Document:

finalloanandsecurityagre

LOAN AND SECURITY AGREEMENT   THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of   December 29, 2015 (the “Effective Date”) between (i) SILICON VALLEY BANK, a   California corporation (“Bank”), and (ii) LOJACK CORPORATION, a Massachusetts   corporation (“LoJack”), and LOJACK GLOBAL LLC, a Delaware limited liability company   (“Global”; LoJack and Global are referred to herein, each and together, jointly and severally, as   “Borrower”), provides the terms on which Bank shall lend to Borrower and Borrower shall   repay Bank.  The parties agree as follows:   1 ACCOUNTING AND OTHER TERMS   Accounting terms not defined in this Agreement shall be construed following   GAAP.  Calculations and determinations must be made following GAAP.  Capitalized terms not   otherwise defined in this Agreement shall have the meanings set forth in Section 13.  All other   terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided   by the Code to the extent such terms are defined therein.   2 LOAN AND TERMS OF PAYMENT   2.1 Promise to Pay.  Borrower hereby unconditionally promises to pay Bank the   outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as   and when due in accordance with this Agreement.   2.2 Revolving Advances.   (a) Availability.  Subject to the terms and conditions of this Agreement and to   deduction of Reserves, Bank shall make Advances not exceeding the Availability Amount.    Amounts borrowed under the Revolving Line may be repaid and, prior to the Revolving Line   Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein.   (b) Termination; Repayment.  The Revolving Line terminates on the   Revolving Line Maturity Date, when the principal amount of all Advances, the unpaid interest   thereon, and all other Obligations relating to the Revolving Line shall be immediately due and   payable.   2.3 Overadvances.  If, at any time, the outstanding principal amount of any   Advances exceeds the lesser of either the Revolving Line or the Borrowing Base, Borrower shall   immediately pay to Bank in cash the amount of such excess (such excess, the “Overadvance”).   Without limiting Borrower’s obligation to repay Bank any Overadvance, Borrower agrees to pay   Bank interest on the outstanding amount of any Overadvance, on demand, at the Default Rate.   2.4 Payment of Interest on the Credit Extensions.   (a) Advances.  Subject to Section 2.4(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-quarter of one percent (0.25%); provided, however, during a Streamline Period,   the principal amount outstanding under the Revolving Line shall accrue interest at a floating per     

 

   -2-   annum rate equal to the Prime Rate.  Interest hereunder shall be payable monthly in accordance   with Section 2.4(d) below.   (b) Default Rate.  Immediately upon the occurrence and during the   continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is   three percentage points (3.0%) above the rate that is otherwise applicable thereto (the “Default   Rate”).  Fees and expenses which are required to be paid by Borrower pursuant to the Loan   Documents (including, without limitation, Bank Expenses) but are not paid when due shall bear   interest until paid at a rate equal to the highest rate applicable to the Obligations.  Payment or   acceptance of the increased interest rate provided in this Section 2.4(b) is not a permitted   alternative to timely payment and shall not constitute a waiver of any Event of Default or   otherwise prejudice or limit any rights or remedies of Bank.   (c) Adjustment to Interest Rate.  Changes to the interest rate of any Credit   Extension based on changes to the Prime Rate shall be effective on the effective date of any   change to the Prime Rate and to the extent of any such change.    (d) Payment; Interest Computation.  Interest is payable monthly on the last   calendar day of each month and shall be computed on the basis of a 360-day year for the actual   number of days elapsed.  In computing interest, (i) all payments received after 12:00 p.m.   Eastern time on any day shall be deemed received at the opening of business on the next   Business Day, and (ii) the date of the making of any Credit Extension shall be included and the   date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on   the same day on which it is made, such day shall be included in computing interest on such   Credit Extension.   2.5 Fees.  Borrower shall pay to Bank:    (a) Commitment Fee.  A fully earned, non-refundable commitment fee of   Sixty Thousand Dollars ($60,000), on the Effective Date;    (b) Termination Fee.  Upon termination of this Agreement 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 one-half of one percent (0.50%) of the Revolving   Line if such termination occurs prior to the first anniversary of the Effective Date; provided that   no termination fee shall be charged if the credit facility hereunder is replaced with a new facility   from Bank;    (c) Unused Revolving Line Facility Fee.  Payable monthly in arrears on   December 31, 2015, on the last day of each calendar month occurring thereafter 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 three-eighths of one percent (0.375%) per   annum of the average unused portion of the Revolving Line (net of any Reserves imposed by   Bank), as determined by Bank.  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 (net of any Reserves imposed by Bank), and (ii) the average for the period   of the daily closing balance of the Revolving Line outstanding; and     

 

   -3-   (d) Bank Expenses.  All Bank Expenses (including reasonable attorneys’ fees   and expenses for documentation and negotiation of this Agreement) incurred through and after   the Effective Date, when due (or, if no stated due date, upon demand by Bank).   (e) Fees Fully Earned.  Unless otherwise provided in this Agreement or in a   separate writing by Bank, Borrower shall not be entitled to any credit, rebate, or repayment of   any fees earned by Bank pursuant to this Agreement notwithstanding any termination of this   Agreement or the suspension or termination of Bank’s obligation to make loans and advances   hereunder.  Bank may deduct amounts owing by Borrower under the clauses of this Section 2.5   pursuant to the terms of Section 2.6(c).  Bank shall provide Borrower written notice of   deductions made from the Designated Deposit Account pursuant to the terms of the clauses of   this Section 2.5.   2.6 Payments; Application of Payments; Debit of Accounts.     (a) All payments to be made by Borrower under any Loan Document shall be   made in immediately available funds in Dollars, without setoff or counterclaim, before 12:00   p.m. Eastern time on the date when due.  Payments of principal and/or interest received after   12:00 p.m. Eastern time are considered received at the opening of business on the next Business   Day.  When a payment is due on a day that is not a Business Day, the payment shall be due the   next Business Day, and additional fees or interest, as applicable, shall continue to accrue until   paid.     (b) Bank has the exclusive right to determine the order and manner in which   all payments with respect to the Obligations may be applied.  Borrower shall have no right to   specify the order or the accounts to which Bank shall allocate or apply any payments required to   be made by Borrower to Bank or otherwise received by Bank under this Agreement when any   such allocation or application is not specified elsewhere in this Agreement.   (c) Bank may debit any of Borrower’s deposit accounts, including the   Designated Deposit Account, for principal and interest payments or any other amounts Borrower   owes Bank when due.  These debits shall not constitute a set-off.   3 CONDITIONS OF LOANS   3.1 Conditions Precedent to Initial Credit Extension.  Bank’s obligation to make   the initial Credit Extension is subject to the condition precedent that Bank shall have received the   following, in form and substance satisfactory to Bank:   (a) duly executed original signatures to the Loan Documents;   (b) the Operating Documents and long-form good standing certificates of   Borrower certified by the Secretary of State (or equivalent agency) of Borrower’s jurisdiction of   organization or formation, each as of a date no earlier than thirty (30) days prior to the Effective   Date;    (c) duly executed original signatures to the completed Borrowing Resolutions   for Borrower;     

 

   -4-   (d) duly executed original signature to a payoff letter from RBS Citizens,   N.A., as Administrative Agent;   (e) evidence that (i) the Liens securing Indebtedness owed by Borrower to   RBS Citizens, N.A., as Administrative Agent, will be terminated and (ii) the documents and/or   filings evidencing the perfection of such Liens, including without limitation any financing   statements and/or control agreements, have or will, concurrently with the initial Credit   Extension, be terminated;   (f) certified copies, dated as of a recent date, of financing statement searches,   as Bank may request, accompanied by written evidence (including any UCC termination   statements) that the Liens indicated in any such financing statements either constitute Permitted   Liens or have been or, in connection with the initial Credit Extension, will be terminated or   released;   (g) the Perfection Certificate of Borrower, together with the duly executed   original signatures thereto;   (h) a landlord’s consent in favor of Bank for 40 Pequot Way, Canton, MA   02021 by the landlord thereof, together with the duly executed original signatures thereto;   (i) a legal opinion of Borrower’s counsel dated as of the Effective Date   together with the duly executed original signature thereto;   (j) evidence satisfactory to Bank that the insurance policies and endorsements   required by Section 6.7 hereof are in full force and effect, together with appropriate evidence   showing lender loss payable and/or additional insured clauses or endorsements in favor of Bank;   (k) the completion of the Initial Audit with results satisfactory to Bank in its   sole and absolute discretion; and   (l) payment of the fees and Bank Expenses then due as specified in Section   2.5 hereof.   3.2 Conditions Precedent to all Credit Extensions.  Bank’s obligations to make   each Credit Extension, including the initial Credit Extension, is subject to the following   conditions precedent:   (a) timely receipt of an executed Transaction Report;     (b) the representations and warranties in this Agreement shall be true,   accurate, and complete in all material respects on the date of the Transaction Report and on the   Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall   not be applicable to any representations and warranties that already are qualified or modified by   materiality in the text thereof; and provided, further that those representations and warranties   expressly referring to a specific date shall be true, accurate and complete in all material respects   as of such date, and no Default or Event of Default shall have occurred and be continuing or   result from the Credit Extension.  Each Credit Extension is Borrower’s representation and     

 

   -5-   warranty on that date that the representations and warranties in this Agreement remain true,   accurate, and complete in all material respects; provided, however, that such materiality qualifier   shall not be applicable to any representations and warranties that already are qualified or   modified by materiality in the text thereof; and provided, further that those representations and   warranties expressly referring to a specific date shall be true, accurate and complete in all   material respects as of such date; and   (c) Bank determines to its reasonable satisfaction that there has not been a   Material Adverse Change.   3.3 Covenant to Deliver.  Borrower agrees to deliver to Bank each item required to   be delivered to Bank under this Agreement as a condition precedent to any Credit Extension.    Borrower expressly agrees that a Credit Extension made prior to the receipt by Bank of any such   item shall not constitute a waiver by Bank of Borrower’s obligation to deliver such item, and the   making of any Credit Extension in the absence of a required item shall be in Bank’s reasonable   discretion.   3.4 Procedures for Borrowing.  Subject to the prior satisfaction of all other   applicable conditions to the making of an Advance set forth in this Agreement, to obtain an   Advance, Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail by   12:00 p.m. Eastern time on the Funding Date of the Advance.  In connection with such   notification, Borrower must promptly deliver to Bank by electronic mail a completed   Transaction Report executed by an Authorized Signer together with such other reports and   information, including without limitation, sales journals, cash receipts journals, accounts   receivable aging reports, as Bank may request in its reasonable discretion.  Bank shall credit   proceeds of an Advance to the Designated Deposit Account.  Bank may make Advances under   this Agreement based on instructions from an Authorized Signer or without instructions if the   Advances are necessary to meet Obligations which have become due.   3.5 Post-Closing Conditions.  Borrower shall take the following actions after the   Effective Date:   (a) Within thirty (30) days after the Effective Date, Borrower shall deliver to   Bank a bailee’s waiver in favor of Bank for (i) 1130 E. Watson Center Road, Carson, CA 90745   and (ii) 1 First Avenue, Waltham, MA 02451 by the owner thereof, together with the duly   executed original signatures thereto;   (b) Within thirty (30) days after the Effective Date, Borrower shall deliver to   Bank duly executed original signatures to the Control Agreements in respect of the Existing   Accounts;   (c) Within ninety (90) days after the Effective Date, Borrower shall close the   Existing Accounts and transfer the proceeds therein to one or more accounts in the name of   Borrower maintained at Bank or Bank’s Affiliates.   4 CREATION OF SECURITY INTEREST       

 

   -6-   4.1 Grant of Security Interest.  Borrower hereby grants Bank, to secure the payment   and performance in full of all of the Obligations, a continuing security interest in, and pledges to   Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and   all proceeds and products thereof.   Borrower acknowledges that it previously has entered, and/or may in the future   enter, into Bank Services Agreements with Bank.  Regardless of the terms of any Bank Services   Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed   to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such   Obligations secured by the first priority perfected security interest in the Collateral granted   herein (subject only to Permitted Liens that are permitted pursuant to the terms of this   Agreement to have superior priority to Bank’s Lien in this Agreement).      If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until   the Obligations (other than inchoate indemnity obligations) are repaid in full in cash.  Upon   payment in full in cash of the Obligations (other than inchoate indemnity obligations) and at such   time as Bank’s obligation to make Credit Extensions has terminated, Bank shall, at the sole cost   and expense of Borrower, release its Liens in the Collateral and all rights therein shall revert to   Borrower.  In the event (x) all Obligations (other than inchoate indemnity obligations), except for   Bank Services, are satisfied in full, and (y) this Agreement is terminated, Bank shall terminate   the security interest granted herein upon Borrower providing cash collateral acceptable to Bank   in its reasonable discretion for Bank Services, if any.  In the event such Bank Services consist of   outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in an amount equal   to (x) if such Letters of Credit are denominated in Dollars, then at least one hundred five percent   (105.0%); and (y) if such Letters of Credit are denominated in a Foreign Currency, then at least   one hundred ten percent (110.0%), of the Dollar Equivalent of the face amount of all such Letters   of Credit plus all interest, fees, and costs due or to become due in connection therewith (as   estimated by Bank in its business judgment), to secure all of the Obligations relating  to such    Letters of Credit.   4.2 Priority of Security Interest.  Borrower represents, warrants, and covenants   that the security interest granted herein is and shall at all times continue to be a first priority   perfected security interest in the Collateral (subject only to Permitted Liens that are permitted   pursuant to the terms of this Agreement to have superior priority to Bank’s Lien under this   Agreement).  If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify   Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such   writing a security interest therein and in the proceeds thereof, all upon the terms of this   Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.   4.3 Authorization to File Financing Statements.  Borrower hereby authorizes Bank   to file financing statements, without notice to Borrower, with all appropriate jurisdictions to   perfect or protect Bank’s interest or rights hereunder, including a notice that any disposition of   the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of   Bank under the Code.   Such financing statements may indicate the Collateral as “all assets of the   Debtor” or words of similar effect, or as being of an equal or lesser scope, or with greater detail,   all in Bank’s discretion.     

