Document:

Document

Exhibit 4.1

DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
 
General
 
Any references in this exhibit to "the Company,” “Pillarstone,” “us,” “we” or “our” are to Pillarstone Capital REIT and its consolidated subsidiaries. Pillarstone is a Maryland real estate investment trust (“REIT”) engaged in investing in, owning and operating commercial properties.  The rights of our shareholders are generally covered by Maryland law and our Articles of Amendment & Reinstatement of the Declaration of Trust of the Company (as amended and restated and in effect on the date hereof, the “Articles”).  The terms of our common stock are therefore subject to Maryland law.  The following description of the terms of the common stock and preferred stock of Pillarstone is a summary and is subject to and is qualified in its entirety by reference to the Articles and our Third Amended and Restated Bylaws (the “Bylaws”), copies of which are incorporated by reference to the Annual Report on Form 10-K of which this Exhibit 4.1 is a part.
 
Authorized Shares of Beneficial Interest
 
Pillarstone’s authorized beneficial interest (the “Shares”) consists of 450,000,000 shares of beneficial interest having a par value of $0.01 per share.  400,000,000 Shares are classified as common shares of beneficial interest having a par value of $0.01 per share (the “Common Shares”), and 50,000,000 Shares are classified as preferred shares of beneficial interest having a par value of $0.01 per share the (“Preferred Shares”).  Of the Preferred shares, 1,518,000 are designated as Class A Cumulative Convertible Preferred Shares (the “Class A Preferred Shares”) and 300,000 are classified as Class C Convertible Preferred Shares (the “Class C Preferred Shares”).

As  of December 31, 2021, there were 657,084 common shares outstanding, 256,636 Class A Preferred Shares outstanding and 231,944 Class C Preferred Shares.

Common Shares
Outstanding Shares of Common Shares are fully paid and nonassessable. Common Shares do not carry any preemptive rights enabling a holder to subscribe for or receive any additional securities that Pillarstone may issue from time to time.  No conversion rights, redemption rights or sinking fund provisions are applicable to the Common Shares.  The rights of holders of Common Shares will be subject to the rights of holders of any Preferred Shares that may be issued and outstanding from time to time.  Our Board of Trustees (our “Board”) can authorize the issuance of Preferred Shares without shareholder approval.  Such issued shares could have voting, conversion and other rights that could adversely affect the rights of holders of Common Shares.  

Our Board also could authorize the issuance of additional shares of Common Shares from time to time without shareholder approval. 
 
Listing. Our Common Shares are listed on the Over-The-Counter Bulletin Board an on pink sheets under the symbol “PRLE”. 
 
Dividends. The holders of Common Shares are entitled to receive such dividends as may be declared by our Board out of funds legally available for distribution.  These dividends may be paid only out of funds remaining after payment in full of any cumulative dividends upon all outstanding Preferred Shares have been paid or set apart for payment for all past dividend periods and the then current dividend period. 
 
Liquidation Rights.  Upon any voluntary or involuntary liquidation of Pillarstone, its assets must be used in the following order of priority: 
 
									
	 		payment of or provision for all of our debts and liabilities;

									
	 		payment of all sums to which the Preferred Shares may be entitled; and

									
	 		distribution ratably to holders of Common Shares our remaining assets.

 
Voting Rights.  Each Common Share entitles the holder thereof to one vote on each matter upon which holders of Common Shares are entitled to vote.  Our Board may reclassify any unissued Common Shares from time to time in one or more classes or series of Common Shares or Preferred Shares.ý  Our Articles provide that our Board shall consist of 6 trustees, which may be increased or decreased pursuant to the Bylaws, to contain never less than 1 trustee and never more than 15 trustees. 
 
Restrictions on Ownership and Transfer of Shares
 
Pillarstone was formed as an REIT on March 15, 1994.  To qualify for taxation as a REIT, Pillarstone must comply with certain provisions of the Internal Revenue Code (the “Code”).  In general, to qualify for taxation as a REIT no more than 50% in value of Pillarstone’s capital stock may be owned by five or fewer “individuals” (as defined in the Code) at any time during the last half of a taxable year, and shares of Pillarstone common stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. Pillarstone does not currently qualify for taxation as a REIT for federal income tax purposes.
 
