Document:

Exhibit 4.2

 

TELADOC, INC.

FIRST AMENDMENT TO FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

This First Amendment to the Fifth Amended and Restated Investors’ Rights Agreement (this “Amendment”) is made as of February 9, 2015, by and among Teladoc, Inc. a Delaware corporation (the “Company”) and each of the undersigned Investors.

 

RECITALS

 

WHEREAS, each of the undersigned (other than the Company) is an “Investor” and a “Holder” as those terms are defined in that certain Fifth Amended and Restated Investors’ Rights Agreement (the “IRA”) dated as of September 10, 2014;

 

WHEREAS, the undersigned Investors collectively hold a majority of the Company’s outstanding Preferred Stock, and therefore constitute a “Requisite Approval” under the IRA;

 

WHEREAS, it is desirable and in the best interests of the Company, the Investors and the Current Holders to amend the IRA in accordance with Section 13(f) thereof to increase the number of Mutual Designees on the Company’s Board of Directors and allow for the election of Michael Goldstein to the Board of Directors of the Company as a Mutual Designee (as such term is defined in the IRA).

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises contained herein, the parties hereto agree as follows:

 

1.              Section 7(a)(vii) of the IRA shall be amended and restated in its entirety as follows:

 

“(vii)                     The three (3) Mutual Designees (as defined below).”

 

2.              Section 7(b)(v) of the IRA shall be amended and restated in its entirety as follows:

 

“(v)                           The one (1) “First Issued Preferred Designee” shall be designated by New Capital for so long as (i) New Capital holds a number of shares of First Issued Preferred Stock (or Common Stock issued on conversion thereof) equal to at least 40% of the number of shares of First Issued Preferred Stock held by New Capital as of the date of the Prior Rights Agreement (as adjusted for any stock combination, stock split, stock dividend, recapitalization or other similar transaction), and (ii) such First Issued Preferred Designee is the New Capital Director.  If, for any reason, New Capital no longer holds such number of shares or the First Issued Preferred Designee is no longer the New Capital Director (i) all remaining holders of First Issued Preferred Stock shall immediately vote to remove the current First Issued Preferred Director pursuant to Section 7(d) below, (ii) the First Issued Preferred Director seat shall remain vacant and be eliminated pursuant to the Company’s Certificate of Incorporation, and (iii) if requested by a

 

 

majority of the Preferred Directors, all holders of Preferred Stock shall vote all of their shares so as to remove such director, eliminate such seat on the Board of Directors and reduce the number of Board of Directors to nine (9).”

 

3.              Section 7(b)(vii) of the IRA shall be amended and restated in its entirety as follows:

 

“(vii)                     The three (3) “Mutual Designees,” all of whom will be industry experts, shall be designated as by a majority in number of the other members of the Board of Directors.”

 

4.              Section 7(c) of the IRA shall be amended and restated in its entirety as follows:

 

“(c)                            Current Designees.  For the purpose of this Agreement, the current directors of the Company shall be deemed to be the following Designees:  (i) Tom Mawhinney shall be deemed to be the Series F Designee; (ii) Dana G. Mead, Jr. shall be deemed to be the Series D Designee; (iii) Marty Felsenthal, and Tom McKinley shall be deemed to be the Series C Designees, (iv) Arneek Multani shall be deemed to be the Series B Designee, (v) James Outland shall be deemed to be the First Issued Preferred Designee, (vi) Jason Gorevic shall be deemed to be the CEO Designee and (vii) David B. Snow, Jr., Senator William Frist, M.D. and Michael Goldstein shall be deemed to be the Mutual Designees.”

 

5.              The third paragraph of Section 7(d)(ii) of the IRA shall be amended and restated in its entirety as follows:

 

“During the term of this Agreement, each Holder agrees to vote all Shares to maintain the authorized number of members of the Board of Directors at ten (10) directors (or nine (9) if the size of the Board of Directors is reduced pursuant to Section 7(b)(v)), or such other number designated in accordance with the provisions of the Certificate of Incorporation.”