 

   -7-   5 REPRESENTATIONS AND WARRANTIES   Borrower represents and warrants as follows:    5.1 Due Organization, Authorization; Power and Authority.  Borrower is duly   existing and in good standing as a Registered Organization in its jurisdiction of formation and is   qualified and licensed to do business and is in good standing in any jurisdiction in which the   conduct of its business or its ownership of property requires that it be qualified except where the   failure to do so could not reasonably be expected to have a material adverse effect on Borrower’s   business.  In connection with this Agreement, Borrower has delivered to Bank a completed   certificate signed by Borrower, entitled “Perfection Certificate”.  Borrower represents and   warrants to Bank that (a) Borrower’s exact legal name is that indicated on the Perfection   Certificate and on the signature page hereof; (b) Borrower is an organization of the type and is   organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate   accurately sets forth Borrower’s organizational identification number or accurately states that   Borrower has none; (d) the Perfection Certificate accurately sets forth Borrower’s place of   business, or, if more than one, its chief executive office as well as Borrower’s mailing address (if   different than its chief executive office); (e) Borrower (and each of its predecessors) has not, in   the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or   any organizational number assigned by its jurisdiction; and (f) all other information set forth on   the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and   complete (it being understood and agreed that Borrower may from time to time update certain   information in the Perfection Certificate after the Effective Date to the extent permitted by one or   more specific provisions in this Agreement).  If Borrower is not now a Registered Organization   but later becomes one, Borrower shall promptly notify Bank of such occurrence and provide   Bank with Borrower’s organizational identification number.   The execution, delivery and performance by Borrower of the Loan Documents to   which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s   organizational documents, (ii) contravene, conflict with, constitute a default under or violate any   material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ,   judgment, injunction, decree, determination or award of any Governmental Authority by which   Borrower or any of its Subsidiaries or any of their property or assets may be bound or affected,   (iv) require any action by, filing, registration, or qualification with, or Governmental Approval   from, any Governmental Authority (except such Governmental Approvals which have already   been obtained and are in full force and effect), or (v) conflict with, contravene, constitute a   default or breach under, or result in or permit the termination or acceleration of, any material   agreement by which Borrower is bound.  Borrower is not in default under any agreement to   which it is a party or by which it is bound in which the default could reasonably be expected to   have a material adverse effect on Borrower’s business.     5.2 Collateral.  Borrower has good title to, rights in, and the power to transfer each   item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and   all Liens except Permitted Liens.  Borrower has no Collateral Accounts at or with any bank or   financial institution other than Bank or Bank’s Affiliates except for the Collateral Accounts   described in the Perfection Certificate delivered to Bank in connection herewith and which   Borrower has taken such actions as are necessary to give Bank a perfected security interest     

 

   -8-   therein, if required and pursuant to the terms of Section 6.8(b).  The Accounts are bona fide,   existing obligations of the Account Debtors.     The Collateral is not in the possession of any third party bailee (such as a warehouse)   except as otherwise provided in the Perfection Certificate.  None of the components of the   Collateral shall be maintained at locations other than as provided in the Perfection Certificate or   as permitted pursuant to Section 7.2.   All Inventory is in all material respects of good and marketable quality, free from   material defects.   Borrower is the sole owner of the Intellectual Property which it owns except for non-   exclusive licenses granted to its customers in the ordinary course of business.  Each Patent which   it owns or purports to own and which is material to Borrower’s business is, to Borrower’s   knowledge, valid and enforceable, and no part of the Intellectual Property which Borrower owns   or purports to own and which is material to Borrower’s business has been judged invalid or   unenforceable, in whole or in part.  To the best of Borrower’s knowledge, no claim has been   made that any part of its owned Intellectual Property violates the rights of any third party except   to the extent such claim would not reasonably be expected to have a material adverse effect on   Borrower’s business.   Except as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound   by, any Restricted License.   5.3 Accounts Receivable.     (a) For each Account with respect to which Advances are requested, on the   date each Advance is requested and made, such Account shall be an Eligible Account.   (b) All statements made and all unpaid balances appearing in all invoices,   instruments and other documents evidencing the Eligible Accounts are and shall be true and   correct in all material respects and all such invoices, instruments and other documents, and all of   Borrower's Books are genuine and in all respects what they purport to be.  All sales and other   transactions underlying or giving rise to each Eligible Account shall comply in all material   respects with all applicable laws and governmental rules and regulations.  Borrower has no   knowledge of any actual or imminent Insolvency Proceeding of any Account Debtor whose   accounts are Eligible Accounts in any Transaction Report.  To the best of Borrower’s   knowledge, all signatures and endorsements on all documents, instruments, and agreements   relating to all Eligible Accounts are genuine, and all such documents, instruments and   agreements are legally enforceable in accordance with their terms.     5.4 Litigation.  Except as disclosed in LoJack’s Form 10-K for the year ending   December 31, 2014 or described in any of LoJack’s Forms 8-K thereafter through the Effective   Date, there are no actions or proceedings pending or, to the knowledge of any Responsible   Officer, threatened in writing by or against Borrower or any of its Subsidiaries involving more   than, individually or in the aggregate, Five Hundred Thousand Dollars ($500,000) (other than   worker’s compensation claims covered by insurance).     

 

   -9-   5.5 Financial Statements; Financial Condition.  All consolidated financial   statements for Borrower and any of its Subsidiaries delivered to Bank fairly present in all   material respects Borrower’s consolidated financial condition and Borrower’s consolidated   results of operations.  There has not been any deterioration in Borrower’s consolidated financial   condition since the date of the most recent financial statements submitted to Bank that could   reasonably be expected to result in a Material Adverse Change in Borrower’s business.   5.6 Solvency.  The fair salable value of Borrower’s consolidated assets (including   goodwill minus disposition costs) exceeds the fair value of Borrower’s liabilities; Borrower is   not left with unreasonably small capital after the transactions in this Agreement; and Borrower is   able to pay its debts (including trade debts) as they mature.   5.7 Regulatory Compliance.  Borrower is not an “investment company” or a   company “controlled” by an “investment company” under the Investment Company Act of 1940,   as amended.  Borrower is not engaged as one of its important activities in extending credit for   margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors).    Borrower (a) has complied in all material respects with all Requirements of Law, and (b) has not   violated any Requirements of Law the violation of which could reasonably be expected to have a   material adverse effect on its business.  None of Borrower’s or any of its Subsidiaries’ properties   or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge,   by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous   substance other than legally.  Borrower and each of its Subsidiaries have obtained all consents,   approvals and authorizations of, made all declarations or filings with, and given all notices to, all   Government Authorities that are material and necessary to continue their respective businesses as   currently conducted.   5.8 Subsidiaries; Investments.  Borrower does not own any stock, partnership, or   other ownership interest or other equity securities except for Permitted Investments.     5.9 Tax Returns and Payments; Pension Contributions.  Borrower has timely filed   all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and   material local taxes, assessments, deposits and contributions owed by Borrower except to the   extent such taxes are being contested in good faith by appropriate proceedings promptly   instituted and diligently conducted, so long as such reserve or other appropriate provision, if any,   as shall be required in conformity with GAAP shall have been made therefor.     To the extent Borrower defers payment of any contested taxes, Borrower shall   (i) notify Bank in writing of the commencement of, and any material development in, the   proceedings, and (ii) post bonds or take any other steps required to prevent the governmental   authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is   other than a “Permitted Lien.”  Borrower is unaware of any claims or adjustments proposed for   any of Borrower's prior tax years which could result in additional taxes becoming due and   payable by Borrower.  Borrower has paid all amounts necessary to fund all present pension,   profit sharing and deferred compensation plans in accordance with their terms, and Borrower has   not withdrawn from participation in, and has not permitted partial or complete termination of, or   permitted the occurrence of any other event with respect to, any such plan which could     

 

   -10-   reasonably be expected to result in any liability of Borrower, including any liability to the   Pension Benefit Guaranty Corporation or its successors or any other governmental agency.   5.10 Use of Proceeds.  Borrower shall use the proceeds of the Credit Extensions solely   as working capital and to fund its general business requirements and not for personal, family,   household or agricultural purposes.   5.11 Full Disclosure.  No written representation, warranty or other statement of   Borrower in any certificate or written statement given to Bank in connection with this   Agreement, as of the date such representation, warranty, or other statement was made, taken   together with all such written certificates and written statements given to Bank, contains any   untrue statement of a material fact or omits to state a material fact necessary to make the   statements contained in the certificates or statements not misleading (it being recognized by   Bank that the projections and forecasts provided by Borrower in good faith and based upon   reasonable assumptions are not viewed as facts and that actual results during the period or   periods covered by such projections and forecasts may differ from the projected or forecasted   results).   5.12 Definition of “Knowledge.”  For purposes of the Loan Documents, whenever a   representation or warranty is made to Borrower’s knowledge or awareness, to the “best of”   Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual   knowledge, after reasonable investigation, of any Responsible Officer.   6 AFFIRMATIVE COVENANTS   Borrower shall do all of the following:   6.1 Government Compliance.     (a) Maintain its and all its Subsidiaries’ legal existence and good standing in   their respective jurisdictions of formation and maintain qualification in each jurisdiction in which   the failure to so qualify would reasonably be expected to have a material adverse effect on   Borrower’s business or operations.  Borrower shall comply, and have each Subsidiary comply, in   all material respects, with all laws, ordinances and regulations to which it is subject.   (b) Obtain all of the Governmental Approvals necessary for the performance   by Borrower of its obligations under the Loan Documents to which it is a party and the grant of a   security interest to Bank in all of its property.  Borrower shall promptly provide copies of any   such Governmental Approvals reasonably requested by Bank.   6.2 Financial Statements, Reports, Certificates.  Provide Bank with the following:   (a) a Transaction Report (and any schedules related thereto) (i) with each   request for an Advance, (ii) on the fifteenth (15th) day and last Business Day of each month when   a Streamline Period is not in effect, and (iii) within thirty (30) days after the end of each month   when a Streamline Period is in effect;      

 

   -11-   (b) (i) on the fifteenth (15th) day and last Business Day of each month when a   Streamline Period is not in effect and (ii) within thirty (30) days after the end of each month   when a Streamline Period is in effect, (A) monthly accounts receivable agings, aged by invoice   date, (B) monthly accounts payable agings, aged by invoice date, and outstanding or held check   registers, if any, and (C) monthly reconciliations of accounts receivable agings (aged by invoice   date), transaction reports, and general ledger;   (c) as soon as available, but no later than thirty (30) days after the last day of   each month, a company prepared consolidated and consolidating balance sheet and income   statement covering Borrower’s consolidated, and Borrower’s and each of its Subsidiary’s,   respectively, operations for such month certified by a Responsible Officer and in a form   acceptable to Bank (the “Monthly Financial Statements”);   (d) within thirty (30) days after the last day of each month and together with   the Monthly Financial Statements, a duly completed Compliance Certificate signed by a   Responsible Officer;    (e) within sixty (60) days after the end of each fiscal year of Borrower, (A)   annual operating budgets (including income statements, balance sheets and cash flow statements,   by month) for such fiscal year of Borrower as approved by LoJack’s board of directors, together   with (B) the related annual financial projections for such the following fiscal year (on a quarterly   basis), together with any related business forecasts used in the preparation of such annual   financial projections (collectively, the “Projections”);    (f) as soon as available, and in any event within one hundred twenty (120)   days following the end of Borrower’s fiscal year, audited consolidated financial statements   prepared under GAAP, consistently applied, together with an unqualified opinion on the   financial statements from an independent certified public accounting firm reasonably acceptable   to Bank;   (g) in the event that Borrower becomes subject to the reporting requirements   under the Exchange Act within five (5) days of filing, copies of all periodic and other reports,   proxy statements and other materials filed by Borrower with the SEC, any Governmental   Authority succeeding to any or all of the functions of the SEC or with any national securities   exchange, or distributed to its shareholders, as the case may be.  Documents required to be   delivered pursuant to the terms hereof (to the extent any such documents are included in   materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall   be deemed to have been delivered on the date on which Borrower posts such documents, or   provides a link thereto, on Borrower’s website on the Internet at Borrower’s website address;    (h) Reserved;   (i) prompt report of any legal actions (other than worker’s compensation   claims covered by insurance) pending or threatened in writing against Borrower or any of its   Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of,   individually or in the aggregate, Five Hundred Thousand Dollars ($500,000) or more; and   (j) other financial information reasonably requested by Bank.     