Our Articles contain restrictions on the ownership and transfer of Shares intended to assist Pillarstone in attaining status as a REIT for federal income tax purposes.  Our Articles provide that, among other things and subject to certain exceptions, no person may own, or be deemed to own by virtue of the attribution provisions of the Code, 9.8% or more, in aggregate number of shares or value, of the outstanding shares of any class or series of Pillarstone capital stock. Our Articles also include other restrictions on ownership and transfer.  In the event any transfer of 

shares of stock or other event would result in a person (referred to as the “Intended Transferee”) beneficially or constructively owning shares in excess of the ownership limit that would result in Pillarstone’s disqualification as a REIT, that number of shares that would cause a violation of the applicable limit (referred to as the “excess shares”) will be automatically transferred to a trust for the benefit of a charitable organization.  If a transfer to a trust would not avoid a violation of the ownership limitation provisions for some reason, such transfer of the excess shares to the Intended Transferee will be void ab inito, and of no force or effect. 
 
Anti-Takeover Provisions 
 
The provisions of Maryland law and our Articles could discourage or make it more difficult to accomplish a proxy contest or other change in our management or the acquisition of control by a holder of a substantial amount of our voting stock.  It is possible that these provisions could make it more difficult to accomplish, or could deter, transactions that shareholders may otherwise consider to be in their best interests or in our best interests.  These provisions are intended to enhance the likelihood of continuity and stability in the composition of our Board and in the policies formulated by the Board and to discourage certain types of transactions that may involve an actual or threatened change of our control.  These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal that may not be in the best interests of our shareholders and to discourage certain coercive tactics.  Such provisions also may have the effect of preventing changes in our Board and management. 
 
The provisions in our Articles and Bylaws include, among other things, the following: 

•classified board with three-year staggered terms;

•the ability of our Board to classify any unissued Preferred Shares and reclassify any previously classified but unissued Preferred Shares of any series, in one or more serious of Common Shares or Preferred Shares, without shareholder approval;

•shareholder action can only be taken at a special or regular meeting, and absent a meeting, only by unanimous written or electronic consent;

•shareholders cannot call a special meeting except upon the written request of shareholders entitled to cast not less than a majority of all of the votes entitled to be cast at the meeting;

•advance notice procedures for nominating candidates to our Board;

•limitations as to what the shareholders are entitled to vote on;

•removal of trustees only for cause;

•in order to facilitate the preservation of Pillarstone’s status as PREIT under the Code, a prohibition on any single shareholder, or any group of affiliated shareholders from 

beneficially owning more than 9.8% of our outstanding common or preferred stock, unless our Board waives or modifies this ownership limitation;

•supermajority voting requirements to amend certain provisions of our Articles;

•limitations allowing only our Board to amend our Bylaws.ex101firstloanmodificati

  FIRST LOAN MODIFICATION AGREEMENT   This First Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of March  28, 2022, by and between 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 PHREESIA, INC., a Delaware corporation, with its  principal place of business at 434 Fayetteville Street, Suite 1400, Raleigh, North Carolina 27601 (“Borrower”).  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 loan arrangement  dated as of  May 5, 2020, evidenced by, among other documents, a certain Second Amended and Restated Loan and  Security Agreement dated as of May 5, 2020, 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 defined  in the Loan Agreement (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 CHANGE IN TERMS.    A. Modifications to Loan Agreement.     1 Borrower hereby acknowledges and agrees that Borrower will deliver to Bank, on or  before the date that is thirty (30) days from the date of this Loan Modification  Agreement, in form and substance satisfactory to Bank: (a) a certificate on the Acord 25  form with respect to Borrower’s general liability insurance policy; (b) a certificate on the  Acord 28 form with respect to Borrower’s property insurance policy; (c) an endorsement  to Borrower’s general liability insurance policy that names Bank as an additional insured;  (d) an endorsement to Borrower’s property insurance policy that names Bank as lender’s  loss payable; and (e) endorsements to Borrower’s general liability and property insurance  policies stating that the insurer will give Bank at least thirty (30) days prior written notice  before any such policy or policies shall be materially altered or canceled.  Borrower  acknowledges and agrees that the failure of Borrower to satisfy the requirements set forth  in the immediately preceding sentence within thirty (30) days from the date of this Loan  Modification Agreement shall result in an immediate Event of Default under the Loan  Agreement for which there shall be no grace or cure period.    2 The Loan Agreement shall be amended by deleting the following text, appearing in  Section 2.3 thereof:    “ (a) Interest Rate.  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 (i) at all times when a Performance Pricing Period is in  effect, the greater of (A) one-half of one percent (0.50%) below the Prime Rate  and (B) four percent (4.0%) and (ii) at all times when a Performance Pricing  Period is not in effect, the greater of (A) the Prime Rate and (B) four and one- half of one percent (4.50%), which interest shall be payable monthly in  accordance with Section 2.3(d) below.”    and inserting in lieu thereof the following:    “ (a) Interest Rate.  Subject to Section 2.3(b), the principal amount  outstanding under the Revolving Line shall accrue interest at a floating per  

