Secured Parties’ security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of California, the term “UCC” shall mean the Uniform Commercial Code (including the Articles thereof) as in effect at such time in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions.

 

In addition, the following terms shall be defined terms having the meaning set forth for such terms in the UCC: “Account” (including health-care-insurance receivables), “Account Grantor”, “Chattel Paper” (including tangible and electronic chattel paper), “Commercial Tort Claims”, “Commodity Account”, “Deposit Account”, “Documents”, “Equipment” (including all accessions and additions thereto), “Fixtures”, “General Intangibles” (including payment intangibles and software), “Instrument”, “Inventory” (including all goods held for sale or lease or to be furnished under a contract of service, and including returns and repossessions), “Investment Property” (including securities and securities entitlements), “Letter-of-Credit Right” (whether or not the letter of credit is evidenced by a writing), “Payment Intangibles”, “Proceeds”, “Promissory Notes”, “Securities Account”, and “Supporting Obligations”. Each of the foregoing defined terms shall include all of such items now owned, or hereafter acquired, by Grantor. 

 

2.     Grant of Security Interest. As collateral security for the full, prompt, complete and final payment and performance when due (whether at stated maturity, by conversion, acceleration or otherwise) of all the Secured Obligations and to induce the Secured Parties to cause the Additional Loans to be made, Grantor hereby assigns, conveys, mortgages, pledges, hypothecates and transfers to Lenders’ Agent for the benefit of the Secured Parties, and hereby grants to the Lenders’ Agent for the benefit of Secured Parties, a security interest in all of Grantor’s right, title and interest in, to and under the following, whether now owned or hereafter acquired, (all of which being collectively referred to herein as the “Collateral”), subject to the first-position rights of Bank under the Senior Credit Facility and the Subordination Agreement:

 

(a)     All Accounts of Grantor;

 

(b)     All Chattel Paper of Grantor;

 

(c)     All Commercial Tort Claims of Grantor;

 

(d)     All Contracts of Grantor;

 

(e)     All Deposit Accounts of Grantor;

 

(f)     All Documents of Grantor;

 

(g)     All Equipment of Grantor;

 

(h)     All Fixtures of Grantor;

 

(i)      All General Intangibles of Grantor, including, without limitation, Payment Intangibles, all Intellectual Property, Copyrights, Patents, Trademarks, Licenses, designs, drawings, technical information, marketing plans, customer lists, trade secrets, proprietary or confidential information, inventions (whether or not patentable), procedures, know-how, models and data;

 

 

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(j)      All Instruments of Grantor, including, without limitation, Promissory Notes;

 

(k)     All Inventory of Grantor;

 

(l)      All Investment Property of Grantor;

 

(m)     All Letter-of Credit Rights of Grantor;

 

(n)     All Supporting Obligations of Grantor;

 

(o)     All property of Grantor held by any Secured Party, or any other party for whom any Secured Party is acting as agent hereunder, including, without limitation, all property of every description now or hereafter in the possession or custody of or in transit to any Secured Party or such other party for any purpose, including, without limitation, safekeeping, collection or pledge, for the account of Grantor, or as to which Grantor may have any right or power;

 

(p)     All other goods and personal property of Grantor, wherever located, whether tangible or intangible, and whether now owned or hereafter acquired, existing, leased or consigned by or to Grantor; 

 

(q)     All of the Grantor’s books and records including ledgers, federal and state tax returns, records regarding the Grantor’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information 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; and

 

(r)     To the extent not otherwise included, all Proceeds of each of the foregoing and all accessions to, substitutions and replacements for and rents, profits and products of each of the foregoing.

 

3.     Pledge of Subsidiaries. In addition, and without limiting any other rights of the Secured Parties pursuant to this Security Agreement, to secure the prompt payment and satisfaction of the Notes, all obligations and liabilities of Grantor under the Purchase Agreements and all interest, reasonable costs and expenses, and reasonable attorneys’ fees which may be made or incurred by the Lender in the disbursement, administration, and collection of such amounts, following the written demand of the Lender, Grantor shall pledge, assign and grant a security interest to the Lender in all of Grantor’s right, title and interest to the equity securities of each of the subsidiaries of Grantor (and any subsidiary of Grantor acquired after the date hereof), which are set forth on Schedule A, as the same shall be amended from time to time (each a “Subsidiary” and, collectively, the “Subsidiaries”), including all attendant rights in equity, economic, voting or otherwise, together with all distributions of capital, income, cash-flow, profits and all other fees and payments of any nature whatsoever arising from said interest(s) and any interest on any of the foregoing and all fees, accounts, contract rights, claims, advances and loans payable to Grantor by any Subsidiary, and all collateral therefor, and all proceeds of the foregoing, which, collectively, shall be incorporated into the Collateral; provided, however, that Grantor may not pledge, assign or grant such right, title and interest to the equity securities of the Subsidiaries to the Lenders until after all Senior Debt has been paid in full in cash and Bank’s obligation to lend under the Senior Credit Facility has terminated. Following a written demand of the Lenders’ Agent under this Section 3, Grantor shall execute and deliver to the Lenders such instruments and documents, including certificates representing the pledged securities of the Subsidiaries, as the Lenders’ Agent may deem reasonably necessary or advisable to perfect the rights of the Lenders under this Section 3.

 

 

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4.     Representations And Warranties. Grantor hereby represents and warrants to the Secured Parties that:

 

(a)     Except for the security interest granted to the Secured Parties under this Security Agreement and Permitted Liens, Grantor is the sole legal and equitable owner of, and holds marketable title to, each item of the Collateral in which it purports to grant a security interest hereunder.

 

(b)     No effective security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or any part of the Collateral exists, except such as may have been filed by Grantor in favor of the Secured Parties pursuant to this Security Agreement and except for Permitted Liens.

 

(c)     This Security Agreement creates a legal and valid security interest on and in all of the Collateral in which Grantor now has rights; this Security Agreement and the other Loan Documents are the legal, valid and binding obligations of Grantor and are enforceable in accordance with their terms. 