 

   -12-   6.3 Accounts Receivable.   (a) Schedules and Documents Relating to Accounts.  Borrower shall deliver   to Bank Transaction Reports, as provided in Section 6.2; provided, however, that Borrower’s   failure to execute and deliver the same shall not affect or limit Bank’s Lien and other rights in all   of Borrower’s Accounts, nor shall Bank’s failure to advance or lend against a specific Account   affect or limit Bank’s Lien and other rights therein.  After the occurrence and during the   continuance of an Event of Default, if reasonably requested by Bank, Borrower shall furnish   Bank with copies (or, at Bank’s request, originals) of all contracts, orders, invoices, and other   similar documents, and all shipping instructions, delivery receipts, bills of lading, and other   evidence of delivery, for any goods the sale or disposition of which gave rise to such Accounts.    In addition, Borrower shall deliver to Bank, on its request, the originals necessary to perfect   Bank’s first priority Lien in the Collateral of all instruments, chattel paper, security agreements,   guarantees and other documents and property evidencing or securing any Accounts, in the same   form as received, with all necessary indorsements, and copies of all credit memos.    (b) Disputes.  Borrower shall promptly notify Bank of all disputes or claims   relating to Accounts in excess of One Hundred Thousand Dollars ($100,000) for any such   dispute or claim.  Borrower may forgive (completely or partially), compromise, or settle any   Account for less than payment in full, or agree to do any of the foregoing so long as (i) Borrower   does so in good faith, in a commercially reasonable manner, in the ordinary course of business,   in arm’s-length transactions, and reports the same to Bank in the regular reports provided to   Bank; (ii) no Default or Event of Default has occurred and is continuing; and (iii) after taking   into account all such discounts, settlements and forgiveness, the total outstanding Advances will   not exceed the lesser of the Revolving Line or the Borrowing Base.     (c) Collection of Accounts.  Borrower shall have the right to collect all   Accounts, unless and until a Default or an Event of Default has occurred and is continuing.    Bank shall require that Borrower direct Account Debtors to deliver or transmit all proceeds of   Accounts into a lockbox account, or such other “blocked account” as specified by Bank (either   such account, the “Cash Collateral Account”).  Whether or not an Event of Default has   occurred and is continuing, Borrower shall immediately deliver all payments on and proceeds of   Accounts to the Cash Collateral Account.  Such payments and proceeds shall be (X) prior to the   occurrence and continuance of an Event of Default, (i) when a Streamline Period is not in effect,   applied to immediately reduce the Obligations or (ii) during a Streamline Period, transferred to   an account of Borrower at Bank, and (Y) upon the occurrence and continuance of an Event of   Default, applied in accordance with Section 9.4.     (d) Returns.  Provided no Event of Default has occurred and is continuing, if   any Account Debtor returns any Inventory to Borrower in excess of One Hundred Thousand   Dollars ($100,000), Borrower shall promptly (i) determine the reason for such return, (ii) issue a   credit memorandum to the Account Debtor in the appropriate amount, and (iii) provide a copy of   such credit memorandum to Bank, upon request from Bank.  In the event any attempted return   occurs after the occurrence and during the continuance of any Event of Default, Borrower shall   hold the returned Inventory in trust for Bank, and immediately notify Bank of the return of the   Inventory.      

 

   -13-   (e) Verification.  After the occurrence and during the continuation of an   Event of Default, Bank may, from time to time, verify directly with the respective Account   Debtors the validity, amount and other matters relating to the Accounts, either in the name of   Borrower or Bank or such other name as Bank may choose, and notify any Account Debtor of   Bank’s security interest in such Account.   (f) No Liability.  Bank shall not be responsible or liable for any shortage or   discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of   which gives rise to an Account, or for any error, act, omission, or delay of any kind occurring in   the settlement, failure to settle, collection or failure to collect any Account, or for settling any   Account in good faith for less than the full amount thereof, nor shall Bank be deemed to be   responsible for any of Borrower's obligations under any contract or agreement giving rise to an   Account.  Nothing herein shall, however, relieve Bank from liability for its own gross negligence   or willful misconduct.   (g) Foreign Accounts.  For the avoidance of doubt, the foregoing provisions   of this Section 6.3 shall not apply to any Accounts of any Foreign Subsidiary.   6.4 Remittance of Proceeds.  Except as otherwise provided in Section 6.3(c),   deliver, in kind, all proceeds arising from the disposition of any Collateral to Bank in the original   form in which received by Borrower not later than the following Business Day after receipt by   Borrower, to be applied to the Obligations (a) prior to an Event of Default, pursuant to the terms   of Section 2.6(b) hereof, and (b) after the occurrence and during the continuance of an Event of   Default, pursuant to the terms of Section 9.4 hereof; provided that, if no Event of Default has   occurred and is continuing, Borrower shall not be obligated to remit to Bank the proceeds of (i)   the Permitted Entity Disposition or (ii) the sale of worn out or obsolete Equipment disposed of   by Borrower in good faith in an arm’s length transaction for an aggregate purchase price of One   Hundred Thousand Dollars ($100,000) or less (for all such transactions in any fiscal year).    Borrower agrees that it will not commingle proceeds of Collateral with any of Borrower’s other   funds or property, but will hold such proceeds separate and apart from such other funds and   property and in an express trust for Bank.  Nothing in this Section limits the restrictions on   disposition of Collateral set forth elsewhere in this Agreement.   6.5 Taxes; Pensions.  Timely file, and require each of its Subsidiaries to timely file,   all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely   pay, all foreign, federal, state and material local taxes, assessments, deposits and contributions   owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes   contested pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on demand,   appropriate certificates attesting to such payments, and pay all amounts necessary to fund all   present pension, profit sharing and deferred compensation plans in accordance with their terms.   6.6 Access to Collateral; Books and Records.  At reasonable times, on one (1)   Business Day’s notice (provided no notice is required if an Event of Default has occurred and is   continuing), Bank, or its agents, shall have the right to inspect the Collateral and the right to   audit and copy Borrower’s Books.  The foregoing inspections and audits shall be conducted at   Borrower’s expense and no more often than once every twelve (12) months unless an Event of   Default has occurred and is continuing in which case such inspections and audits shall occur as     

 

   -14-   often as Bank shall determine is necessary.  The charge therefor shall be $850 per person per day   (or such higher amount as shall represent Bank’s then-current standard charge for the same), plus   reasonable out-of-pocket expenses.  In the event Borrower and Bank schedule an audit more than   ten (10) days in advance, and Borrower cancels or seeks to or reschedules the audit with less than   ten (10) days written notice to Bank, then (without limiting any of Bank’s rights or remedies)   Borrower shall pay Bank a fee of $1,000 plus any out-of-pocket expenses incurred by Bank to   compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling.   6.7 Insurance.     (a) Keep its business and the Collateral insured for risks and in amounts   standard for companies in Borrower’s industry and location and as Bank may reasonably request.    Insurance policies shall be in a form, with financially sound and reputable insurance companies   that are not Affiliates of Borrower, and in amounts that are satisfactory to Bank.  All property   policies shall have a lender’s loss payable endorsement showing Bank as lender loss payee.  All   liability policies shall show, or have endorsements showing, Bank as an additional insured.    Bank shall be named as lender loss payee and/or additional insured with respect to any such   insurance providing coverage in respect of any Collateral.    (b) Ensure that proceeds payable under any property policy are, at Bank’s   option, payable to Bank on account of the Obligations; provided, however, prior to the   occurrence and continuation of an Event of Default, Bank shall promptly release to Borrower (i)   any insurance proceeds in connection with the Permitted Insurance Event and (ii) the first One   Hundred Thousand Dollars ($100,000) of such proceeds received by Bank.    (c) At Bank’s request, Borrower shall deliver certified copies of insurance   policies and evidence of all premium payments.  Each provider of any such insurance required   under this Section 6.7 shall agree, by endorsement upon the policy or policies issued by it or by   independent instruments furnished to Bank, that it will give Bank twenty (20) days prior written   notice before any such policy or policies shall be canceled.  If Borrower fails to obtain insurance   as required under this Section 6.7 or to pay any amount or furnish any required proof of payment   to third persons and Bank, Bank may make all or part of such payment or obtain such insurance   policies required in this Section 6.7, and take any action under the policies Bank deems prudent.   6.8 Operating Accounts.   (a) Subject to the requirements set forth in Section 3.5(b), maintain all of its   domestic operating and other deposit accounts and securities accounts with Bank and Bank’s   Affiliates.     (b) Provide Bank five (5) days prior written notice before establishing any   Collateral Account at or with any bank or financial institution other than Bank or Bank’s   Affiliates. Subject to the requirements set forth in Section 3.5(a), for each Collateral Account   that Borrower at any time maintains, Borrower shall cause the applicable bank or financial   institution (other than Bank) at or with which any Collateral Account is maintained to execute   and deliver a Control Agreement or other appropriate instrument with respect to such Collateral   Account to perfect Bank’s Lien in such Collateral Account in accordance with the terms   hereunder which Control Agreement may not be terminated without the prior written consent of     

 

   -15-   Bank.  The provisions of the previous sentence shall not apply to deposit accounts exclusively   used for payroll, payroll taxes, and other employee wage and benefit payments to or for the   benefit of Borrower’s employees and identified to Bank by Borrower as such.   6.9 Financial Covenant.  Achieve, to be measured as of the last day of each fiscal   quarter of Borrower on a trailing twelve (12) month basis, on a consolidated basis with respect to   Borrower and its Subsidiaries, Adjusted EBITDA of at least Five Million Dollars ($5,000,000).    6.10 Protection and Registration of Intellectual Property Rights.        (a) (i) Use commercially reasonable efforts to protect, defend and maintain   the validity and enforceability of Intellectual Property material to the operation of its business;   (ii) upon Borrower’s knowledge thereof, promptly advise Bank in writing of material   infringements or any other event that could reasonably be expected to materially and adversely   affect the value of Intellectual Property material to the operation of its business; and (iii) not   allow any of its owned Intellectual Property material to Borrower’s business to be abandoned,   forfeited or dedicated to the public without Bank’s written consent.     (b) To the extent not already disclosed in writing to Bank, if Borrower   obtains any Patent, registered Trademark, registered Copyright, registered mask work, or any   pending application for any of the foregoing, then Borrower shall provide written notice thereof   to Bank in the next Compliance Certificate delivered to Bank and shall execute such intellectual   property security agreements and other documents and take such other actions as Bank may   request in its reasonable discretion to perfect and maintain a first priority perfected security   interest in favor of Bank in such property.      (c) Provide written notice to Bank within ten (10) days of entering or   becoming bound by any Restricted License (other than over-the-counter software that is   commercially available to the public).  Borrower shall take such commercially reasonable steps   as Bank requests to obtain the consent of, or waiver by, any person whose consent or waiver is   necessary for (i) other than any Excluded Collateral, any Restricted License to be deemed   “Collateral” and for Bank to have a security interest in it that might otherwise be restricted or   prohibited by law or by the terms of any such Restricted License, whether now existing or   entered into in the future, and (ii) Bank to have the ability in the event of a liquidation of any   Collateral to dispose of such Collateral in accordance with Bank’s rights and remedies under this   Agreement and the other Loan Documents.   6.11 Litigation Cooperation.  From the date hereof and continuing through the   termination of this Agreement, upon reasonable advance notice and during normal business   hours, make available to Bank, without expense to Bank, Borrower and its officers, employees   and agents and Borrower's books and records, to the extent that Bank may deem them reasonably   necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank   with respect to any Collateral or relating to Borrower.   6.12 Formation or Acquisition of Subsidiaries.  Notwithstanding and without   limiting the negative covenants contained in Sections 7.3 and 7.7 hereof, at the time that   Borrower forms any direct Subsidiary or acquires any direct Subsidiary after the Effective Date,     

 

   -16-   Borrower shall (a) cause such new Subsidiary to provide to Bank a joinder to the Loan   Agreement to cause such Subsidiary to become a co-borrower hereunder, together with such   appropriate financing statements and/or Control Agreements, all in form and substance   satisfactory to Bank (including being sufficient to grant Bank a first priority Lien (subject to   Permitted Liens) in and to the assets of such newly formed or acquired Subsidiary), (b) provide   to Bank appropriate certificates and powers and financing statements, pledging all of the direct   or beneficial ownership interest in such new Subsidiary, in form and substance satisfactory to   Bank; provided, that with respect to any Foreign Subsidiary, such Foreign Subsidiary shall not be   required to become a co-borrower, and Borrower shall not be required to effect (i) the grant of a   continuing pledge and security interest in and to the assets of any such Foreign Subsidiary, (ii)   the guaranty of the Obligations of the Borrower by any such Foreign Subsidiary and/or (iii) the   pledge by Borrower of a perfected security interest in one hundred percent (100%) of the stock,   units or other evidence of ownership of each Foreign Subsidiary, except that Borrower shall only   be required to grant and pledge to Bank a perfected security interest in up to sixty-five percent   (65%) of the voting stock, units or other evidence of ownership of such Foreign Subsidiary to the   extent such Foreign Subsidiary is directly owned by Borrower;  and (c) provide to Bank all other   documentation in form and substance satisfactory to Bank, including one or more opinions of   counsel satisfactory to Bank, which in its opinion is appropriate with respect to the execution and   delivery of the applicable documentation referred to above.  Any document, agreement, or   instrument executed or issued pursuant to this Section 6.12 shall be a Loan Document.   6.13 Further Assurances.  Execute any further instruments and take further action as   Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the   purposes of this Agreement.    6.14 Permitted Entity Disposition.  Borrower shall consummate the Permitted Entity   Disposition on or before April 30, 2016.   7 NEGATIVE COVENANTS   Borrower shall not do any of the following without Bank’s prior written consent:   7.1 Dispositions.  Convey, sell, lease, transfer, assign, or otherwise dispose of   (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its   business or property, except for Transfers (a) of Inventory in the ordinary course of business;   (b) of worn-out or obsolete Equipment that is, in the reasonable judgment of Borrower, no longer   economically practicable to maintain or useful in the ordinary course of business of Borrower;   (c) consisting of Permitted Liens and Permitted Investments; (d) consisting of the sale or   issuance of any stock of Borrower permitted under the definition of Change in Control;   (e) consisting of Borrower’s use or transfer of money or Cash Equivalents in a manner that is not   prohibited by the terms of this Agreement or the other Loan Documents; (f) of assets (A)   between Subsidiaries, (B) from one Borrower to another Borrower or (C) from a Subsidiary to a   Borrower; (g) consisting of the sale of delinquent notes or Accounts in the ordinary course of   business for purposes of collection no to exceed One Hundred Thousand Dollars ($100,000) in   any fiscal year; (h) the Permitted Entity Disposition; and (i) not covered under clauses (a)   through (h) in an aggregate amount of not more than Two Hundred Fifty Thousand Dollars   ($250,000) during any fiscal year of LoJack;     