 

2    annum rate equal to the greater of (i) one-half of one percent (0.50%) below the  Prime Rate and (ii) three and one-quarter of one percent (3.25%), which interest  shall be payable monthly in accordance with Section 2.3(d) below.”    3 The Loan Agreement shall be amended by deleting the following text, appearing in  Section 2.4(b) thereof:  “For each one (1) year anniversary of the Effective Date occurring prior to the  Revolving Line Maturity Date, Borrower shall pay to Bank a fully-earned, non- refundable anniversary fee equal to one-quarter of one percent (0.25%) of the  amount of the Revolving Line as of the date of such anniversary (each, an  “Anniversary Fee” and, collectively, the “Anniversary Fees”).”      and inserting in lieu thereof the following:  “For each one (1) year anniversary of the Effective Date occurring prior to the  Revolving Line Maturity Date, Borrower shall pay to Bank a fully-earned, non- refundable anniversary fee equal to one-quarter of one percent (0.25%) of the  amount of the Revolving Line (provided that the amount of the anniversary fee  payable on May 5, 2022 shall be equal to Two Hundred Sixty Thousand Four  Hundred Sixteen and 67/100 Dollars ($260,416.67)) as of the date of such  anniversary (each, an “Anniversary Fee” and, collectively, the “Anniversary  Fees”).”    4 The Loan Agreement shall be amended by deleting the following text, appearing in  Section 2.4 thereof:    “ (c) Termination Fee.  Upon termination by Borrower of this  Agreement or the termination by Borrower of the Revolving Line for any reason  prior to the Revolving Line Maturity Date, in addition to the payment of any  other amounts then-owing, a termination fee in an amount equal to (i) (A) One  Hundred Eighty Seven Thousand Dollars ($187,000.00), minus (B) Six  Thousand Dollars ($6,000.00) for each full calendar month that has elapsed after  April 30, 2020, plus (ii) the applicable Termination Fee Percentage of the  Revolving Line (the “Termination Fee”), provided that (x) Bank shall waive  the portion of the Termination Fee described in subclause (ii) above (but for  clarity not the portion of the Termination Fee described in subclause (i) above)  if each of the following occurs: (A) Borrower requests Bank’s consent to an  Acquisition that satisfies the criteria in subsections (a), (b), (c), (f), (g) and (h) of  the definition of Permitted Acquisition and the total consideration to be paid by  Borrower and its Subsidiaries in connection with such Acquisition does not  exceed the maximum aggregate amount of consideration for all Acquisitions  permitted pursuant to subsection (d) of the definition of Permitted Acquisitions  (taking into account all exclusions and adjustments set forth in such subsection),  (B) Borrower has provided to Bank all available documentation, financial  information, financial analysis or other information relating to such Acquisition  reasonably requested by Bank, (C) Bank declines to provide its consent to such  proposed Acquisition and (D) this Agreement is terminated and all Obligations  repaid in full prior to, or simultaneously with, the closing of such Acquisition,  and (y) no Termination Fee shall be charged if the credit facility hereunder is  replaced with a new facility or facilities from Bank;     (d) Unused Revolving Line Facility Fee.  Payable quarterly in  arrears on the last day of each calendar quarter occurring prior to the Revolving  Line Maturity Date, and on the Revolving Line Maturity Date, a fee (the  “Unused Revolving Line Facility Fee”) in an amount equal to one-quarter of  

 