 

(d)     This Security Agreement is effective to create in favor of the Secured Parties a legal, valid and enforceable security interest in all right, title and interest of the Grantor in the Collateral, and the Lender’s Agent, for the benefit of the Secured Parties, has (or within ten (10) days following the Closing Date will have) a fully perfected security interest in all right, title and interest in all of the Collateral, subject to no other Liens (other than Permitted Liens). 

 

(e)     All filings, registrations, recordings and other actions necessary or appropriate to create, preserve and perfect the security interest granted by Grantor to the Secured Parties hereby in respect of the Collateral have been accomplished, and the security interest granted to the Secured Parties pursuant to this Security Agreement in and to the Collateral creates a valid and, together with all such filings, registrations, recordings and other actions, a perfected security interest therein prior to the rights of all other Persons therein and subject to no other Liens (other than Permitted Liens), and the Secured Parties and Lender’s Agent are entitled to all the rights, priorities and benefits afforded by the UCC or other relevant law as enacted in any relevant jurisdiction to perfected security interests, in each case to the extent that the Collateral consists of the type of property in which a security interest may be perfected by possession or control (within the meaning of the UCC), by filing a financing statement under the UCC as enacted in any relevant jurisdiction.

 

(f)     Grantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is located in Delaware for purposes of the UCC; Grantor is duly qualified to do business and in good standing in each state in which it conducts its business.

 

(g)     Grantor’s chief executive office, principal place of business, and the place where Grantor maintains its records concerning the Collateral are presently located at the addresses set forth on the signature page hereof.

 

(h)     The name and address of each depository institution at which Grantor maintains any Deposit Account and the account number and account name of each such Deposit Account is listed on Schedule B attached hereto.

 

(i)     The information set forth on Schedules A and B is true and accurate. 

 

(j)     None of the execution and delivery of this Security Agreement or the other Loan Documents, the consummation of the transactions contemplated hereby and thereby or the performance of the obligations of Grantor hereunder or thereunder will result in, no constitute a breach of, applicable law, the organizational documents of Grantor or any Subsidiary, the provisions of any judgment or order of any governmental body or authority or any agreement to which Grantor or any Subsidiary is a party. 

 

 

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(k)     All action on the part of Grantor and its directors and officers necessary for the authorization, execution, delivery and performance of this Security Agreement (and all other Loan Documents) has been taken; Grantor has full right, power and authority to enter into and perform its obligations under each of the Loan Documents.

 

(l)      The representations and warranties of Grantor contained in this Security Agreement will survive the execution and delivery of this Security Agreement and the other Loan Documents and the making of the Loans until the Secured Obligations are indefeasibly repaid in full and all other obligations of the Grantor hereunder and under the other Loan Documents have terminated.

 

5.     Covenants. Grantor covenants and agrees with the Secured Parties that from and after the date of this Security Agreement and until the Secured Obligations have been performed and paid in full:

 

5.1     Limitation on Liens on Collateral. Grantor shall not, directly or indirectly, create, permit or suffer to exist, and shall defend the Collateral against and take such other action as is necessary to remove, any Lien on the Collateral, except (a) Permitted Liens and (b) the Lien granted to the Secured Parties under this Security Agreement. Further, Grantor shall not sell, assign, pledge, dispose of or transfer in any manner any interest in the Collateral to any party other than the Secured Parties and Bank and other than (i) in the ordinary course of business, (ii) non-exclusive licenses and similar arrangements for the use of the property of such Grantor in the ordinary course of business, other licenses that would not result in a legal transfer of title of the licensed property but that may be exclusive, or licenses or transfers under such Grantor’s source code escrow arrangements, (iii) sales or disposal of surplus, worn-out or obsolete equipment and (iv) transfers of other assets of any Grantor that do not in the aggregate exceed Two Hundred and Fifty Thousand Dollars ($250,000) in the aggregate for all Grantors during any fiscal year of Grantors.

 

5.2     Taxes and Assessments. Grantor shall pay when due all taxes, assessments and other charges lawfully levied or assessed upon the Collateral, and if such taxes or other assessments remain unpaid after the date fixed for the payment of the same, except to the extent and so long as (i) the same are being contested in good faith and by appropriate proceedings in a manner that will not cause any material adverse effect upon the Collateral, or the loss of any right of redemption from any sale thereunder and (ii) Grantor shall have set aside on its books adequate reserves with respect thereto; provided, however, if any lien, other than a Permitted Lien, shall be claimed which might possibly create a valid obligation having priority over the rights granted to the Secured Parties herein, the Secured Parties shall have the right, but not the obligation, with one day’s prior written notice to Grantor, pay such taxes, assessments, charges or claims, and the amount thereof shall be added to the obligations under the Note

 

5.3     Further Assurances. At any time and from time to time, upon the written request of the Lenders’ Agent, and at the sole expense of Grantor, Grantor shall promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the Lenders’ Agent may reasonably deem necessary or desirable for the Lenders collectively to obtain the full benefits of this Security Agreement, including, without limitation, executing, delivering and causing to be filed any financing or continuation statements (including “in lieu” continuation statements) under the UCC with respect to the security interests granted hereby and obtaining deposit account control agreements in form satisfactory to the Lenders’ Agent with respect to the Deposit Accounts listed on Schedule B. Grantor also hereby authorizes Lenders’ Agent to file any such financing or continuation statement (including “in lieu” continuation statements) without the signature of Grantor. Grantor approves, authorizes and ratifies any filings or recordings made by or on behalf of the Lenders in connection with the perfection of the security interest in favor of the Secured Parties, whether the same is by Lenders’ Agent or by any individual Lender. Grantor shall pay all filing, registration and recording fees or re-filing, re-registration and re-recording fees, and all reasonable expenses incident to the execution of and acknowledgement of this Security Agreement and all federal, state, county and municipal stamp taxes and other taxes, duties, imports, assessments and charges arising out of or in connection with the execution and delivery of this Security Agreement and any agreement supplemental hereto and any instruments of further assurance. Grantor shall, promptly upon request, provide to the Lenders’ Agent all information and evidence he may reasonably request concerning the Collateral to enable the Lenders to administer or enforce the provisions of this Security Agreement.

