Document:

Exhibit 10.22

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of May 21, 2012 (the “Effective Date”) between SILICON VALLEY BANK, a California corporation (“Bank”), and MARKETO, INC., a Delaware corporation (“Borrower”), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank.  The parties agree as follows:

 

1.             ACCOUNTING AND OTHER TERMS

 

Accounting terms not defined in this Agreement shall be construed following GAAP.  Calculations and determinations must be made following GAAP (except for non-compliance with FASB ASC Topic 718 in the monthly reporting).  Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13.  All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.

 

2.             LOAN AND TERMS OF PAYMENT

 

2.1          Promise to Pay.  Borrower hereby unconditionally promises to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement.

 

2.1.1       Equipment Facility.

 

(a)           Equipment Advances.  Subject to the terms and conditions of this Agreement, during the Draw Period, Bank shall make advances (each, an “Equipment Advance” and, collectively, “Equipment Advances”) not exceeding the Equipment Line.  Equipment Advances may only be used to finance Eligible Equipment purchased within ninety (90) days (determined based upon the applicable invoice date of such Eligible Equipment) before the date of each Equipment Advance.  All Eligible Equipment must have been new when purchased by Borrower, except for such Eligible Equipment that is disclosed in writing to Bank by Borrower, and that Bank in its sole discretion has agreed to finance, prior to being financed by Bank.  No Equipment Advance may exceed 100% of the total invoice for Eligible Equipment (excluding taxes, shipping, warranty charges, freight discounts and installation expenses relating to such Eligible Equipment except to the extent such are allowed to be financed pursuant hereto as Other Equipment).  Unless otherwise agreed to by Bank, not more than 25% of the proceeds of the Equipment Line shall be used to finance Other Equipment.  Each Equipment Advance must be in an amount equal to at least the lesser of Five Hundred Thousand Dollars ($500,000) or the amount that has not yet been drawn under the Equipment Line.  After repayment, no Equipment Advance may be reborrowed.

 

(b)           Repayment.  For each Equipment Advance: (i) Borrower shall make monthly payments of interest only commencing on the first day of the month following the month in which the Funding Date occurs with respect to such Equipment Advance and continuing thereafter on the first day of each successive calendar month during the Equipment Interest Only Period; (ii) commencing on its Equipment Amortization Date and continuing thereafter on the first day of each successive calendar month through and including its Equipment Maturity Date (each a

 

 

“Payment Date”), Borrower shall make thirty-six (36) equal monthly payments of principal and interest which would fully amortize such outstanding Equipment Advance (individually, the “Scheduled Payment”, and collectively, “Scheduled Payments”); and (iii) all unpaid principal and accrued interest is due and payable in full on the Equipment Maturity Date with respect to such Equipment Advance.  An Equipment Advance may only be prepaid, at Borrower’s option, in accordance with Section 2.1.1(d).

 

(c)           Mandatory Prepayment Upon an Acceleration.  If the Equipment Advances are accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to Bank an amount equal to the sum of (i) all outstanding principal plus accrued and unpaid interest, and (ii) all other sums, if any, that shall have become due and payable, including interest at the Default Rate with respect to any past due amounts.

 

(f)            Permitted Prepayment of Equipment Advances.  So long as no Event of Default has occurred and is continuing, Borrower shall have the option to prepay all, but not less than all, of the Equipment Advances advanced by Bank under this Agreement, provided Borrower (i) delivers written notice to Bank of its election to prepay the Equipment Advances at least ten (10) days prior to such prepayment, and (ii) pays, on the date of such prepayment (A) all outstanding principal plus accrued and unpaid interest, and (B) all other sums, if any, that shall have become due and payable, including interest at the Default Rate with respect to any past due amounts.

 

2.2          Intentionally omitted.

 

2.3          Payment of Interest on the Credit Extensions.

 

(a)           Interest Rate.

 

(i)    Equipment Advances.  Subject to Section 2.3(b), the principal amount outstanding for each Equipment Advance shall accrue interest at a fixed per annum rate equal to the greater of: (i) four percent (4%), or (ii) three-quarters percentage points (0.75%) above the WSJ Prime Rate, as determined on the applicable Funding Date.

 

(b)           Default Rate.  Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is five percentage points (5.00%) above the rate that is otherwise applicable thereto (the “Default Rate”) unless Bank otherwise elects from time to time in its sole discretion to impose a smaller increase.  Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations.  Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.

 

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(c)           Intentionally omitted.

 

(d)           Computation: 360-Day Year.  In computing interest, the date of the making of any Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension.  Interest shall be computed on the basis of a 360-day year for the actual number of days elapsed.

 

(e)           Debit of Accounts.  Bank may debit the Designated Deposit Account (and if insufficient funds are in the Designated Deposit Account, then any of Borrower’s other deposit accounts) for principal and interest payments or any other amounts Borrower owes Bank when due.  These debits shall not constitute a set-off.

 

(f)            Interest Payment Date.  Unless otherwise provided, interest is payable monthly on the first (1st) calendar day of each month.

 

2.4          Fees.  Borrower shall pay to Bank:

 

(a)           Loan Fee.  A fully earned, non-refundable loan fee of Fifteen Thousand Dollars ($15,000), on the Effective Date; and

 

(b)           Bank Expenses.  All Bank Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement, which legal fees for the documentation and negotiation of this Agreement (excluding UCC search and filing fees and obtaining good standing certificates) will not exceed $6,000 as of the Effective Date so long as there are not more than 2 drafts of this Agreement made in negotiations) incurred through and after the Effective Date, when due.  Borrower has paid Bank a good faith deposit of Fifteen Thousand Dollars ($15,000) which shall be applied to Bank Expenses.

 

2.5          Payments; Application of Payments.

 

(a)           All payments (including prepayments) to be made by Borrower under any Loan Document shall be made in immediately available funds in U.S. Dollars, without setoff or counterclaim, before 12:00 p.m. Pacific time on the date when due.  Payments of principal and/or interest received after 12:00 p.m. Pacific time are considered received at the opening of business on the next Business Day.  When a payment is due on a day that is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid.

 

(b)           Borrower shall have no right to specify the order or the accounts to which Bank shall allocate or apply any payments required to be made by Borrower to Bank or otherwise received by Bank under this Agreement when any such allocation or application is not specified elsewhere in this Agreement.

 

3.             CONDITIONS OF LOANS

 

3.1          Conditions Precedent to Initial Credit Extension.  Bank’s obligation to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form

 

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and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation:

 

(a)           duly executed original signatures to the Loan Documents;

 

(b)           duly executed original signatures to the Control Agreements required by Section 6.6(b);

 

(c)           Borrower’s Operating Documents and a good standing certificate of Borrower certified by the Secretary of State of the States of Delaware and California as of a date no earlier than thirty (30) days prior to the Effective Date;

 

(d)           duly executed original signatures to the completed Borrowing Resolutions for Borrower;

 

(e)           certified copies, dated as of a recent date, of financing statement searches, as Bank shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;

 

(f)            the Perfection Certificate of Borrower, together with the duly executed original signature thereto;

 

(g)           evidence satisfactory to Bank that the insurance policies required by Section 6.5 hereof are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses and cancellation notice to Bank (or endorsements reflecting the same) in favor of Bank;

 

(h)           payment of the fees and Bank Expenses then due as specified in Section 2.4 hereof.

 

3.2          Conditions Precedent to all Credit Extensions.  Bank’s obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:

 

(a)           except as otherwise provided in Section 3.5(a), timely receipt of an executed Payment/Advance Form;

 

(b)           the representations and warranties in this Agreement shall be true, accurate, and complete in all material respects on the date of the Payment/Advance Form and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension.  Each Credit Extension is Borrower’s representation and warranty on that date that the representations and 

 

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warranties in this Agreement remain true, accurate, and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; and

 

(c)           in Bank’s sole discretion, there has not been any material impairment in the general affairs, management, results of operation, financial condition or the prospect of repayment of the Obligations, or any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank.

 

3.3          Intentionally Omitted.

 

3.4          Covenant to Deliver.  Borrower agrees to deliver to Bank each item required to be delivered to Bank under this Agreement as a condition precedent to any Credit Extension.  Borrower expressly agrees that a Credit Extension made prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of Borrower’s obligation to deliver such item, and the making of any Credit Extension in the absence of a required item shall be in Bank’s sole discretion.

 

3.5          Procedures for Borrowing.

 

(a)           Equipment Advances.  Subject to the prior satisfaction of all other applicable conditions to the making of an Equipment Advance set forth in this Agreement, to obtain an Equipment Advance, Borrower must notify Bank (which notice shall be irrevocable) by electronic mail or facsimile no later than 12:00 p.m. Pacific time one (1) Business Day before the proposed Funding Date.  The notice shall be a Payment/Advance Form, must be signed by a Responsible Officer or designee, and shall include a copy of the invoice for the Equipment being financed.  Borrower shall also deliver to Bank, copies of invoices for the Financed Equipment and such additional information as Bank may reasonably request at least five (5) Business Days before the proposed Funding Date.  At Bank’s discretion, Bank shall have the opportunity to confirm that, upon filing the UCC-1 financing statement covering the Equipment, Bank shall have a first priority perfected security interest in such Equipment.  If Borrower satisfies the conditions of each Equipment Advance, Bank shall disburse such Equipment Advance by transfer to the Designated Deposit Account.

 

4.             CREATION OF SECURITY INTEREST

 

4.1          Grant of Security Interest.  Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.

 

4.2          Priority of Security Interest.  Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that may have superior priority to Bank’s Lien under this Agreement).  If Borrower shall acquire a commercial tort claim, Borrower 

 

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shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.

 

If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) arc repaid in full in cash.  Upon payment in full in cash of the Obligations and at such time as Bank’s obligation to make Credit Extensions has terminated, Bank shall, at Borrower’s sole cost and expense, release its Liens in the Collateral and all rights therein shall revert to Borrower.

 

4.3          Authorization to File Financing Statements.  Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Bank’s interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Bank under the Code.

 

5.             REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants as follows:

 

5.1          Due Organization, Authorization; Power and Authority.  Borrower is duly existing and in good standing as a Registered Organization in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrower’s business.  In connection with this Agreement, Borrower has delivered to Bank a completed certificate each signed by Borrower, entitled “Perfection Certificate”.  Borrower represents and warrants to Bank that (a) Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrower’s place of business, or, if more than one, its chief executive office as well as Borrower’s mailing address (if different than its chief executive office); (e) Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement).  If Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly notify Bank of such occurrence and provide Bank with Borrower’s organizational identification number.

 

The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material 

 

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Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any of its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect) or (v) constitute an event of default under any material agreement by which Borrower is bound.  Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrower’s business.

 

5.2          Collateral.  Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens.  Borrower has no deposit accounts other than the deposit accounts with Bank, the deposit accounts, if any, described in the Perfection Certificate delivered to Bank in connection herewith, or of which Borrower has given Bank notice and taken such actions as are necessary to give Bank a perfected security interest therein.

 

The Collateral (other than Equipment with Borrower’s agents or employees in the ordinary course of business and Inventory in transit in the ordinary course of business) is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate.  None of the components of the Collateral (other than Equipment with Borrower’s agents or employees in the ordinary course of business and Inventory in transit in the ordinary course of business) shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2.

 

Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers in the ordinary course of business, (b) over-the-counter software that is commercially available to the public, and (c) material Intellectual Property licensed to Borrower and noted on the Perfection Certificate.  Each Patent which it owns or purports to own and which is material to Borrower’s business is valid and enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrower’s business has been judged invalid or unenforceable, in whole or in part.  To the best of Borrower’s knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party except to the extent such claim would not reasonably be expected to have a material adverse effect on Borrower’s business.  Except as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound by, any Restricted License.

 

All Financed Equipment is new, except for such Financed Equipment that has been disclosed in writing to Bank by Borrower as “used” and that Bank, in its sole discretion, has agreed to finance.

 

5.3          Intentionally omitted.

 

5.4          Litigation.  There are no actions or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries involving more than, individually or in the aggregate, Fifty Thousand Dollars ($50,000).

 

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5.5          Financial Statements; Financial Condition.  All consolidated financial statements for Borrower and any of its Subsidiaries delivered to Bank fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of operations.  There has not been any material deterioration in Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to Bank.

 

5.6          Solvency.  The fair salable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.

 

5.7          Regulatory Compliance.  Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended.  Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors).  Borrower has complied in all material respects with the Federal Fair Labor Standards Act.  Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005.  Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a material adverse effect on its business.  None of Borrower’s or any of its Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally.  Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.

 

5.8          Subsidiaries; Investments.  Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments.

 

5.9          Tax Returns and Payments; Pension Contributions.  Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower.  Borrower may defer payment of any contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Bank in writing of the commencement of, and any material development in, the proceedings, (c) posts bonds or takes any other steps required to prevent the governmental authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien”.  Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years which could result in additional taxes becoming due and payable by Borrower.  Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

 

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5.10        Use of Proceeds.  Borrower shall use the proceeds of the Credit Extensions solely as working capital, to purchase Eligible Equipment, and to fund its general business requirements and not for personal, family, household or agricultural purposes.