3    one percent (0.25%) per annum of the average unused portion of the Revolving  Line, as determined by Bank, computed on the basis of a year with the  applicable number of days as set forth in Section 2.4(d).  The unused portion of  the Revolving Line, for purposes of this calculation, shall be calculated on a  calendar year basis and shall equal the difference between (i) the Revolving  Line, and (ii) the average for the period of the daily closing balance of the  Revolving Line outstanding; and”  and inserting in lieu thereof the following:    “ (c) Termination Fee.  Upon termination by Borrower of this  Agreement or the termination by Borrower of the Revolving Line for any reason  prior to the Revolving Line Maturity Date, in addition to the payment of any  other amounts then-owing, a termination fee in an amount equal to (i) (A) Sixty- One Thousand Dollars ($61,000.00), minus (B) Six Thousand Dollars  ($6,000.00) for each full calendar month that has elapsed after January 31, 2022,  plus (ii) the applicable Termination Fee Percentage of the Revolving Line (the  “Termination Fee”), provided that (x) Bank shall waive the portion of the  Termination Fee described in subclause (ii) above (but for clarity not the portion  of the termination fee described in subclause (i) above) if each of the following  occurs: (A) Borrower requests Bank’s consent to an Acquisition that satisfies the  criteria in subsections (a), (b), (c), (f), (g) and (h) of the definition of Permitted  Acquisition and the total consideration to be paid by Borrower and its  Subsidiaries in connection with such Acquisition does not exceed the maximum  aggregate amount of consideration for all Acquisitions permitted pursuant to  subsection (d) of the definition of Permitted Acquisitions (taking into account all  exclusions and adjustments set forth in such subsection), (B) Borrower has  provided to Bank all available documentation, financial information, financial  analysis or other information relating to such Acquisition reasonably requested  by Bank, (C) Bank declines to provide its consent to such proposed Acquisition  and (D) this Agreement is terminated and all Obligations repaid in full prior to,  or simultaneously with, the closing of such Acquisition, and (y) no Termination  Fee shall be charged if the credit facility hereunder is replaced with a new  facility or facilities from Bank;     (d) Unused Revolving Line Facility Fee.  Payable quarterly in  arrears on the last day of each calendar quarter occurring prior to the Revolving  Line Maturity Date, and on the Revolving Line Maturity Date, a fee (the  “Unused Revolving Line Facility Fee”) in an amount equal to fifteen- hundredths of one percent (0.15%) per annum of the average unused portion of  the Revolving Line, as determined by Bank, computed on the basis of a year  with the applicable number of days as set forth in Section 2.4(d).  The unused  portion of the Revolving Line, for purposes of this calculation, shall be  calculated on a calendar year basis and shall equal the difference between (i) the  Revolving Line, and (ii) the average for the period of the daily closing balance  of the Revolving Line outstanding.  Notwithstanding the foregoing, Borrower  shall not be required to pay an Unused Revolving Line Facility Fee for any  quarter in which the aggregate outstanding principal amount of Advances was  equal to at least Ten Million Dollars ($10,000,000.00) at all times; and”    5 The Loan Agreement shall be amended by deleting the following text, appearing in  Section 6.2 thereof:    “ (a) 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  

 