 

 

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5.4     Power of Attorney. Grantor hereby irrevocably appoints the Lender’s Agent as its attorney-in-fact, with full power and authority in its place and stead and in its name or in the Secured Parties’ name to do any or all of the following after the occurrence and during the continuance of a Grantor default under any Loan Document: (a) endorse its name on any checks, notes, acceptances, money orders, drafts or other forms of payment or security that may come into the Secured Parties’ possession; (b) receive, endorse and collect all checks and other orders for the payment of money made payable to Grantor representing any dividend or distribution payable in respect of the Collateral; (c) collect any Collateral; and (d) take all actions and do all things necessary to carry out the terms of this Security Agreement, and all related documents. The powers conferred on the Lender’s Agent hereunder are solely to protect the Secured Parties’ interests in the Collateral and shall not impose any duty upon it to exercise such powers. Neither the Secured Parties nor Lender’s Agent will be liable for any acts or omissions or for any error of judgment or mistake of fact or law relating to the foregoing actions. This power of attorney is coupled with any interest and is irrevocable by Grantor. Notwithstanding the foregoing, this power of attorney may not be exercised until all Senior Debt (as defined in the Subordination Agreement) has been paid in full in cash, and Bank has released its lien on the Collateral.

 

5.5     Consents. Grantor will promptly upon the written request by Lender’s Agent, and in any event within thirty (30) days after such written request, use its commercially reasonable efforts to obtain a waiver or consent, in a form reasonably satisfactory to Lender’s Agent, from (i) each landlord from whom Grantor now or hereafter may lease real property where any existing or future Collateral is located and (ii) any bailee in possession of Collateral, in each case if such Collateral has an aggregate fair market value of not less than Twenty-Five Thousand Dollars ($25,000.00), indicating that such bailee or landlord holds such Collateral for the benefit of the Secured Parties and shall act upon the instructions of the Lender’s Agent, without the further consent of such Grantor.

 

5.6     Insurance. Grantor will at all times maintain insurance, at Grantor’s own expense, to the extent required in the Purchase Agreements, if specified, and, in any case, consistent with its prior practices and industry standards. Except to the extent otherwise permitted to be retained by Grantor or applied by Grantor pursuant to the terms of the Loan Documents, Lender’s Agent shall, at the time any proceeds of such insurance are distributed to the Secured Parties, apply such proceeds in accordance with Section 7 hereof. Grantor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of Grantor to pay the Secured Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to Grantor.

 

5.7     Existence. Grantor will maintain its existence and good standing in the State of Delaware and its qualification and good standing as a foreign corporation in each jurisdiction in which such qualification is required by applicable law. Grantor will not change its legal name or the location of its principal business office without the prior written consent of Lender’s Agent. 

 

 

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6.     Events of Default. The following shall constitute Events of Default under this Security Agreement:

 

(a)     The failure of any representation or warranty made by Grantor to be true and correct; and

 

(b)     The occurrence of any Event of Default under the Purchase Agreements or the Note evidencing any Lender’s Loan.

 

7.     Rights and Remedies upon Default. Beginning on the date on which any Event of Default shall have occurred and while such Event of Default is continuing, and subject to the rights of Bank under the Senior Credit Facility and the Subordination Agreement:

 

(a)     At the sole and absolute discretion of the Lenders’ Agent and for the benefit of the Secured Parties, the Lenders’ Agent may exercise in addition to all other rights and remedies granted to it under this Security Agreement all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing, Grantor expressly agrees that in any such event the Lenders’ Agent, without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Grantor or any other person, may (i) reclaim, take possession, recover, store, maintain, finish, repair, prepare for sale or lease, shop, advertise for sale or lease and sell or lease (in the manner provided herein) the Collateral, and in connection with the liquidation of the Collateral and collection of the accounts receivable pledged as Collateral, use any Trademark, Copyright, or process used or owned by Grantor and (ii) forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and may forthwith sell, lease, assign, give an option or options to purchase or sell or otherwise dispose of and deliver said Collateral (or contract to do so), or any part thereof, in one or more parcels at public or private sale or sales, at any exchange or broker’s board or at any Secured Party’s offices or elsewhere at such prices as it may deem commercially reasonable, for cash or on credit or for future delivery without assumption of any credit risk. Grantor further agrees, at the Lenders’ Agent’s request, to assemble its Collateral and make it available to the Lenders’ Agent for the benefit of the Secured Parties at places which the Lenders’ Agent shall reasonably select, whether at Grantor’s premises or elsewhere. The Secured Parties shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale as provided in Section 6(d), below, with Grantor remaining liable for any deficiency remaining unpaid after such application. Grantor agrees that the Secured Parties need not give more than ten (10) days’ notice of the time and place of any public sale or of the time after which a private sale may take place and that such notice is reasonable notification of such matters.

 

(b)     Grantor also agrees to pay all fees, costs and expenses of the Secured Parties, including, without limitation, reasonable attorneys’ fees, incurred in connection with the enforcement of any of its rights and remedies hereunder.

 

(c)     Grantor hereby waives presentment, demand, protest or any notice (to the maximum extent permitted by applicable law or under the Senior Credit Facility) of any kind in connection with this Security Agreement or any Collateral.

