Document:

ex10-1.htm

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

 

This Employment Agreement effective as of May 4, 2011 (the “Effective Date”) is between AuthenTec, Inc., a Delaware corporation (the “Company” or “AuthenTec”), and Philip L. Calamia (“Employee”).

 

	
1.

	
Employment.  The Company hereby employs Employee and Employee hereby accepts employment with the Company to assist in the development and to promote the operation of the business carried on by the Company, subject to the following conditions:

 

	
  

	
(a)

	
Position.  Employee will serve as Chief Financial Officer, reporting to the Chief Executive Officer and will perform such duties and will exercise such responsibilities, commensurate with such position, on behalf of the Company as from time to time will be assigned to him.  During his service hereunder, Employee will at all times provide his full working time and best efforts to the performance of his obligations and duties hereunder; provided, however, that nothing herein contained will be deemed to prevent or limit the right of Employee to (i) invest his funds in the capital stock or other securities of any corporation except a competitor or (ii) serve on the boards of directors or advisory committees of charitable organizations, trade organizations or other companies which are not competitors and which are previously approved in writing by the Company or (iii) engage in other personal business matters that do not interfere with the performance of Employee’s duties as described above.

 

	
  

	
(b)

	
Base Compensation.  During the term of his employment hereunder, Employee will be paid an annual base salary at the rate of $235,000 (“Base Compensation”), payable in equal bi-weekly installments in arrears; provided however, that beginning with the standard review cycle planned for 2012, the Board will review and, in its discretion, may increase Employee’s Base Compensation based on the Company’s performance and Employee’s contributions. Employee’s Base Compensation shall not be reduced, without prior written agreement, except in accordance with a Board approved reduction that is uniformly applied to all Employees who are employed as Directors and above within the Company.

 

	
  

	
(c)

	
Bonus Plan; Annual Bonus.  In addition, Employee will be eligible to participate in AuthenTec’s annual bonus plans which are generally available to other senior level Employees of AuthenTec as may be approved from time to time.

 

	
  

	
(d)

	
Equity Grants.  The Employee shall be eligible to participate in and receive grants commensurate with his senior level position of stock options and other equity-based awards under any compensation plan, programs or agreements of the Company made available generally to its senior executives; provided that the amount, timing, and other terms of any future grant shall be determined by the Board (or the Compensation Committee thereof) in its sole discretion.

 

	
  

	
(e)

	
Other Benefits.

 

	
  

	
(i)

	
Insurance and Other Benefits.  Employee shall be entitled to participate in all of the benefits afforded full-time AuthenTec employees, subject to the various eligibility requirements of the specific benefit plans and subject, in some cases, to Employee contributions to such plans.  These benefits shall include group health, dental and vision plans, a 401(k) deferred compensation plan, life insurance and short term disability coverage, as well as optional supplemental life insurance and long term disability coverages.

 

  

  

  

 

	
  

	
(ii)

	
Vacation.  Employee shall be entitled to an annual vacation of three (3) weeks per year for the first year of employment and increasing to four (4) weeks per year thereafter.  Unused vacation shall be accrued pursuant to the Company’s policy.

 

	
  

	
(iii)

	
Transition/Relocation Assistance.  The Company shall reimburse Employee for transition-related expenses up to a maximum of $20,000 for expenses incurred in 2011 and $20,000 for expenses incurred in 2012.  These expenses may include temporary living costs, rental car, and airfare to/from Philadelphia.

 

Additionally, it is anticipated that the Employee will relocate to the Melbourne, Florida area after two (2) years.  At that time the Company will provide a relocation package in an amount not to exceed $125,000, subject to approval by the Board of Directors.  The specifics of the relocation package will be mutually determined based on Employee’s personal needs and Company guidelines, and in compliance with Internal Revenue Code Section 409A.   Should the Employee voluntarily decide to leave the Company within one year of receiving relocation assistance, 100% of all relocation monies paid will be due as reimbursement to AuthenTec on the Employee’s last day of work.

 

	
  

	
(iv)

	
Reimbursement of Expenses.  The Company shall reimburse Employee for all reasonable travel, temporary lodging, entertainment and other expenses incurred or paid by Employee in connection with or related to the performance of his duties or responsibilities under this Agreement, provided that Employee submits to the Company substantiation of such expenses sufficient to satisfy the Company’s expense reimbursement policies and the record keeping guidelines promulgated from time to time by the Internal Revenue Service.

 

	
  

	
(v)

	
Indemnification; Liability Insurance:  Company agrees to indemnify Employee and hold Employee harmless to the fullest extent permitted by Delaware law and under the bylaws of Company against and in respect to any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including reasonable attorneys’ fees), losses, and damages resulting from the Employee’s good-faith performance of his duties and obligations.  Company shall cover Employee under directors and officers’ liability insurance in substantially the same amount and on substantially the same terms as Company covers its other active officers and directors.

 

	
2.

	
Term of Employment; Termination.

 

	
  

	
(a)

	
Term.  Nothing in this agreement shall be construed as a contractual guarantee of employment.  Employment is both considered “at will” and, subject to local law, may be discontinued by either party, with or without cause, at any time.

 

	
  

	
(b)

	
Termination; Post-Termination Matters.

 

	
  

	
(i)

	
Termination.

 

	
  

	
(A)

	
Voluntary Termination By Employee.  Employee will give the Company at least thirty (30) days prior written notice as to the date of any voluntary termination by Employee, specifying therein the date of termination.

 

	
  

	
(B)

	
Termination By the Company For Cause.  The Company may terminate Employee’s employment hereunder at any time for Cause.

 

  

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(C)

	
Termination By The Company Without Cause.  The Company may terminate Employee’s employment upon at least thirty (30) days prior written notice Without Cause.  Any such termination Without Cause will be within the sole discretion of the Company.  Such discretion if exercised by the Company will be unlimited and will not be subject to any test of reasonableness by any court of law or by Employee.

 

	
  

	
(D)

	
Constructive Termination Of Employee.  Employee may terminate his employment upon written notice to the Company of any one of the following events that occurs, if not cured and corrected by the Company or its successor within thirty (30) business days after written notice thereof by the Employee to the Company or its successor (“Good Reason”):  (i) any adverse change in the Employee’s titles or position that constitutes a material diminution or material adverse change in authority as compared to the authority of the Employee’s title or position as of the Effective Date; (ii) any material reduction in the Employee’s annual Base Compensation as in effect on the Effective Date (other than as set forth in the proviso to item (v)); (iii) a substantial diminution or material adverse change in the Employee’s duties and responsibilities (other than a change due to the Employee’s total and permanent disability or as an accommodation under the Americans With Disabilities Act); (iv) any requirement that the Employee relocate, by more than 50 miles, the principal location from which he performs services for the Company as compared to such location as of the Effective Date; (v) any other material breach of this Agreement by the Company; (vi) failure of Company to obtain the agreement from any successor to Company to assume and agree to perform this Agreement;  provided, however, that no diminution of title, position, duties or responsibilities shall be deemed to occur solely because the Company becomes a subsidiary of another corporation or entity or because there has been a change in the reporting hierarchy incident thereto involving the Employee.