4    in a form reasonably acceptable to Bank (the “Monthly Financial  Statements”);”  and inserting in lieu thereof the following:    “ (a) as soon as available, but no later than (i) thirty (30) days after  the last day of each month with respect to which there were Credit Extensions  outstanding at any time during the period commencing on the first day of such  month through and including the date that is thirty (30) days after the last day of  such month and (ii) thirty (30) days after the last day of each quarter with  respect to which Monthly Financial Statements were not required for any given  month in such quarter pursuant to subsection (i), a company-prepared  consolidated balance sheet and income statement covering Borrower’s  consolidated operations for such month or quarter (as applicable) in a form  reasonably acceptable to Bank (the “Monthly Financial Statements”)     6 The Loan Agreement shall be amended by deleting the following text, appearing in  Section 6.7(a) thereof:  “Borrower, any Subsidiary of Borrower and any Guarantor shall maintain its  operating and other deposit accounts and excess cash with Bank and Bank’s  Affiliates; provided that Borrower may maintain an operating account with  Royal Bank of Canada so long as (i) such account is used exclusively for the  payment of ordinary course payroll, rent and operating expenses of Borrower  and (ii) the aggregate amount of all cash in such account does not exceed One  Million Three Hundred Thousand Dollars ($1,300,000.00) at any time, provided  that the amount in such account may exceed such dollar limitation once annually  for a period of no more than five (5) consecutive Business Days in connection  with the payment of annual bonuses.”  and inserting in lieu thereof the following:  “(i) Other than during any Depository Exclusivity Period, Borrower, any  Subsidiary of Borrower and any Guarantor shall maintain operating and other  deposit accounts with Bank and Bank’s Affiliates and excess cash in accounts  with Bank and Bank’s Affiliates holding an aggregate amount (for all such  accounts together) equal to at least fifty-one percent (51.0%) of the Dollar value  of all amounts held in Borrower’s, Borrower’s Subsidiaries’ and all Guarantors’  accounts at all financial institutions, and (ii) during any Depository Exclusivity  Period, Borrower, any Subsidiary of Borrower and any Guarantor shall maintain  all of their operating and other deposit accounts with Bank and Bank’s Affiliates  and excess cash in accounts with Bank and Bank’s Affiliates, provided,  however, that (A) Borrower and its Subsidiaries may maintain operating  accounts with Royal Bank of Canada so long as (1) such accounts are used  exclusively for the payment of ordinary course payroll, rent and operating  expenses of Borrower (or transfers of funds to deposit accounts with Bank or  Bank’s Affiliates) and (2) the aggregate amount of all cash in such accounts (for  all such accounts together) does not exceed Fifteen Million Dollars  ($15,000,000.00) at any time, and (B) Borrower and its Subsidiaries may  maintain accounts acquired pursuant to a Permitted Acquisition with financial  institutions other than Bank and Bank’s Affiliates so long as the aggregate  amount maintained in such accounts (for all such accounts together) does not  exceed Ten Million Dollars ($10,000,000.00) at any time.”    7 The Loan Agreement shall be amended by deleting the following, appearing as Section  6.8 thereof:  

 

5      “ 6.8 Financial Covenant – Adjusted EBITDA.  Maintain at all  times, to be tested as of the last day of each fiscal quarter, Adjusted EBITDA of  at least:  (a) ($15,000,000.00) for the six (6) month period ending on each of  July 31, 2020 and October 31, 2020;  (b) ($8,000,000.00) for the six (6) month period ending on January 31,  2021;  (c) ($6,000,000.00) for the six (6) month period ending on April 30,  2021;  (d) ($5,500,000.00) for the six (6) month period ending on July 31,  2021;  (e) ($5,000,000.00) for the six (6) month period ending on October 31,  2021;  (f) ($4,500,000.00) for the six (6) month period ending on January 31,  2022;  (g) ($3,500,000.00) for the six (6) month period ending on April 30,  2022;  (h) ($2,000,000.00) for the six (6) month period ending on July 31,  2022;  (i) ($500,000.00) for the six (6) month period ending on October 31,  2022; and   (j) $1.00 for the six (6) month period ending on January 31, 2023 and  for the six (6) month period ending on the last day of each fiscal quarter  thereafter.    Notwithstanding the foregoing, the financial covenant set forth in this  Section 6.8 shall not be tested for any six (6) month period during which  Borrower’s Liquidity was at least Seventy Million Dollars ($70,000,000.00) at  all times during such period.”  and inserting in lieu thereof the following:    “ 6.8 Financial Covenants.  Maintain at all times:  (a) Adjusted EBITDA.  To be tested as of the last day of each  fiscal quarter, Adjusted EBITDA of at least:  (i) ($15,000,000.00) for the six (6) month period ending on  each of July 31, 2020 and October 31, 2020;  (ii) ($8,000,000.00) for the six (6) month period ending on  January 31, 2021;  

 