 

6.              Capitalized terms used but not defined herein shall have the respective meanings set forth in the IRA.

 

7.              Except as expressly amended hereby, the IRA shall remain in full force and effect.

 

8.              This Amendment may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

 

9.              This Amendment shall be governed by and construed under the laws of the State of Delaware (without regard to its conflicts of laws principles).

 

[SIGNATURE PAGES FOLLOW]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment, or caused this Amendment to be executed by their respective representatives thereunto duly authorized, as of the date first above written.

 

 

	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
TELADOC, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jason Gorevic
    
	
 
    	
 
    	
Jason   Gorevic
    
	
 
    	
 
    	
Its   Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
Teladoc, Inc.
    
	
 
    	
One   Sound Shore Drive, Suite 300
    
	
 
    	
Greenwich,   CT 06830
    
	
 
    	
Attn:   Jason Gorevic
    
	
 
    	
Facsimile:   (203) 769-1544
    

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
JAFCO TECHNOLOGY PARTNERS II, L.P.
    
	
 
    	
 
    
	
 
    	
By:   JTP MANAGEMENT ASSOCIATES II,
    
	
 
    	
LLC
    
	
 
    	
Its:     General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Thomas M. Mawhinney
    
	
 
    	
Name:   Thomas M. Mawhinney
    
	
 
    	
Title:   Managing Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
JAFCO TECHNOLOGY PARTNERS IV, L.P.
    
	
 
    	
 
    
	
 
    	
By:   JTP MANAGEMENT ASSOCIATES IV,
    
	
 
    	
LLC
    
	
 
    	
Its:     General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Thomas M. Mawhinney
    
	
 
    	
Name:   Thomas M. Mawhinney
    
	
 
    	
Title:   Managing Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
JAFCO TECHNOLOGY PARTNERS V, L.P.
    
	
 
    	
 
    
	
 
    	
By:   JTP MANAGEMENT ASSOCIATES V,
    
	
 
    	
LLC
    
	
 
    	
Its:     General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Thomas M. Mawhinney
    
	
 
    	
Name:   Thomas M. Mawhinney
    
	
 
    	
Title:   Managing Director
    

 

 

	
 
    	
INVESTORS (CONT’D)
    
	
 
    	
 
    
	
 
    	
RICHARD KING MELLON FOUNDATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:   Douglas L. Sisson
    
	
 
    	
Title:   Vice President and Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MELLON FAMILY INVESTMENT COMPANY V
    
	
 
    	
 
    
	
 
    	
By:   MFIC V, LLC
    
	
 
    	
Its:     General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:   Lawrence S. Busch
    
	
 
    	
Title:   Member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
                                  ,   as trustee for the
    
	
 
    	
HERBERT S. MADAN REVOCABLE TRUST 4/23/97
    

 

 

	
 
    	
INVESTORS (CONT’D)
    
	
 
    	
 
    
	
 
    	
GREENSPRING GLOBAL PARTNERS VI-A, L.P.
    
	
 
    	
 
    
	
 
    	
By:   GREENSPRING   GENERAL PARTNER VI, L.P.
    
	
 
    	
Its General Partner
    
	
 
    	
 
    
	
 
    	
By: GREENSPRING GP VI, LLC
    
	
 
    	
Its General Partner
    
	
 
    	
 
    
	
 
    	
By: GREENSPRING ASSOCIATES, INC
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Eric Thompson
    
	
 
    	
 
    	
Name: Eric Thompson
    
	
 
    	
 
    	
Title: Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
GREENSPRING GLOBAL PARTNERS VI-C, L.P.
    
	
 
    	
 
    
	
 
    	
By:   GREENSPRING   GENERAL PARTNER VI, L.P.
    
	
 
    	
Its General Partner
    
	
 
    	
 
    
	
 
    	
By: GREENSPRING GP VI, LLC
    
	
 
    	
Its General Partner
    
	
 
    	
 
    
	
 
    	
By: GREENSPRING ASSOCIATES, INC
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Eric Thompson
    
	
 
    	
 
    	
Name: Eric Thompson
    
	
 
    	
 
    	
Title: Chief Financial Officer
    

 

 

	
 
    	
INVESTORS (CONT’D)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
FLAG VENTURE PARTNERS IX, L.P.
    