 

	
  

	
(E)

	
Death or Disability.  If the Company determines in good faith that Employee has become Disabled (as defined below), it may give to Employee written notice of its intention to terminate Employee’s employment.  In such event, Employee’s employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Employee, provided that, within the 30 days after such receipt, Employee shall not have returned to full-time performance of Employee’s duties.  For purposes of this Agreement, Employee shall be Disabled if either of the following conditions is met, as determined by the Board in good faith: (i) Employee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (ii) Employee is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company.

 

	
  

	
(ii)

	
Severance.

 

	
  

	
(A)

	
If Employee’s employment is terminated pursuant to Sections 2(b)(i)(A), (B) or (E), the Company shall pay Employee his Base Compensation through his actual day of termination and any amounts earned, accrued or owing to Employee but not yet paid under Section 1(e) above (collectively, the “Accrued Obligations”), and the Company shall have no further liability or obligation to Employee, his executors, heirs, assigns or other persons claiming under or through his estate.

 

  

3

  

 

	
  

	
(B)

	
If the Company terminates Employee’s employment Without Cause pursuant to Section 2(b)(i)(C) or Employee terminates his employment in accordance with Section 2(b)(i)(D) then, the Company shall pay to Employee his Accrued Obligations and, provided Employee executes a general release with language acceptable to the Company (a “Release”), the Company shall also provide Employee with the following:

 

	
  

	
(I)

	
Payment in an aggregate amount equal to twelve (12) months of Employee’s then-applicable annual Base Compensation, plus a pro-rata portion of his target bonus opportunity under AuthenTec’s annual bonus plan for the year in which his termination occurs (with the pro-ration based on (i) the portion of the fiscal year for which he was employed and (ii) an assessment by the Compensation Committee of the actual level of achievement of the performance goals relating to the Target Bonus Opportunity through the date of termination), which amount will be paid to Employee in a single lump sum on the 60th day after his termination of employment.

 

	
  

	
Payment in an aggregate amount equal to twelve (12)  months of the COBRA costs associated with continuation of benefits under the Company’s Employee healthcare benefit plans (medical, dental, prescription) in which Employee participated immediately prior to Employee’s termination of employment.  Payment will be made to the Employee within sixty (60) days after Employee’s termination of employment.

 

	
  

	
(II)

	
The assignment, at Employee’s option, of life and disability insurance policies insuring Employee, provided that Employee shall thereafter be responsible for any premium payments and such assignment shall only be permitted if allowed under the terms of the applicable insurance policy.

 

	
  

	
(III)

	
Subject to Section 2(b)(ii)(B)(IV) below, the treatment of outstanding equity awards, as follows:

 

(i)  the portion of Employee’s outstanding stock options, stock appreciation rights and other awards in the nature of rights that may be exercised that would have become vested and exercisable within 12 months following the effective date of his termination shall become fully vested and exercisable as of the effective date of his termination and shall thereafter remain exercisable for a period of one (1) year or until the earlier expiration of the original term of the award;

 

(ii)  all time-based vesting restrictions on Employee’s outstanding equity awards that would have lapsed within 12 months following the effective date of his termination shall lapse as of the effective date of his termination; and

 

  

4

  

 

(iii)  the payout level under all of Employee’s performance-based awards that (A) were outstanding immediately prior to the effective date of his termination, and (B) would have been eligible to have been earned within 12 months following the effective date of his termination, shall be determined and deemed to have been earned as of the effective date of his termination based upon an assumed achievement of all relevant performance goals at the “target” level, and there shall be a pro rata payout to Employee on the 60th day after the effective date of his termination of employment (or such later date as may be required pursuant to Section 4(g)), based upon the length of time within the performance period that has elapsed prior to the effective date of termination of employment.

 

Any outstanding equity awards that do not vest pursuant to the foregoing provisions, if any, shall remain outstanding for an additional six (6) months following the effective date of Employee’s termination, but such outstanding equity awards shall not continue to vest or become exercisable during such 6-month period except as otherwise provided in Section 2(b)(ii)(B)(IV) below.  At the end of such 6-month period, Employee’s outstanding and unvested equity awards shall be cancelled and Employee shall forfeit all of his right, title and interest in and to such equity awards as of such date, without further consideration or any act or action by Employee.

 

	
  

	
(IV)

	
If the Company terminates Employee’s employment Without Cause pursuant to Section 2(b)(i)(C) or Employee terminates his employment in accordance with Section 2(b)(i)(D) either (1) during the six months prior to the effective date of a Change of Control, unless the Company reasonably demonstrates that such termination of employment was not in connection with or anticipation of a Change of Control, or (2) during the twelve (12) months following the effective date of a Change of Control, then:

 

(i)  Employee’s options, stock appreciation rights, and other awards in the nature of rights that may be exercised that were outstanding immediately prior to the effective date of the Change of Control shall become fully vested and exercisable as of the effective date of his termination and shall thereafter remain exercisable for a period of one (1) year or until the earlier expiration of the original term of the award;

 

(ii)  all time-based vesting restrictions on Employee’s equity awards that were outstanding immediately prior to the effective date of the Change of Control shall lapse as of the effective date of his termination; and

 

(iii)  the payout level under all of Employee’s performance-based awards that were outstanding immediately prior to the effective date of the Change of Control shall be determined and deemed to have been earned as of the effective date of the Change of Control based on an assumed achievement of all relevant performance goals at the “target” level, and there shall be a payout of the full award to Employee on the 60th day after the effective date of his termination of employment (or such later date as may be required pursuant to Section 4(g)).

 

  

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(V)

	
Vested Equity Awards shall remain exercisable for a period of twelve (12) months from the termination date; provided, however, that to the extent any Equity Awards are “incentive stock options”, such options shall cease to be “incentive stock options” after 90 days following the termination date.  Notwithstanding the foregoing, no Equity Awards may be exercised after the end of the original maximum term of the Equity Award.  The parties acknowledge and agree that this letter serves to amend the applicable Equity Award grant agreements to comport with the provisions set forth herein.