6    (iii) ($6,000,000.00) for the six (6) month period ending on  April 30, 2021;  (iv) ($5,500,000.00) for the six (6) month period ending on  July 31, 2021;  (v) ($5,000,000.00) for the six (6) month period ending on  October 31, 2021; and  (vi) ($4,500,000.00) for the six (6) month period ending on  January 31, 2022.  Notwithstanding the foregoing, the financial covenant set forth in this  Section 6.8(a) shall not be tested for any six (6) month period during which  Borrower’s Liquidity was at least Seventy Million Dollars ($70,000,000.00) at  all times during such period.   (b) Adjusted Quick Ratio.  To be tested as of the last day of each  month, an Adjusted Quick Ratio of at least 1.35 to 1.00.”    8 The Loan Agreement shall be amended by deleting the following text, appearing in the  definition of “Permitted Acquisition” in Section 13.1 thereof:  “ (d)          the total aggregate consideration to be paid by Borrower and  its Subsidiaries (excluding (X) the value of Borrower’s or its Subsidiaries’ stock  issued by Borrower or its Subsidiaries used in satisfaction of the purchase price  and (Y) the portion of any such consideration financed with segregated and  identifiable proceeds from the sale of equity securities of Borrower (or any  parent company of Borrower)) in connection therewith in all of the  contemplated transactions during the term of this Agreement does not exceed  Fifteen Million Dollars ($15,000,000.00);”  and inserting in lieu thereof the following:  “ (d)          (i) the total aggregate consideration to be paid by Borrower  and its Subsidiaries (excluding (X) the value of Borrower’s or its Subsidiaries’  stock issued by Borrower or its Subsidiaries used in satisfaction of the purchase  price and (Y) the portion of any such consideration financed with segregated and  identifiable proceeds from the sale of equity securities of Borrower (or any  parent company of Borrower) or a Subordinated Debt financing that consists of  convertible notes with investors) in connection therewith in all of the  contemplated transactions during the term of this Agreement does not exceed  Fifty Million Dollars ($50,000,000.00) and (ii) the total aggregate consideration  to be paid by Borrower and its Subsidiaries in connection therewith that is  financed with segregated and identifiable proceeds from the sale of equity  securities of Borrower (or any parent company of Borrower) or a Subordinated  Debt financing that consists of convertible notes with investors does not exceed  One Hundred Million Dollars ($100,000,000.00) for all of the contemplated  transactions in any consecutive twelve (12) month period;”    9 The Loan Agreement shall be amended by deleting the following text, appearing in the  definition of “Permitted Acquisition” in Section 13.1 thereof:  “ (h)          such Acquisition and the Target being acquired is accretive;”  

 

7    and inserting in lieu thereof the following:  “ (h)          Intentionally omitted;”    10 The Loan Agreement shall be amended by deleting the following text, appearing in the  definition of “Permitted Indebtedness” in Section 13.1 thereof:  “ (i) if Bank is unable or declines to provide a particular type of  credit card or letter of credit banking service to Borrower or any Subsidiary, or  Bank otherwise consents in writing in its sole discretion, unsecured  Indebtedness of Borrower or such Subsidiary in connection with such services in  an aggregate amount (for all such services together) not exceeding Five Hundred  Thousand Dollars ($500,000.00);”  and inserting in lieu thereof the following:  “ (i) if Bank is unable or declines to provide a particular type of  credit card banking service to Borrower or any Subsidiary, or Bank otherwise  consents in writing in its sole discretion, unsecured Indebtedness of Borrower or  such Subsidiary in connection with such services;”    11 The Loan Agreement shall be amended by deleting the following text, appearing in the  definition of “Permitted Liens” in Section 13.1 thereof:  “ (c) purchase money Liens or capital leases (i) on Equipment  acquired or held by Borrower incurred for financing the acquisition of the  Equipment securing no more than Eight Million Dollars ($8,000,000.00) 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 or capital leases (i) on Equipment  acquired or held by Borrower incurred for financing the acquisition of the  Equipment securing no more than Twenty Five Million Dollars  ($25,000,000.00) 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 Loan Agreement shall be amended by inserting the following new definitions,  appearing alphabetically in Section 13.1 thereof:    “ “Adjusted Quick Ratio” is the ratio of (a) Quick Assets to (b) (i)  Current Liabilities minus (ii) the current portion of Deferred Revenue minus (iii)  all settlement obligations presented as liabilities on Borrower’s most recent  balance sheet delivered to Bank.”  “ “Current Liabilities” are (a) all Obligations, plus (b) without  duplication of (a), the aggregate amount of Borrower’s Total Liabilities that  mature within one (1) year.”  “ “Depository Exclusivity Period” is any period (i) commencing upon  the occurrence of a Depository Exclusivity Trigger and (ii) continuing until the  first date thereafter on which Borrower’s and its Subsidiaries’ aggregate  

 