 

   -17-   7.2 Changes in Business, Management, or Business Locations.  (a) Engage in or   permit any of its Subsidiaries to engage in any business other than the businesses currently   engaged in by Borrower and such Subsidiary, as applicable, or reasonably related thereto; (b)   liquidate or dissolve; or (c) fail to provide notice to Bank of any Key Person departing from or   ceasing to be employed by Borrower within five (5) days after such Key Person’s departure from   Borrower.     Borrower shall not, without at least thirty (30) days prior written notice to Bank: (1) add   any new offices or business locations, including warehouses (unless such new offices or business   locations contain less than Two Hundred Fifty Thousand Dollars ($250,000) in Borrower’s   assets or property) or deliver any portion of the Collateral valued, individually or in the   aggregate, in excess of Two Hundred Fifty Thousand Dollars ($250,000) to a bailee at a location   other than to a bailee and at a location already disclosed in the Perfection Certificate, (2) change   its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal   name, or (5) change any organizational number (if any) assigned by its jurisdiction of   organization.  If Borrower intends to deliver any portion of the Collateral valued, individually or   in the aggregate, in excess of Two Hundred Fifty Thousand Dollars ($250,000) to a bailee, and   Bank and such bailee are not already parties to a bailee agreement governing both the Collateral   and the location to which Borrower intends to deliver the Collateral, then Borrower will first   receive the written consent of Bank, and such bailee shall execute and deliver a bailee agreement   in form and substance satisfactory to Bank.   7.3 Mergers or Acquisitions.  Merge or consolidate, or permit any of its Subsidiaries   to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to   acquire, all or substantially all of the capital stock or property of another Person (including,   without limitation, by the formation of any Subsidiary).  A Subsidiary may merge or consolidate   into another Subsidiary or into Borrower.   7.4 Indebtedness.  Create, incur, assume, or be liable for any Indebtedness, or permit   any Subsidiary to do so, other than Permitted Indebtedness.   7.5 Encumbrance.  Create, incur, allow, or suffer any Lien on any of its property, or   assign or convey any right to receive income, including the sale of any Accounts, or permit any   of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to   the first priority security interest granted herein, or enter into any agreement, document,   instrument or other arrangement (except with or in favor of Bank) with any Person which   directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from   assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of   Borrower’s or any Subsidiary’s Intellectual Property, except as is otherwise permitted in Section   7.1 hereof and the definition of “Permitted Liens” herein.   7.6 Maintenance of Collateral Accounts.  Maintain any Collateral Account except   pursuant to the terms of Section 6.8(b) hereof.   7.7 Distributions; Investments.  (a) Pay any dividends or make any distribution or   payment or redeem, retire or purchase any capital stock; or (b) directly or indirectly make any     

 

   -18-   Investment (including, without limitation, by the formation of any Subsidiary) other than   Permitted Investments, or permit any of its Subsidiaries to do so.   7.8 Transactions with Affiliates.  Directly or indirectly enter into or permit to exist   any material transaction with any Affiliate of Borrower, except for transactions that are in the   ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable   to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.   7.9 Subordinated Debt.  (a) Make or permit any payment on any Subordinated Debt,   except under the terms of the subordination, intercreditor, or other similar agreement to which   such Subordinated Debt is subject, or (b) amend any provision in any document relating to the   Subordinated Debt which would increase the amount thereof, provide for earlier or greater   principal, interest, or other payments thereon, or adversely affect the subordination thereof to   Obligations owed to Bank.   7.10 Compliance.  Become an “investment company” or a company controlled by an   “investment company”, under the Investment Company Act of 1940, as amended, or undertake   as one of its important activities extending credit to purchase or carry margin stock (as defined in   Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of   any Credit Extension for that purpose; fail to meet the minimum funding requirements of   ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail   to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the   violation could reasonably be expected to have a material adverse effect on Borrower’s business,   or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from   participation in, permit partial or complete termination of, or permit the occurrence of any other   event with respect to, any present pension, profit sharing and deferred compensation plan which   could reasonably be expected to result in any material liability of Borrower, including any   material liability to the Pension Benefit Guaranty Corporation or its successors or any other   governmental agency.   8 EVENTS OF DEFAULT   Any one of the following shall constitute an event of default (an “Event of   Default”) under this Agreement:   8.1 Payment Default.  Borrower fails to (a) make any payment of principal or   interest on any Credit Extension when due, or (b) pay any other Obligations within five (5)   Business Days after such Obligations are due and payable (which five (5) Business Day cure   period shall not apply to payments due on the Revolving Line Maturity Date).  During the cure   period, the failure to make or pay any payment specified under clause (b) hereunder is not an   Event of Default (but Bank may elect that no new Credit Extension will be made during the cure   period);   8.2 Covenant Default.     (a) (a) Borrower fails or neglects to perform any obligation in Sections 6.2,   6.5, 6.7, 6.8, 6.9, 6.10(c), 6.12 or violates any covenant in Section 7; or     

 

   -19-   (b) Borrower fails or neglects to perform, keep, or observe any other term,   provision, condition, covenant or agreement contained in this Agreement or any Loan   Documents, and as to any default (other than those specified in this Section 8) under such other   term, provision, condition, covenant or agreement that can be cured, has failed to cure the default   within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by   its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower   be cured within such ten (10) day period, and such default is likely to be cured within a   reasonable time, then Borrower shall have an additional period (which shall not in any case   exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period   the failure to cure the default shall not be deemed an Event of Default (but Bank may elect that   no new Credit Extensions shall be made during such cure period).  Cure periods provided under   this section shall not apply, among other things, to financial covenants or any other covenants set   forth in clause (a) above;   8.3 Material Adverse Change.  A Material Adverse Change occurs;   8.4 Attachment; Levy; Restraint on Business.     (a) (i) The service of process seeking to attach, by trustee or similar process, any   funds of Borrower or of any entity under the control of Borrower (including a Subsidiary) not to   exceed One Hundred Thousand Dollars ($100,000), or (ii) a notice of lien or levy is filed against   any of Borrower’s assets by any Governmental Authority, and the same under subclauses (i) and   (ii) hereof are not, within thirty (30) days after the occurrence thereof, discharged or stayed   (whether through the posting of a bond or otherwise); provided, however, Bank may elect that no   new Credit Extensions shall be made during any thirty (30) day cure period; or    (b) (i) any material portion of Borrower’s assets is attached, seized, levied on, or   comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or   prevents Borrower from conducting all or any material part of its business, the result of which   under subclauses (i) or (ii) hereof would result in a Material Adverse Change in Borrower’s   business;   8.5 Insolvency.  (a) Borrower or the Irish Subsidiary are unable to pay its debts   (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower or the   Irish Subsidiary begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun   against Borrower or the Irish Subsidiary and is not dismissed or stayed within forty-five (45)   days (but Bank may elect that no new Credit Extensions shall be made while any of the   conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);   8.6 Other Agreements.  There is, under any agreement to which Borrower is a party   with a third party or parties, any default resulting in a right by such third party or parties, whether   or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Two   Hundred Fifty Thousand Dollars ($250,000);    8.7 Judgments; Penalties.  One or more fines, penalties or final judgments, orders or   decrees for the payment of money in an amount of at least Two Hundred Fifty Thousand Dollars   ($250,000) (not covered by independent third-party insurance as to which liability has been     

 

   -20-   accepted by such insurance carrier) shall be rendered against Borrower by any Governmental   Authority, and the same are not, within thirty (30) days after the entry, assessment or issuance   thereof, discharged, satisfied, or paid, or after execution thereof, stayed or bonded pending   appeal, or such judgments are not discharged prior to the expiration of any such stay (provided   that Bank may elect that no new Credit Extensions will be made prior to the satisfaction,   payment, discharge, stay, or bonding of such fine, penalty, judgment, order or decree);   8.8 Misrepresentations.  Borrower or any Person acting for Borrower makes any   representation, warranty, or other statement now or later in this Agreement, any Loan Document   or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan   Document, and such representation, warranty, or other statement is incorrect in any material   respect when made;    8.9 Subordinated Debt.  Any document, instrument, or agreement subordinating any   Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full   force and effect, any Person shall be in material breach thereof or contest in any manner the   validity or enforceability thereof or deny that it has any further liability or obligation thereunder   in any manner material and adverse to Bank, or the Obligations shall for any reason be   subordinated or shall not have the priority contemplated by this Agreement; or   8.10 Change in Control.  Borrower permits or suffers any Change in Control.   9 BANK’S RIGHTS AND REMEDIES   9.1 Rights and Remedies.  Upon the occurrence and during the continuance of an   Event of Default, Bank may, without notice or demand, do any or all of the following:   (a) declare all Obligations immediately due and payable (but if an Event of   Default described in Section 8.5 occurs all Obligations are immediately due and payable without   any action by Bank);   (b) stop advancing money or extending credit for Borrower’s benefit under   this Agreement or under any other agreement between Borrower and Bank;   (c) demand that Borrower (i) deposit cash with Bank in an amount equal to   (X) if such Letters of Credit are denominated in Dollars, then at least one hundred five percent   (105.0%) and (Y) if such Letters of Credit are denominated in a Foreign Currency, then at least   one hundred ten percent (110.0%), of the Dollar Equivalent of the aggregate face amount of all   Letters of Credit remaining undrawn (plus all interest, fees, and costs due or to become due in   connection therewith (as estimated by Bank in its reasonable discretion)), to secure all of the   Obligations relating to such Letters of Credit, as collateral security for the repayment of any   future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such   amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid or payable over the   remaining term of any Letters of Credit;   (d) terminate any FX Contracts;     

 

   -21-   (e) verify the amount of, demand payment of and performance under, and   collect any Accounts and General Intangibles, settle or adjust disputes and claims directly with   Account Debtors for amounts on terms and in any order that Bank considers advisable, and   notify any Person owing Borrower money of Bank’s security interest in such funds;     (f) make any payments and do any acts it considers necessary or reasonable to   protect the Collateral and/or its security interest in the Collateral.  Borrower shall assemble the   Collateral if Bank requests and make it available as Bank designates.  Bank may enter premises   where the Collateral is located, take and maintain possession of any part of the Collateral, and   pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its   security interest and pay all expenses incurred. Borrower grants Bank a license to enter and   occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies;   (g) apply to the Obligations any (i) balances and deposits of Borrower it   holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower;   (h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,   advertise for sale, and sell the Collateral.  Bank is hereby granted a non-exclusive, royalty-free   license or other right to use, without charge, Borrower’s labels, Patents, Copyrights, mask works,   rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any   similar property as it pertains to the Collateral, in completing production of, advertising for sale,   and selling any Collateral and, in connection with Bank’s exercise of its rights under this   Section, Borrower’s rights under all licenses and all franchise agreements inure to Bank’s   benefit;   (i) place a “hold” on any account maintained with Bank and/or deliver a   notice of exclusive control, any entitlement order, or other directions or instructions pursuant to   any Control Agreement or similar agreements providing control of any Collateral;   (j) demand and receive possession of Borrower’s Books; and   (k) exercise all rights and remedies available to Bank under the Loan   Documents or at law or equity, including all remedies provided under the Code (including   disposal of the Collateral pursuant to the terms thereof).   9.2 Power of Attorney.  Borrower hereby irrevocably appoints Bank as its lawful   attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of   Default, to:  (a) endorse Borrower’s name on any checks or other forms of payment or security;   (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against   Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with   Account Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle, and   adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge,   encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based   thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the   Collateral into the name of Bank or a third party as the Code permits.  Borrower hereby appoints   Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to   perfect or continue the perfection of Bank’s security interest in the Collateral regardless of     

 

   -22-   whether an Event of Default has occurred until all Obligations have been satisfied in full and   Bank is under no further obligation to make Credit Extensions hereunder.  Bank’s foregoing   appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an   interest, are irrevocable until all Obligations have been fully repaid and performed and Bank’s   obligation to provide Credit Extensions terminates.   9.3 Protective Payments.  If Borrower fails to obtain the insurance called for by   Section 6.7 or fails to pay any premium thereon or fails to pay any other amount which Borrower   is obligated to pay under this Agreement or any other Loan Document or which may be required   to preserve the Collateral, Bank may obtain such insurance or make such payment, and all   amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest   at the then highest rate applicable to the Obligations, and secured by the Collateral.  Bank will   make reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the   time it is obtained or within a reasonable time thereafter.  No payments by Bank are deemed an   agreement to make similar payments in the future or Bank’s waiver of any Event of Default.   9.4 Application of Payments and Proceeds.  If an Event of Default has occurred and   is continuing, Bank shall have the right to apply in any order any funds in its possession, whether   from Borrower account balances, payments, proceeds realized as the result of any collection of   Accounts or other disposition of the Collateral, or otherwise, to the Obligations.  Bank shall pay   any surplus to Borrower by credit to the Designated Deposit Account or to other Persons legally   entitled thereto; Borrower shall remain liable to Bank for any deficiency.  If Bank, directly or   indirectly, enters into a deferred payment or other credit transaction with any purchaser at any   sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the   Obligations by the principal amount of the purchase price or deferring the reduction of the   Obligations until the actual receipt by Bank of cash therefor.   9.5 Bank’s Liability for Collateral.  So long as Bank complies with reasonable   banking practices regarding the safekeeping of the Collateral in the possession or under the   control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral;   (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d)   any act or default of any carrier, warehouseman, bailee, or other Person.  Borrower bears all risk   of loss, damage or destruction of the Collateral.   9.6 No Waiver; Remedies Cumulative.  Bank’s failure, at any time or times, to   require strict performance by Borrower of any provision of this Agreement or any other Loan   Document shall not waive, affect, or diminish any right of Bank thereafter to demand strict   performance and compliance herewith or therewith.  No waiver hereunder shall be effective   unless signed by the party granting the waiver and then is only effective for the specific instance   and purpose for which it is given.  Bank’s rights and remedies under this Agreement and the   other Loan Documents are cumulative.  Bank has all rights and remedies provided under the   Code, by law, or in equity.  Bank’s exercise of one right or remedy is not an election and shall   not preclude Bank from exercising any other remedy under this Agreement or other remedy   available at law or in equity, and Bank’s waiver of any Event of Default is not a continuing   waiver.  Bank’s delay in exercising any remedy is not a waiver, election, or acquiescence.       