 

	
  

	
(iii)

	
Definitions.  As used in this Agreement.

 

	
  

	
(A)

	
A “voluntary termination” of employment means any termination of Employee’s employment with the Company, other than Termination for Cause or Without Cause by the Company, termination due to death or disability or termination by Employee for Good Reason.

 

	
  

	
(B)

	
“Termination for Cause” means Employee’s termination if such termination results from any one or more of the following events, circumstances or occurrences:  (i) the Employee’s material breach of any written employment, consulting, advisory, proprietary information, nondisclosure or other agreement with the Company and his or her subsequent failure to cure such breach to the satisfaction of the Company within thirty (30) days following written notice of such breach to the Employee by the Company; (ii) the Employee’s conviction of, or entry of a plea of guilty or nolo contendere to, a felony or any misdemeanor involving moral turpitude if the Board reasonably determines that such conviction or plea materially adversely affects the Company; (iii) the commission of an act of fraud or dishonesty by the Employee if the Company reasonably determines that such act materially adversely affects the Company; or (iv) Employee’s intentional damage or destruction of substantial property of the Company.  The determination of “cause” shall be made in good faith by the Company and its determination shall be final and conclusive.

 

	
  

	
(C)

	
A termination “Without Cause” means a termination at the will of the Company other than Termination for Cause.

 

	
  

	
(D)

	
“Change of Control” shall mean the earliest to occur of (i) a merger or consolidation to which the Company is a party and which results in, or is effected in connection with, a change in ownership of a majority of the outstanding shares of voting stock of the Company, (ii) any sale or transfer of all or substantially all of the assets of the Company to an unaffiliated third party or (iii) a liquidation or dissolution of the Company.

 

	
  

	
(E)

	
“Equity Award” means any option, stock appreciation right, restricted stock, restricted stock unit, performance share or performance unit award or other award with respect to shares of the capital stock of the Company granted to you by the Company prior to a Change in Control, including any such award which is assumed or continued by, or for which a replacement award is substituted by, any successor to the Company in connection with the Change in Control.

 

  

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(c)

	
Post-Termination Matters.

 

	
  

	
(i)

	
Return of Materials.  Upon any termination of Employee’s employment, Employee will promptly return to the Company all personal property of the Company and all copies and originals of documents and other tangible impressions, in any medium, containing confidential or proprietary information of the Company.

 

	
  

	
(ii)

	
Expenses.  The Company will pay to Employee all expenses permitted to be reimbursed hereunder within ten (10) days after appropriate documentation has been submitted by Employee.

 

	
  

	
(iii)

	
Noncompete; Nonsolicitation.  During the term hereof and the period specifically indicated in subsections (A), (B), (C) and (D) below, following termination of Employee’s employment for any reason, Employee will not, directly or indirectly, on behalf of himself or any behalf of anyone else:

 

	
  

	
(A)

	
for a period of twelve (12) months, as an individual proprietor, partner, stockholder, officer, employee, director, joint venturer, investor, lender, or in any other capacity whatsoever (other than as the holder of not more than five percent (5%) of the total outstanding stock of a publicly-held company), engage in any business activity that directly competes with the kind or type of products or services of developed or being developed, produced marketed, distributed, planned, furnished or sold by the Company while Employee was employed by the Company;

 

	
  

	
(B)

	
for a period of twelve (12) months, call upon any of the customers of the Company who are such at the time of Employee’s termination of employment hereunder, for the purpose of soliciting or providing any product or service the same as or similar to any product or service provided by the Company at any time during Employee’s employment with the Company; and

 

	
  

	
(C)

	
for a period of twelve (12) months, communicate with any of the other Employees, consultants or representatives of the Company for the purpose of inducing such Employees, consultants or representatives to discontinue their relationship with the Company or to establish a relationship with Employee or any Competitive Business; and

 

	
  

	
(D)

	
for a period of twelve (12) months, solicit, divert or take away or attempt to solicit, divert or take away any of the customers, clients, licenses, strategic partners or patrons of the Company who are such at the time of the Employee’s termination of employment with the Company.

 

	
  

	
(vi)

	
Reasonableness of Covenants.  Employee covenants and agrees with the Company that, if Employee violates any of his covenants or agreements under Section 2(c)(iii), the Company will be entitled, subject to any limitations of Florida law, to an accounting and repayment of all profits, compensation, commissions, remuneration or benefits that Employee has directly realized or may directly realize as a result of, growing out of or in connection with any such violation; such remedy will be in addition to and not in limitation of any injunctive relief or other rights or remedies that the Company is or may be entitled at law or in equity or under this Agreement.  In the event that, notwithstanding the foregoing, any part of the covenants set forth in Section 2(c)(iii) is held by a court of competent jurisdiction to exceed the restrictions which such court deems reasonable and enforceable, such restrictions will be deemed to become and thereafter be the maximum restrictions that such court deems reasonable and enforceable.

 

  

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3.

	
Proprietary Information and Inventions.  Employee has executed and delivered (or will execute and deliver on the date hereof) such customary confidentiality and invention assignment agreements during the term hereof as the Company requests of its Employees (the “Employee NDA”).  Employee represents and warrants to the Company that Employee is not bringing with him, and covenants with the Company that he will not use in the course of his employment with Company, any proprietary rights or intellectual property rights to which he does not lawfully possess.

 

	
4.

	
Miscellaneous.

 

	
  

	
(a)

	
Governing Law.  This Agreement will be subject to and governed by the laws of the State of Florida, without regard to its conflict of laws provisions.

 

	
  

	
(b)

	
No Waiver; Amendment.  Failure to insist upon strict compliance with any provision hereof will not be deemed a waiver of such provision or any other provision hereof.  This Agreement may not be modified except by a written agreement executed by the parties hereto.

 

	
  

	
(c)

	
Severability; Context.  The provisions of this Agreement will be deemed severable, and the invalidity or unenforceability of any one or more of the provisions hereof will not affect the validity or enforceability of the other provisions hereof.  Whenever required by the context, the singular number will include the plural and the masculine or neuter gender will include all genders.

 

	
  

	
(d)

	
Survival and Priority.  Provisions herein which by their terms so provide will survive any termination of this Agreement or of termination of Employee’s employment by the Company.  Each of the parties hereto acknowledge and agrees that this Agreement supersedes any existing agreements and any agreements entered into after the date hereof (unless specifically stating otherwise therein) to which the Company and Employee are parties or subject to relating to the subject matter contained herein; provided, however, that nothing contained herein shall be deemed to terminate or limit in any way the rights of the Company under the Employee NDA.