8    Liquidity has been greater than or equal to the Depository Exclusivity Threshold  for thirty (30) consecutive days.”  “ “Depository Exclusivity Threshold” is Two Hundred Million Dollars  ($200,000,000.00).  “ “Depository Exclusivity Trigger” means that Borrower’s and its  Subsidiaries’ aggregate Liquidity is less than the Depository Exclusivity  Threshold on any date after either (i) the First LMA Effective Date or (ii) the  final day of a Depository Exclusivity Period.”  “ “First LMA Effective Date” is March 28, 2022.”  “ “Quick Assets” is, on any date, Borrower’s unrestricted and  unencumbered cash maintained with Bank and net billed accounts receivable  determined according to GAAP.”  “ “Total Liabilities” is on any day, obligations that should, under  GAAP, be classified as liabilities on Borrower’s consolidated balance sheet,  including all Indebtedness.”    13 The Loan Agreement shall be amended by deleting the definitions of “Increase  Approval” and “Performance Pricing Period” appearing in Section 13.1 thereof.    14 The Loan Agreement shall be amended by deleting the following definitions, appearing  in Section 13.1 thereof:  “ “Revolving Line” is an aggregate principal amount equal to the sum of  (a) Fifty Million Dollars ($50,000,000.00) and (b) upon and after any Increase  Approval, the amount by which Borrower has requested the Revolving Line  amount to increase in connection with such Increase Approval; provided that at  no time shall the Revolving Line exceed Sixty Five Million Dollars  ($65,000,000.00).”  “ “Termination Fee Percentage” means for a termination by Borrower  of this Agreement or the Revolving Line (a) prior to the second (2nd) anniversary  of the Effective Date, one and one-half of one percent (1.50%), (b) on or after  the second (2nd) anniversary of the Effective Date but prior to the third (3rd)  anniversary of the Effective Date, three-quarters of one percent (0.75%), (c) on  or after the third (3rd) anniversary of the Effective Date but prior to the fourth  (4th) anniversary of the Effective Date, one-half of one percent (0.50%), and (d)  on or after the fourth (4th) anniversary of the Effective Date, zero percent  (0.0%).”  and inserting in lieu thereof the following:  “ “Revolving Line” is an aggregate principal amount equal to One  Hundred Million Dollars ($100,000,000.00).”  “ “Termination Fee Percentage” means for a termination by Borrower  of this Agreement or the Revolving Line (a) prior to the First LMA Effective  Date, one and one-half of one percent (1.50%), (b) on or after First LMA  Effective Date but prior to the third (3rd) anniversary of the Effective Date,  three-quarters of one percent (0.75%), (c) on or after the third (3rd) anniversary  of the Effective Date but prior to the fourth (4th) anniversary of the Effective  

 

9    Date, one-half of one percent (0.50%), and (d) on or after the fourth (4th)  anniversary of the Effective Date, zero percent (0.0%).”    15 The Compliance Statement appearing as Exhibit B to the Loan Agreement is hereby  replaced with the Compliance Statement attached as Schedule 1 hereto.  4. ZEESIA JOINDER.  Borrower hereby agrees that it shall, within ninety (90) days of the date of this Loan  Modification Agreement (or such later date as Bank may agree in writing (which may be an email from Bank or its  counsel) in its sole discretion), (i) cause ZEESIA, INC., a Delaware corporation (“Zeesia”), to become a co- borrower with respect to each of the Loan Agreement and the other Loan Documents and (ii) grant Bank a first- priority perfected Lien in such assets of Zeesia as are consistent with the description of the Collateral under the Loan  Agreement (as if the Collateral were deemed to pertain to the assets of Zeesia) and, with respect to (i) and (ii),  executing and/or delivering (as applicable) to Bank a copy of Zeesia’s certificate of incorporation (together with all  amendments thereto) certified by the Delaware Secretary of State, a copy of Zeesia’s by-laws (together with all  amendments thereto), a secretary’s corporate borrowing certificate in connection with Zeesia’s joinder to the Loan  Documents, a long-form certificate of good standing for Zeesia from the State of Delaware, certificates of good  standing/foreign qualification from each State where Zeesia is qualified to do business, a joinder agreement with  respect to the Loan Agreement, a landlord’s consent with respect to each of Zeesia’s leased locations (subject to  commercially reasonable efforts to obtain such consent), a bailee’s waiver with respect to each location where  Zeesia maintains property with a third party (subject to commercially reasonable efforts to obtain such waiver), a  perfection certificate, account control agreements (to the extent required by Bank), insurance certificates and  endorsements, a legal opinion (authority and enforceability) of Borrower’s counsel, certified copies, dated as of a  recent date, of lien searches (including, without limitation, UCC searches) with respect to Zeesia which reflect no  liens (other than Permitted Liens) against such entity and such other documents as may be reasonably requested by  Bank, all in form and substance acceptable to Bank in Bank’s sole and absolute discretion.    5. FEES AND EXPENSES.  Borrower shall reimburse Bank for all Bank Expenses incurred in connection  with this amendment to the Existing Loan Documents as and to the extent required under Section 2.4(e) of the Loan  Agreement.  6. PERFECTION CERTIFICATE.  Borrower hereby ratifies, confirms and reaffirms, all and singular, the  terms and disclosures contained in a certain Perfection Certificate of Borrower dated as of March 28, 2022, and  acknowledges, confirms and agrees that the disclosures and information Borrower provided to Bank in such  Perfection Certificate have not changed, as of the date hereof.  Borrower acknowledges and agrees that all references  in the Loan Agreement to the “Perfection Certificate” shall mean and include the Perfection Certificate as described  herein.  7. INTENTIONALLY OMITTED.  8. RATIFICATION OF LOAN DOCUMENTS.  Borrower hereby ratifies, confirms, and reaffirms all terms  and conditions of all security or other collateral granted to Bank, and confirms that the indebtedness secured thereby  includes, without limitation, the Obligations.  9. INTENTIONALLY OMITTED.  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.  