 

(d)     The Proceeds of any sale, disposition or other realization upon all or any part of the Collateral shall be received by the Lenders’ Agent and distributed by Lenders’ Agent to the Secured Parties to be applied to the Secured Obligations in the following order of priorities:

 

 

10

 

 

First, to the reasonable costs, fees and expenses incurred by Lenders’ Agent but not yet paid in connection with the sale, disposition or other realization on the Collateral, including all fees, costs, expenses, liabilities in connection therewith, including reasonable attorneys’ fees; 

 

Second the extent that any Secured Party has advanced to the Lenders’ Agent any amount in connection with the sale, disposition or other realization on the Collateral, then to each Secured Party in an amount sufficient to pay in full the reasonable costs of such Secured Party actually advanced by such Secured Party in connection with such sale, disposition or other realization, including all fees, costs, expenses, liabilities and advances incurred or made by any Secured Party in connection therewith, including, without limitation, reasonable attorneys’ fees;

 

Third, to the Secured Parties in amounts proportional to the Pro Rata share of the then unpaid Secured Obligations of each Secured Party; 

 

Fourth, upon payment in full of the Secured Obligations, to the holder of any subordinate security interest, judgment lien or other similar encumbrance affecting the Collateral, in accordance with the UCC, otherwise applicable law or as a court of competent jurisdiction may direct; and

 

Finally, thereafter to Grantor or its representatives, in accordance with the UCC or as a court of competent jurisdiction may direct.

 

(e)     The costs of enforcing or pursuing any right or remedy hereunder, including without limitation any repossession, sale, possession and management (including, without limitation, reasonable attorneys’ fees), and distribution shall be borne Pro Rata by the Secured Parties to the extent that such costs, fees and expenses are not paid by Grantor and without prejudice to the right of Lenders’ Agent to recover the same from Grantor as provided in this Security Agreement, the Purchase Agreements and the Notes. Each Secured Party shall pay to the Lenders’ Agent promptly upon demand therefor, its Pro Rata share of all such costs.

 

8.     Miscellaneous.

 

8.1     Waivers; Amendments. None of the terms or provisions of this Security Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by Grantor and the Lenders’ Agent; provided, however that Schedule A shall be deemed automatically amended to add the name of any Subsidiary acquired by Grantor after the date hereof without any executed writing required.

 

8.2     Termination of this Security Agreement. This Security Agreement shall automatically terminate upon the earlier of the conversion or payment and performance in full of the Secured Obligations.

 

8.3     Successor and Assigns. This Security Agreement and all obligations of Grantor hereunder shall be binding upon the successors and assigns of Grantor, and shall, together with the rights and remedies of the Secured Parties hereunder, inure to the benefit of the Secured Parties and their respective successors and assigns. Grantor shall not be permitted to sell, assign, transfer or otherwise convey its rights or obligations hereunder. 

 

 

11

 

 

8.4     Counterparts; Facsimile. This Security Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. This Security Agreement and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of electronic mail or a facsimile machine, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party hereto or to any such agreement or instrument shall raise the use of electronic mail or a facsimile machine to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of electronic mail or a facsimile machine as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.

 

8.5     Governing Law. In all respects, including all matters of construction, validity and performance, this Security Agreement and the Secured Obligations arising hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of New York applicable to contracts made and performed in such state, without regard to the conflict of laws provisions of the State of New York or of any other state.

 

8.6     Entire Agreement. This Security Agreement (including its exhibits and together with the other Loan Documents) constitutes the full and entire understanding and agreement among the parties with regard to the subjects hereof (and thereof) and supersedes any prior written or oral agreement, including, without limitation, the Prior Agreement. 

 

8.7     Severability. Should any provision of this Security Agreement be held by any court of competent jurisdiction to be void or unenforceable, such defect shall not affect the remainder of this Security Agreement, which shall continue in full force and effect.’

 

8.8     Subordination Agreement. This Security Agreement and the Loan Documents (other than the Subordination Agreement) are subject to the Subordination Agreement. In the event of any conflict between the terms and condition of this Security Agreement or any Loan Document (other than the Subordination Agreement), on the one hand, and the Subordination Agreement, on the other hand, the terms and conditions of the Subordination Agreement shall govern and control.

 

[Signature pages follow]

 

 

12

 

 

In Witness Whereof, each of the parties hereto has caused this Security Agreement to be executed and delivered by its duly authorized officer on the date first set forth above.

 

 

	
ADDRESS OF GRANTOR
	
 
	
DETERMINE, INC.
	
 

	 	 	 	 	 	 
	 	 	 	 	 	 
	615 West Carmel Drive, Suite 100	 	By:	/s/ John K. Nolan	 
	Carmel, IN 46032	 	Name:	John K. Nolan	 
	 	 	 	Title:	Chief Financial Officer	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	ACCEPTED AND ACKNOWLEDGED BY:	 	 	 	 
	 	 	 	 	 	 
	SECURED PARTIES	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	LLOYD I. MILLER, III, AS LENDERS’ AGENT AND 	 	ALIMCO FINANCIAL CORPORATION,	 
	AS A SECURED PARTY	 	formerly known as Alliance Semiconductor Corporation	 
	 	 	 	 	 	 
	/s/ Lloyd I. Miller, III	 	 	 	 
	Signature	 	 	 	 
	 	 	 	By:	/s/ Alan B. Howe	 
	 	 	 	Name:	Alan B. Howe	 
	MILFAM II L.P., a Georgia limited partnership	 	Title:	Interim Chief Executive Officer	 
	 	 	 	 	 	 
	By:	MILFAM LLC	 	 	 	 
	Its:	General Partner	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	/s/ Lloyd I. Miller, III	 	 	 	 
	Name:	Lloyd I. Miller, III	 	 	 	 
	Title:	Manager	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	LLOYD I. MILLER TRUST A-4	 	 	 	 
	 	 	 	 	 	 
	By:	MILFAM LLC	 	 	 	 
	Its:	Investment Advisor	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	/s/ Lloyd I. Miller, III	 	 	 	 
	Name:	Lloyd I. Miller, III	 	 	 	 
	Title:	Manager	 	 	 	 

 

 

 

 

 

Schedule A

 

Subsidiaries

 

	 	
■
	
Determine GmbH

 

	 	
■
	
Determine Sourcing Inc.