 

	
  

	
(e)

	
Successors.

 

	
  

	
(i)

	
Company’s Successors.  Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets shall assume the Company’s obligations under this Agreement and agree expressly to perform the Company’s obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession.  For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets that assumes this Agreement or that becomes bound by the terms of this Agreement by operation of law.

 

	
  

	
(ii)

	
Employee’s Successors.  Without the written consent of the Company, the Employee shall not assign or transfer this Agreement or any right or obligation under this Agreement to any other person or entity.  Notwithstanding the foregoing, except as provided herein,  the terms of this Agreement and all rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

 

  

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(f)

	
Equitable Relief; Arbitration.

 

	
  

	
(i)

	
In the event of a breach or threatened breach by Employee of the provisions of this Agreement, the Company will, in addition to any other rights and remedies available to it, at law or otherwise, be entitled to an injunction to be issued by any court of competent jurisdiction enjoining and restraining Employee from committing any present violation or future violation of this Agreement.  Employee hereby (1) agrees that any such action shall be brought in the state or federal courts of the State of Florida; (2) irrevocably submits to the personal jurisdiction of such courts; (3) consents to service of process; and (4) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.

 

	
  

	
(ii)

	
The parties agree that, except as set forth in Section 4(f)(i) above, any controversy, claim or dispute arising out of or relating to this agreement, or the breach thereof, except as discussed herein or arising out of or relating to the employment of the Employee, or the termination thereof, including any statutory or common law claims under federal, state or local law, including all laws prohibiting discrimination in the workplace, shall be resolved by arbitration in Melbourne, Florida, in accordance with the employment dispute resolution rules of the American Arbitration Association.  The parties agree that any award rendered by the arbitrator shall be final and binding, and that judgment upon the award may be entered in any court having jurisdiction thereof.  The parties further acknowledge and agree that, due to the nature of the confidential information, trade secrets, and intellectual property belonging to the Company to which Employee has or will be given access, and the likelihood of significant harm that the Company would suffer in the event that such information was disclosed to third parties, nothing in this Section 4(f)(ii) shall preclude the Company from going to court to seek injunctive relief to prevent Employee from violating the obligations established in Sections 2 and 3 of this Agreement.  Subject to Section 4(f)(iii), each party shall bear its own costs in any such arbitration, and the parties shall share the expenses of the arbitrator.

 

	
  

	
(iii)

	

Employee shall be entitled to receive interest (at the Wall Street Journal prime rate) on any overdue payments of severance compensation (accruing from the sixtieth day after termination) or expenses hereunder if the Company shall fail to make the payments provided for herein and is in breach hereof at the time of termination (no inference being created that the Company shall have any right to withhold payment).

 

	
  

	
(g)

	
Compliance with Section 409A.

 

	
  

	
(i)

	
This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements of Section 409A of the Internal Revenue Code (the “Code”) and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder (any applicable transition relief under Section 409A of the Code).  Nevertheless, the tax treatment of the benefits provided under the Agreement is not warranted or guaranteed.  Neither the Company nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by Employee as a result of the application of Section 409A of the Code. (ii)For purposes of Section 409A, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

 

  

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(iii)

	
With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, Employee, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (1) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (2) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (3) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

	
  

	
(iv)

	
“Termination of employment,” or words of similar import, as used in this Agreement means, for purposes of any payments under this Agreement that are payments of deferred compensation subject to Section 409A, the Employee’s “separation from service” as defined in Section 409A.

 

	
  

	
(v)

	
If a payment obligation under this Agreement or other compensation arrangement arises on account of Employee’s separation from service while Employee is a “specified employee” (as defined under Section 409A and determined in good faith by the Compensation Committee), any payment of “deferred compensation” (as defined under Treasury Regulation Section 1.409A-1(b)(1), after giving effect to the exemptions in Treasury Regulation Sections 1.409A-1(b)(3) through (b)(12)) that is scheduled to be paid within six (6) months after such separation from service shall accrue without interest and shall be paid within 15 days after the end of the six-month period beginning on the date of such separation from service or, if earlier, within 15 days after the appointment of the personal representative or executor of Employee’s estate following his death.

 

	
  

	
(vi)

	
Whenever in this Agreement a payment or benefit is conditioned on Employee’s execution or non-revocation of a release of claims, such release must be executed and all revocation periods shall have expired within 60 days after the date of termination; failing which such payment or benefit shall be forfeited.  If such payment or benefit constitutes non-exempt deferred compensation, then, subject to subsection (v) above, such payment or benefit that would have otherwise been payable during such 60-day period shall be accumulated and paid on the 60th day after the Date of Termination provided such release shall have been executed and such revocation periods shall have expired.  If such payment or benefit is exempt from Section 409A of the Code, the Company may elect to make or commence payment at any time during such 60-day period.

 

	
  

	
(h)

	
Notices.  Unless otherwise herein provided, notice required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement on the earliest of:  (i) the date of personal delivery; (ii) the date of delivery by facsimile; or (iii) the next business day after deposit with a nationally-recognized courier or overnight service, including FedEx or Express Mail, for United Sates deliveries or three (3) business days after such deposit for deliveries outside of the United States.  All notices not delivered personally or by facsimile will be sent with postage and other charges prepaid and properly addressed to the party to be notified at the address set forth on the signature page of this Agreement, or at such other address as such party may designate by ten (10) days’ advance written notice to the other party hereto.  All notices for delivery outside the United States will be sent by facsimile, or by nationally recognized courier or overnight service, including Express Mail.  Notices to the Company by Mr. Calamia will be marked to the Chairman of the Board.

 

  

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(i)

	
Counterparts.  This Agreement may be executed in counterparts, each of which will be an original and both of which together will constitute one instrument.

 

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

 

 

	 	AuthenTec, Inc.	 	EMPLOYEE:
	 	 	 	 
	By:	/s/ Lawrence J. Ciaccia	 	/s/ Philip L. Calamia
	Name:	Lawrence J. Ciaccia	 	Philip L. Calamia
	Title:	
Chief Executive Officer

	 	 

 

 

 

11ex10-1.htm

Exhibit 10.1

 

FOURTH LOAN MODIFICATION AGREEMENT

 

This Fourth Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of May 6, 2011 (the “Fourth Loan Modification Effective Date”), by and between (i) SILICON VALLEY BANK, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 275 Grove Street, Suite 2-200, Newton, Massachusetts 02466 (“Bank”) and (ii) BRIDGELINE DIGITAL, INC., a Delaware corporation with its chief executive office located at 10 Sixth Road, Woburn, Massachusetts 01801 (“Bridgeline”) and e.MAGINATION IG, LLC, a Maryland limited liability company, with offices located at 6711 Columbia Gateway Drive, Suite 550, Columbia, Maryland 21046 (“e.Magination”).