 

10    11. 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] 

 

   This Loan Modification Agreement is executed as a sealed instrument under the laws of the  Commonwealth of Massachusetts as of the date first written above.    BORROWER:      BANK:    PHREESIA, INC.     SILICON VALLEY BANK          By: /S/ Randy Rasmussen____________________  By: /S/ Matt Griffiths____________________  Name: Randy Rasmussen     Name: Matt Griffiths  Title: Chief Financial Officer    Title: Director             

 

  SCHEDULE 1    EXHIBIT B  COMPLIANCE STATEMENT    Date:        TO:  SILICON VALLEY BANK       FROM:   PHREESIA, INC.      Under the terms and conditions of the Second Amended and Restated Loan and Security Agreement  between Borrower and Bank (the “Agreement”), Borrower is in compliance for the period ending _______________ with all  required covenants except as noted below.  Attached are the required documents evidencing such compliance, setting forth  calculations prepared in accordance with GAAP consistently applied from one period to the next except as explained in an  accompanying letter or footnotes.  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 Covenants Required Complies      Monthly financial statements (i) Monthly within 30 days (when  applicable) and (ii) within 30 days of   the end of  each quarter with respect to   which financial statements were not   required for any given month in such  quarter  Yes   No  Compliance Statement Monthly within 30 days and quarterly  within 45 days  Yes   No  10-K FYE within 90 days Yes   No  10-Q Quarterly within 45 days Yes   No  Board-approved projections Within 45 days of fiscal year end, and   as amended/updated  Yes   No    Financial Covenants Required Actual Complies       Maintain as indicated:     Minimum Adjusted Quick Ratio (at all times; tested  monthly)  > 1.35:1.0 _____:1.0 Yes   No    The following financial covenant analyses and information set forth in Schedule 1 attached hereto are true  and accurate as of the date of this Compliance Statement.    The following are the exceptions with respect to the statements above: (If no exceptions exist, state “No  exceptions to note.”)        

 

  Schedule 1 to Compliance Statement    Financial Covenants of Borrower    In the event of a conflict between this Schedule and the Agreement, the terms of the Agreement shall govern.    Dated: ____________________    I. Adjusted Quick Ratio (Section 6.8(b))    Required: > 1.35:1.00    Actual:    A. Aggregate value of the unrestricted and unencumbered cash of Borrower maintained with Bank     $     B. Aggregate value of net billed accounts receivable of Borrower $     C. Quick Assets (the sum of lines A and B)    $     D. Aggregate value of Obligations    $     E. Aggregate value of liabilities of Borrower (including all Indebtedness)   that matures within one (1) year    $     F. Current Liabilities (the sum of line D and E) $     G. Aggregate value of all amounts received or invoiced by Borrower in advance of performance  under contracts and not yet recognized as revenue      $     H. All settlement obligations presented as liabilities on Borrower’s most recent balance sheet  delivered to Bank    $     I. Line F minus lines G and H $     J. Adjusted Quick Ratio (line C divided by line I)        Is line J equal to at least 1.35:1:00?       No, not in compliance       Yes, in compliance

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