 

5.11        Full Disclosure.  No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank in connection with the Loan Documents, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Bank in connection with the Loan Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).

 

5.12        Definition of “Knowledge.”  For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible Officers.

 

6.             AFFIRMATIVE COVENANTS

 

Borrower shall do all of the following:

 

6.1          Government Compliance.

 

(a)           Maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrower’s business or operations.  Borrower shall comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower’s business.

 

(b)           Obtain all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Bank in all of its property.  Borrower shall promptly provide copies of any such obtained Governmental Approvals to Bank.

 

6.2          Financial Statements, Reports, Certificates.  Deliver to Bank:

 

(a)           Monthly Financial Statements.  As soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated balance sheet and income statement covering Borrower’s consolidated operations for such month certified by a Responsible Officer and in a form acceptable to Bank (the “Monthly Financial Statements”);

 

(b)           Monthly Compliance Certificate.  Within thirty (30) days after the last day of each month and together with the Monthly Financial Statements, a duly completed Compliance 

 

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Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and such other information as Bank shall reasonably request;

 

(c)           Annual Audited Financial Statements.  If Borrower’s Board of Directors requires audited financial statements for such year, as soon as available, but no later than two hundred seventy (270) days after the last day of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Bank in its reasonable discretion;

 

(d)           Company Prepared Annual Financial Statements.  If Borrower’s Board of Directors does not require audited financial statements for such year, as soon as available, but no later than thirty (30) days after the last day of Borrower’s fiscal year, company prepared annual financial statements covering Borrower’s consolidated operations for such year certified by a Responsible Officer and in a form acceptable to Bank;

 

(e)           Annual Projections.  As soon as available, but no later than sixty (60) days after the last day of Borrower’s fiscal year, annual financial projections approved by Borrower’s Board of Directors consistent in form and detail with those provided to Borrower’s venture capital investors;

 

(f)            Other Statements.  Within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or to any holders of Subordinated Debt;

 

(g)           SEC Filings.  In the event that Borrower becomes subject to the reporting requirements under the Exchange Act within five (5) days of filing, copies of all periodic and other reports, proxy statements and other materials filed by Borrower with the SEC, any Governmental Authority succeeding to any or all of the functions of the SEC or with any national securities exchange, or distributed to its shareholders, as the case may be.  Documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the Internet at Borrower’s website address;

 

(h)           Legal Action Notice.  A prompt report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, Fifty Thousand Dollars ($50,000) or more; and 

 

(i)            Other Financial Information.  Other financial information reasonably requested by Bank.

 

6.3          Inventory; Returns.  Keep all Inventory in good and marketable condition, free from material defects.  Returns and allowances between Borrower and its Account Debtors shall follow

 

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Borrower’s customary practices as they exist at the Effective Date.  Borrower must promptly notify Bank of all returns, recoveries, disputes and claims that involve more than Fifty Thousand Dollars ($50,000).

 

6.4          Taxes; Pensions.  Timely file, and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms.

 

6.5          Insurance.  Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrower’s industry and location and as Bank may reasonably request (Bank acknowledges the insurance maintained by Borrower as of the Effective Date is satisfactory to Bank).  Insurance policies shall be in a form, with companies, and in amounts that are satisfactory to Bank.  All property policies shall have a lender’s loss payable endorsement showing Bank as a lender loss payee and waive subrogation against Bank.  All liability policies shall show, or have endorsements showing, Bank as an additional insured.  Borrower shall give Bank at least twenty (20) days notice before the insurer cancels, amends, or declines to renew its policy.  At Bank’s request, Borrower shall deliver certified copies of policies and evidence of all premium payments.  Proceeds payable under any policy shall, at Bank’s option, be payable to Bank on account of the Obligations.  If Borrower fails to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Bank deems prudent.

 

6.6          Operating Accounts.

 

(a)           Maintain its primary operating and other domestic deposit accounts and domestic securities accounts with Bank and Bank’s Affiliates.

 

(b)           Borrower shall maintain at least Two Million Dollars ($2,000,000) at all times in deposit accounts and securities accounts maintained with Bank and Bank’s Affiliates.

 

(c)           Provide Bank five (5) days prior written notice before establishing any Collateral Account at or with any bank or financial institution other than Bank or Bank’s Affiliates.  For each Collateral Account that Borrower at any time maintains, Borrower shall cause the applicable bank or financial institution (other than Bank) at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Bank’s Lien in such Collateral Account in accordance with the terms hereunder which Control Agreement may not be terminated without the prior written consent of Bank.  The provisions of the previous sentence shall not apply to: (i) deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s employees and identified to Bank by Borrower as such, and (ii) foreign accounts so long 

 

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as the aggregate amount in all such foreign accounts does not exceed Three Million Dollars ($3,000,000) at any time.

 

6.7          Protection of Intellectual Property Rights.

 

(a)           (i) Protect, defend and maintain the validity and enforceability of its Intellectual Property; (ii) promptly advise Bank in writing of material infringements of its Intellectual Property; and (iii) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Bank’s written consent.

 

(b)           Provide written notice to Bank within ten (10) days of entering or becoming bound by any Restricted License (other than over-the-counter software that is commercially available to the public).  Borrower shall take such steps as Bank requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License to be deemed “Collateral” and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (ii) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Bank’s rights and remedies under this Agreement and the other Loan Documents.

 

6.8          Litigation Cooperation.  From the date hereof and continuing through the termination of this Agreement, make available to Bank, without expense to Bank, Borrower and its officers, employees and agents and Borrower’s books and records, to the extent that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with respect to any Collateral or relating to Borrower.

 

6.9          Access to Collateral; Books and Records.  Allow Bank, or its agents, to inspect the Collateral and audit and copy Borrower’s Books.  Such inspections or audits shall be conducted no more often than once every twelve (12) months unless an Event of Default has occurred and is continuing.  The foregoing inspections and audits shall be at Borrower’s expense.

 

6.10        Further Assurances.  Execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the purposes of this Agreement.

 

7.             NEGATIVE COVENANTS

 

Borrower shall not do any of the following without Bank’s prior written consent:

 

7.1          Dispositions.  Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete Equipment that does not constitute Financed Equipment; (c) in connection with Permitted Liens and Permitted Investments; and (d) of non-exclusive licenses for the use of the property of Borrower or its Subsidiaries in the ordinary course of business.

 

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7.2          Changes in Business, Management, Ownership, or Business Locations.  (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) have a change in its Chief Executive Officer or Chief Financial Officer unless the board of directors of Borrower replaces such officer within 90 days of such change; or (ii) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than 40% of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering or to venture capital investors so long as Borrower identifies to Bank the venture capital investors prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction).

 

Borrower shall not, without at least thirty (30) days prior written notice to Bank: (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Ten Thousand Dollars ($10,000) in Borrower’s assets or property) or deliver any portion of the Collateral (other than Equipment with Borrower’s agents or employees in the ordinary course of business and Inventory in transit in the ordinary course of business) valued, individually or in the aggregate, in excess of Twenty Five Thousand Dollars ($25,000) to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate, (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its jurisdiction of organization.  If Borrower intends to deliver any portion of the Collateral (other than Equipment with Borrower’s agents or employees in the ordinary course of business and Inventory in transit in the ordinary course of business) valued, individually or in the aggregate, in excess of Twenty Five Thousand Dollars ($25,000) to a bailee, and Bank and such bailee are not already parties to a bailee agreement governing both the Collateral and the location to which Borrower intends to deliver the Collateral, then Borrower will first receive the written consent of Bank, and such bailee shall execute and deliver a bailee agreement in form and substance satisfactory to Bank in its sole discretion.

 

7.3          Mergers or Acquisitions.  Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person.  A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.

 

7.4          Indebtedness.  Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.

 

7.5          Encumbrance.  Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s 

 

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Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Liens” herein.

 

7.6          Maintenance of Collateral Accounts.  Maintain any Collateral Account except pursuant to the terms of Section 6.6(b) hereof.

 

7.7          Distributions; Investments.  (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock provided that (i) Borrower may convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof, (ii) Borrower may pay dividends solely in common stock; and (iii) Borrower may repurchase the stock of former employees or consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided such repurchase does not exceed in the aggregate of Fifty Thousand Dollars ($50,000) per fiscal year; or (b) directly or indirectly make any Investment other than Permitted Investments, or permit any of its Subsidiaries to do so.

 

7.8          Transactions with Affiliates.  Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower, except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.

 

7.9          Subordinated Debt.  (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to Bank.

 

7.10        Compliance.  Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

 

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8.             EVENTS OF DEFAULT

 

Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:

 

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

 

8.2          Covenant Default.

 

(a)           Borrower fails or neglects to perform any obligation in Sections 6,2, 6.4, 6.5, 6.6 or violates any covenant in Section 7; or

 

(b)           Borrower fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period).  Cure periods provided under this section shall not apply, among other things, to any other covenants set forth in clause (a) above;

 

8.3          Material Adverse Change.  A Material Adverse Change occurs;

 

8.4          Attachment; Levy; Restraint on Business.

 

(a)           (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the control of Borrower (including a Subsidiary) on deposit or otherwise maintained with Bank or any Bank Affiliate, or (ii) a notice of lien or levy is filed against any of Borrower’s assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; or

 

(b)           (i) any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting any material part of its business;

 

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8.5          Insolvency (a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while of any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);

 

8.6          Other Agreements.  There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties, (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Fifty Thousand Dollars ($50,000); or (b) any default by Borrower or Guarantor , the result of which could have a material adverse effect on Borrower’s or any Guarantor’s business;

 

8.7          Judgments.  One or more final judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Fifty Thousand Dollars ($50,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower and the same are not, within ten (10) days after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay (provided that no Credit Extensions will be made prior to the discharge, stay, or bonding of such judgment, order, or decree);

 

8.8          Misrepresentations.  Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made; or

 

8.9          Subordinated Debt.  Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement.

 

9.             BANK’S RIGHTS AND REMEDIES

 

9.1          Rights and Remedies.  While an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following:

 

(a)           declare all Obligations immediately due and payable (but if an event of Default described in Section 8.5 occurs all Obligations are immediately due and payable with any action by Bank);

 

(b)           stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Bank;

 

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(c)           settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable, notify any Person owing Borrower money of Bank’s security interest in such funds, and verify the amount of such account;

 

(d)           make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral.  Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates.  Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred.  Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies;

 

(e)           apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower;

 

(f)            ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral.  Bank is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section, Borrower’s tights under all licenses and all franchise agreements inure to Bank’s benefit;

 

(g)           place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;

 

(h)           demand and receive possession of Borrower’s Books; and

 

(i)            exercise all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).

 

9.2          Power of Attorney.  Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Bank or a third party as the Code permits.  Borrower hereby appoints Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or continue the perfection of Bank’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations (other than inchoate indemnity obligations) have been satisfied in full and Bank is under

 

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no further obligation to make Credit Extensions hereunder.  Bank’s foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and Bank’s obligation to provide Credit Extensions terminates.

 

9.3          Protective Payments.  If Borrower fails to obtain the insurance called for by Section 6.5 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other than Loan Document, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then highest rate applicable to the Obligations, and secured by the Collateral.  Bank will make reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the time it is obtained or within a reasonable time thereafter.  No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default.

 

9.4          Application of Payments and Proceeds Upon Default.  If an Event of Default has occurred and is continuing, Bank may apply any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order as Bank shall determine in its sole discretion.  Any surplus shall be paid to Borrower or other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency.  If Bank, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor.

 

9.5          Bank’s Liability for Collateral.  So long as Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person.  Borrower bears all risk of loss, damage or destruction of the Collateral.

 

9.6          No Waiver; Remedies Cumulative.  Bank’s failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance herewith or therewith.  No waiver hereunder shall be effective unless signed by the party granting the waiver and then is only effective for the specific instance and purpose for which it is given.  Bank’s rights and remedies under this Agreement and the other Loan Documents are cumulative.  Bank has all rights and remedies provided under the Code, by law, or in equity.  Bank’s exercise of one right or remedy is not an election and shall not preclude Bank from exercising any other remedy under this Agreement or other remedy available at law or in equity, and Bank’s waiver of any Event of Default is not a continuing waiver.  Bank’s delay in exercising any remedy is not a waiver, election, or acquiescence.

 

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9.7          Demand Waiver.  Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable.

 

10.          NOTICES

 

All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below.  Bank or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.

 

	
If   to Borrower:
    	
Marketo, Inc.
    