 

1.           DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a certain Amended and Restated Loan and Security Agreement dated as of March 31, 2010, as amended by a certain First Loan Modification Agreement, dated as of June 22, 2010, as further amended by a certain Second Loan Modification Agreement, dated as of July 7, 2010 and as further amended by a certain Joinder, Waiver and Third Loan Modification Agreement, dated as of November 5, 2010, each between Borrower and Bank (as amended, the “Loan Agreement”).  Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.

 

2.           DESCRIPTION OF COLLATERAL.  Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement and in a  certain Amended and Restated Intellectual Property Security Agreement, dated as of March 31, 2010 (the “IP Agreement”, and together with any other collateral security granted to Bank, the “Security Documents”).  Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the “Existing Loan Documents”.

 

3.           DESCRIPTION OF CHANGES IN TERMS.

 

	
  

	
A.

	
Modifications to Loan Agreement.

 

	
  

	
1

	
The Loan Agreement shall be amended by inserting the following new Section 2.1.5 immediately following Section 2.1.4 thereof:

 

“2.1.5           Term Loan.

 

(a)           Availability.  Subject to the terms and conditions of this Agreement, during the Draw Period, Bank shall make one (1) term loan consisting of up to two (2) Draw Requests available to Borrower.  Each Draw Request must be in an amount equal to at least the lesser of (i) One Million Dollars ($1,000,000) or (ii) the amount that has not yet been drawn under the Term Loan; providedthat in any event the total amount requested under all Draw Requests shall not exceed the Term Loan Amount.  After repayment, the Term Loan may not be reborrowed.

 

(b)           Interest Period.   During the Draw Period, commencing on the first Payment Date of the month following the month in which the Funding Date occurs, Borrower shall make monthly payments of interest, in arrears, on the outstanding principal amount of the Term Loan at the rate set forth in Section 2.3(a)(ii).

 

(c)           Repayment.  Commencing on the first day of the month following the last day of the Draw Period through and including the Term Loan Maturity Date, the principal amount of the Term Loan outstanding on the last day of the Draw Period is payable in (i) thirty-six (36) consecutive equal monthly installments of principal, based on a thirty-six (36) month amortization period, plus (ii) monthly payments of interest, in arrears, on the outstanding principal amount of the Term Loan at the rate set forth in Section 2.3(a)(ii).  Notwithstanding the foregoing, all unpaid principal and interest on the Term Loan shall be due on the Term Loan Maturity Date.

 

  

 

  

 

(d)           Prepayment.  The Term Loan may be prepaid by Borrower prior to the Term Loan Maturity Date, effective three (3) Business Days after written notice of prepayment is given to Bank.  Notwithstanding any such prepayment, Bank’s lien and security interest in the Collateral shall continue until Borrower fully satisfies its Obligations.  If such prepayment is at Borrower’s election prior to the last day of the Draw Period, there shall be no prepayment premium.  If such prepayment is at Borrower’s election or at Bank’s election due to the occurrence and continuance of an Event of Default after the termination of the Draw Period, but (i) prior to the first anniversary of the termination of the Draw Period, Borrower shall pay to Bank, in addition to the payment of any other expenses or fees then-owing, a prepayment fee in an amount equal to Forty Thousand Dollars ($40,000) (i.e. two percent (2.00%) of Two Million Dollars ($2,000,000)) and (ii) on or after the first anniversary of the termination of the Draw Period, but prior to the second anniversary of the termination of the Draw Period, Borrower shall pay to Bank, in addition to the payment of any other expenses or fees then-owing, a prepayment fee in an amount equal to Twenty Thousand Dollars ($20,000) (i.e. one percent (1.00%) of Two Million Dollars ($2,000,000)); providedthat no termination fee shall be charged if the Term Loan is replaced with a new facility from another division of Silicon Valley Bank.  If such prepayment is at Borrower’s election or at Bank’s election due to the occurrence and continuance of an Event of Default after the second anniversary of the termination of the Draw Period, there shall be no prepayment premium.

 

Notwithstanding the foregoing, if such prepayment of the Term Loan is at Borrower’s election and is made for the sole purpose of increasing the unused Availability Amount (the “Excess Availability”) and, together with such Term Loan prepayment, Borrower submits a Transaction Report (including a request for an Advance) that supports, as determined by Bank, in its sole discretion, lending such Excess Availability, on a Dollar for Dollar basis, under the Revolving Line (by reference to the Availability Amount and such Transaction Report), then no prepayment premium shall be applicable with respect to such prepayment of the Term Loan.”  

 

	
  

	
2

	
The Loan Agreement shall be amended by deleting the following text appearing as Section 2.3(a) thereof:

 

“(a)           Interest Rate; Advances.  Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to the Prime Rate plus one and one-quarter percentage points (1.25%); provided, however, that during a Performance Pricing Period, subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to the Prime Rate plus one percent (1.00%), which interest shall in any event be payable monthly, in arrears, in accordance with Section 2.3(f) below.”

 

and inserting in lieu thereof the following:

 

“(a)           Interest Rate.

 

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

 

  

2

  

 

(ii)           Term Loan.  Subject to Section 2.3(b), the principal amount outstanding under the Term Loan shall accrue interest at a floating per annum rate equal to the Prime Rate plus one and three-quarters percent (1.75%), which interest shall be payable monthly, in arrears, in accordance with Section 2.1.5.

 

	
  

	
3

	
The Loan Agreement shall be amended by deleting the following text appearing as Section 6.2(a)(vi) thereof:

 

“(vi)           as soon as available, and in any event within one hundred twenty (120) days following the end of Borrower’s fiscal year, annual financial statements certified by, and with an unqualified opinion of, independent certified public accountants reasonably acceptable to Bank;”

 

and inserting in lieu thereof the following:

 

“(vi)           as soon as available, and in any event within one hundred fifty (150) days following the end of Borrower’s fiscal year, annual audited financial statements certified by, and with an unqualified opinion of, independent certified public accountants reasonably acceptable to Bank;”

 

	
  

	
4

	
The Loan Agreement shall be amended by deleting the following text appearing as Section 6.9(a) thereof:

 

“(a)           EBITDA. EBITDA, measured on a trailing three-month basis as of the last day of each month, of no less than (i) commencing on the Effective Date through and including the testing period ending August 31, 2010, Fifty Thousand Dollars ($50,000); and (ii) commencing on the next testing period ending September 30, 2010, and for each testing period ending thereafter, One Hundred Thousand Dollars ($100,000).”