 

   -23-   9.7 Demand Waiver.  Borrower waives demand, notice of default or dishonor, notice   of payment and nonpayment, notice of any default, nonpayment at maturity, release,   compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel   paper, and guarantees held by Bank on which Borrower is liable.   9.8 Borrower Liability.  Any Borrower may, acting singly, request Advances   hereunder.  Each Borrower hereby appoints the other as agent for the other for all purposes   hereunder, including with respect to requesting Advances hereunder.  Each Borrower hereunder   shall be jointly and severally obligated to repay all Advances made hereunder, regardless of   which Borrower actually receives said Advance, as if each Borrower hereunder directly received   all Advances.  Each Borrower waives (a) any suretyship defenses available to it under the Code   or any other applicable law, and (b) any right to require Bank to: (i) proceed against any   Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any   other remedy.  Bank may exercise or not exercise any right or remedy it has against any   Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale)   without affecting any Borrower’s liability.  Notwithstanding any other provision of this   Agreement or other related document, each Borrower irrevocably waives all rights that it may   have at law or in equity (including, without limitation, any law subrogating Borrower to the   rights of Bank under this Agreement) to seek contribution, indemnification or any other form of   reimbursement from any other Borrower, or any other Person now or hereafter primarily or   secondarily liable for any of the Obligations, for any payment made by Borrower with respect to   the Obligations in connection with this Agreement or otherwise and all rights that it might have   to benefit from, or to participate in, any security for the Obligations as a result of any payment   made by Borrower with respect to the Obligations in connection with this Agreement or   otherwise.  Any agreement providing for indemnification, reimbursement or any other   arrangement prohibited under this Section shall be null and void.  If any payment is made to a   Borrower in contravention of this Section, such Borrower shall hold such payment in trust for   Bank and such payment shall be promptly delivered to Bank for application to the Obligations,   whether matured or unmatured.   10 NOTICES   All notices, consents, requests, approvals, demands, or other communication by   any party to this Agreement or any other Loan Document must be in writing and shall be deemed   to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three   (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return   receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic   mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight   courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of   which shall be addressed to the party to be notified and sent to the address, facsimile number, or   email address indicated below.  Bank or Borrower may change its mailing or electronic mail   address or facsimile number by giving the other party written notice thereof in accordance with   the terms of this Section 10.    If to Borrower: c/o LoJack Corporation   40 Pequot Way Canton, MA 02021 Attn: Ken Dumas, Chief Financial Officer     

 

   -24-   Fax: Email: ken.dumas@lojack.com     with a copy to: Sullivan & Worcester LLP       One Post Office Square       Boston, Massachusetts 02109       Attn:  Harry E. Ekblom, Jr., Esquire       Fax: (617) 338-2880       Email: hekblom@sandw.com     If to Bank:  Silicon Valley Bank        275 Grove Street, Suite 2-200       Newton, MA 02466        Attn: Steve Lyons       Fax:  (617) 527-0177       Email: slyons@svb.com        with a copy to: Riemer & Braunstein LLP       Three Center Plaza       Boston, Massachusetts 02108       Attn:  Charles W. Stavros, Esquire       Fax: (617) 880-3456       Email: cstavros@riemerlaw.com    11 CHOICE OF LAW, VENUE, AND JURY TRIAL WAIVER   Except as otherwise expressly provided in any of the Loan Documents,   Massachusetts law governs the Loan Documents without regard to principles of conflicts of law.    Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in   Massachusetts; provided, however, that nothing in this Agreement shall be deemed to operate to   preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize   on the Collateral or any other security for the Obligations, or to enforce a judgment or other court   order in favor of Bank.  Borrower expressly submits and consents in advance to such jurisdiction   in any action or suit commenced in any such court, and Borrower hereby waives any objection   that it may have based upon lack of personal jurisdiction, improper venue, or forum non   conveniens and hereby consents to the granting of such legal or equitable relief as is deemed   appropriate by such court.  Borrower hereby waives personal service of the summons,   complaints, and other process issued in such action or suit and agrees that service of such   summons, complaints, and other process may be made by registered or certified mail addressed   to Borrower at the address set forth in Section 10 of this Agreement and that service so made   shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three   (3) days after deposit in the U.S. mails, proper postage prepaid.   TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,   BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY   CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS   AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED     

 

   -25-   TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL   OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH   PARTIES TO ENTER INTO THIS AGREEMENT.  EACH PARTY HAS REVIEWED   THIS WAIVER WITH ITS COUNSEL.   This Section 11 shall survive the termination of this Agreement.   12 GENERAL PROVISIONS   12.1 Termination Prior to Revolving Line Maturity Date; Survival.  All covenants,   representations and warranties made in this Agreement shall continue in full force until this   Agreement has terminated pursuant to its terms and all Obligations have been satisfied.  So long   as Borrower has satisfied the Obligations (other than inchoate indemnity obligations, any other   obligations which, by their terms, are to survive the termination of this Agreement, and any   Obligations under Bank Services Agreements that are cash collateralized in accordance with   Section 4.1 of this Agreement), this Agreement may be terminated prior to the Revolving Line   Maturity Date by Borrower, effective three (3) Business Days after written notice of termination   is given to Bank.  Those obligations that are expressly specified in this Agreement as surviving   this Agreement’s termination shall continue to survive notwithstanding this Agreement’s   termination.    12.2 Successors and Assigns.  This Agreement binds and is for the benefit of the   successors and permitted assigns of each party.  Borrower may not assign this Agreement or any   rights or obligations under it without Bank’s prior written consent (which may be granted or   withheld in Bank’s discretion).  Bank has the right, without the consent of or notice to Borrower,   to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in,   Bank’s obligations, rights, and benefits under this Agreement and the other Loan Documents.    12.3 Indemnification.  Borrower agrees to indemnify, defend and hold Bank and its   directors, officers, employees, agents, attorneys, or any other Person affiliated with or   representing Bank (each, an “Indemnified Person”) harmless against:  (i) all obligations,   demands, claims, and liabilities (collectively, “Claims”) claimed or asserted by any other party   in connection with the transactions contemplated by the Loan Documents; and (ii) all losses or   expenses (including Bank Expenses) in any way suffered, incurred, or paid by such Indemnified   Person as a result of, following from, consequential to, or arising from transactions between   Bank and Borrower (including reasonable attorneys’ fees and expenses), except for Claims   and/or losses directly caused by such Indemnified Person’s gross negligence or willful   misconduct.     This Section 12.3 shall survive until all statutes of limitation with respect to the   Claims, losses, and expenses for which indemnity is given shall have run.   12.4 Time of Essence.  Time is of the essence for the performance of all Obligations in   this Agreement.   12.5 Severability of Provisions.  Each provision of this Agreement is severable from   every other provision in determining the enforceability of any provision.     

 

   -26-   12.6 Correction of Loan Documents.  Bank may correct patent errors and fill in any   blanks in the Loan Documents consistent with the agreement of the parties.   12.7 Amendments in Writing; Waiver; Integration.  No purported amendment or   modification of any Loan Document, or waiver, discharge or termination of any obligation under   any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly   set forth in a writing signed by the party against which enforcement or admission is sought.    Without limiting the generality of the foregoing, no oral promise or statement, nor any action,   inaction, delay, failure to require performance or course of conduct shall operate as, or evidence,   an amendment, supplement or waiver or have any other effect on any Loan Document.  Any   waiver granted shall be limited to the specific circumstance expressly described in it, and shall   not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to,   or evidence, any obligation or commitment to grant any further waiver.  The Loan Documents   represent the entire agreement about this subject matter and supersede prior negotiations or   agreements.  All prior agreements, understandings, representations, warranties, and negotiations   between the parties about the subject matter of the Loan Documents merge into the Loan   Documents.   12.8 Counterparts.  This Agreement may be executed in any number of counterparts   and by different parties on separate counterparts, each of which, when executed and delivered, is   an original, and all taken together, constitute one Agreement.   12.9 Confidentiality.  In handling any confidential information, Bank shall exercise   the same degree of care that it exercises for its own proprietary information, but disclosure of   information may be made: (a) to Bank’s Subsidiaries or Affiliates (such Subsidiaries and   Affiliates, together with Bank, collectively, “Bank Entities”); (b) to prospective transferees or   purchasers of any interest in the Credit Extensions (provided, however, Bank shall obtain any   prospective transferee’s or purchaser’s agreement to the terms of this provision or undertakings   to a similar effect); (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s   regulators or as otherwise required in connection with Bank’s examination or audit; (e) as Bank   considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party   service providers of Bank so long as such service providers have executed a confidentiality   agreement with Bank with terms no less restrictive than those contained herein.  Confidential   information does not include information that is either: (i) in the public domain or in Bank’s   possession when disclosed to Bank, or becomes part of the public domain (other than as a result   of its disclosure by Bank in violation of this Agreement) after disclosure to Bank; or   (ii) disclosed to Bank by a third party, if Bank does not know that the third party is prohibited   from disclosing the information.   Bank Entities may use confidential information for the development of databases,   reporting purposes, and market analysis so long as such confidential information is aggregated and   anonymized prior to distribution unless otherwise expressly permitted by Borrower.  The provisions   of the immediately preceding sentence shall survive the termination of this Agreement.   12.10 Attorneys’ Fees, Costs and Expenses.  In any action or proceeding between   Borrower and Bank arising out of or relating to the Loan Documents, the Bank shall be entitled     

 

   -27-   to recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any   other relief to which it may be entitled.   12.11 Electronic Execution of Documents.  The words “execution,” “signed,”   “signature” and words of like import in any Loan Document shall be deemed to include   electronic signatures or the keeping of records in electronic form, each of which shall be of the   same legal effect, validity and enforceability as a manually executed signature or the use of a   paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any   applicable law, including, without limitation, any state law based on the Uniform Electronic   Transactions Act.   12.12 Right of Setoff.   Borrower hereby grants to Bank a Lien and a right of setoff 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 subsidiary of   Bank) 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 setoff 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.   12.13 Captions.  The headings used in this Agreement are for convenience only and   shall not affect the interpretation of this Agreement.   12.14 Construction of Agreement.  The parties mutually acknowledge that they and   their attorneys have participated in the preparation and negotiation of this Agreement.  In cases   of uncertainty this Agreement shall be construed without regard to which of the parties caused   the uncertainty to exist.   12.15 Relationship.  The relationship of the parties to this Agreement is determined   solely by the provisions of this Agreement.  The parties do not intend to create any agency,   partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different   from those of parties to an arm’s-length contract.   12.16 Third Parties.  Nothing in this Agreement, whether express or implied, is   intended to: (a) confer any benefits, rights or remedies under or by reason of this Agreement on   any persons other than the express parties to it and their respective permitted successors and   assigns; (b) relieve or discharge the obligation or liability of any person not an express party to   this Agreement; or (c) give any person not an express party to this Agreement any right of   subrogation or action against any party to this Agreement.   13 DEFINITIONS     

 