	
 
    	
901   Mariner’s Blvd., Suite 200
    
	
 
    	
San   Mateo, CA 94404
    
	
 
    	
Attn:
    
	
 
    	
Fax:
    
	
 
    	
Email:
    
	
 
    	
 
    
	
If   to Bank:
    	
Silicon   Valley Bank
    
	
 
    	
555   Mission Street, 9th Floor
    
	
 
    	
San   Francisco, CA 94105
    
	
 
    	
Attn:
    
	
 
    	
Fax:
    
	
 
    	
Email:
    

 

11.                               CHOICE OF LAW, VENUE, JURY TRIAL WAIVER, AND JUDICIAL REFERENCE

 

California law governs the Loan Documents without regard to principles of conflicts of law.  Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank.  Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court.  Borrower hereby waives personal service of the summons, complaints,

 

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and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

 

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS.  THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court.  The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive.  The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers.  All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed.  If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief.  The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings.  The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings.  The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge.  The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a).  Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies.  The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

 

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12.                               GENERAL PROVISIONS

 

12.1                        Successors and Assigns.  This Agreement binds and is for the benefit of the successors and permitted assigns of each party.  Borrower may not assign this Agreement or any rights or obligations under it without Bank’s prior written consent (which may be granted or withheld in Bank’s discretion).  Bank has the right, without the consent of or notice to Borrower, to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights, and benefits under this Agreement and the other Loan Documents.

 

12.2                        Indemnification.  Borrower agrees to indemnify, defend and hold Bank and its directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank (each, an “Indemnified Person”) harmless against: (a) all obligations, demands, claims, and liabilities (collectively, “Claims”) claimed or asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or expenses (including Bank Expenses) in any way suffered, incurred, or paid by such Indemnified Person as a result of, following from, consequential to, or arising from transactions between Bank and Borrower contemplated by the Loan Documents (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct.

 

12.3                        Time of Essence.  Time is of the essence for the performance of all Obligations in this Agreement.

 

12.4                        Severability of Provisions.  Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

 

12.5                        Correction of Loan Documents.  Bank may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the parties.

 

12.6                        Amendments in Writing; Waiver; Integration.  No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought.  Without limiting the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document.  Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver.  The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.  All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents merge into the Loan Documents.

 

12.7                        Counterparts.  This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.

 

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12.8                        Survival.  All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been paid in full and satisfied.  The obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the statute of limitations with respect to such claim or cause of action shall have run.

 

12.9                        Confidentiality.  In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Bank’s Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with Bank, collectively, “Bank Entities”); (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, Bank shall use its best efforts to obtain any prospective transferee’s or purchaser’s agreement to the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise required in connection with Bank’s examination or audit; (e) as Bank considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein.  Confidential information does not include information that is either: (i) in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or (ii) disclosed to Bank by a third party if Bank does not know that the third party is prohibited from disclosing the information,

 

Bank Entities may use the confidential information for reporting purposes and the development and distribution of databases and market analyses so long as such confidential information is aggregated and anonymized prior to distribution unless otherwise expressly prohibited by Borrower.  The provisions of the immediately preceding sentence shall survive the termination of this Agreement.

 

12.10                 Attorneys’ Fees, Costs and Expenses.  In any action or proceeding between Borrower and Bank arising out of or relating to the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled.

 

12.11                 Electronic Execution of Documents.  The words “execution,” “signed,” “signature” and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.

 

12.12                 Captions.  The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

 

12.13                 Construction of Agreement.  The parties mutually acknowledge that they and their attorneys have participated in the preparation and negotiation of this Agreement.  In cases of

 

22

 

uncertainty this Agreement shall be construed without regard to which of the parties caused the uncertainty to exist.

 

12.14                 Relationship.  The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement.  The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different from those of parties to an arm’s-length contract.

 

12.15                 Third Parties.  Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement; or (c) give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.

 

13.                               DEFINITIONS

 

13.1                        Definitions.  As used in the Loan Documents, the word “shall” is mandatory, the word “may” is permissive, the word “or” is not exclusive, the words “includes” and “including” are not limiting, the singular includes the plural, and numbers denoting amounts that are set off in brackets are negative.  As used in this Agreement, the following capitalized terms have the following meanings:

 

“Account” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower.

 

“Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.

 

“Affiliate” is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.

 

“Agreement” is defined in the preamble hereof.

 

“Bank” is .defined in the preamble hereof.

 

`Bank Expenses” are all reasonable audit fees and expenses, costs, and expenses (including reasonable attorneys’ foes and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower.

 

“Borrower” is defined in the preamble hereof.

 

23

 

“Borrower’s Books” are all Borrower’s books and records including ledgers, federal and state tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.

 

“Borrowing Resolutions” are, with respect to any Person, those resolutions substantially in the form attached hereto as Exhibit C.

 

“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed.

 

“Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition.

 

“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.

 

“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A.

 

“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.

 

“Commodity Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.

 

“Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit D.

 

“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation, in each case, directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not

 

24

 

include endorsements in the ordinary course of business.  The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.

 

“Control Agreement” is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account Securities Account, or Commodity Account

 

“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.

 

“Credit Extension” is any Equipment Advance, or any other extension of credit by Bank for Borrower’s benefit.

 

“Default Rate” is defined in Section 2.3(b).

 

“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.

 

“Designated Deposit Account” is Borrower’s deposit account, account number                      maintained with Bank.

 

“Dollars,” “dollars” or use of the sign “$” means only lawful money of the United States and not any other currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily converted into lawful money of the United States.

 

“Draw Period” is the period of time from the Effective Date through the earlier to occur of (a) December 31, 2012 or (b) an Event of Default.

 

“Effective Date” is defined in the preamble hereof.

 

“Eligible Equipment” is the following to the extent it complies with all of Borrower’s representations and warranties to Bank, is acceptable to Bank in all respects, is located at Borrower’s headquarters or such other location of which Bank has approved in writing, and is subject to a first priority Lien in favor of Bank new and used: (a) general purpose equipment, computer equipment (including servers and routers), office equipment, test and laboratory equipment, furnishings, subject to the limitations set forth herein, and (b) Other Equipment.

 

“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

 

25

 

“Equipment Advance” is defined in Section 2.1.5(a).

 

“Equipment Amortization Date” means, for Equipment Advance, the earlier of (a) the day nine (9) months after its Funding Date, or if such date is not the first day of the month, then the first day of the calendar month immediately following such date, and (b) October 1, 2013.

 

“Equipment Interest Only Period” means, for each Equipment Advance, the period of time commencing on its Funding Date through the day before its Equipment Amortization Date.

 

“Equipment Line” is an Equipment Advance or Equipment Advances in an aggregate original principal amount of up to Four Million Dollars ($4,000,000).

 

“Equipment Maturity Date” is, for each Equipment Advance, its 36th Payment Date but no later than September 1, 2016.

 

“ERISA” is the Employee Retirement Income Security Act of 1974, and its regulations.

 

“Event of Default” is defined in Section 8.

 

“Exchange Act” is the Securities Exchange Act of 1934, as amended.

 

“Financed Equipment” is all present and future Eligible Equipment in which Borrower has any interest which is financed by an Equipment Advance.

 

“Funding Date” is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business Day.

 

“GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.

 

“General Intangibles” is all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

 

“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of; any Governmental Authority.

 

“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or

 

26

 

other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.

 

“Guarantor” is any present or future guarantor of the Obligations.

 

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.

 

“Indemnified Person” is defined in Section 12.2.

 

“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

 

“Intellectual Property” means all of Borrower’s right, title, and interest in and to the following:

 

(a)                                 its Copyrights, Trademarks and Patents;

 

(b)                                 any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating manuals;

 

(c)                                  any and all source code;

 

(d)                                 any and all design rights which may be available to Borrower;

 

(e)                                  any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and

 

(f)                                   all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.

 

“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

 

“Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person.

 

27

 

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.

 

“Loan Documents” are, collectively, this Agreement, the Perfection Certificate, any note, or notes or guaranties executed by Borrower or any Guarantor, and any other present or future agreement between Borrower any Guarantor and/or for the benefit of Bank in connection with this Agreement, all as amended, restated, or otherwise modified.

 

“Material Adverse Change” is (a) a material impairment in the perfection or priority of Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; or (c) a material impairment of the prospect of repayment of any portion of the Obligations.

 

“Monthly Financial Statements” is defined in Section 6.2(a).

 

“Obligations” are Borrower’s obligations to pay when due any debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, whether under this Agreement, the Loan Documents, or otherwise, including, without limitation, all obligations relating to letters of credit (including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and to perform Borrower’s duties under the Loan Documents.

 

“Operating Documents” are, for any Person, such Person’s formation documents, as certified with the Secretary of State of such Person’s state of formation on a date that is no earlier than 30 days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.

 

“Other Equipment” is leasehold improvements, intangible property such as computer software and software licenses, equipment specifically designed or manufactured for Borrower, other intangible property, nonrecurring engineering expenses, limited use property and other similar property and soft costs approved by Bank, including taxes, shipping, warranty charges, freight discounts and installation expenses.

 

“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.

 

“Payment/Advance Form” is that certain form attached hereto as Exhibit B.

 

“Payment Date” is defined in Section 2.1.1(b).

 

“Perfection Certificate” is defined in Section 5.1.

 

28

 

“Permitted Indebtedness” is:

 

(a)                                 Borrower’s Indebtedness to Bank under this Agreement and the other Loan Documents;

 

(b)                                 Indebtedness existing on the Effective Date and shown on the Perfection Certificate;

 

(c)                                  Subordinated Debt;

 

(d)                                 unsecured Indebtedness to trade creditors incurred in the ordinary course of business;

 

(e)                                  Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;

 

(f)                                   Indebtedness secured by Liens permitted under clauses (a)-and (c) of the definition of “Permitted Liens” hereunder; and

 

(g)                                  extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (1) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.

 

“Permitted Investments” are:

 

(a)                                 Investments (including, without limitation, Subsidiaries) existing on the Effective Date and shown on the Perfection Certificate and;

 

(b)                                 (i) Investments consisting of Cash Equivalents, and (ii) any Investments permitted by Borrower’s investment policy, as amended from time to time, provided that such investment policy (and any such amendment thereto) has been approved in writing by Bank;

 

(c)                                  Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;

 

(d)                                 Investments consisting of deposit accounts in which Bank has a perfected security interest;

 

(e)                                  Investments accepted in connection with Transfers permitted by Section 7.1;

 

(f)                                   Investments (i) by Borrower in Subsidiaries not to exceed One Million Dollars ($1,000,000) in the aggregate in any fiscal year and (ii) by Subsidiaries in other Subsidiaries or in Borrower,

 

(g)                                  Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors;

 

29

 

(h)                                 Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; and

 

(i)                                     Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (i) shall not apply to Investments of Borrower in any Subsidiary.

 

“Permitted Liens” are:

 

(a)                                 Liens existing on the Effective Date and shown on the Perfection Certificate or arising under this Agreement and the other Loan Documents;

 

(b)                                 Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

 

(c)                                  purchase money Liens (i) on Equipment (other than Financed Equipment) acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than One Million Dollars ($1,000,000) in the aggregate amount outstanding, or (ii) existing on Equipment (other than Financed Equipment) when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;

 

(d)                                 Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;

 

(e)                                  Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

 

(f)                                   Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;

 

(g)                                  leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest therein;

 

30

 

(h)                                 non-exclusive licenses of Intellectual Property granted to third parties in the ordinary course of business;

 

(i)                                     Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and 8.7; and

 

(j)                                    Liens in favor of other financial institutions arising in connection with Borrower’s deposit and/or securities accounts held at such institutions, provided that Bank has a perfected security interest in the amounts held in such deposit and/or securities accounts in accordance with Section 6.6.

 

“Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.

 

“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.

 

“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

“Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of Borrower.

 

“Restricted License” is any material license or other agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with the Bank’s right to sell any Collateral.

 

“Scheduled Payment” is defined in Section 2.1.1(b).

 

“SEC” shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.

 

“Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.

 

“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.

 

“Subsidiary” is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the

 

31

 

happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.  Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower.

 

“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.

 

“Transfer” is defined in Section 7.1.

 

“WSJ Prime Rate” is the then per annum rate of interest most recently quoted as the ‘Prime Rate” in the Wall Street Journal Western Edition.

 

[Signature page follows.]

 

32

 

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

 

	
BORROWER:
    	
 
    
	
 
    	
 
    
	
MARKETO, INC.
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Fred Ball
    	
 
    
	
Name:
    	
Fred   Ball
    	
 
    
	
Title:
    	
CFO
    	
 
    
	
 
    	
 
    
	
BANK:
    	
 
    
	
 
    	
 
    
	
SILICON   VALLEY BANK
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Holly R. Dungan
    	
 
    
	
Name:
    	
Holly   R. Dungan
    	
 
    
	
Title:
    	
RM
    	
 
    

 

33

 

EXHIBIT A — COLLATERAL DESCRIPTION

 

The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (except as provided below), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and all Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding the foregoing, the Collateral does not include any Intellectual Property; provided, however, the Collateral shall include all Accounts and all proceeds of Intellectual Property.  If a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in the underlying Intellectual Property is necessary to have a security interest in such Accounts and such property that arc proceeds of Intellectual Property, then the Collateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection of Bank’s security interest in such Accounts and such other property of Borrower that are proceeds of the Intellectual Property.

 

Pursuant to the terms of a certain negative pledge arrangement with Bank, Borrower has agreed not to encumber any of its Intellectual Property without Bank’s prior written consent.