 

	 	
■
	
Determine Limited

 

	 	
■
	
Determine SAS

 

	 	
■
	
b-pack Services SA

 

 

 

 

Schedule B

 

List of Deposit Accountsex10-5.htm

Exhibit 10.5

 

SECOND AMENDED AND RESTATED SUBORDINATION AGREEMENT

 

This SECOND AMENDED AND RESTATED SUBORDINATION AGREEMENT, dated as of December 27, 2016 (this “Agreement”), is between each of the undersigned creditors (each, a “Creditor” and, collectively, “Creditors”), and WESTERN ALLIANCE BANK, an Arizona corporation, as successor in interest to Bridge Bank, National Association (“Lender”), with reference to the following facts:

 

R E C I T A L S

 

A.     DETERMINE, INC., a Delaware corporation formerly known as Selectica, Inc. (“Borrower”) has requested and/or obtained certain credit accommodations from Lender (as defined in the Business Financing Agreement) which are or may be from time to time secured by assets and property of Borrower. As used herein, “Business Financing Agreement” means that certain Amended and Restated Business Financing Agreement, dated as of July 25, 2014, among Borrower, Selectica Sourcing Inc., a Delaware corporation, and Lender, as amended to date and as may be further amended or restated from time to time. All initially capitalized terms used but not defined herein have the meanings given to such terms in the Business Financing Agreement.

 

B.     Each Creditor has extended loans or other credit accommodations to Borrower, and/or may extend loans or other credit accommodations to Borrower from time to time, or Borrower may otherwise be indebted or liable to a Creditor.

 

C.     The Creditors are party to that certain Amended and Restated Subordination Agreement, dated as of December 16, 2015 (the “Prior Agreement”), with Lender, and in connection with additional financial accommodations made by the Creditors to Borrower, the parties hereto desire to amend and restate the Prior Agreement as set forth herein.

 

D.     Creditors and Borrower are entering into that certain Junior Secured Convertible Note Purchase Agreement, dated as of essentially even date herewith, pursuant to which Borrower will issue to (i) Alimco Financial Corporation (formerly known as Alliance Semiconductor Corporation) that certain Junior Secured Convertible Promissory Note in the principal amount of $1,000,000, and (ii) MILFAM II L.P. that certain Junior Secured Convertible Promissory Note in the principal amount of $1,000,000 (collectively, the “Additional Subordinated Debt”).

 

E.     In order to induce Lender to consent to the issuance of the Additional Subordinated Debt, Creditors have agreed to enter into this Second Amended and Restated Subordination Agreement. 

 

F.     In order to induce Lender to continue to extend credit to Borrower and, at any time or from time to time, at Lender’s option, to make such further loans, extensions of credit, or other accommodations to or for the account of Borrower, or to extend credit upon any instrument or writing in respect of which Borrower may be liable in any capacity, or to grant such renewals or extension of any such loan, extension of credit, or other accommodation as Lender may deem advisable, each Creditor is willing to subordinate: (i) all of each Borrower’s indebtedness and obligations to such Creditor, whether presently existing or arising in the future (the “Subordinated Debt”) to all of Borrower’s indebtedness and obligations to Lender now existing or hereafter arising under or in connection with the Business Financing Agreement, the other Loan Documents, including, without limitation, all Advances, Finance Charges, fees, interest, expenses, bank product obligations, Letter of Credit obligations, and swap obligations, together with all costs of collecting such obligations, including reasonable attorneys’ fees (the “Senior Debt”), including, without limitation, all interest, fees and other charges accruing on the Senior Debt after the commencement by or against Borrower of any Insolvency Proceeding, regardless of whether allowed in such Insolvency Proceeding; and (ii) all of each Creditor’s Liens pursuant to the Subordinated Debt, if any, in the Collateral (as defined below) to all of Lender’s Liens in the Collateral pursuant to the Senior Debt. For purposes of this Agreement, “Collateral” shall mean all the assets of Borrower, including the accounts, including health care receivables, chattel paper, general intangibles, inventory, equipment, instruments, including promissory notes, deposit accounts, investment property, documents, letter of credit rights, and any commercial tort claim of Borrower.

 

 

1

 

 

NOW, THEREFORE, THE PARTIES HEREBY AMEND AND RESTATE THE PRIOR AGREEMENT AND AGREE AS FOLLOWS:

 

1.     Each Creditor subordinates any Lien that such Creditor may have in the Collateral to Lender’s Lien in the Collateral. Notwithstanding the respective dates of attachment or perfection of the Lien of each Creditor and the Lien of Lender, the Lien of Lender in the Collateral shall at all times be prior to any Lien of Creditor in the Collateral.

 

2.     All Subordinated Debt is subordinated in right of payment to all Senior Debt of Borrower to Lender.

 

3.     No Creditor will demand or receive from Borrower (and Borrower will not pay to any Creditor) all or any part of the Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or otherwise, nor will any Creditor exercise any remedy with respect to the Collateral, nor will any Creditor accelerate the Subordinated Debt, or commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against Borrower, until such time as all the Senior Debt is fully paid in cash. Nothing in the foregoing paragraph shall prohibit any Creditor from converting all or any part of the Subordinated Debt into equity securities of Borrower or from refinancing the Subordinated Debt solely with the proceeds of additional Subordinated Debt. Notwithstanding the foregoing, Borrower may make, and each Creditor may receive, cash payments (but no prepayments) of interest or principal when due on any outstanding Subordinated Debt if, and only if, Borrower has first demonstrated in writing to Lender’s reasonable satisfaction, that both immediately before and immediately after giving effect to such proposed payment on a pro forma basis, no Default or Event of Default has occurred and is continuing, or will result therefrom.

 

4.     Each Creditor shall promptly deliver to Lender in the form received (except for endorsement or assignment by such Creditor where required by Lender) for application to the Senior Debt any payment, distribution, security or proceeds received by such Creditor with respect to the Subordinated Debt other than in accordance with this Agreement.

 

5.     In the event of Borrower’s insolvency, reorganization or any case or proceeding under any bankruptcy or insolvency law or laws relating to the relief of debtors, these provisions shall remain in full force and effect, and Lender’s claims against Borrower and the estate of Borrower shall be paid in full before any payment is made to Creditor.