 

and inserting in lieu thereof the following:

 

“(a)           EBITDA. EBITDA, measured quarterly on a trailing three-month basis as of the last day of each fiscal quarter listed below, of no less than the corresponding amounts listed below:

 

	
Quarterly Period Ending

	
Minimum EBITDA

	
March 31, 2011

	
$200,000

	
June 30, 2011

	
$300,000

	
September 30, 2011, and as of the last day of each quarterly period ending thereafter

	
$400,000"

 

	
  

	
5

	
The Loan Agreement shall be amended by deleting the following text appearing as Section 8.1 thereof:

 

“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 grace period shall not apply to payments due on the Revolving Line Maturity Date).  During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period);”

 

  

3

  

 

and inserting in lieu thereof the following:

 

“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 grace period shall not apply to payments due on the Revolving Line Maturity Date and/or the Term Loan Maturity Date, as applicable).  During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period);”

 

	
  

	
6

	
The Loan Agreement shall be amended by deleting the following text appearing in Section 10 thereof:

 

	 	“If to Borrower:	
Bridgeline Software, Inc.

10 Sixth Road

Woburn, Massachusetts  01801

Attn:  Gary M. Cebula, CFO

Fax:  (781) 497-3033

Email:  gcebula@bridgelinesw.com

	 
	 	 	 	 
	 	with a copy to:	
Morse, Barnes-Brown & Pendleton, P.C.

1601 Trapelo Road

Waltham, Massachusetts  02451

Attn:  Joseph C. Marrow, Esquire

Fax:  (781) 622-5933

Email:  jmarrow@mbbp.com

	 
	 	 	 	 
	 	If to Bank: 	
Silicon Valley Bank

2221 Washington Street

One Newton Executive Pa0rk, Suite 200

Newton, Massachusetts

Attn: Mr. Philip Silvia

Fax: (617) 969-5962

Email:  PSilvia@svb.com

	 
	 	 	 	 
	 	with a copy to: 	
Riemer & Braunstein, LLP

Three Center Plaza

Boston, Massachusetts  02108

Attn:  David A. Ephraim, Esquire

Fax:  (617) 880-3456

Email:   DEphraim@riemerlaw.com"

	 
	 	 	 	 
	 	
and inserting in lieu thereof the following:

	 
	 	 	 	 

 

  

4

  

 

	 	“If to Borrower:  	
Bridgeline Digital, Inc.

e.Magination IG, LLC

c/o Bridgeline Digital, Inc.

10 Sixth Road

Woburn, Massachusetts  01801

Attn:  Michael Prinn, CAO

Fax:  (781) 376-0533

Email:   mprinn@blinedigital.com

	 
	 	 	 	 
	 	with a copy to: 	
Morse, Barnes-Brown & Pendleton, P.C.

1601 Trapelo Road

Waltham, Massachusetts  02451

Attn:  Joseph C. Marrow, Esquire

Fax:  (781) 622-5933

Email:  jmarrow@mbbp.com

	 
	 	 	 	 
	 	If to Bank:  	
Silicon Valley Bank

275 Grove Street, Suite 2-200

Newton, Massachusetts 02466

Attn:  Mr. Benjamin Johnston

Fax:  (617) 969-4395

Email:   bjohnston@svb.com

	 
	 	 	 	 
	 	with a copy to: 	
Riemer & Braunstein, LLP

Three Center Plaza

Boston, Massachusetts  02108

Attn:  Charles W. Stavros, Esquire

Fax:  (617) 880-3477

Email:  cstavros@riemerlaw.com”

	 

 

 

	
  

	
7

	
The Loan Agreement shall be amended by deleting the following definitions from Section 13.1 thereof:

 

“             “Non-formula Advance” is (a) the lesser of (i) Two Million Dollars ($2,000,000) or (ii) the difference between (x) the Revolving Line minus (y) the amount available under the applicable Borrowing Base; provided, however, that Bank may decrease the foregoing amount in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect the Collateral.

 

“Non-formula Advance Availability Period” is, provided a Default has not occurred, the period commencing three (3) Business Days prior to the end of each fiscal quarter of the Borrower and terminating on the earlier to occur of (i) the occurrence of a Default and (ii) 12:00 noon eastern time on the third Business Day of the immediately succeeding fiscal quarter of the Borrower.

 

“Performance Pricing Period” is, provided no Default has occurred and is continuing, the period commencing on the first day of the month following the date in which Borrower reports that Borrower’s EBITDA, measured on a trailing three-month basis, is greater than One Hundred Fifty Thousand Dollars ($150,000), and terminating on the earlier to occur of (i) the occurrence of a Default and (ii) the first day of the month in which Borrower reports, or Bank otherwise determines, in its sole discretion, that Borrower’s EBITDA, measured on a trailing three-month basis, is equal to or less than One Hundred Fifty Thousand Dollars ($150,000).  All reports of EBITDA made by Borrower to Bank shall be in form and substance acceptable to Bank, in its sole discretion.  Borrower shall provide Bank written notice of its intent to enter into a Performance Pricing Period.

 

  

5

  

 

“Streamline Period” is, on and after the Effective Date, the period (i) beginning on the first (1st) day in which Borrower has, for each consecutive day in the immediately-preceding thirty (30) day period, maintained unrestricted cash at Bank plus the Availability Amount (based upon Borrower’s last Borrowing Base Certificate delivered to Bank) in an amount at all times greater than Three Million Dollars ($3,000,000), as determined by Bank, in its sole discretion (the “Streamline Balance”); and (ii) ending on the earlier to occur of (A) the occurrence of a Default or an Event of Default; and (B) the first day thereafter in which Borrower fails to maintain the Streamline Balance, as determined by Bank, in its sole discretion.  Upon the termination of a Streamline Period, Borrower must maintain the Streamline Balance each consecutive day for thirty (30) consecutive days, as determined by Bank, in its sole discretion, prior to entering into a subsequent Streamline Period.  Borrower shall endeavor to give Bank prior-written notice of Borrower’s intention to enter into any such Streamline Period.”