 

 

EXHIBIT B - LOAN PAYMENT/ADVANCE REQUEST FORM

 

DEADLINE FOR SAME DAY PROCESSING IS NOON PACIFIC TIME

 

	
Fax   To:
    	
Date:
    	
 
    
	
 
    	
 
    
	
LOAN   PAYMENT:
    	
Marketo,   Inc.
    
	
 
    	
 
    
	
From   Account #
    	
 
    	
 
    	
To   Account #
    	
 
    
	
 
    	
(Deposit Amount #)
    	
 
    	
(Loan Account#)
    
	
 
    	
 
    
	
 
    	
 
    
	
Principal   $
    	
 
    	
 
    	
and/or   Interest $
    	
 
    
	
 
    	
 
    
	
Authorized   Signature
    	
 
    	
 
    	
Phone   Number
    	
 
    
	
Print   Name/Title
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
LOAN   ADVANCE:
    	
 
    
	
 
    	
 
    
	
Complete Outgoing Wire Request   section below if all or portion of the funds from this loan advance are for   an outgoing wire.
    
	
 
    
	
From   Account # 
    	
 
    	
 
    	
To   Account #
    	
 
    
	
 
    	
(Loan Account #)
    	
 
    	
(Deposit/Account #)
    
	
 
    	
 
    
	
Amount   of Advance $
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
All   Borrower’s representations and warranties in the Loan and Security Agreement   are true, correct and complete in all material respects on the date of the   request for an advance, provided, however, that such materiality qualified   shall not be applicable to any representations and warranties that already   are qualified or modified by materiality in the text thereof; and provided,   further, that those representations and warranties expressly referring to a   specific date shall be true, accurate and complete in all material respects   as of such date:
    
	
 
    	
 
    
	
Authorized   Signature:
    	
 
    	
 
    	
Phone   Number:
    	
 
    
	
Print   Name/Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
OUTGOING   WIRE REQUEST:  
    	
 
    
	
Complete   only if all or a proportion of funds from the loan advance above is to be   wired.
    
	
Deadline for same day processing is noon, Pacific   Time
    
	
 
    	
 
    
	
Beneficiary   Name:
    	
 
    	
 
    	
Amount   of Wire $
    	
 
    
	
Beneficiary   Bank:
    	
 
    	
 
    	
Account   number:
    	
 
    
	
City   and State:
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Beneficiary   Bank Transit (ABA) #
    	
 
    	
 
    	
Beneficiary   Bank Code (Swift, Sort, Chip, etc.)
    	
 
    
	
 
    	
(For International Wire Only)
    
	
 
    	
 
    
	
Intermediary   Bank:
    	
 
    	
 
    	
Transit   (ABA) #
    	
 
    
	
For   Further Credit to:
    	
 
    
	
 
    	
 
    
	
Special   Instructions:
    	
 
    
	
 
    	
 
    
	
By   signing below, I(we) acknowledge and agree that my (our) funds transfer   request shall be processed in accordance with and subject to the terms and   conditions set forth in the agreement(s) covering funds transfer service(s),   which agreements(s) were previously received and executed by me (us).
    
	
 
    	
 
    
	
Authorized   Signature:
    	
 
    	
 
    	
2nd   Signature (if required):
    	
 
    
	
Print   Name/Title:
    	
 
    	
 
    	
Print   Name/Title:
    	
 
    
	
Telephone   #:
    	
 
    	
 
    	
Telephone   #:
    	
 
    
															

 

 

EXHIBIT C

 

BORROWING RESOLUTIONS

CORPORATE BORROWING CERTIFICATE

 

	
BORROWER:
    	
Marketo, Inc.
    	
 
    	
DATE:
    	
 
    
	
BANK:
    	
Silicon   Valley Bank
    	
 
    

 

I hereby certify as follows, as of the date set forth above:

 

1.                                      I am the Secretary, Assistant Secretary or other officer of the Borrower.  My title is as set forth below.

 

2.                                      Borrower’s exact legal name is set forth above.  Borrower is a corporation existing under the laws of the State of Delaware.

 

3.                                      Attached hereto is a true, correct and complete copy of Borrower’s Certificate of Incorporation (including amendments), as filed with the Secretary of State of the State of Delaware.  Such Certificate of Incorporation has not been amended, annulled, rescinded, revoked or supplemented, and remains in full force and effect as of the date hereof.

 

4.                                      The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action).  Such resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and Bank may rely on them until Bank receives written notice of revocation from Borrower.  In addition, these resolutions were approved by the requisite number of holders of Borrower’s preferred stock, if required, as set forth in Borrower’s Certificate of Incorporation.

 

RESOLVED, that any one of the following officers or employees of Borrower, whose names, titles and signatures are below, may act on behalf of Borrower:

 

	
Name
    	
 
    	
Title
    	
 
    	
Signature
    	
 
    	
Authorized to
   Add or Remove
   Signatories
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
o
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
o
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
o
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
o
    

 

RESOLVED FURTHER, that any one of the persons designated above with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Borrower.

 

 

RESOLVED FURTHER, that such individuals may, on behalf of Borrower:

 

Borrow Money.  Borrow money from Silicon Valley Bank (“Bank”).

Execute Loan Documents.  Execute any loan documents Bank requires.

Grant Security.  Grant Bank a security interest in any of Borrower’s assets.

Negotiate Items.  Negotiate or discount all drafts, trade acceptance, promissory rates, or other indebtedness in which Borrower has an interest and receive and/or otherwise use the proceeds.

Letters of Credit.  Apply for letters of credit from Bank.

Foreign Exchange Contracts.  Execute spot or forward foreign exchange contracts.

Issue Warrants.  Issue warrants for Borrower’s capital stock.

Further Acts.  Designate other individuals to request advances, pay fees and costs and execute other documents or agreements (including documents or agreement that waive Borrowers right to a jury trial) they believe to be necessary to effectuate such resolutions.

 

RESOLVED FURTHER, that all acts authorized by the above resolution and any prior acts relating thereto are ratified.

 

5.                                      The persons listed above are Borrower’s officers or employees with their titles and signatures shown next t their names.

 

	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

*** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower.

 

I, the                                of Borrower, hereby certify as to paragraphs 1 through 5 above, as of the date set forth above.

[print title]

 

	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

2

 

EXHIBIT D

 

COMPLIANCE CERTIFICATE

 

	
TO:
    	
SILICON   VALLEY BANK
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    
	
FROM:
    	
MARKETO, INC.
    	
 
    

 

The undersigned authorized officer of Marketo, Inc.(“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”):

 

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

 

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

 

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

 

	
Reporting Covenant
    	
 
    	
Required
    	
 
    	
Complies
    
	
Monthly   financial statements with Compliance Certificate
    	
 
    	
Monthly   within 30 days
    	
 
    	
Yes     No
    
	
Annual   financial statement (CPA Audited) + CC
    	
 
    	
FYE   within 270 days if required by Borrower’s Board of Directors
    	
 
    	
Yes     No
    
	
Annual   financial statement (company prepared) + CC
    	
 
    	
FYE   within 30 days if audited financials not required by Borrower’s Board of   Directors
    	
 
    	
 
    
	
Annual   projections
    	
 
    	
FYE   within 60 days
    	
 
    	
Yes     No
    
	
10-Q,   10-K and 8-K.
    	
 
    	
Within   5 days after filing with SEC
    	
 
    	
Yes     No
    

 

 

	
Section 6.6 Covenant
    	
 
    	
Required
    	
 
    	
Actual
    	
 
    	
Complies
    
	
Maintain   at all time minimum cash at Bank and Bank’s Affiliates:
    	
 
    	
$
    	
2,000,000
    	
 
    	
$
    	
 
    	
 
    	
Yes     No
    
									

 

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

 

 

 

	
Marketo, Inc.
    	
BANK   USE ONLY
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    	
Received   by:
    	
 
    
	
Name:
    	
 
    	
 
    	
AUTHORIZED SIGNER
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
 
    
	
 
    	
 
    
	
 
    	
Verified:
    	
 
    
	
 
    	
AUTHORIZED SIGNER
    
	
 
    	
 
    
	
 
    	
Date:
    	
 
    
	
 
    	
 
    
	
 
    	
Compliance   Status:
    	
o Yes     o No
    
								

 

2ex10_1.htm

EXHIBIT 10.1

 

CREDIT AGREEMENT

 

THIS AGREEMENT dated for reference March 28, 2013 is between:

 

SPROTT RESOURCE LENDING PARTNERSHIP, a general partnership organized and existing under the laws of the Province of Ontario

 

(the “Lender”)

 

AND:

VISTA GOLD CORP., a Yukon corporation, having its chief executive office at 7961 Shaffer Parkway, Suite 5, Littleton, Colorado  80127

 

(the “Borrower”)

 

 

BACKGROUND

 

The Lender has agreed to lend to the Borrower and the Borrower has agreed to borrow from the Lender the aggregate principal amount of $10,000,000 on the terms and subject to the conditions of this Agreement.

 

AGREEMENTS

 

For good and valuable consideration, the receipt and sufficiency of which each party acknowledges, the parties agree as follows:

 

	
1.

	
Definitions.  In this Agreement:

 

	
  

	
(a)

	
“Advance” means the advance of the Facility hereunder;

 

	
  

	
(b)

	
“Applicable Securities Legislation” means all applicable securities laws of each of the jurisdictions in which the Borrower is a reporting issuer and the respective rules and regulations under such laws together with applicable published fee schedules, prescribed forms, policy statements, national or multilateral instruments, orders, blanket rulings and other applicable regulatory instruments of the securities regulatory authorities in any of such jurisdictions;

 

	
  

	
(c)

	
“Borrower” means Vista Gold Corp., a Yukon corporation continued on December 17, 1997 under incorporation no. 526273;

 

	
  

	
(d)

	
“Business Day” means a day which is not a Saturday, Sunday or a statutory holiday in the Province of British Columbia;

 

	
  

	
(e)

	
“change of control” has the meaning set forth in subsection 15(m) below;

 

	
  

	
(f)

	
“Closing Date” means the date of the Advance made pursuant to the terms of this Agreement;

  

  

  

 

	
  

	
(g)

	
“Colomac Mill Equipment” means any equipment currently owned by the Borrower that is currently stored at either Continental Cartage Inc., 5545 – 56 Avenue SE, Calgary, AB  T2C 4M1, or Custom Landtran, #103, 53016 HWY 60, Acheson, AB  T7X 5A7;

 

	
  

	
(h)

	
“Constating Documents” means:

 

	
  

	
(i)

	
with respect to a corporation, its notice of articles, articles of incorporation, amalgamation or continuance or other similar documents and its by-laws; and

 

	
  

	
(ii)

	
with respect to any other Person which is an artificial body, whether with or without legal personality, the organization and governance documents of such Person,

 

in each case as amended or supplemented from time to time;

 

	
  

	
(i)

	
“Event of Default” has the meaning set forth in Section 15 below;

 

	
  

	
(j)

	
“Exchange” means the Toronto Stock Exchange;

 

	
  

	
(k)

	
“Facility” means the credit facility granted by the Lender to the Borrower in the aggregate principal amount of $10,000,000 pursuant to this Agreement;

 

	
  

	
(l)

	
“Facility Documents” means this Agreement, the Security Documents and all other agreements, certificates, instruments and other documents delivered or to be delivered by the Borrower hereunder or thereunder, each as amended, modified, supplemented, restated or replaced from time to time;

 

	
  

	
(m)

	
“Financial Statements” has the meaning set forth in subsection 11(h) below;

 

	
  

	
(n)

	
“GAAP” means generally accepted accounting principles in effect in the United States from time to time;

 

	
  

	
(o)

	
“Governmental Authority” means the government, parliament or legislature of Canada or any other nation, or of any political subdivision thereof, whether provincial, state, municipal or local, and any agency, authority, instrumentality, ministry, tribunal, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government in Canada or any other nation;

 

	
  

	
(p)

	
“Indebtedness” means:

 

	
  

	
(i)

	
all indebtedness for borrowed money and all obligations evidenced by notes, bonds, debentures or other similar instruments;

 

	
  

	
(ii)

	
all obligations, contingent or otherwise, in respect of letters of credit (whether or not drawn) or bankers acceptances or similar facilities;

 

	
  

	
(iii)

	
all obligations to pay the deferred purchase price of property or services (other than current trade payables that are incurred in the ordinary course of business and are not overdue for a period of more than 90 days;

  

2

  

 

	
  

	
(iv)

	
all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired;

 

	
  

	
(v)

	
all obligations which would be required to be disclosed on the Borrower’s balance sheet as a liability in accordance with GAAP and which would be payable more than 12 months from the date of creation thereof (other than reserves for taxes and for contingent obligations); and

 

	
  

	
(vi)

	
all obligations of the kind referred to above in this subsection (p) secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights), whether or not either Borrower has become liable for the payment of such obligation;

 

	
  

	
(q)

	
“Lender” means Sprott Resource Lending Partnership, a general partnership organized and existing under the laws of the Province of Ontario;

 

	
  

	
(r)