 

6.     Until the Senior Debt is fully paid in cash, each Creditor irrevocably appoints Lender as such Creditor’s attorney-in-fact, and grants to Lender a power of attorney with full power of substitution, in the name of such Creditor or in the name of Lender, for the use and benefit of Lender, with notice to such Creditor, to perform at Lender’s option the following acts in any bankruptcy, insolvency or similar proceeding involving Borrower: (i) to file the appropriate claim or claims in respect of the Subordinated Debt on behalf of such Creditor if such Creditor does not do so prior to 30 days before the expiration of the time to file claims in such proceeding and if Lender elects, in its sole discretion, to file such claim or claims; and (ii) to accept or reject any plan of reorganization or arrangement on behalf of such Creditor and to otherwise vote such Creditor’s claims in respect of any Subordinated Debt in any manner that Lender deems appropriate for the enforcement of its rights hereunder; provided that Lender shall not be entitled to release, forgive or reduce any amount owing on the Subordinated Debt and that each Creditor may receive and retain Reorganization Subordinated Securities. As used herein, “Reorganization Subordinated Securities” means (a) any equity securities issued in substitution of all or any portion of the Subordinated Debt that are subordinated in right of payment to the Senior Debt (or any notes or other securities issued in substitution of all or any portion of the Senior Debt), and (b) any notes or other debt securities issued in substitution of all or any portion of the Subordinated Debt that are subordinated to the Senior Debt (or any notes or other securities issued in substitution of all or any portion of the Senior Debt) to the same extent that the Subordinated Debt is subordinated to the Senior Debt pursuant to the terms of this Agreement, which equity or debt securities have been provided for by a plan of reorganization that has been approved by final order of a court. All Reorganization Subordinated Securities shall be on terms reasonably satisfactory to Lender, and shall constitute Subordinated Debt that is subject to the terms of this Agreement.

 

 

2

 

 

7.     Creditors shall have the option to purchase all Senior Debt in accordance with the terms and conditions set forth in this Section 7.

 

(a)     Upon the occurrence and during the continuation of a Triggering Event (as herein after defined), Creditors shall have the right, but not the obligation, upon 5 Business Days' advance written notice (a "Purchase Notice") to Lender, to acquire from Lender all (but not less than all) of the right, title, and interest of Lender in and to the Senior Debt and the Loan Documents; provided that Lender remains obligated to sell the Senior Debt to Creditors pursuant to the terms and conditions of this Section 7. As used herein, “Triggering Event” means (i) an Event of Default under Section 7.1(d) or 7.1(e) of the Business Financing Agreement, (ii) the acceleration of the Senior Debt, or (iii) the exercise due to any Event of Default of any remedies by Lender under Section 7.2 of the Financing Agreement or under any other Loan Document, including any action to foreclose on any of the Collateral (“Enforcement Action”). Lender shall give Creditors prompt notice of the occurrence of any Triggering Event described in clause (ii) or (iii) of the definition thereof set forth in the prior sentence and the amount of the Senior Debt as of the date of such Triggering Event (the "Trigger Notice").

 

(b)     Any Creditor(s) desiring to purchase all of the Senior Debt shall deliver a Purchase Notice that:

 

(i)     is signed by such Creditor(s),

 

(ii)    states that it is a Purchase Notice under this Section 7,

 

(iii)   states that such Creditor(s), acting together, are irrevocably electing to purchase all of the Senior Debt in accordance with this Section 7,

 

(iv)   designates a date (“Purchase Date”) on which the purchase will occur, that is (x) at least five but not more than fifteen Business Days after Lender's receipt of the Purchase Notice, and (y) not more than 90 days after the Triggering Event.

 

A Purchase Notice will be ineffective if it is received by Lender after the occurrence giving rise to the Triggering Event is waived, cured, or otherwise ceases to exist; provided that if a Triggering Event is waived, cured, or otherwise ceases to exist and thereafter a subsequent Triggering Event shall occur, then the procedures set forth in this Section 7 shall apply de novo.

 

(c)     After its receipt of a Purchase Notice, Lender shall forbear from exercising any Enforcement Action (except to the extent reasonably necessary to protect Lender against any loss or damage that may be occasioned by Exigent Circumstances) during the period from the date of Lender’s receipt of such Purchase Notice until the first to occur of (i) payment of the purchase price for the Senior Debt pursuant to Section 7(e)(i) below and (ii) the Purchase Date. As used herein, the term "Exigent Circumstances" shall mean the occurrence or existence of any one or more of the following events or conditions:

 

(i)     an Insolvency Proceeding is commenced by or against Borrower (other than by Lender),

 

(ii)    a fraud, concealment of assets, or material misrepresentation has been made or committed by Borrower,

 

 

3

 

 

(iii)   Borrower withholds from Lender any collections of Receivables or other proceeds of Collateral in violation of any Loan Document,

 

(iv)   a Person (other than Lender) holding a Lien upon any of the Collateral shall commence any action, suit, proceeding or self-help remedy to enforce such Lien, or

 

(v)    any other event or circumstance occurs or exists that, in the reasonable judgment of Lender, materially and imminently threatens Lender's ability promptly to realize upon all or any material part of the Collateral, such as, without limitation, fraudulent removal, concealment or abscondment thereof, destruction (to the extent not covered by insurance) or material waste of any of the Collateral.

 

(d)     Lender shall advise the purchasing Creditor(s) of the full amount of all the Senior Debt (other than indemnification obligations for which no claim or demand for payment has been made at such time, and other than Senior Debt cash collateralized in accordance with Section 7(e)(ii) below) then outstanding and unpaid on the Business Day immediately preceding the Purchase Date, including interest calculated in accordance with Section 7(f) below (the "Purchase Price"). 