 

	
  

	
8

	
The Loan Agreement shall be amended by inserting the following new definitions in Section 13.1 thereof, each in its appropriate alphabetical order:

 

“              “Draw Period” of time from the Fourth Loan Modification Effective Date through the earliest to occur of (a) March 31, 2012, (b) an Event of Default, or (c) the existence of any Default.

 

“Draw Request” and “Draw Requests” is, during the Draw Period, each request for a Credit Extension under the Term Loan.

 

“Fourth Loan Modification Effective Date” is May 6, 2011.

 

“Term Loan” is a loan made by Bank pursuant to the terms of Section 2.1.5 hereof.

 

“Term Loan Amount” is an aggregate amount equal to Two Million Dollars ($2,000,000) outstanding at any time.

 

“Term Loan Maturity Date” is the earliest of (a) April 1, 2015 or (b) the occurrence of an Event of Default.”

 

	
  

	
9

	
The Loan Agreement shall be amended by deleting the following definitions from Section 13.1 thereof:

 

“            “Availability Amount” is (a) the lesser of (i) the Revolving Line or (ii) (X) the amount available under the Borrowing Base plus (Y) during the Non-formula Advance Availability Period, the Non-formula Advance minus (b) the Dollar Equivalent amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit plus an amount equal to the Letter of Credit Reserve), minus (c) the FX Reduction Amount, minus (d) any amounts used for Cash Management Services, and minus (e) the outstanding principal balance of any Advances, including, without limitation, any outstanding Non-formula Advance.

 

“Credit Extension” is any Advance, Non-formula Advance, Letter of Credit, FX Forward Contract, amount utilized for Cash Management Services, or any other extension of credit by Bank for Borrower’s benefit.

 

“Revolving Line Maturity Date” is March 31, 2012 (two (2) years from the Effective Date).”

 

and inserting in lieu thereof the following:

 

  

6

  

 

“           “Availability Amount” is (a) the lesser of (i) the Revolving Line minus the outstanding principal balance of the Term Loan or (ii) the amount available under the Borrowing Base, minus (b) the Dollar Equivalent amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit plus an amount equal to the Letter of Credit Reserve), minus (c) the FX Reduction Amount, minus (d) any amounts used for Cash Management Services, and minus (e) the outstanding principal balance of any Advances.

 

“Credit Extension” is any Advance, Term Loan, Letter of Credit, FX Forward Contract, amount utilized for Cash Management Services, or any other extension of credit by Bank for Borrower’s benefit.

 

“Revolving Line Maturity Date” is March 31, 2013.”

 

	
  

	
10

	
The Loan Agreement shall be amended by deleting the following clause (g) from the definition of “Permitted Acquisition” contained in Section 13.1 thereof:

 

“           (g)           the total cash and non-cash consideration payable (including, without limitation, any earn-out payment obligations) for all such Acquisitions may not exceed Six Million Dollars ($6,000,000); Borrower shall provide Bank evidence satisfactory to Bank, in its sole discretion, that no more than Three Million Dollars ($3,000,000) in the aggregate of Credit Extensions or other proceeds of loans made by Bank to Borrower, have been utilized as purchase consideration for all such Acquisitions; and”

 

and inserting the following in lieu thereof:

 

“           (g)           the total cash and non-cash consideration payable (including, without limitation, any earn-out payment obligations) for all such Acquisitions may not exceed Five Million Dollars ($5,000,000); Borrower shall provide Bank evidence satisfactory to Bank, in its sole discretion, that no more than Three Million Dollars ($3,000,000) in the aggregate of Credit Extensions or other proceeds of loans made by Bank to Borrower, have been utilized as purchase consideration for all such Acquisitions; and”

 

	
  

	
11

	
The Loan Agreement shall be amended by deleting the following clause (c) from the definition of “Permitted Liens” contained in Section 13.1 thereof:

 

“           (c)           purchase money Liens and capital leases (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than Five Hundred Thousand Dollars ($500,000) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;”

 

and inserting in lieu thereof the following:

 

“           (c)           purchase money Liens and capital leases (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than Seven Hundred Fifty Thousand Dollars ($750,000) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;”

 

	
  

	
12

	
The Compliance Certificate attached as Exhibit B to the Loan Agreement is hereby deleted and replaced with Exhibit B attached hereto.

 

  

7

  

 

4.           CONDITIONS PRECEDENT.  As a condition precedent to the effectiveness of this Loan Modification Agreement and the Bank’s obligation to make further Advances under the Revolving Line, the Bank shall have received the following documents prior to or concurrently with this Agreement, each in form and substance satisfactory to the Bank:

 

	
  

	
A.

	
Copies, certified by a duly authorized officer of each Borrower, to be true and complete as of the date hereof, of each of (i) the governing documents of each Borrower, respectively, as in effect on the date hereof (but only to the extent modified since last delivered to the Bank), (ii) the resolutions of each Borrower, respectively, authorizing the execution and delivery of this Loan Modification Agreement, the other documents executed in connection herewith and each Borrower’s respective performance of all of the transactions contemplated hereby (but only to the extent required since last delivered to Bank), and (iii) an incumbency certificate giving the name and bearing a specimen signature of each individual who shall be so authorized (but only to the extent any signatories have changed since such incumbency certificate was last delivered to Bank);

 

	
  

	
B.

	
Bank shall have received a certificate of the Secretary of State (or similar entity) of the applicable jurisdiction of organization of a recent date as to each Borrower’s respective existence and good standing;

 

	
  

	
C.

	
Bank shall have received the results of UCC searches and other searches as necessary with respect to the Collateral indicating no Liens (other than the Liens of Bank or Permitted Liens) and otherwise in form and substance satisfactory to the Bank;

 

	
  

	
D.

	
Updated evidence of insurance;

 

	
  

	
E.

	
Updated Perfection Certificate for each Borrower; and

 

	
  

	
F.

	
Such other documents as Bank may reasonably request.

 

5.           FEES.  Borrower shall pay to Bank an annual renewal fee equal to Twenty Five Thousand Dollars ($25,000), which fee shall be due and payable on March 31, 2012 and shall be deemed fully earned as of that date.   Borrower shall also reimburse Bank for all legal fees and expenses incurred in connection with this amendment to the Existing Loan Documents.