	
“Lien” means any mortgage, charge, lien, hypothec or encumbrance, whether fixed or floating on, or any Security Interest in, any property, whether real, personal or mixed, tangible or intangible, any pledge or hypothecation of any property, any royalty payment obligation, any deposit arrangement, priority, conditional sale agreement, other title retention agreement or equipment trust, capital lease or other security arrangement of any kind;

 

	
  

	
(s)

	
“Material Adverse Effect” means a material adverse effect on the assets, properties, businesses, results of operations, prospects or condition (financial or otherwise);

 

	
  

	
(t)

	
“Maturity Date” has the meaning set forth in subsection 4(a) below;

 

	
  

	
(u)

	
“Note” has the meaning set forth in subsection 9(a) below;

 

	
  

	
(v)

	
“Notice Date” has the meaning set forth in section 5 below;

 

	
  

	
(w)

	
“Outstanding Balance” has the meaning set forth in subsection 4(a) below;

 

	
  

	
(x)

	
“Permitted Lien” means any of the following items: (i) Security Interests granted by the Borrower pursuant to the Security; (ii) easements, rights of way, servitudes or other similar rights; (iii) any rights reserved to or vested in any governmental entity to levy taxes, provided always that all such taxes, levies, rates, assessments or  other governmental charges thereunder are not delinquent, or if delinquent, are being contested in good faith by appropriate proceedings; (iv) undetermined or inchoate mechanics’ liens and similar liens for which payment for services rendered or goods supplied is not delinquent as of the date hereof; and (v) liens granted in the ordinary course of business to a governmental entity respecting operations pertaining to workers compensation, unemployment insurance, employer’s health taxes or other social security or a statutory obligations that secure amounts that are not yet due or that are being diligently contested in good faith by appropriate proceedings;

 

	
  

	
(y)

	
“Person” means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, body corporate, unincorporated association, trust, trustee, executor, administrator or other legal 

  

3

  

 

	
  

	
personal representative, government or Governmental Authority or entity, however designated or constituted;

 

	
  

	
(z)

	
“Public Record” has the meaning set forth in subsection 11(j) below;

 

	
  

	
(aa)

	
“Restricted Payment” means, with respect to the Borrower or any Subsidiary, (a) any dividend or other distribution on account of share capital, or (b) any payment on account of the purchase, redemption, retirement or acquisition of, or of the setting apart of money for a sinking or other analogous fund for the purchase, redemption, retirement or acquisition of any equity securities or any option, warrant or other right to acquire equity securities;

 

	
  

	
(bb)

	
“Regulation D” means Regulation D as promulgated under the U.S. Securities Act;

 

	
  

	
(cc)

	
“Regulation S” means Regulation S as promulgated under the U.S. Securities Act;

 

	
  

	
(dd)

	
“Securities” means this Agreement, the Promissory Note and the Bonus Shares;

 

	
  

	
(ee)

	
“Security Documents” means, collectively, the security and other agreements and documents listed in Section 9 below and delivered pursuant to Section 10 of this Agreement;

 

	
  

	
(ff)

	
“Security Interest” means any security interest, assignment by way of security, mortgage, charge (whether fixed or floating), hypothec, deposit arrangement, pledge,  lien, encumbrance, preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, and any financing lease having substantially the same economic effect as any of the foregoing);

 

	
  

	
(gg)

	
“Structuring Fee” has the meaning set forth in Section 7 below;

 

	
  

	
(hh)

	
“Subsidiaries” means, with respect to the Borrower, any corporation of which at least a majority of the outstanding shares to which there is attached voting power under ordinary circumstances to elect a majority of the board of directors of such corporation, shall at the relevant time be owned directly or indirectly by the Borrower, one or more Subsidiaries of the Borrower, or any combination thereof, and for greater certainty, shall include those corporations listed on Schedule “B” hereto, and “Subsidiary” shall mean any one of them;

 

	
  

	
(ii)

	
“Term Sheet” means the Term Sheet for the Facility dated March 13, 2013, between the Lender and the Borrower;

 

	
  

	
(jj)

	
“United States” means the “United States” as that term is defined in Rule 902(1) of Regulation S and, without restricting the generality of the foregoing, generally means United States of America, its states, territories, possessions and the District of Columbia;

 

	
  

	
(kk)

	
“U.S. Person” means a U.S. person as that term is defined in Rule 902(k) of Regulation S; and

 

	
  

	
(ll)

	
“U.S. Securities Act” means the United States Securities Act of 1933, as amended.

 

  

4

  

	
2.

	
Facility Advance.  Subject to and upon the fulfilment of the conditions precedent contained in Section 10 of this Agreement, the Lender will advance the principal amount of the Facility, or such lesser amount as the Borrower may request, to the Borrower or as the Borrower may otherwise direct.

 

	
3.

	
Use of Proceeds.  The Borrower covenants and agrees with the Lender that the proceeds of the Facility will be used by the Borrower for the continued development of the Borrower's Mt. Todd Gold project located in the Northern Territory, Australia and its Guadalupe de los Reyes project located in Mexico and for general working capital purposes, and for no other purpose whatsoever without the express written consent of the Lender.

 

	
4.

	
Term and Prepayment.

 

	
  

	
(a)

	
Subject to the rights of the Lender under Section 16 to accelerate payment of all monies owing hereunder, the principal amount of the Advance, together with all accrued but unpaid interest, fees and other costs or charges payable hereunder from time to time (collectively the “Outstanding Balance”), will be immediately due and payable in full by the Borrower to the Lender on March 28, 2014 (“Maturity Date”).

 

	
  

	
(b)

	
If after the Advance, the Borrower or any of its Subsidiaries sell or otherwise dispose of any material assets outside of the ordinary course of business in excess of $1,000,000 in the aggregate (excluding the Colomac Mill Equipment), the Borrower will pay or cause to be paid to the Lender 50% of the proceeds from such sale, disposition in excess of $1,000,000 in the aggregate, net of reasonable selling costs, to be applied on account of the Facility up to the full amount of the Outstanding Balance.

 

	
  

	
(c)

	
If after the Advance, the Borrower or any of its Subsidiaries close one or more equity financings in excess of $1,000,000 in the aggregate (which for greater certainty shall not include the exercise of any options or warrants issued by the Borrower or any Subsidiary), the Borrower will pay or cause to be paid to the Lender 50% of the proceeds of such equity financings in excess of $1,000,000 in the aggregate, net of reasonable financing costs, to be applied on account of the Facility up to the full amount of the Outstanding Balance.

 

	
  

	
(d)

	
The Borrower may voluntarily prepay the Facility in whole at any time before maturity, without penalty provided that not less than four months of interest on the total principal amount of the Facility has been paid to the Lender, and further provided that such prepayment is made on the last business day of a calendar month after not less than 10 Business Days' prior written notice of the Borrower's intention to prepay the Facility.

 

	
5.

	
Extension of Term.  The term of the Facility and the Maturity Date may be extended for an additional term of one (1) year, provided that no default or Event of Default shall have occurred and be continuing in the Lender’s reasonable opinion and that the Lender is satisfied with the Borrower’s ability to pay the outstanding balance of the Facility and to perform its obligations under the Facility Documents and that none of the Security granted by the Borrower to the Lender is or is about to be impaired or in jeopardy in any material respect, and further provided that the Borrower shall have given the Lender not less than 30 days’ prior written notice of a request for such extension (the date such notice is received is the “Notice Date”), together with payment of an extension fee equal to three and one half percent (3.5%) of the outstanding balance of the Facility as at the date of such notice (the "Extension Fee"), which for greater certainty will include the outstanding principal amount and all accrued but unpaid interest, bonus and other 

  

5

  

 

	
  

	
costs, fees or charges payable hereunder from time to time, payable in common shares of the Borrower (the "Extension Fee Shares") issued at a deemed price (subject to all required regulatory approvals) equal to a 10% discount to the volume weighted average trading price of the Borrower's common shares as they trade on the Exchange for the five trading days immediately prior to the Notice Date.  The Extension Fee Shares shall be subject to a maximum hold period under applicable Canadian securities laws of four months and one day from their date of issue.  The Extension Fee Shares shall be “restricted securities” under the Rule 144 of the U.S. Securities Act and will be subject to a minimum six-month hold period pursuant to the provisions of Rule 144 of the U.S. Securities Act.  If for any reason the Borrower is unable or fails to deliver the Extension Fee Shares to the Lender as contemplated in this Section 5, the Borrower may pay the Extension Fee in cash.  The Extension Fee is only incurred if the Lender extends the term of the Facility as contemplated in this Section 5, and, if incurred, the Extension Fee is due on the original Maturity Date.

 

	
6.

	
Interest. Interest will accrue on the Outstanding Balance from the date of Advance at the rate of eight percent (8%) per annum, calculated daily and compounded monthly and shall be payable by the Borrower to the Lender monthly on the last Business Day of every month, as well as after maturity, default and judgment. The Borrower covenants and agrees to establish and maintain throughout the term of the Facility a pre-authorized electronic debit arrangement with a financial institution on terms satisfactory to the Lender, pursuant to which all payments coming due to the Lender in respect of interest and other amounts coming due under this Agreement shall be made.

 

	
7.

	
Structuring Fee. In consideration for the structuring and syndication of the Facility, the Borrower will pay to the Lender a structuring fee (the “Structuring Fee”) comprised of:

 

	
  

	
(a)

	
a cash payment in the amount of $100,000, payable by the Borrower to the Lender concurrently with the Advance of the Facility hereunder; and

 

	
  

	
(b)

	
a cash payment in the amount of $125,000 if, on the Closing Date the Borrower fails to draw down the Advance in circumstances where the Lender is prepared to make the Advance in accordance with the terms and conditions contained in this Agreement, such amount to be payable within seven (7) days of the earlier of: (i) the date on which the Borrower has made a determination not to proceed with the draw down of the Advance, and (ii) the Closing Date.

 

If the Borrower satisfies all conditions precedent to the Advance as set forth in Section 10 and the Lender fails to complete the Advance, the Lender shall repay the Structuring Fee to the Borrower in full and final settlement of the Lender’s obligations to the Borrower in respect of the Credit Facility.  In all other circumstances, the Structuring Fee shall be non-refundable.

 

	
8.

	
Bonus. In consideration for the Lender entering into this Agreement, the Borrower shall pay to the Lender, or as the Lender may direct, a non-refundable bonus in the amount of $250,000 (the “Bonus”), payable in the form of 125,798 common shares in the capital of the Borrower (the “Bonus Shares”) issued at a deemed price (subject to all required regulatory approvals) equal to a 10% discount to the volume weighted average trading price of the Borrower's common shares as they trade on the Exchange for the five trading days immediately prior to the date of execution of the Term Sheet.  The Bonus Shares shall be subject to a maximum hold period under applicable Canadian securities laws of four months and one day from their date of issue. The Bonus Shares shall be “restricted securities” under the Rule 144 of the U.S. Securities Act and will be subject to a minimum six-month hold period pursuant to the provisions of Rule 144 of the

  

6

  

 

	
  

	
U.S. Securities Act.  If for any reason the Borrower is unable or fails to deliver the Bonus Shares to the Lender as contemplated in this Section 8, the Borrower shall pay the Bonus in cash.

 

	
9.

	
Security.  As security for the Facility the Borrower will execute and deliver, or cause to be executed and delivered, to the Lender:

 

	
  

	
(a)

	
a promissory note in the form attached hereto as Schedule “A” (the “Note”) in the principal amount of the Advance; and

 

	
  

	
(b)

	
a general security agreement (the “GSA”) under which the Borrower will grant to the Lender a first priority Security Interest over all of its present and after-acquired personal property and all proceeds thereof,

 

all in form and terms satisfactory to the Lender and its counsel (collectively, the “Security”).

 

	
10.

	
Conditions Precedent to the Advance.  As conditions precedent to the Advance under the Facility by the Lender:

 

	
  

	
(a)

	
receipt by the Lender of the following documents, each in full force and effect, and in form and substance satisfactory to the Lender:

 

	
  

	
(i)

	
this Agreement;

 

	
  

	
(ii)

	
all of the security documents referred to in Section 9 above and the documents, securities and instruments referred therein;

 

	
  

	
(iii)

	
legal opinions of the Borrower’s counsel;

 

	
  

	
(iv)

	
a certificate of status for the Borrower issued by the Yukon corporate registry and a certificate of good standing for the Borrower issued by BC Registry Services;

 

	
  

	
(v)

	
a certified copy of the Constating Documents of the Borrower;

 

	
  

	
(vi)

	
a certified copy of the directors’ resolutions of the Borrower with respect to its authorization, execution and delivery of the Facility Documents to which it is a party;

 

	
  

	
(vii)

	
a certificate of an officer of the Borrower as to corporate matters and certifying that (A) all of the representations and warranties of the Borrower contained herein or in any other Facility Document are true and correct on and as of the Closing Date, and (B) no Default or Event of Default has occurred and is continuing;

 

	
  

	
(viii)

	
Exchange and all other regulatory approvals, including approvals to the transactions contemplated herein, if required; and

 

	
  

	
(ix)

	
such other documents, certificates, opinions and agreements which the Lender may reasonably require;

  

7

  

 

	
  

	
(b)

	
the Lender will have completed all registrations and other filings that may be prudent or necessary to perfect the Lender’s security therein, all in form and terms satisfactory to the Lender and its counsel;

 

	
  

	
(c)

	
the representations and warranties of the Borrower contained in Section 11 will continue to be true and correct and the Borrower will have complied with all the covenants set out herein that are required to be complied with by it prior to the making of the Advance under the Facility by the Lender;

 

	
  

	
(d)

	
the Lender shall have completed and be satisfied with its due diligence review of the Borrower and its properties and assets;

 

	
  

	
(e)

	
there shall have been no material adverse change in the assets, properties, business, results of operations, prospects or condition (financial or otherwise) of the Borrower or any of its Subsidiaries, taken as a whole, since the date of the Term Sheet;

 

	
  

	
(f)

	
the Lender shall have received the approval of its credit committee and other required authorizations, including the approval of its partners; and

 

	
  

	
(g)

	
such other conditions precedent as the Lender may require based on its due diligence review.