 

(e)     On the Purchase Date, Lender shall (subject to the terms and conditions set forth in this Section 7) sell the Senior Debt and the Loan Documents to the purchasing Creditor(s), and such Creditor(s) shall: 

 

(i)     pay to Lender for the ratable account of Lender, as the purchase price therefor, the Purchase Price in immediately available funds, 

 

(ii)    furnish cash collateral to Lender for the ratable benefit of Issuer and Lender in such amounts as Lender determines is reasonably necessary to secure Lender, Issuer and Lender in respect of (A) any issued and outstanding Letters of Credit (but not in any event in an amount not greater than 105% of the aggregate undrawn amount of such Letters of Credit) (such cash collateral shall be applied to the reimbursement of any drawing under a Letter of Credit as and when such drawing is paid and, if a Letter of Credit expires undrawn, the cash collateral held by Lender in respect of such Letter of Credit shall be remitted to the purchasing Creditor(s)), (B) Bank Product Obligations (including contingent obligations) existing on the date of purchase and included in Senior Debt (such cash collateral shall be applied to the reimbursement of the Bank Product Obligations as and when such obligations become due and payable and, at such time as all of the Bank Product Obligations are paid in full, the remaining cash collateral held by Lender in respect of Bank Product Obligations shall be remitted to such Creditor(s)), and (C) the Retained Interest (as defined below) to the extent that Lender has knowledge that any third party claims, demands, actions, suits, proceedings, investigations, liabilities, fines, costs, penalties, or damages that are the subject of the indemnification provisions of the Business Financing Agreement have then been asserted or threatened, and 

 

(iii)   to the extent incurred up to the Purchase Date, reimburse Lender for all expenses to the extent earned or due and payable in accordance with the Loan Documents (including the reimbursement of reasonable attorneys' fees, financial examination expenses, and appraisal fees) up to the Purchase Date, provided that it is agreed that (A) Lender shall reimburse such Creditor(s) to the extent any such expenses are ultimately paid to Lender by Borrower and (B) Borrower shall be liable to such Creditor(s) for such expenses paid by such Creditor(s) to Lender.

 

(f)     The Purchase Price and cash collateral shall be remitted by wire transfer of federal funds to such bank account of Lender as Lender may designate in writing to the purchasing Creditor(s) for such purpose. Interest shall be calculated to but excluding the Business Day on which such purchase and sale shall occur if the amounts so paid by the purchasing Creditor(s) to the bank account designated by Lender are received in such bank account prior to 2:00 p.m., Pacific time, and interest shall be calculated to and including such Business Day if the amounts so paid by such Creditor(s) to the bank account designated by Lender are received in such bank account later than 2:00 p.m., Pacific time.

 

 

4

 

 

(g)     Such purchase shall be effected by the execution and delivery of a customary form of assignment and acceptance agreement reasonably acceptable to the purchasing Creditor(s) and Lender and shall be expressly made without representation or warranty of any kind by Lender as to the Senior Debt so purchased, or otherwise, and without recourse to Lender, except that Lender shall represent and warrant: (i) that the amount quoted by Lender as the Purchase Price represents the amount shown as owing with respect to the Senior Debt as reflected on its books and records, (ii) it owns, or has the right to transfer to the purchasing Creditor(s), the rights being transferred, and (iii) such transfer will be free and clear of Liens.

 

(h)     [Reserved].

 

(i)     In the event that the purchasing Creditor(s) exercise and consummate the purchase option set forth in this Section 7, this Agreement shall terminate (except for this Section 7(i)), but Lender shall retain its indemnification rights under the Loan Documents for actions or other matters arising on or prior to the date of such purchase, including any asserted or threatened third party claims, demands, actions, suits, proceedings, investigations, liabilities, fines, costs, penalties, or damages that are the subject of the indemnification provisions of the Business Financing Agreement (the "Retained Interest").

 

8.     Except as otherwise provided in Section 9(b) below, each Creditor shall immediately affix a legend to the instruments evidencing the Subordinated Debt stating that the instruments are subject to the terms of this Agreement. No amendment of the documents evidencing or relating to the Subordinated Debt shall directly or indirectly modify the provisions of this Agreement in any manner which might terminate or impair the subordination of the Subordinated Debt or the subordination of the Lien that such Creditor may have in the Collateral as described in Section 1. By way of example, such instruments shall not be amended to (i) increase the rate of interest with respect to the Subordinated Debt, or (ii) accelerate the payment of the principal or interest or any other portion of the Subordinated Debt, other than in an event of default thereunder.

 

9.     Borrower shall deliver to Lender true and correct copies of all instruments evidencing such Subordinated Debt bearing the conspicuous legend required by Section 8 above.

 

10.     This Agreement shall remain effective for so long as Borrower owes any amounts to Lender. If, at any time after payment in full of the Senior Debt, any payments of the Senior Debt must be disgorged by Lender for any reason (including, without limitation, the bankruptcy of Borrower), this Agreement and the relative rights and priorities set forth herein shall be reinstated as to all such disgorged payments as though such payments had not been made and each Creditor shall immediately pay over to Lender for the account of itself all payments received with respect to the Subordinated Debt to the extent that such payments would have been prohibited hereunder. At any time and from time to time, without notice to Creditors, Lender may take such actions with respect to the Senior Debt as Lender, in its sole discretion, may deem appropriate, including, without limitation, terminating advances to Borrower, extending the time of payment, increasing applicable interest rates, renewing, compromising or otherwise amending the terms of any documents affecting the Senior Debt and any collateral securing the Senior Debt, and enforcing or failing to enforce any rights against Borrower or any other person; provided that Lender shall not increase the principal amount of the Senior Debt beyond $13,500,000, and any increase in principal beyond such amount shall not be subject to this Agreement. Subject to the foregoing proviso, no such action or inaction shall impair or otherwise affect Lender’s rights hereunder. Each Creditor waives the benefits, if any, of California Civil Code Sections 2809, 2810, 2819, 2845, 2847, 2848, 2849, 2850, 2899 and 3433.

 

11.     This Agreement shall bind any successors or assignees of each Creditor and shall benefit any successors or permitted assigns of Lender. This Agreement is solely for the benefit of Creditors, Lender, and not for the benefit of Borrower or any other party. Each Creditor further agrees that if Borrower is in the process of refinancing a portion of the Senior Debt with a new lender, and if the new lender makes a request of such Creditor, such Creditor shall enter into a new subordination agreement with the new lender on substantially the terms and conditions of this Agreement.