   -28-   13.1 Definitions.  As used in the Loan Documents, the word “shall” is mandatory, the   word “may” is permissive, the word “or” is not exclusive, the words “includes” and “including”   are not limiting, and the singular includes the plural.  As used in this Agreement, the following   capitalized terms have the following meanings:   “Account” is any “account” as defined in the Code with such additions to such   term as may hereafter be made, and includes, without limitation, all accounts receivable and   other sums owing to Borrower.   “Account Debtor” is any “account debtor” as defined in the Code with such   additions to such term as may hereafter be made.   “Adjusted EBITDA” means, for any date of determination, the sum of (i)   EBITDA, plus (ii) stock-based compensation, plus (iii) a one-time, non-recurring add-back for   expenses incurred in any consecutive twelve (12) calendar month period not to exceed Five   Hundred Thousand Dollars ($500,000).   “Advance” or “Advances” means a revolving credit loan (or revolving credit   loans) under the Revolving Line.   “Affiliate” is, with respect to any Person, each other Person that owns or controls   directly or indirectly the Person, any Person that controls or is controlled by or is under common   control with the Person, and each of that Person’s senior executive officers, directors, partners   and, for any Person that is a limited liability company, that Person’s managers and members.   “Agreement” is defined in the preamble hereof.   “Authorized Signer” is any individual listed in Borrower’s Borrowing   Resolution who is authorized to execute the Loan Documents, including any Advance request,   on behalf of Borrower.   “Availability Amount” is (a) the lesser of (i) the Revolving Line or (ii) the   amount available under the Borrowing Base minus (b) the outstanding principal balance of any   Advances.   “Bank” is defined in the preamble hereof.   “Bank Entities” is defined in Section 12.9.    “Bank Expenses” are all audit fees and expenses, costs, and expenses (including   reasonable attorneys’ fees and expenses) for preparing, amending, negotiating, administering,   defending and enforcing the Loan Documents (including, without limitation, those incurred in   connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to   Borrower.   “Bank Services”  are any products, credit services, and/or financial   accommodations previously, now, or hereafter provided to Borrower or any of its Subsidiaries by   Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management     

 

   -29-   services (including, without limitation, merchant services, direct deposit of payroll, business   credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange   services as any such products or services may be identified in Bank’s various agreements related   thereto (each, a “Bank Services Agreement”).   “Bank Services Agreement” is defined in the definition of Bank Services.   “Borrower” is defined in the preamble hereof.   “Borrower’s Books” are all Borrower’s books and records including ledgers,   federal and state tax returns, records regarding Borrower’s assets or liabilities, the Collateral,   business operations or financial condition, and all computer programs or storage or any   equipment containing such information.   “Borrowing Base” is (a) eighty-five percent (85%) of Eligible Accounts (as   determined by Bank from Borrower’s most recent Transaction Report) plus (b) during a   Borrowing Base Enhancement Period, One Million Dollars ($1,000,000); provided, however,   that Bank has the right to decrease the foregoing percentage in its reasonable discretion to   mitigate the impact of events, conditions, contingencies, or risks which may adversely affect the   Collateral or its value.   “Borrowing Base Enhancement Period” is, on the Effective Date through the   first anniversary of the Effective Date, the period (a) commencing on the day that Borrower   demonstrates to Bank that Borrower has maintained for at least fifteen (15) Business Days an   aggregate amount of unrestricted cash in one or more Deposit Accounts in the name of Borrower   at Bank equal to or greater than Two Million Dollars ($2,000,000) (the “Borrowing Base   Enhancement Balance”) and (b) terminating immediately at any time Borrower fails to   maintain the Borrowing Base Enhancement Balance.  In order to enter into any subsequent   Borrowing Base Enhancement Period, Borrower must demonstrate to Bank compliance with the   Borrowing Base Enhancement Balance.   “Borrowing Resolutions” are, with respect to any Person, those resolutions   adopted by such Person’s board of directors or managers, as applicable (and, if required under   the terms of such Person’s Operating Documents, stockholders or members, as applicable) and   delivered by such Person to Bank approving the Loan Documents to which such Person is a party   and the transactions contemplated thereby, together with a certificate executed by its secretary on   behalf of such Person certifying (a) such Person has the authority to execute, deliver, and   perform its obligations under each of the Loan Documents to which it is a party, (b) that set forth   as a part of or attached as an exhibit to such certificate is a true, correct, and complete copy of   the resolutions then in full force and effect authorizing and ratifying the execution, delivery, and   performance by such Person of the Loan Documents to which it is a party, (c) the name(s) of the   Person(s) authorized to execute the Loan Documents, including any Advance request, on behalf   of such Person, together with a sample of the true signature(s) of such Person(s), and (d) that   Bank may conclusively rely on such certificate unless and until such Person shall have delivered   to Bank a further certificate canceling or amending such prior certificate.     

 

   -30-   “Business Day” is any day that is not a Saturday, Sunday or a day on which Bank   is closed.   “Cash Equivalents” means (a) marketable direct obligations issued or   unconditionally guaranteed by the United States or any agency or any State thereof having   maturities of not more than one (1) year from the date of acquisition; (b) commercial paper   maturing no more than one (1) year after its creation and having the highest rating from either   Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of   deposit issued maturing no more than one (1) year after issue; and (d) money market funds at   least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds   described in clauses (a) through (c) of this definition.   “Change in Control” means (a) at any time after the Effective Date, any   “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act),   shall become, or obtain rights (whether by means or warrants, options or otherwise) to become,   the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act),   directly or indirectly, of thirty-five (35%) or more of the ordinary voting power for the election   of directors of Borrower (determined on a fully diluted basis) other than by the sale of   Borrower’s equity securities in a public offering or to venture capital or private equity investors   so long as Borrower identifies to Bank the venture capital or private equity investors at least   seven (7) Business Days prior to the closing of the transaction and provides to Bank a description   of the material terms of the transaction; (b) during any period of 12 consecutive months, a   majority of the members of the board of directors or other equivalent governing body of   Borrower cease to be composed of individuals (i) who were members of that board or equivalent   governing body on the first day of such period, (ii) whose election or nomination to that board or   equivalent governing body was approved by individuals referred to in clause (i) above   constituting at the time of such election or nomination at least a majority of that board or   equivalent governing body or (iii) whose election or nomination to that board or other equivalent   governing body was approved by individuals referred to in clauses (i) and (ii) above constituting   at the time of such election or nomination at least a majority of that board or equivalent   governing body; or (c) at any time, Borrower shall cease to own and control, of record and   beneficially, directly or indirectly, one hundred percent (100%) of each class of outstanding   capital stock of each Subsidiary of Borrower that was wholly-owned by Borrower on the   Effective Date free and clear of all Liens (except Liens created by this Agreement).   “Claims” is defined in Section 12.3.   “Code” is the Uniform Commercial Code, as the same may, from time to time, be   enacted and in effect in the Commonwealth of Massachusetts; provided, that, to the extent that   the Code is used to define any term herein or in any Loan Document and such term is defined   differently in different Articles or Divisions of the Code, the definition of such term contained in   Article or Division 9 shall govern; provided further, that in the event that, by reason of   mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies   with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in   effect in a jurisdiction other than the Commonwealth of Massachusetts, the term “Code” shall   mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for     

 

   -31-   purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies   and for purposes of definitions relating to such provisions.      “Collateral” is any and all properties, rights and assets of Borrower described on   Exhibit A, but shall in no event include any Excluded Collateral.   “Collateral Account” is any Deposit Account, Securities Account, or   Commodity Account.   “Commodity Account” is any “commodity account” as defined in the Code with   such additions to such term as may hereafter be made.   “Compliance Certificate” is that certain certificate in the form attached hereto as   Exhibit B.   “Contingent Obligation” is, for any Person, any direct or indirect liability,   contingent or not, of that Person for (a) any indebtedness, capital lease, dividend, letter of credit   or other obligation of another such as an obligation, in each case, directly or indirectly   guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which   that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the   account of that Person; and (c) all obligations from any interest rate, currency or commodity   swap agreement, interest rate cap or collar agreement, or other agreement or arrangement   designated to protect a Person against fluctuation in interest rates, currency exchange rates or   commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary   course of business.  The amount of a Contingent Obligation is the stated or determined amount   of the primary obligation for which the Contingent Obligation is made or, if not determinable,   the maximum reasonably anticipated liability for it determined by the Person in good faith; but   the amount may not exceed the maximum of the obligations under any guarantee or other   support arrangement.   “Control Agreement” is any control agreement entered into among the   depository institution at which Borrower maintains a Deposit Account or the securities   intermediary or commodity intermediary at which Borrower maintains a Securities Account or a   Commodity Account, Borrower, and Bank pursuant to which Bank obtains control (within the   meaning of the Code) over such Deposit Account, Securities Account, or Commodity Account.   “Copyrights” are any and all copyright rights, copyright applications, copyright   registrations and like protections in each work of authorship and derivative work thereof,   whether published or unpublished and whether or not the same also constitutes a trade secret.   “Credit Extension” is any Advance, any Overadvance, Letter of Credit, FX   Contract, amount utilized for cash management services, or any other extension of credit by   Bank for Borrower’s benefit.   “Currency” is coined money and such other banknotes or other paper money as   are authorized by law and circulate as a medium of exchange.     

 

   -32-   “Default” means any event which with notice or passage of time or both, would   constitute an Event of Default.   “Default Rate” is defined in Section 2.4(b).   “Deferred Revenue” is all amounts received or invoiced in advance of   performance under contracts and not yet recognized as revenue.   “Deposit Account” is any “deposit account” as defined in the Code with such   additions to such term as may hereafter be made.   “Designated Deposit Account” is the multicurrency account denominated in   Dollars, account number _____________, maintained by Borrower with Bank.   “Dollars,” “dollars” or use of the sign “$” means only lawful money of the   United States and not any other currency, regardless of whether that currency uses the “$” sign to   denote its currency or may be readily converted into lawful money of the United States.   “Dollar Equivalent” is, at any time, (a) with respect to any amount denominated   in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency,   the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the   then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency   for transfer to the country issuing such Foreign Currency.   “Domestic Subsidiary” means a Subsidiary organized under the laws of the   United States or any state or territory thereof or the District of Columbia.   “EBITDA” shall mean (a) Net Income, plus (b) Interest Expense, plus (c) to the   extent deducted in the calculation of Net Income, depreciation expense and amortization   expense, plus (d) income tax expense.   “Effective Date” is defined in the preamble hereof.   “Eligible Accounts” means Accounts which arise in the ordinary course of   Borrower’s business that meet all Borrower’s representations and warranties in Section 5.3.    Bank reserves the right at any time after the Effective Date to adjust any of the criteria set forth   below and to establish new criteria in its reasonable discretion.  Unless Bank otherwise agrees in   writing, Eligible Accounts shall not include:   (a) Accounts for which the Account Debtor is Borrower’s Affiliate, officer,   employee, or agent;   (b) Accounts that the Account Debtor has not paid within ninety (90) days of   invoice date regardless of invoice payment period terms;   (c) Accounts with credit balances over ninety (90) days from invoice date;     

 

   -33-   (d) Accounts owing from an Account Debtor if fifty percent (50%) or more of   the Accounts owing from such Account Debtor have not been paid within ninety (90)   days of invoice date;   (e) Accounts owing from an Account Debtor which does not have its   principal place of business in the United States unless such Accounts are otherwise   Eligible Accounts and (i) covered in full by credit insurance satisfactory to Bank, less any   deductible, (ii) supported by letter(s) of credit acceptable to Bank, (iii) supported by a   guaranty from the Export-Import Bank of the United States, or (iv) that Bank otherwise   approves of in writing;   (f) Accounts billed from and/or payable to Borrower outside of the United   States unless (A) Bank has a first priority, perfected security interest or other enforceable   Lien in such Accounts under all applicable laws, including foreign laws (sometimes   called foreign invoiced accounts) or (B) such Accounts are otherwise Eligible Accounts   and (i) covered in full by credit insurance satisfactory to Bank, less any deductible,   (ii) supported by letter(s) of credit acceptable to Bank, (iii) supported by a guaranty from   the Export-Import Bank of the United States, or (iv) that Bank otherwise approves of in   writing;   (g) Accounts owing from an Account Debtor to the extent that Borrower is   indebted or obligated in any manner to the Account Debtor (as creditor, lessor, supplier   or otherwise - sometimes called “contra” accounts, accounts payable, customer deposits   or credit accounts);    (h) Accounts owing from an Account Debtor which is a United States   government entity or any department, agency, or instrumentality thereof unless Borrower   has assigned its payment rights to Bank and the assignment has been acknowledged   under the Federal Assignment of Claims Act of 1940, as amended;   (i) Accounts for demonstration or promotional equipment, or in which goods   are consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on approval”, or   other terms if Account Debtor’s payment may be conditional;   (j) Accounts owing from an Account Debtor where goods or services have   not yet been rendered to the Account Debtor (sometimes called memo billings or pre-   billings);   (k) Accounts subject to contractual arrangements between Borrower and an   Account Debtor where payments shall be scheduled or due according to completion or   fulfillment requirements where the Account Debtor has a right of offset for damages   suffered as a result of Borrower’s failure to perform in accordance with the contract   (sometimes called contracts accounts receivable, progress billings, milestone billings, or   fulfillment contracts);   (l) Accounts owing from an Account Debtor the amount of which may be   subject to withholding based on the Account Debtor’s satisfaction of Borrower’s     

 

   -34-   complete performance (but only to the extent of the amount withheld; sometimes called   retainage billings);   (m) Accounts subject to trust provisions, subrogation rights of a bonding   company, or a statutory trust;   (n) Accounts owing from an Account Debtor that has been invoiced for goods   that have not been shipped to the Account Debtor unless Bank, Borrower, and the   Account Debtor have entered into an agreement acceptable to Bank wherein the Account   Debtor acknowledges that (i) it has title to and has ownership of the goods wherever   located, (ii) a bona fide sale of the goods has occurred, and (iii) it owes payment for such   goods in accordance with invoices from Borrower (sometimes called “bill and hold”   accounts);   (o) Accounts for which the Account Debtor has not been invoiced;   (p) Accounts that represent non-trade receivables or that are derived by means   other than in the ordinary course of Borrower’s business;   (q) Accounts for which Borrower has permitted Account Debtor’s payment to   extend beyond ninety (90) days;   (r) Accounts arising from chargebacks, debit memos or other payment   deductions taken by an Account Debtor;   (s) Accounts arising from product returns and/or exchanges (sometimes called   “warranty” or “RMA” accounts);   (t) Accounts in which the Account Debtor disputes liability or makes any   claim (but only up to the disputed or claimed amount), or if the Account Debtor is subject   to an Insolvency Proceeding, or becomes insolvent, or goes out of business;    (u) Accounts owing from an Account Debtor with respect to which Borrower   has received Deferred Revenue (but only to the extent of such Deferred Revenue);   (v) Accounts owing from an Account Debtor, whose total obligations to   Borrower exceed twenty-five percent (25%) of all Accounts, for the amounts that exceed   that percentage, unless Bank approves in writing; and   (w) Accounts for which Bank in its reasonable discretion determines   collection to be doubtful, including, without limitation, accounts represented by   “refreshed” or “recycled” invoices.   “Equipment” is all “equipment” as defined in the Code with such additions to   such term as may hereafter be made, and includes without limitation all machinery, fixtures,   goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.     