 

If any of the foregoing conditions precedent are not satisfied or waived by the Lender in writing on or before March 31, 2013, this Agreement will terminate and the Lender will be under no further obligation to the Borrower in connection with the transaction contemplated herein.

 

	
11.

	
Representations and Warranties of the Borrower.  The Borrower represents and warrants to the Lender as follows:

 

	
  

	
(a)

	
the Borrower exists as a company under the Business Corporations Act (Yukon), and has not discontinued or been dissolved under that Act and is in good standing with respect to the filing of annual reports thereunder;

 

	
  

	
(b)

	
the Borrower exists as an extra-provincial company under the Business Corporations Act (British Columbia);

 

	
  

	
(c)

	
the Borrower has the corporate power and authority to (i) carry on its business as now being conducted and is licensed or registered or otherwise qualified in all jurisdictions where in the nature of its assets or the business transacted makes such licensing, registration or qualification necessary, (ii) acquire, own, hold, lease and mortgage or grant security in its assets including real property and personal property and (iii) enter into and perform its obligations under this Agreement and all other documents or instruments delivered hereunder;

 

	
  

	
(d)

	
this Agreement and all ancillary instruments or documents issued, executed and delivered hereunder by the Borrower, has been duly authorized by all necessary action of the Borrower and each constitutes or will constitute a legal, valid and binding obligation of each, enforceable against the Borrower in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights and remedies of creditors and to the general principles of equity;

  

8

  

 

	
  

	
(e)

	
neither the Borrower nor any Subsidiary has committed any act of bankruptcy, or proposed a compromise or arrangement to its creditors generally, had a petition or receiving order in bankruptcy filed against it, made a voluntary assignment in bankruptcy, taken any proceedings with respect to a compromise or arrangement, taken any proceedings to have a receiver appointed for any of its property or had any execution or distress become enforceable or become levied upon any of its property;

 

	
  

	
(f)

	
the Borrower is not in breach of or in default under any material agreement which if terminated or cancelled could reasonably be expected to have a Material Adverse Effect on the Borrower, or any obligation in respect of the Indebtedness and the execution and delivery of this Agreement and all ancillary instruments or documents issued and delivered hereunder or thereunder, and the performance of the terms hereof and thereof will not be, or result in, a violation or breach of, or default under the Borrower’s Constating Documents, any law, any judgment, agreement or instrument to which it is a party or may be bound;

 

	
  

	
(g)

	
no material litigation or administrative proceedings before any court or Governmental Authority are presently ongoing, or have been threatened in writing, or to the best of the Borrower’s knowledge are pending, against the Borrower or any Subsidiary or any of their respective properties or assets or affecting any of their properties or assets which could reasonably be expected to have a Material Adverse Effect on the Borrower or any Subsidiary;

 

	
  

	
(h)

	
the audited financial statements for the Borrower for the twelve-months ended December 31, 2012, including all notes and management’s discussion and analysis publicly disclosed in connection therewith (collectively, the “Financial Statements”), fairly present, in accordance with GAAP, the financial affairs of the Borrower and its Subsidiaries as of the date to which they are made, and have been prepared in accordance with GAAP;

 

	
  

	
(i)

	
the Borrower is in compliance, in all material respects, with its continuous disclosure obligations under applicable securities laws and, without limiting the generality of the foregoing, there has been no material adverse change (actual, contemplated or threatened) in the assets, properties, business, results of operations, prospects or condition (financial or otherwise) of the Borrower or any of its Subsidiaries, taken as a whole, since the date of release of the Financial Statements, other than as publicly disclosed in writing by the Borrower prior to the date of this Agreement;

 

	
  

	
(j)

	
the information circulars, prospectuses, annual information forms, offering memoranda, financial statements, material change reports and news releases filed with the Exchange and the securities commissions in those jurisdictions in which the Borrower is a reporting issuer on or during the twelve (12) months preceding the date hereof (collectively, the “Public Record”), are complete and accurate in all material respects and omit no material facts, the omission of which makes the Public Record, or any particulars therein, misleading, misrepresentative or incorrect in any material respect;

 

	
  

	
(k)

	
the Borrower and each of its Subsidiaries are the beneficial owners of the properties, business and assets referred to as being owned by them in the Public Record;

 

	
 

 

	
(l)

	
the Borrower is the registered and beneficial owner of 1,400,000 common shares in the capital of Midas Gold Corp. and the Borrower's wholly-owned subsidiary, Vista Gold

  

9

  

 

 

	
  

	
 

	
U.S. Inc., is the registered and beneficial owner of 30,402,615 common shares in the capital of Midas Gold Corp.;

 

	
  

	
(m)

	
the Borrower and its Subsidiaries have conducted and are conducting their respective businesses in compliance with all applicable laws, bylaws, rules and regulations of each jurisdiction in which their businesses are now carried on and hold all licenses, registrations, permits, consents or qualifications (whether governmental, regulatory or otherwise) required in order to enable their businesses to be carried on as now conducted and all such licenses, registrations, permits, consents and qualifications are valid and subsisting and in good standing and neither the Borrower nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such licenses, registrations, permits, consents or qualifications which could reasonably be expected to have any Material Adverse Effect on the Borrower and its Subsidiaries, taken as a whole;

 

	
  

	
(n)

	
no order ceasing or suspending trading in securities of the Borrower or prohibiting the sale of securities by the Borrower has been issued and no proceedings for this purpose have been instituted, are pending, or to the best of the Borrower’s knowledge, contemplated or threatened;

 

	
  

	
(o)

	
neither Canada Revenue Agency, the United States Internal Revenue Service, nor any other taxation authority has asserted or, to the best of the Borrower’s knowledge, has threatened to assert any assessment, claim or liability for taxes due or to become due in connection with any review or examination of the tax returns of the Borrower or any Subsidiary filed for any year which would have Material Adverse Effect on the Borrower and its Subsidiaries, taken as a whole;

 

	
  

	
(p)

	
neither the Borrower nor any Subsidiary is a party to any material contract other than as disclosed in the Public Record;

 

	
  

	
(q)

	
the Borrower is a reporting issuer under the Securities Acts of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut (collectively, the "Reporting Jurisdictions") and is in compliance with its obligations under those Acts and under the rules, regulations and policies of the Exchange;

 

	
  

	
(r)

	
as at the date of this Agreement, except as disclosed in the Financial Statements, in the Public Record, in any filings within any governmental body or securities regulatory authority or to the Lender in writing and as contemplated by this Agreement, no holder of outstanding shares in the capital of the Borrower will be entitled to any pre-emptive or any similar rights to subscribe for any of the shares in the capital of the Borrower or other securities of the Borrower and no rights, warrants or options to acquire, or instruments convertible into or exchangeable for any shares in the capital of the Borrower are outstanding;

 

	
  

	
(s)

	
except as disclosed on Schedule “B” hereto, the Borrower has no direct or indirect subsidiary corporations;

 

	
  

	
(t)

	
the Borrower's outstanding common shares are listed and posted for trading on the Exchange;

  

10

  

 

	
  

	
(u)

	
the Borrower has the power and capacity to create, issue and deliver the Bonus Shares and, upon the issuance thereof, the Bonus Shares will be validly issued as fully paid and non-assessable common shares in the capital of the Borrower;

 

	
  

	
(v)

	
the issuance of the Bonus Shares is exempt from the prospectus requirements of Applicable Securities Legislation and no document will be required to be filed and no proceeding taken or approval, permit, consent, order or authorization obtained by the Borrower under the Applicable Securities Legislation in connection with the first trade of the Bonus Shares provided that: the Borrower is and has been a “reporting issuer” (as defined under the Applicable Securities Law) in a jurisdiction of Canada for the four months immediately preceding the first trade; at the time of such trade, at least four months have elapsed from the “distribution date” (as such term is defined in National Instrument 45-102 Resale of Securities (“NI 45-102”); the certificates representing the Bonus Shares carry a legend, or an ownership statement issued under a direct registration system or other electronic book-entry system acceptable to the regulator bears a legend restriction notation, as prescribed by section 2.5(2)3(i) of NI 45-102; such trade is not a “control distribution” as defined in NI 45-102; no unusual effort is made to prepare the market or create a demand for the Bonus Shares that are the subject of the trade; no extraordinary commission or other consideration is paid to a person or company in respect of the trade; and, if the Lender is an insider (as defined under Applicable Securities Legislation) of the Borrower, the Lender has no reasonable grounds to believe that the Borrower is in default of “securities legislation” (as defined in National Instrument 14-101 Definitions));

 

	
  

	
(w)

	
all factual information previously or contemporaneously furnished to the Lender by or on behalf of the Borrower for purposes of or in connection with this Agreement or any transaction contemplated hereby is true and accurate in every material respect and such information is not incomplete by the omission of any material fact necessary to make such information not misleading in any material respect; and

 

	
  

	
(x)

	
the Borrower is solvent and is generally able to pay its debts as they come due and will be able to do so after giving effect to the transactions contemplated in this Agreement.

 

	
12.

	
Representations and Warranties of the Lender.  The Lender represents and warrants to the Borrower as follows:

 

	
  

	
(a)

	
the Lender, on its own behalf and on behalf of any beneficial purchaser for whom it is acting (“Beneficial Purchaser”),  understands and acknowledges that none of the Securities have been registered under the U.S. Securities Act or any applicable securities laws of any state of the United States and accordingly, the Securities may not be offered, sold, pledged, assigned or otherwise transferred into the United States or to, or for the account or benefit of, a U.S. Person or person in the United States unless registered under the U.S. Securities Act and any applicable securities laws of any state of the United States or pursuant to an exemption from such registration requirements and the Lender has no intention to distribute either directly or indirectly any of the Securities in the United States or to, or for the account or benefit of a U.S. Person, except in compliance with the U.S. Securities Act and any applicable state securities laws;

 

	
  

	
(b)

	
the Lender and any Beneficial Purchaser acknowledges that the Securities are "restricted securities", as such term is defined under Rule 144 under the U.S. Securities Act, the certificate representing the Bonus Shares will bear a legend to such effect, and the Lender

  

11

  

 

	
  

	
 

	
and any Beneficial Purchaser will not be able to offer, sell, pledge or otherwise transfer, directly or indirectly, any of the Bonus Shares, except pursuant to the terms of the legend; provided, that the legend may be removed by delivery to the registrar and transfer agent and the Borrower of an opinion of counsel, of recognized standing, in form and substance reasonably satisfactory to the Borrower, to the effect that such legend is no longer required under applicable requirements of the U.S. Securities Act.

 

	
  

	
(c)

	
the Lender and any Beneficial Purchaser acknowledge that the Securities are being offered and sold by the Borrower pursuant to the exemption from the registration requirements of the U.S. Securities Act provided by Rule 506 of Regulation D thereunder and Section 4(2) thereof, the Lender and each Beneficial Purchaser have completed the United States Accredited Investor Certificate attached hereto a “Schedule D”; and

 

	
  

	
(d)

	
the Lender consents to the Borrower making a notation on its records or giving instructions to any transfer agent of the Borrower in order to implement the restrictions on transfer set forth and described in this Agreement.

 

	
13.