 

 

5

 

 

12.     All notices shall be given to Lender and Creditors at the addresses or faxes set forth in this Section 12 and shall be deemed to have been delivered and received: (a) one (1) calendar day after deposit with an overnight mail or messenger service; or (b) on the same date of confirmed transmission if sent by hand delivery, telecopy, telefax or telex.

 

	
If to Creditors:
	
c/o Lloyd I. Miller, III

	 	3300 South Dixie Highway, Suite 1-365
	 	West Palm Beach, Florida 33405
	 	Phone: (561) 287-5399
	 	E-Fax: (619) 923-2908
	 	eric@limadvisory.com
	 	 
	 	Alimco Financial Corporation f/k/a Alliance Semiconductor Corporation
	 	10755 Scripps Poway Pkwy, #302
	 	San Diego, CA 92131
	 	Attention: Alan B. Howe, Interim CEO
	 	Tel: (858) 829-6713
	 	info@alsc.com
	 	 
	 	 
	
If to Lender: 
	
Western Alliance Bank

	 	55 Almaden Blvd.
	 	San Jose, CA 95113
	 	Fax: (408) 423-8510
	 	Tel: (408) 556-6502
	 	Email: docprep@bridgebank.com

 

 

13.     This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

14.     This Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect to conflicts of law principles. Each Creditor and Lender submit to the exclusive jurisdiction of the state and federal courts located in Santa Clara County, California. EACH CREDITOR AND LENDER WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.

 

15.     REFERENCE PROVISION.

 

(a)     In the event the Jury Trial waiver is not enforceable, the parties elect to proceed under this Judicial Reference Provision.

 

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

 

 

6

 

 

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

 

(d)     The referee shall be a retired judge or justice selected by mutual written agreement of the parties. If the parties do not agree within ten (10) days of a written request to do so by any party, then, upon request of any party, the referee shall be selected by the Presiding Judge of the Court (or his or her representative). A request for appointment of a referee may be heard on an ex parte or expedited basis, and the parties agree that irreparable harm would result if ex parte relief is not granted. Pursuant to CCP § 170.6, each party shall have one peremptory challenge to the referee selected by the Presiding Judge of the Court (or his or her representative).

 

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

 

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

 

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

 

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

 

 

7

 

 

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

 

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

 

16.     This Agreement represents the entire agreement with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and commitments. Creditors are not relying on any representations by Lender or Borrower in entering into this Agreement, and each Creditor has kept and will continue to keep itself fully apprised of the financial and other condition of Borrower; provided, however, that, as of the date hereof, to the knowledge of each of Lender and Borrower, no default, event of default or Triggering Event exists with respect to the Senior Debt. This Agreement may be amended only by written instrument signed by the party asserted to be bound thereby.

 

17.     In the event of any legal action to enforce the rights of a party under this Agreement, the party prevailing in such action shall be entitled, in addition to such other relief as may be granted, all reasonable costs and expenses, including reasonable attorneys’ fees, incurred in such action.

 

18.     Lender and Creditors hereby agree that, effective upon the execution and delivery of this Agreement by each such party, the terms and provisions of the Prior Agreement shall be and hereby are amended, restated and superseded in their entirety by the terms and provisions of this Agreement. Nothing herein contained shall be construed as a substitution or novation of the obligations of Creditors outstanding under the Prior Agreement, which obligations shall remain in full force and effect, except to the extent that the terms thereof are modified hereby or by instruments executed concurrently herewith. Nothing expressed or implied in this Agreement shall be construed as a release or other discharge of Creditors from any of their obligations or liabilities under the Prior Agreement.

 

[signature pages to follow]

 

 

8

 

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

 

	
LENDER:
	  
	 	 	 
	WESTERN ALLIANCE BANK,	 
	an Arizona corporation	 
	 	 	 
	 	 	 
	By:	/s/ Josh Converse	 
	Name:	Josh Converse	 
	Title:	SVP	 

 

 

 

SECOND AMENDED AND RESTATED SUBORDINATION AGREEMENT

 

 

 

 

	
CREDITORS:
	  
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	/s/ Lloyd I. Miller, III	 
	LLOYD I. MILLER, III	 
	 	 	 
	 	 	 
	 	 	 
	MILFAM II L.P.	 
	 	 	 
	By:	MILFAM LLC	 
	Its:	General Partner	 
	 	 	 
	 	 	 
	 	 	 
	By:	/s/ Lloyd I. Miller, III	 
	Name:	Lloyd I. Miller, III	 
	Title:	Manager	 
	 	 	 
	 	 	 
	 	 	 
	LLOYD I. MILLER TRUST A-4	 
	 	 	 
	By:	MILFAM LLC	 
	Its:	Investment Advisor	 
	 	 	 
	 	 	 
	 	 	 
	By:	/s/ Lloyd I. Miller, III	 
	Name:	Lloyd I. Miller, III	 
	Title:	Manager	 
	 	 	 
	 	 	 
	ALIMCO FINANCIAL CORPORATION, f/k/a	 
	ALLIANCE SEMICONDUCTOR CORPORATION,	 
	a Delaware corporation	 
	 	 	 
	 	 	 
	By:	/s/ Eric W. Fangmann	 
	Name:	Eric W. Fangmann	 
	Title:	Chief Administrative Officer	 
	 	Vice President, Secretary	 

 

 

 

SECOND AMENDED AND RESTATED SUBORDINATION AGREEMENT

 

 

 

 

The undersigned approve the terms of this Agreement.

 

LOAN PARTIES:

 

DETERMINE, INC.,

a Delaware corporation

 

 

	By:	/s/ John K. Nolan	 
	Name:	John K. Nolan	 
	Title:	
Chief Financial Officer
	  

 

 

 

SECOND AMENDED AND RESTATED SUBORDINATION AGREEMENT

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