 

   -35-   “ERISA” is the Employee Retirement Income Security Act of 1974, and its   regulations.   “Event of Default” is defined in Section 8.   “Exchange Act” is the Securities Exchange Act of 1934, as amended.   “Excluded Collateral” means, collectively, (i) Excluded Equity; (ii) any asset of   property of any Excluded Subsidiary; (iii) any permit or license of, or any contractual obligation   entered into by, Borrower (A) that prohibits or requires the consent of any Person other than any   Borrower or its Affiliates as a condition to the creation by Borrower of a Lien on any right, title   or interest in such permit, license or contractual obligation or (B) to the extent that any law   applicable thereto prohibits the creation of a Lien thereon; (iv) fixed or capital assets owned by   Borrower that is subject to a purchase money Lien or a capital lease if the contractual obligation   pursuant to which such Lien is granted (or in the document providing such capital lease)   prohibits or requires the consent of any Person other than Borrower or its Affiliates as a   condition to the creation of any other Lien thereon; and (v) any “intent to use” Trademark   applications for which a statement of use has not been filed (but only until such statement is   filed; provided, however, “Excluded Collateral” shall not include any proceeds, products,   substitutions or replacements of Excluded Collateral (unless such proceeds, products,   substitutions or replacements would otherwise constitute Excluded Collateral); and provided,   further, however, that upon the termination of any prohibition described in clauses (iii) or (iv)   above, such permit, license, contractual obligation or asset shall immediately become Collateral   without any action by Borrower or Bank.   “Excluded Equity” means, collectively, (i) all of the outstanding voting stock of   any indirect Subsidiary of Borrower; (ii) thirty-five percent (35%) of the outstanding voting   stock of any Foreign Subsidiary directly owned by Borrower; and (iii) any voting stock or other   equity interest in SafetyNet.  For the purposes of this definition, “voting stock” means, with   respect to any issuer, the issued and outstanding shares of each class of stock of such issuer   entitled to vote (within the meaning of Treasury Regulation §1.956-2(c)(2)).   “Excluded Subsidiary” means any indirectly owned Foreign Subsidiary of   Borrower.   “Existing Accounts” means each of Borrower’s (i) Deposit Accounts at Citizens   Bank, N.A. and (ii) Securities Accounts at Merrill Lynch.   “Foreign Currency” means lawful money of a country other than the United   States.   “Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.   “Funding Date” is any date on which a Credit Extension is made to or for the   account of Borrower which shall be a Business Day.     

 

   -36-   “FX Contract” is any foreign exchange contract by and between Borrower and   Bank under which Borrower commits to purchase from or sell to Bank a specific amount of   Foreign Currency on a specified date.   “GAAP” is generally accepted accounting principles set forth in the opinions and   pronouncements of the Accounting Principles Board of the American Institute of Certified Public   Accountants and statements and pronouncements of the Financial Accounting Standards Board   or in such other statements by such other Person as may be approved by a significant segment of   the accounting profession, which are applicable to the circumstances as of the date of   determination.   “General Intangibles” is all “general intangibles” as defined in the Code in effect   on the date hereof with such additions to such term as may hereafter be made, and includes   without limitation, all Intellectual Property, claims, income and other tax refunds, security and   other deposits, payment intangibles, contract rights, options to purchase or sell real or personal   property, rights in all litigation presently or hereafter pending (whether in contract, tort or   otherwise), insurance policies (including without limitation key man, property damage, and   business interruption insurance), payments of insurance and rights to payment of any kind.    “Global” is defined in the preamble hereof.      “Governmental Approval” is any consent, authorization, approval, order,   license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by,   from or to, or other act by or in respect of, any Governmental Authority.   “Governmental Authority” is any nation or government, any state or other   political subdivision thereof, any agency, authority, instrumentality, regulatory body, court,   central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or   administrative functions of or pertaining to government, any securities exchange and any self-   regulatory organization.   “Indebtedness” is (a) indebtedness for borrowed money or the deferred price of   property or services, such as reimbursement and other obligations for surety bonds and letters of   credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital   lease obligations, and (d) Contingent Obligations.   “Indemnified Person” is defined in Section 12.3.   “Initial Audit” is Bank’s inspection of Borrower’s Accounts, the Collateral, and   Borrower’s Books, with results satisfactory to Bank in its sole and absolute discretion.   “Insolvency Proceeding” is any proceeding by or against any Person under the   United States Bankruptcy Code, or any other bankruptcy or insolvency law, including   assignments for the benefit of creditors, compositions, extensions generally with its creditors, or   proceedings seeking reorganization, arrangement, or other relief.    “Intellectual Property” means, with respect to any Person, all of such Person’s   right, title, and interest in and to the following:        

 

   -37-   (a) its Copyrights, Trademarks and Patents;    (b) any and all trade secrets and trade secret rights, including, without   limitation, any rights to unpatented inventions, know-how and operating manuals;   (c) any and all source code;   (d) any and all design rights which may be available to such Person;   (e) any and all claims for damages by way of past, present and future   infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect   such damages for said use or infringement of the Intellectual Property rights identified above;   and   (f) all amendments, renewals and extensions of any of the Copyrights,   Trademarks or Patents.   “Interest Expense” means for any fiscal period, interest expense (whether cash or   non-cash) determined in accordance with GAAP for the relevant period ending on such date,   including, in any event, interest expense with respect to any Credit Extension and other   Indebtedness of Borrower and its Subsidiaries, including, without limitation or duplication, all   commissions, discounts, or related amortization and other fees and charges with respect to letters   of credit and bankers’ acceptance financing and the net costs associated with interest rate swap,   cap, and similar arrangements, and the interest portion of any deferred payment obligation   (including leases of all types).   “Inventory” is all “inventory” as defined in the Code in effect on the date hereof   with such additions to such term as may hereafter be made, and includes without limitation all   merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and   finished products, including without limitation such inventory as is temporarily out of   Borrower’s custody or possession or in transit and including any returned goods and any   documents of title representing any of the above.   “Investment” is any beneficial ownership interest in any Person (including stock,   partnership interest or other securities), and any loan, advance or capital contribution to any   Person.   “IP Agreement” is that certain Intellectual Property Security Agreement   executed and delivered by Borrower to Bank dated as of the Effective Date.   “Irish Subsidiary” means LoJack Equipment Ireland Ltd., a wholly-owned   Subsidiary of LoJack.   “Key Person” is each of Borrower’s Chief Executive Officer and Chief Financial   Officer.    “Letter of Credit” is a standby or commercial letter of credit issued by Bank   upon request of Borrower based upon an application, guarantee, indemnity, or similar agreement.     

 

   -38-   “Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest   or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or   otherwise against any property.   “Liquidity Ratio” is, on any date of determination, the quotient of (a) Quick   Assets divided by (b) the amount of outstanding Obligations (including Obligations owing on   account of Bank Services), expressed as a ratio.   “Loan Documents” are, collectively, this Agreement and any schedules, exhibits,   certificates, notices, and any other documents related to this Agreement, the IP Agreement, any   Bank Services Agreement, any subordination agreement, any note, or notes or guaranties   executed by Borrower, and any other present or future agreement by Borrower with or for the   benefit of Bank in connection with this Agreement or Bank Services, all as amended, restated, or   otherwise modified.   “LoJack” is defined in the preamble hereof.   “Material Adverse Change” is (a) a material impairment in the perfection or   priority of Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse   change in the business, operations, or financial condition of Borrower; or (c) a material   impairment of the prospect of repayment of any portion of the Obligations.   “Monthly Financial Statements” is defined in Section 6.2(c).   “Net Income” means, as calculated on a consolidated basis for Borrower and its   Subsidiaries for any period as at any date of determination, the net profit (or loss), after provision   for taxes, of Borrower and its Subsidiaries for such period taken as a single accounting period.   “Obligations” are Borrower’s obligations to pay when due any debts, principal,   interest, fees, Bank Expenses, and other amounts Borrower owes Bank now or later, whether   under this Agreement, the other Loan Documents, or otherwise, including, without limitation, all   obligations relating to Letters of Credit (including reimbursement obligations for drawn and   undrawn Letters of Credit), cash management services, and foreign exchange contracts, if any,   and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or   obligations of Borrower assigned to Bank, and to perform Borrower’s duties under the Loan   Documents.    “Operating Documents” are, for any Person, such Person’s formation   documents, as certified by the Secretary of State (or equivalent agency) of such Person’s   jurisdiction of organization on a date that is no earlier than thirty (30) days prior to the Effective   Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a   limited liability company, its limited liability company agreement (or similar agreement), and   (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the   foregoing with all current amendments or modifications thereto.   “Overadvance” is defined in Section 2.3.     

 

   -39-   “Patents” means all patents, patent applications and like protections including   without limitation improvements, divisions, continuations, renewals, reissues, extensions and   continuations-in-part of the same.   “Perfection Certificate” is defined in Section 5.1.   “Permitted Entity Disposition” is described on Schedule 6.14 attached hereto.   “Permitted Indebtedness” is:   (a) Borrower’s Indebtedness to Bank under this Agreement and the other   Loan Documents;   (b) Indebtedness existing on the Effective Date and shown on the Perfection   Certificate;   (c) Subordinated Debt;   (d) unsecured Indebtedness to trade creditors incurred in the ordinary course   of business;    (e) Indebtedness incurred as a result of endorsing negotiable instruments   received in the ordinary course of business;   (f) Indebtedness secured by Liens permitted under clauses (a) and (c) of the   definition of “Permitted Liens” hereunder; and   (g) extensions, refinancings, modifications, amendments and restatements of   any items of Permitted Indebtedness (a) through (f) above, provided that the principal amount   thereof is not increased or the terms thereof are not modified to impose more burdensome terms   upon Borrower or its Subsidiary, as the case may be.   “Permitted Insurance Event” means Borrower’s or its Subsidiary’s recovery of   insurance proceeds pursuant to claims with carriers pending as of the Effective Date (and any   amendments thereto) related to batteries manufactured and/or sold by EVE Energy Co., Ltd. or   its affiliates.   “Permitted Investments” are:   (a) Investments (including, without limitation, Subsidiaries) existing on the   Effective Date and shown on the Perfection Certificate;   (b) Investments consisting of Cash Equivalents;   (c) Investments consisting of the endorsement of negotiable instruments for   deposit or collection or similar transactions in the ordinary course of Borrower;   (d) Investments consisting of deposit accounts in which Bank has a perfected   security interest;      

 

   -40-   (e) Investments accepted in connection with Transfers permitted by Section   7.1;   (f) Investments consisting of the creation of a Subsidiary for the purpose of   consummating a merger transaction permitted by Section 7.3 of this Agreement, which is   otherwise a Permitted Investment;   (g) Investments (i) by Borrower in SafetyNet not to exceed Twenty Five   Thousand Dollars ($25,000) in any calendar month, (ii) by Borrower in Subsidiaries other than   SafetyNet not to exceed Five Hundred Thousand Dollars ($500,000) in the aggregate at any time   and (iii) by Subsidiaries in other Subsidiaries or in Borrower;   (h) Investments consisting of (i) travel advances and employee relocation   loans and other employee loans and advances in the ordinary course of business, and (ii) loans to   employees, officers or directors relating to the purchase of equity securities of Borrower or its   Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower’s   Board of Directors;   (i) Investments (including debt obligations) received in connection with the   bankruptcy or reorganization of customers or suppliers and in settlement of delinquent   obligations of, and other disputes with, customers or suppliers arising in the ordinary course of   business; and   (j) Investments consisting of notes receivable of, or prepaid royalties and   other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course   of business; provided that this paragraph (j) shall not apply to Investments of Borrower in any   Subsidiary.   “Permitted Liens” are:   (a) Liens existing on the Effective Date and shown on the Perfection   Certificate or arising under this Agreement and the other Loan Documents;   (b) Liens for taxes, fees, assessments or other government charges or levies,   either (i) not due and payable or (ii) being contested in good faith and for which Borrower   maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed   or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations   adopted thereunder;   (c) purchase money Liens and capital leases (i) on Equipment acquired or   held by Borrower incurred for financing the acquisition of the Equipment securing no more than   Two Hundred Fifty Thousand Dollars ($250,000) 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;   (d) Liens of carriers, warehousemen, suppliers, or other Persons that are   possessory in nature arising in the ordinary course of business so long as such Liens attach only   to Inventory and which are not delinquent or remain payable without penalty or which are being     

 