	
Positive Covenants of the Borrower.  The Borrower covenants and agrees that so long as any monies will be outstanding under this Agreement, it will:

 

	
  

	
(a)

	
at all times maintain its corporate existence and the corporate existence of all of its Subsidiaries;

 

	
  

	
(b)

	
use commercially reasonable efforts to maintain its reporting issuer status in each Reporting Jurisdiction, without default, from the date hereof until repayment in full of the Facility to the Lender;

 

	
  

	
(c)

	
duly perform its obligations under this Agreement and all other agreements and instruments executed and delivered hereunder or thereunder;

 

	
  

	
(d)

	
promptly pay when due all fees payable in connection with the Facility or this Agreement and indemnify and save harmless the Lender from all claims in respect of any such fees;

 

	
  

	
(e)

	
carry on and conduct its business in a proper business-like manner in accordance with good business practice and will keep or cause to be kept proper books of account in accordance with GAAP, and provide the Lender with access to all of its books and records on reasonable notice and during normal business hours;

 

	
  

	
(f)

	
at all times comply with all applicable laws, except where such voluntary non-compliance could not reasonably be expected to have a Material Adverse Effect on the Borrower or any Subsidiary;

 

	
  

	
(g)

	
pay and discharge promptly when due, all taxes, assessments and other governmental charges or levies imposed upon it or upon its properties or assets or upon any part thereof, as well as all claims of any kind (including claims for labour, materials and supplies) which, if unpaid, would by law become a Lien, trust or other claims upon any such properties or assets;

	
  

	
(h)

	
give to the Lender quarterly internal financial reports, financial summaries and such other information and reports with respect to the Borrower or any Subsidiaries as the Lender may request from time to time during the term of this Agreement (which for greater

  

12

  

 

 

	
  

	
 

	
certainty, will include a balance sheet, income statement, statement of aged trade payables);

 

	
  

	
(i)

	
provide the Lender with written notice of any proposed financing made by or to the Borrower concurrently with, but not prior to, public disclosure of such financing;

 

	
  

	
(j)

	
furnish and give to the Lender (if such is the case) notice that an Event of Default has occurred and, if applicable, is continuing or notice in respect of any event which would constitute an Event of Default hereunder with the passage of time and specifying the nature of same; and

 

	
  

	
(k)

	
perform and do all such acts and things as are necessary to perfect and maintain the Security provided to the Lender pursuant to this Agreement.

 

	
14.

	
Negative Covenants of the Borrower.  The Borrower covenants and agrees with the Lender that the Borrower will not without first obtaining the written consent of the Lender (which may be withheld in the Lender’s sole discretion):

 

	
  

	
(a)

	
except for the Permitted Liens, make, give, create or permit or attempt to make, give or create any Lien over any assets of the Borrower or any Subsidiary;

 

	
  

	
(b)

	
change the name of the Borrower or any Subsidiary, without notice to the Lender;

 

	
  

	
(c)

	
in the case of the Borrower or any Subsidiary, except in respect of a proposed continuance of the Borrower from the Yukon to British Columbia under the Business Corporations Act (British Columbia), make any change to its Constating Documents;

 

	
  

	
(d)

	
allot and issue any new shares of any Subsidiary;

 

	
  

	
(e)

	
in the case of the Borrower or any Subsidiary, declare or provide for any dividends or other payments or distributions based on share capital;

 

	
  

	
(f)

	
in the case of the Borrower or any Subsidiary, redeem or purchase any of its shares;

 

	
  

	
(g)

	
make any sale or disposition of any substantial or material part of its business, assets or undertaking, or cause or permit any sale or disposition by any Subsidiary of any substantial or material part of its business, assets or undertaking, outside of the ordinary course of business, unless the Borrower shall have sought and received the prior written approval of the Lender in respect of any such sale or disposition and the net proceeds therefrom are remitted to the Lender in accordance with Section 4(b), other than:

 

	
  

	
(i)

	
a sale of the Colomac Mill Equipment;

 

	
  

	
(ii)

	
a transfer of the shares of Vista Gold Australia Pty. Ltd. by Vista Minerals (Barbados) Corp. to a wholly-owned Subsidiary of the Borrower to be incorporated in Australia; or

 

	
  

	
(iii)

	
any disposition made pursuant to and in accordance with the terms of the earn-in agreements currently in existence relating to the shares of any Subsidiary of the Borrower as more particularly described in Schedule “C”.

 

 

  

13

  

 

 

	
  

	
(h)

	
except for Indebtedness in respect of the Facility and purchase money security interests and equipment leases entered into in the ordinary course of business, incur any Indebtedness or cause or permit any Subsidiary to incur any Indebtedness;

 

	
  

	
(i)

	
in the case of the Borrower or any Subsidiary, make any Restricted Payment;

 

	
  

	
(j)

	
in respect of itself or any Subsidiary, pay out any shareholders loans or other indebtedness to non-arm’s length parties or enter into any transactions with any non-arm’s length parties other than on commercially reasonable terms, unless such payment or transaction is with the Borrower and the proceeds of such payment and all benefits of such transaction continue to be subject to the Security after giving effect to such payment or transaction;

 

	
  

	
(k)

	
amend, modify, vary or terminate any material contract, license, permit or other authorization now held by the Borrower or any of its Subsidiaries where such amendment, modification, variance or termination has a Material Adverse Effect on the Borrower or the applicable Subsidiary;

 

	
  

	
(l)

	
make any material payments to shareholders, affiliates or executives, other than commercially reasonable salaries and employment bonuses that are consistent with past company practices, without the prior written approval of the Lender (which approval may be withheld in its sole discretion); or

 

	
  

	
(m)

	
in respect of itself or any Subsidiary, guarantee the obligations of any other person, directly or indirectly, other than obligations expressly permitted by this Agreement.

 

	
15.

	
Events of Default.  Each and every one of the events set forth in this Section will be an event of default (“Event of Default”):

 

	
  

	
(a)

	
if the Borrower fails to make any payment of principal or interest when due hereunder, and such failure continues for two (2) Business Days;

 

	
  

	
(b)

	
if the Borrower defaults in observing or performing any term, covenant or condition of this Agreement or any Security or other document delivered hereunder or in connection with the Facility, other than the payment of monies as provided for in subsection (a) hereof, on its part to be observed or performed and such failure continues for five (5) Business Days;

 

	
  

	
(c)

	
if the Borrower commits an event of default under the Security;

 

	
  

	
(d)

	
if the Borrower is in default of any material prescribed filings with applicable securities regulatory authorities, the Exchange or market on which its shares then trade (collectively, the “Authorities”), or is subject to any suspension in excess of two (2) trading days or cease trade order issued by any of the Authorities;

 

	
  

	
(e)

	
if any of the Borrower’s representations, warranties or other statements in this Agreement or any other collateral document delivered hereunder or in connection with the Facility were at the time given false or misleading in any material respect;

 

 

  

14

  

 

	
  

	
(f)

	
if the Borrower is in default under any agreement which if terminated could reasonably be expected to result in a Material Adverse Effect on the Borrower and written notice of such default has been given to the Borrower by the other party thereto;

 

	
  

	
(g)

	
if the Borrower or any Subsidiary defaults in observing or performing any term, covenant or condition in respect of any Indebtedness exceeding $500,000 in the aggregate, by which they are bound;

 

	
  

	
(h)

	
if the Borrower permits any sum which has been admitted as due, or is not disputed to be due, and which forms or is capable of being made a charge upon any of the assets or undertaking of the Borrower to remain unpaid or not challenged for 30 days after proceedings have been taken to enforce the same;

 

	
  

	
(i)

	
if the Borrower, directly or indirectly through any Subsidiary, ceases or threatens to cease to carry on business;

 

	
  

	
(j)

	
if any order is made or issued by a competent regulatory authority prohibiting the trading in shares of the Borrower or if the Borrower’s common shares are suspended or de-listed from trading on any stock exchange;

 

	
  

	
(k)

	
if in the reasonable opinion of the Lender a Material Adverse Effect in respect of the Borrower or any of its Subsidiaries shall have occurred;

 

	
  

	
(l)

	
if the Borrower or any Subsidiary petitions or applies to any tribunal for the appointment of a trustee, receiver or liquidator or commences any proceedings under any bankruptcy, insolvency, readjustment of debt or liquidation law of any jurisdiction, whether now or hereafter in effect;

 

	
  

	
(m)

	
any change of control of the Borrower (“change of control” being defined as the acquisition by any person of ownership of or control or direction over, directly or indirectly, (i) greater than 50% of the outstanding voting securities of the Borrower or (ii) greater than 20% of the outstanding voting securities of the Borrower and in connection therewith such person appoints or obtains the right to appoint one or more nominees to the board of directors of the Borrower); or

 

	
  

	
(n)

	
if any petition or application for appointment of a trustee, receiver or liquidator is filed, or any proceedings under any bankruptcy, insolvency, readjustment of debt or liquidation law are commenced, against the Borrower which is not opposed by the Borrower in good faith, or an order, judgment or decree is entered appointing any such trustee, receiver, or liquidator, or approving the petition in any such proceeding.

 

	
16.

	
Effect of Event of Default.  If any one or more of the Events of Default occur or occurs and is or are continuing, the Lender may without limitation, subject to any other rights it may have in law or pursuant to this Agreement or any other document or instrument delivered hereunder, demand immediate payment of all monies owing hereunder.

 

	
17.

	
Lender’s Expenses.  The Borrower will pay the Lender’s legal fees (on a solicitor and own client basis) and other out-of-pocket expenses incurred in connection with its due diligence review and the negotiation and preparation of this Agreement, the Security and the closing of the transaction contemplated herein up to a maximum amount of $25,000, as well as all legal fees (on a solicitor and own client basis) and all other costs, charges and expenses of and incidental to the collection

 

 

  

15

  

 

	
 

	
or recovery of all amounts owing hereunder, including but not limited to the enforcement of the Security granted hereunder or otherwise. In connection with the Advance, the Lender is irrevocably authorized and directed to deduct all such amounts from the proceeds of the Advance as it may require to cover all such fees and expenses incurred up to and including the closing of the transactions contemplated herein. All amounts payable under this Section 17 thereafter will be payable by the Borrower to the Lender immediately upon demand for payment. If not paid forthwith upon demand for payment, such amount will be added to and form part of the principal amount of the Facility and shall accrue interest from the date of demand as if it had been advanced by the Lender to the Borrower hereunder.

 

	
18.

	
Indemnity.  The Borrower agrees to indemnify and save harmless the Lender and each of its directors, officers, employees, affiliates and agents from and against all liabilities, claims, losses, damages and reasonable costs and expenses in any way caused by or arising directly or indirectly from or in consequence of the occurrence of any Event of Default under this Agreement, except as a result of the Lender’s gross negligence or wilful misconduct.

 

	
19.

	
Notices.  In this Agreement:

 

	
  

	
(a)

	
any notice or communication required or permitted to be given under this Agreement will be in writing and will be considered to have been given if delivered by hand, transmitted by facsimile transmission or mailed by prepaid registered post to the address or facsimile transmission number of each party set out below:

 

	
  

	
(i)

	
if to the Lender:

 

Sprott Resource Lending Partnership

Suite 2750, 200 Bay Street,

Toronto, Ontario, M5J 2J2,

 

Attention:                  Chief Financial Officer

Fax: No.                      (416) 977-9555

 

	
  

	
(ii)

	
if to the Borrower:

 

Vista Gold Corp.

7961 Shaffer Parkway, Suite 5

Littleton, Colorado  80127

 

Attention:                 Jack Engele

Fax No:                      (720) 981-1186

 

or to such other address or facsimile transmission number as any party may designate in the manner set out above; and

 

	
  

	
(b)

	
notice or communication will be considered to have been received:

 

	
  

	
(i)

	
if delivered by hand during business hours on a Business Day, upon receipt by a responsible representative of the receiver, and if not delivered during business hours, upon the commencement of business on the next Business Day;

 

 

  

16

  

 

	
  

	
(ii)

	
if sent by facsimile transmission during business hours on a Business Day, upon the sender receiving confirmation of the transmission, and if not transmitted during business hours, upon the commencement of business on the next Business Day; and

 

	
  

	
(iii)

	
if mailed by prepaid registered post upon the fifth Business Day following posting; except that, in the case of a disruption or an impending or threatened disruption in postal services every notice or communication will be delivered by hand or sent by facsimile transmission.

 

	
20.

	
Assignment.  The Borrower acknowledges and agrees that the Lender may assign all or part of the Facility, this Agreement and all collateral agreements, documents or instruments delivered hereunder to one or more assignees, free from any right of set-off or counterclaim or equity (other than such as arise under this Agreement or the Security), subject only to the Lender’s notification of such assignment or assignments (including name and contact details of the assignee or assignees) being given in writing to the Borrower and subject to such assignments being in compliance with the registration requirements of the U.S. Securities Act and any applicable securities laws of any state of the United States or an available exemption from such registration requirements.

 

	
21.

	
Enurement.  This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

 

	
22.

	
Waivers.  No failure or delay on the Lender’s part in exercising any power or right hereunder will operate as a waiver thereof.

 

	
23.

	
Remedies are Cumulative.  The Lender’s rights and remedies hereunder are cumulative and not exclusive of any rights or remedies at law or in equity.

 

	
24.

	
Time.  Time is of the essence of this Agreement and all documents or instruments delivered hereunder.

 

	
25.