 

6.           ADDITIONAL COVENANTS: RATIFICATION OF PERFECTION CERTIFICATE.  Borrower is not a party to, nor is bound by, any 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.  Borrower shall provide written notice to Bank within ten (10) days of entering or becoming bound by any such license or agreement (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 (x) all such licenses or contract rights 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 license or agreement (such consent or authorization may include a licensor’s agreement to a contingent assignment of the license to Bank if Bank determines that is necessary in its good faith judgment), whether now existing or entered into in the future, and (y) 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 the Loan Agreement and the other Loan Documents.  In addition, the Borrower hereby certifies that no Collateral, other than Permitted Collateral is in the possession of any third party bailee (such as at a warehouse).  In the event that Borrower, after the date hereof, intends to store or otherwise deliver the Collateral, other than Permitted Collateral, to such a bailee, then Borrower shall first receive, the prior written consent of Bank and such bailee must acknowledge in writing that the bailee is holding such Collateral for the benefit of Bank.  Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in that certain updated Perfection Certificate, each dated as of the date hereof, and acknowledges, confirms and agrees the disclosures and information above Borrower provided to Bank in such Perfection Certificate remains true and correct in all material respects as of the date hereof.

 

  

8

  

 

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

 

8.           RATIFICATION OF LOAN DOCUMENTS.  Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of the Loan Agreement, as modified hereby, each other Loan Document, all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.

 

9.           NO DEFENSES OF BORROWER.  Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.

 

10.           CONTINUING VALIDITY.  Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents.  Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect.  Bank’s agreement to modifications to the existing Obligations pursuant to this  Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Obligations.  Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations.  It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing.  No maker will be released by virtue of this Loan Modification Agreement.

 

11.           RIGHT OF SET OFF.   Borrower hereby grants to Bank, a lien, security interest and right of set off as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Bank (including a Bank subsidiary) or in transit to any of them.  At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations.  ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

12.           CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER.  Section 11 of the Loan Agreement is hereby incorporated by reference.

 

13.           COUNTERSIGNATURE.  This Loan Modification Agreement shall become effective only when it shall have been executed by Borrower and Bank.

 

 

[The remainder of this page is intentionally left blank]

  

9

  

 

This Loan Modification Agreement is executed as a sealed instrument under the laws of the Commonwealth of Massachusetts, as of the Fourth Loan Modification Effective Date.

 

	
BORROWER:

 

	
BANK:

	
BRIDGELINE DIGITAL, INC.

 

 

By:  /s/Michael D. Prinn    

Name: Michael D. Prinn                                                                

Title:  Chief Accounting Officer                                                              

 

	
SILICON VALLEY BANK

 

 

By:  /s/Benjamin R. Johnston                                                               

Name: Benjamin R. Johnson                                                                

Title:  Relationship Manager                                                                

 

	
e.MAGINATION IG, LLC

 

 

By:  /s/Thomas L. Massie                                                                

Name: Thomas L. Massie  

Title:  President                                                                

 

	  

 

 

 

[Fourth Loan Modification Agreement Signature Page]

 

  

10

  

 

EXHIBIT A- COMPLIANCE CERTIFICATE

 

	TO:	SILICON VALLEY BANK 	Date: __________
	FROM:	BRIDGELINE DIGITAL, INC.	 
	 	e.MAGINATION IG, LLC	 

 

The undersigned authorized officer of Bridgeline Digital, Inc. and e.Magination IG, LLC (individually and collectively, jointly and severally, the “Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries 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 under “Complies” column.

 

	
Reporting Covenant

	
Required

	
Complies

	  	  	  
	
Monthly financial statements with Compliance Certificate

	
Monthly within 30 days

	
Yes   No

	
Annual financial statement (CPA Audited)

	
FYE within 150 days

	
Yes   No

	
10-Q, 10-K and 8-K

	
Within 5 days after filing with SEC

	
 Yes   No

	
A/R & A/P Agings, Transaction Reports and Deferred Revenue reports

	
Monthly within 30 days

	
Yes   No

	
Board-approved projections

	
Annually, w/in 45 days of approval and as amended

	
Yes   No

	
Borrowing Base Certificate

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

	
Yes   No

	  

 

	
Financial Covenant

	
Required

	
Actual

	
Complies

	  	 	  	  
	
Maintain at all times (tested):

	 	  	  
	
Minimum EBITDA (quarterly, on a trailing three-month basis)

	 	  	  
	
March 31, 2011

	$	200,000	
$_________

	
Yes   No

	
June 30, 2011

	$	300,000	
$_________

	
Yes   No

	
September 30, 2011 and thereafter

	$	400,000	
$_________

	
Yes   No

	
Minimum Liquidity (certified monthly)

	$	1,000,000	
$_________

	
Yes   No

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

____________________________________________________________________________.

There were no held checks as of the end of such month there except as follows (if no held checks, state “None”):

 

  

11

  

____________________________________________________________________________.

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

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

 

	
BRIDGELINE DIGITAL, INC.

e.MAGINATION IG, LLC

 

 

By:

Name:

Title:

 

	
BANK USE ONLY

 

Received by: _____________________

authorized signer

Date:           _________________________

 

Verified: ________________________

authorized signer

Date:           _________________________

 

Compliance Status:           Yes     No

  

12

  

Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

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

Dated:           ____________________

I.           Minimum EBITDA (Section 6.9(a))

Required:                      Achieve EBITDA, measured quarterly on a trailing three-month basis as of the last day of each fiscal quarter listed below, of no less than the corresponding amounts listed below:

	
Quarterly Period Ending

	 	
Minimum EBITDA

	 
	
March 31, 2011

	 	 	$200,000	 
	
June 30, 2011

	 	 	$300,000	 
	
September 30, 2011, and as of the last day of each quarterly period ending thereafter

	 	 	$400,000”	 

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

 

	
A.

	
Net Income

	
$           

 

	
B.

	
Interest Expense

	
$           

 

	
C.

	
To the extent deducted from the calculation of Net Income, non-cash stock compensation expense, depreciation expense and amortization expense (including, without limitation, goodwill)

 

	
$           

 

	
D.

	
Other one-time non-cash expenses approved by Bank, on a case-by-case basis, in its sole discretion

	
$           

 

	
E.

	
EBITDA (line A plus line B plus line C plus line D)

	
$           

 

Is line E equal to or greater than $[                                                                                               ]?

_________________ No, not in compliance                                                             ___________ Yes, in compliance

 

  

13

  

II.           Minimum Liquidity (Section 6.9(b))

Required:                      Maintain unrestricted cash at Bank plus Committed Availability of not less than One Million Dollars ($1,000,000).

Actual:

	
A.

	
Unrestricted Cash at Bank

	
$           

 

	
B.

	
Committed Availability

	
$           

 

	
C.

	
Liquidity (line A plus line B)

	
$           

 

Is line C equal to or greater than $1,000,000?

 

__________________  No, not in compliance                                                             ___________ Yes, in compliance

 

14

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