   -41-   contested in good faith and by appropriate proceedings which proceedings have the effect of   preventing the forfeiture or sale of the property subject thereto;    (e) Liens to secure payment of workers’ compensation, employment   insurance, old-age pensions, social security and other like obligations incurred in the ordinary   course of business (other than Liens imposed by ERISA);   (f) Liens incurred in the extension, renewal or refinancing of the Indebtedness   secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien   must be limited to the property encumbered by the existing Lien and the principal amount of the   indebtedness may not increase;   (g) leases or subleases of real property granted in the ordinary course of   Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s   business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other   than Intellectual Property) granted in the ordinary course of Borrower’s business (or, if referring   to another Person, in the ordinary course of such Person’s business), if the leases, subleases,   licenses and sublicenses do not prohibit granting Bank a security interest therein;   (h) non-exclusive license of Intellectual Property granted to third parties in the   ordinary course of business, and licenses of Intellectual Property that could not result in a legal   transfer of title of the licensed property that may be exclusive in respects other than territory and   that may be exclusive as to territory only as to discreet geographical areas outside of the United   States;    (i) Liens arising from attachments or judgments, orders, or decrees in   circumstances not constituting an Event of Default under Sections 8.4 and 8.7; and   (j) Liens in favor of other financial institutions arising in connection with   Borrower’s deposit and/or securities accounts held at such institutions, provided that Bank has a   perfected security interest in the amounts held in such deposit and/or securities accounts if   permitted under this Agreement.    “Person” is any individual, sole proprietorship, partnership, limited liability   company, joint venture, company, trust, unincorporated organization, association, corporation,   institution, public benefit corporation, firm, joint stock company, estate, entity or government   agency.   “Prime Rate” is the rate of interest per annum from time to time published in the   money rates section of The Wall Street Journal or any successor publication thereto as the   “prime rate” then in effect; provided that if such rate of interest, as set forth from time to time in   the money rates section of The Wall Street Journal, becomes unavailable for any reason as   determined by Bank, the “Prime Rate” shall mean the rate of interest per annum announced by   Bank as its prime rate in effect at its principal office in the State of California (such Bank   announced Prime Rate not being intended to be the lowest rate of interest charged by Bank in   connection with extensions of credit to debtors).     

 

   -42-   “Projections” is defined in Section 6.2(e).   “Quick Assets” is, on any date of determination, the sum of (i) Borrower’s   unrestricted cash and Cash Equivalents maintained with Bank (provided that, from the Effective   Date through the date that is thirty (30) days after the Effective Date, cash and Cash Equivalents   in the Existing Accounts shall be included in this calculation; provided, further, that if Borrower   has delivered a Control Agreement to Bank in respect of the Existing Accounts on or before such   thirtieth (30th) day, such cash and Cash Equivalents in the Existing Accounts shall be included in   such calculation for up to ninety (90) days after the Effective Date) plus (ii) the aggregate   amount of Borrower’s net billed accounts receivable.   “Registered Organization” is any “registered organization” as defined in the   Code with such additions to such term as may hereafter be made.   “Requirement of Law” is as to any Person, the organizational or governing   documents of such Person, and any law (statutory or common), treaty, rule or regulation or   determination of an arbitrator or a court or other Governmental Authority, in each case   applicable to or binding upon such Person or any of its property or to which such Person or any   of its property is subject.    “Reserves” means, as of any date of determination, such amounts as Bank may   from time to time establish and revise in its good faith business judgment, reducing the amount   of Advances and other financial accommodations which would otherwise be available to   Borrower (a) to reflect events, conditions, contingencies or risks which, as determined by Bank   in its good faith business judgment, do or may adversely affect (i) the Collateral or any other   property which is security for the Obligations or its value (including without limitation any   increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower, or (iii)   the security interests and other rights of Bank in the Collateral (including the enforceability,   perfection and priority thereof); or (b) to reflect Bank's reasonable belief that any collateral   report or financial information furnished by or on behalf of Borrower to Bank is or may have   been incomplete, inaccurate or misleading in any material respect; or (c) in respect of any state   of facts which Bank determines constitutes an Event of Default or may, with notice or passage of   time or both, constitute an Event of Default.   “Responsible Officer” is any of the Chief Executive Officer, President, Chief   Financial Officer and Controller of Borrower.    “Restricted License” is any material license or other agreement with respect to   which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a   security interest in Borrower’s interest in such license or agreement or any other property, or   (b) for which a default under or termination of could interfere with the Bank’s right to sell any   Collateral.   “Revolving Line” is an aggregate principal amount not to exceed Twelve Million   Dollars ($12,000,000) outstanding at any time.   “Revolving Line Maturity Date” is March 29, 2018.     

 

   -43-   “SafetyNet” means LoJack SafetyNet, Inc., a Delaware corporation, and wholly-   owned Subsidiary of LoJack.   “SEC” shall mean the Securities and Exchange Commission, any successor   thereto, and any analogous Governmental Authority.   “Securities Account” is any “securities account” as defined in the Code with   such additions to such term as may hereafter be made.   “Streamline Period” is, on and after the Effective Date, provided no Event of   Default has occurred and is continuing, the period (a) commencing on the first day of the month   following the day that Borrower provides to Bank a written report that Borrower has, for each   consecutive day in the immediately preceding calendar month, maintained at all times a   Liquidity Ratio in an amount greater than 1.75 to 1.00, as determined by Bank in its reasonable   discretion (the “Streamline Balance”); and (b) terminating on the earlier to occur of (i) the   occurrence of an Event of Default, and (ii) the first day thereafter in which Borrower fails to   maintain the Streamline Balance, as determined by Bank in its discretion.  Upon the termination   of a Streamline Period, Borrower must maintain the Streamline Balance each consecutive day for   one (1) calendar month, as determined by Bank in its discretion, prior to entering into a   subsequent Streamline Period.  Borrower shall give Bank prior written notice of Borrower’s   election to enter into any such Streamline Period, and each such Streamline Period shall   commence on the first day of the monthly period following the date the Bank determines, in its   reasonable discretion, that the Streamline Balance has been achieved.  Bank confirms that a   Streamline Period is in effect on the Effective Date.   “Subordinated Debt” is indebtedness incurred by Borrower subordinated to all   of Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor,   or other similar agreement in form and substance satisfactory to Bank entered into between Bank   and the other creditor), on terms acceptable to Bank.   “Subsidiary” is, as to any Person, a corporation, partnership, limited liability   company or other entity of which shares of stock or other ownership interests having ordinary   voting power (other than stock or such other ownership interests having such power only by   reason of the happening of a contingency) to elect a majority of the board of directors or other   managers of such corporation, partnership or other entity are at the time owned, or the   management of which is otherwise controlled, directly or indirectly through one or more   intermediaries, or both, by such Person.  Unless the context otherwise requires, each reference to   a Subsidiary herein shall be a reference to a Subsidiary of Borrower.   “Trademarks” means any trademark and servicemark rights, whether registered   or not, applications to register and registrations of the same and like protections, and the entire   goodwill of the business of Borrower connected with and symbolized by such trademarks.   “Transaction Report” is that certain report of transactions and schedule of   collections on the Bank’s standard form.   “Transfer” is defined in Section 7.1.      

 

   -44-   “Unused Revolving Line Facility Fee” is defined in Section 2.4(c).   [Signature page follows.]     

 

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be   executed as a sealed instrument under the laws of the Commonwealth of Massachusetts as of the   Effective Date.      BORROWER:      LOJACK CORPORATION      By: /s/ Kenneth L. Dumas       Name: Kenneth L. Dumas   Title:   Senior Vice President, Chief Financial Officer and Treasurer      LOJACK GLOBAL LLC      By: LoJack Corporation, its sole member and manager      By: /s/ Kenneth L. Dumas       Name: Kenneth L. Dumas   Title:   Senior Vice President, Chief Financial Officer and Treasurer      BANK:      SILICON VALLEY BANK      By     Name:   ----------------------------------   Title:                                                                                                 [Signature Page to Loan and Security Agreement]         

 

   IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be   executed as a sealed instrument under the laws of the Commonwealth of Massachusetts as of the   Effective Date.      BORROWER:      LOJACK CORPORATION      By:          Name: Kenneth L. Dumas   Title:   Senior Vice President, Chief Financial Officer and Treasurer      LOJACK GLOBAL LLC      By: LoJack Corporation, its sole member and manager      By:           Name: Kenneth L. Dumas   Title:   Senior Vice President, Chief Financial Officer and Treasurer      BANK:      SILICON VALLEY BANK      By   /s/ Steve Lyons    Name: Steve Lyons   ----------------------------------   Title:  VP                                                                                                 [Signature Page to Loan and Security Agreement]        

 

      Schedule 6.14         “Permitted Entity Disposition” means a sale or liquidation of all or substantially all of   the capital stock or assets of SafetyNet to a Person that is not an Affiliate of Borrower.     

 

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

 

    1   EXHIBIT B  COMPLIANCE CERTIFICATE    TO:  SILICON VALLEY BANK     Date:         FROM:   LOJACK CORPORATION and LOJACK GLOBAL LLC      The undersigned authorized officer of LoJack Corporation and LoJack Global LLC   (“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,   and (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.  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) + CC FYE within 120 days Yes   No   10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes   No   A/R & A/P Agings Monthly (i) within 30 days during a Streamline Period and (ii) on the 15th and last Business Day of each month when a Streamline Period is not in  Effect   Yes   No   Transaction Reports With each request for an Advance, monthly within 30 days during a Streamline Period, and on the 15th and last Business Day of each month whenStreamline Period is not in  effect   Yes   No   Projections FYE within 60 days Yes   No       The following Intellectual Property was registered after the Effective Date (if no registrations, state “None”) ____________________________________________________________________________      

 

    2   Financial Covenant Required Actual Complies      Maintain as indicated:   Minimum Adjusted EBITDA $5,000,000 $_______ Yes   No       Streamline Period Applies      Liquidity Ratio > 1.75 to 1.00 Yes   No       Borrowing Base Enhancement Period Applies      Unrestricted cash at Bank > $2,000,000 Yes   No        The 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.”)      ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------  LOJACK CORPORATION LOJACK GLOBAL LLC   By:     Name:   Title:      BANK USE ONLY Received by: _____________________   AUTHORIZED SIGNER Date:  _________________________  Verified: ________________________   AUTHORIZED SIGNER Date:  _________________________  Compliance Status: Yes     No        

 

    3   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.    I. Adjusted EBITDA (Section 6.9)   Required: Achieve, to be measured as of the last day of each fiscal quarter of Borrower on a trailing twelve (12) month basis, on a consolidated basis with respect to Borrower and its Subsidiaries, Adjusted EBITDA of at least Five Million Dollars ($5,000,000).  Actual:  A. Net Income $   B. Interest Expense $   C. To the extent deducted in the calculation of Net Income    1. Depreciation expense $    2. Amortization expense $    3. Income Tax Expense $    4. The sum of lines 1 through 3 $   D. EBITDA (line A plus line B plus line C.4) $   E. Stock-based compensation $   F. A one-time, non-recurring add-back for expenses incurred in any consecutive   twelve (12) month period not to exceed Five Hundred Thousand Dollars ($500,000)    $   G. Adjusted EBITDA (line D plus line E plus line F) $    Is line G equal to or greater than $5,000,000?     No, not in compliance        Yes, in compliancepbsv_ex101.htm

Exhibit 10.1

 

 

CONSULTING AGREEMENT AMENDMENT

 

CONSULTING AGREEMENT AMENDMENT (this "Amendment"), effective as of January 1, 2016, by and among Pharma-Bio Serv, Inc., a Delaware corporation (the “Company”), Strategic Consultants International, LLC, a Puerto Rico registered Limited Liability Corporation (the “Consultant”), and Elizabeth Plaza, residing in Dorado, Puerto Rico (“Plaza”).

 

W I T N E S S E T H:

 

WHEREAS, the Company, Consultant and Plaza have entered into that certain Consulting Agreement, effective as of January 1, 2014, as such Consulting Agreement has been and may be amended, restated or otherwise modified from time to time (the "Consulting Agreement").  Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Consulting Agreement; and

 

WHEREAS, the Company, Consultant and Plaza desire to modify the Consulting Agreement.

 

NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

 

	
1.  

	
The following shall be added to the end of Section 2 of the Consulting Agreement:

This Agreement shall be extended through December 31, 2016.  For purposes of this Agreement, “Extension Term” shall mean the period from January 1, 2016 through December 31, 2016.

 

	
2.  

	
The following shall be added to the end of Section 5 of the Consulting Agreement:

For the full and proper performance of this Agreement, the Company agrees to compensate Consultant a monthly retainer of $31,500 during the Extension Term.

	
3.  

	
Except as expressly amended by the terms of this Amendment and all prior amendments to the Consulting Agreement, the terms of the Consulting Agreement shall remain in effect and are unchanged by this Amendment.

 

IN WITNESS WHEREOF, the parties have executed this Amendment in Dorado, Puerto Rico, this 30th day of December, 2015.

 

	
PHARMA-BIO SERV, INC.

 

 

 

By:  /s/ Pedro J. Lasanta

Name: Pedro J. Lasanta

Title:   Chief Financial Officer and vice President –

            Finance and Administration and Secretary

	  	
STRATEGIC CONSULTANTS INTERNATIONAL LLC:

 

 

By:  /s/ Elizabeth Plaza

Name: Elizabeth Plaza

Title:  Consultant

 

 

/s/ Elizabeth Plaza

Elizabeth Plaza, individually

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