	
Criminal Code Compliance.  In this Section the terms “interest”, “criminal rate” and “credit advanced” have the meanings ascribed to them in Section 347 of the Criminal Code (Canada) as amended from time to time.  The Borrower and the Lender agree that, notwithstanding any agreement to the contrary, no interest on the Facility or the credit advanced by the Lender under this Agreement will be payable in excess of that permitted under the laws of Canada.  If the effective rate of interest, calculated in accordance with generally accepted actuarial practices and principles, would exceed the criminal rate on the credit advanced, then:

 

	
  

	
(a)

	

the elements of return which fall within the term “interest” will be reduced to the extent necessary to eliminate such excess;

 

	
  

	
(b)

	
any remaining excess that has been paid will be credited towards prepayment of the Facility; and

 

	
  

	
(c)

	
any overpayment that may remain after such crediting will be returned forthwith to the Borrower upon demand, and, in the event of dispute, a Fellow of the Canadian Institute of Actuaries appointed by the Lender will perform the relevant calculations and determine the reductions, modifications and credits necessary to effect the foregoing and the same will be conclusive and binding on the parties.  This Agreement, the Note and all

 

 

  

17

  

 

	
  

	
 

	
related agreements and documents will automatically be modified to reflect such modifications without the necessity of any further act or deed of the Borrower and the Lender to give effect to them.

 

	
26.

	
Invalidity.  If at any time any one or more of the provisions hereof is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions hereof will not in any way be affected or impaired thereby to the fullest extent possible by law.

 

	
27.

	
Governing Laws.  This Agreement will be governed by and interpreted in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein.  The Borrower submits to the non-exclusive jurisdiction of the Courts of the Province of British Columbia and agrees to be bound by any suit, action or proceeding commenced in such Courts and by any order or judgment resulting from such suit, action or proceeding, but the foregoing will in no way limit the right of the Lender to commence suits, actions or proceedings based on this Agreement in any jurisdiction it may deem appropriate.

 

	
28.

	
Amendment.  This Agreement supersedes the Term Sheet and all prior agreements and discussions between the parties with respect to the subject matter set forth herein.  This Agreement may be varied or amended only by or pursuant to an agreement in writing signed by the parties hereto.

 

	
29.

	
Schedules.  All Schedules attached hereto will be deemed fully a part of this Agreement.

 

	
30.

	
Currency and Denomination.  All references herein to “dollars” or “$” are to Canadian dollars, unless otherwise indicated.

 

	
31.

	
Counterparts.  This Agreement may be signed in one or more counterparts, originally or by facsimile, each such counterpart taken together will form one and the same agreement.

 

 

	
  

	
[signature page follows]

 

 

 

18

  

  

  

 

TO EVIDENCE THEIR AGREEMENT each of the parties has executed this Agreement on the date first above written.

 

SPROTT RESOURCE LENDING

PARTNERSHIP by its managing partner

Sprott Lending Consulting Limited Partnership, by

its general partner Sprott Lending Consulting GP Inc.

 

 

Per:  _______________________________

    Authorized Signatory

 

Per:  _______________________________

    Authorized Signatory

 

VISTA GOLD CORP.

 

 

Per:  _______________________________

    Authorized Signatory

 

  

  

  

 

SCHEDULE “A”

PROMISSORY NOTE

 

 

Principal Amount:  CAD$10,000,000

 

For value received, VISTA GOLD CORP. (the “Borrower”) hereby promises to pay to or to the order of SPROTT RESOURCE LENDING PARTNERSHIP (the “Lender”) the principal amount of TEN MILLION CANADIAN DOLLARS (CAD$10,000,000) (the “Principal Amount”) on (subject to the rights of the Lender to accelerate payment under the Credit Agreement dated for reference March 28, 2013 between the Lender and the Borrower (the “Credit Agreement”)) on March 28, 2014 together with interest accruing on the outstanding Principal Amount from the date hereof at a rate of EIGHT PERCENT (8%) per annum, compounded monthly, before and after each of maturity, default and judgment, payable monthly on the last Business Day of every month.  All payments under this promissory note will be made only in Canadian dollars by certified cheque, bank draft or wire transfer (pursuant to wire transfer instructions provided by the Lender from time to time) and delivered to the Lender at Suite 2750, 200 Bay Street, Toronto, Ontario  M5J 2J2, Attention: Chief Financial Officer.

 

If after the Advance, the Borrower or any of its Subsidiaries sell or otherwise dispose of any material assets outside of the ordinary course of business in excess of $1,000,000 in the aggregate (excluding the Colomac mill equipment with a book value of US$10,000,000), the Borrower will pay or cause to be paid to the Lender 50% of the proceeds from such sale, disposition in excess of $1,000,000 in the aggregate, net of reasonable selling costs, to be applied on account of the Facility up to the full amount of the Outstanding Balance.

 

If after the Advance, the Borrower or any of its Subsidiaries close one or more equity financings in excess of $1,000,000 in the aggregate (which for greater certainty shall not include the exercise of any options or warrants issued by the Borrower or any Subsidiary), the Borrower will pay or cause to be paid to the Lender 50% of the proceeds of such equity financings in excess of $1,000,000 in the aggregate, net of reasonable financing costs, to be applied on account of the Facility up to the full amount of the Outstanding Balance.

 

The Borrower may voluntarily prepay the Facility in whole at any time before maturity, without penalty provided that not less than four months of interest on the total principal amount of the Facility has been paid to the Lender, and further provided that such prepayment is made on the last business day of a calendar month after not less than 10 Business Days' prior written notice of the Borrower's intention to prepay the Facility.

 

Unless otherwise defined in this promissory note, all defined terms shall have the meanings set forth in the Credit Agreement.

 

[signature page follows]

  

  

  

 

The undersigned waives demand and presentment for payment, notice of non-payment, protest, notice of protest and notice of dishonour.  This promissory note will be governed by and construed in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein.

 

 

Dated:  March 28, 2013.

VISTA GOLD CORP.

Per:  _______________________________

    Authorized Signatory

 

2

  

  

  

SCHEDULE “B”

SUBSIDIARIES

 

	
  

	
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Vista Gold U.S. Inc.

	
  

	

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Vista California, LLC

	
  

	

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Granges Inc.

	
  

	

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Desarollos Zapal Holdings Corp.

	
  

	

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Desarollos Zapal S.A. de C.V.

	
  

	

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Servicios Administrativos MPA S.A. de C.V.

	
  

	

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Servicios Industriales MPA S.A. de C.V.

	
  

	

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Minera Gold Stake Holdings Corp.

	
  

	

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Minera Gold Stake S.A. de C.V.

	
  

	

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Vista Gold (Barbados) Corp.

	
  

	

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Salu Siwa Pty. Ltd.

	
  

	

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PT Masmindo Dwi Area

	
  

	

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Vista Minerals (Barbados) Corp.

	
  

	

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Vista Gold Australia Pty. Ltd.

  

  

  

SCHEDULE “C”

EARN-IN AGREEMENTS

 

The Borrower entered into an Earn-in Right Agreement dated February 7, 2012 (the “Earn-in Right Agreement”) with Invecture Group, S.A. de C.V. (“Invecture”) whereby Invecture has the right to earn a 62.5% interest in the Borrower’s Mexican Subsidiary, Desarrollos Zapal, S.A. de C.V. (“DZ Mexico”), which owns the Los Cardones gold project.   During the Earn-in Period (as defined in the Earn-in Right Agreement) and subject to the terms of the Earn-in Right Agreement, Desarollos Zapal Holdings Corp., a wholly-owned Subsidiary of the Borrower, holds 37.5% of the DZ Mexico shareholder voting rights.   The remaining 62.5% of the DZ Mexico shareholder voting rights are held in a trust that is instructed by representatives of the Borrower and Invecture.   Upon Invecture's exercise of the Earn-in Right, the Borrower will continue to hold a 37.5% interest in DZ Mexico and indirectly in the Los Cardones gold project.

 

The Borrower entered into a joint venture agreement dated December 23, 2009 with Awak Mas Holdings Pty. Ltd.  (“AM Holdings), assignee of Pan Asia Resources Corp. (“Pan Asia”), whereby AM Holdings may earn a 60.6% interest in Salu Siwa Pty. Ltd. (“Salu Siwa”) which owns a 99% interest in the Awak Mas gold project.  This earn-in has not yet been perfected.   During 2011, the Borrower entered in to an additional option agreement with Pan Asia (subsequently assigned to AM Holdings), which provides AM Holdings the right to earn an additional 20.2% of Salu Siwa, after it has earned the initial 60.6% interest.

 

  

  

  

SCHEDULE “D”

U.S. ACCREDITED INVESTOR CERTIFICATE

Capitalized terms used in this Schedule “D” and defined in the Credit Agreement to which this Schedule “D” is attached have the meaning defined in the Credit Agreement unless otherwise defined herein.

 

The Lender represents warrants and covenants (which representations, warranties and covenants shall survive the Closing) to the Borrower, (and acknowledges that the Borrower is relying thereon) that:

 

	
  

	
(a)

	
it is purchasing the Securities for its own account or for the account of one or more persons for whom it is exercising sole investment discretion, (a “Beneficial Purchaser”), for investment purposes only and not with a view to resale or distribution in violation of applicable securities laws and, in particular, neither it nor any Beneficial Purchaser for whose account it is purchasing the Securities has any intention to distribute either directly or indirectly any of the Securities in the United States or to, or for the account or benefit of, a U.S. Person or person in the United States; provided, however, that this paragraph shall not restrict the Lender from selling or otherwise disposing of any of the Securities pursuant to registration thereof pursuant to the U.S. Securities Act and any applicable state securities laws or under an exemption from such registration requirements;

 

	
  

	
(b)

	
it, and if applicable, each Beneficial Purchaser for whose account it is purchasing the Securities is a “U.S. Accredited Investor” that satisfies one or more of the categories of Rule 501(a) of Regulation D as indicated below (the Lender must initial “LEND” for the Lender, and “BP” for each Beneficial Purchaser, if any, on the appropriate line(s)):

 

	
  _____ 

	
  Category 1.

	
A bank, as defined in Section 3(a)(2) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; or

 

	
  _____

	
  Category 2.

	
A savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; or

 

	
  _____

	
  Category 3.

	
A broker or dealer registered pursuant to Section 15 of the United States Securities Exchange Act of 1934, as amended; or

 

	
  _____

	
  Category 4.

	
An insurance company as defined in Section 2(13) of the U.S. Securities Act; or

 

	
  _____

	
  Category 5.

	
An investment company registered under the United States Investment Company Act of 1940; or

 

	
  _____

	
  Category 6.

	
A business development company as defined in Section 2(a)(48) of the United States Investment Company Act of 1940; or

 

	
  _____

	
  Category 7.

	
A small business investment company licensed by the U.S. Small Business Administration under Section 301 (c) or (d) of the United States Small Business Investment Act of 1958; or

 

	
  _____

	
 Category 8.

	
A plan established and maintained by a state, its political subdivisions or any agency or instrumentality of a state or its political subdivisions, for

  

  

  

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the benefit of its employees, with total assets in excess of U.S. $5,000,000; or

 

	
  _____

	
  Category 9.

	
An employee benefit plan within the meaning of the United States Employee Retirement Income Security Act of 1974 in which the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or an employee benefit plan with total assets in excess of U.S. $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons who are accredited investors; or

 

	
  _____

	
  Category 10.

	
A private business development company as defined in Section 202(a)(22) of the United States Investment Advisers Act of 1940; or

 

	
  _____

	
  Category 11.

	
An organization described in Section 501(c)(3) of the United States Internal Revenue Code of 1986, as amended, a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of U.S. $5,000,000; or

 

	
  _____

	
  Category 12.

	
Any director or executive officer of the Borrower; or

 

	
  _____

	
  Category 13.

	
A natural person, the beneficial owner of which is such natural person) whose individual net worth, or joint net worth with his or her spouse exceeds US$1,000,000, provided, however, that (i) person’s primary residence shall not be included as an asset; (ii) indebtedness that is secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of the sale of securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and (iii) indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of securities shall be included as a liability; or

 

	
  _____

	
  Category 14.

	
A natural person who had an individual income in excess of U.S. $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of U.S. $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; or

 

	
  _____

	
  Category 15.

	
A trust, with total assets in excess of U.S. $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the U.S. Securities Act or a revocable trust which does not satisfy the foregoing and which may be revoked or amended by its settlors (grantors), each of whom is an U.S. Accredited Investor under category 13; or

  

  

  

- 3 -

 

	
  _____

	
  Category 16.

	
Any entity in which all of the equity owners meet the requirements of at least one of the above categories;

 

	
  

	
(c)

	
it and any Beneficial Purchaser has not purchased the Securities as a result of any form of general solicitation or general advertising (as those terms are used in Regulation D of the U.S. Securities Act), including any advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio, television or internet or any seminar or meeting whose attendees have been invited by general solicitation or general advertising.

 

The Lender undertakes to notify the Borrower immediately of any change in any representation, warranty or other information relating to the Lender or any Beneficial Purchaser set forth herein which takes place prior to the Closing.

 

	
If a Corporation, Partnership or Other Entity:

 

____________________________________

Name of Entity

 

____________________________________

Type of Entity

____________________________________

____________________________________

Signature of Person(s) Signing

____________________________________

____________________________________

Print or Type Name and Title(s) of Person(s)

Signing

	  	
If an Individual or Joint Account of Individuals:

 

___________________________________

 

 

____________________________________

Signature(s)

 

____________________________________

 

____________________________________

Print or Type Name(s)

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