	
 
    	
 
    
	
 
    	
By: FLAG Private Equity Company IX, L.P., its   general partner
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Louis Sciarretta
    
	
 
    	
Name:
    	
Louis   Sciarretta
    
	
 
    	
Title:
    	
Member   of Limited Partner’s ultimate general partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
FLAG VENTURE PRIVATE EQUITY V, L.P.
    
	
 
    	
 
    
	
 
    	
By: FLAG Private Equity Company V, LLC, its   general partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Louis Sciarretta
    
	
 
    	
Name:
    	
Louis   Sciarretta
    
	
 
    	
Title:
    	
Member   of Limited Partner’s ultimate general partner
    

 

 

	
 
    	
INVESTORS (CONT’D)
    
	
 
    	
 
    
	
 
    	
KPCB   HOLDINGS, INC., as nominee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Dana G. Mead Jr.
    
	
 
    	
Name:
    	
Dana   G. Mead, Jr.
    
	
 
    	
Title:
    	
Strategic   Advisor
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
c/o   Kleiner Perkins Caufield & Byers
    
	
 
    	
2750   Sand Hill Road
    
	
 
    	
Menlo   Park, CA 94025
    
				

 

 

	
 
    	
INVESTORS (CONT’D)
    
	
 
    	
 
    
	
 
    	
HLM   Venture Partners II, L.P.
    
	
 
    	
By:   HLM Venture Associates II, LLC
    
	
 
    	
Its:   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Martin Robert Felsenthal
    
	
 
    	
 
    	
Name:   Martin Robert Felsenthal
    
	
 
    	
 
    	
Authorized   Member
    

 

 

	
 
    	
INVESTORS   (CONT’D):
    
	
 
    	
 
    
	
 
    	
CHP   III, L.P.
    
	
 
    	
 
    
	
 
    	
By:   CHP III Management, LLC,
    
	
 
    	
its   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   John J. Park
    
	
 
    	
 
    	
Title:   Managing Member
    

 

 

	
 
    	
INVESTORS   (CONT’D)
    
	
 
    	
 
    
	
 
    	
QUESTMARK PARTNERS IV, L.P.
    
	
 
    	
 
    
	
 
    	
By: QUESTMARK ADVISERS, IV LLC
    
	
 
    	
its general partner
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Timothy L. Krongard
    
	
 
    	
Name:
    	
Timothy L. Krongard
    
	
 
    	
Title:
    	
Member
    

 

 

	
 
    	
INVESTORS   (CONT’D):
    
	
 
    	
 
    
	
 
    	
TRIDENT   CAPITAL FUND-VI, L.P.
    
	
 
    	
TRIDENT   CAPITAL FUND-VI
    
	
 
    	
PRINCIPALS FUND, L.L.C.
    
	
 
    	
 
    
	
 
    	
Executed   on behalf of the foregoing entities by the undersigned, as an authorized   signatory of each such entity and/or its general partner or managing member:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Arneek Multani
    
	
 
    	
Name:   Arneek Multani
    
	
 
    	
Title:   Managing Director
    
	
 
    	
 
    
	
 
    	
NEW   CAPITAL PARTNERS PRIVATE
    
	
 
    	
EQUITY FUND, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
New   Capital Partners, LLC
    
	
 
    	
 
    	
Its   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   James K. Outland
    
	
 
    	
 
    	
James   K. Outland
    
	
 
    	
 
    	
Managing   Member
    
	
 
    	
 
    
	
 
    	
WAVELAND   NCP TEXAS VENTURES, LP
    
	
 
    	
 
    
	
 
    	
By:
    	
Waveland   NCP Ventures, Inc.
    
	
 
    	
 
    	
Its   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Paul R. Deslongchamps
    
	
 
    	
 
    	
Paul   R. Deslongchamps
    
	
 
    	
 
    	
Its   Vice President and Secretary
    
	
 
    	
 
    
	
 
    	
COMMONS   CAPITAL, LP
    
	
 
    	
 
    
	
 
    	
By:
    	
Commons   Capital Management, LLC
    
	
 
    	
 
    	
Its   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
William   C. Osborn
    
	
 
    	
 
    	
Its   Managing MemberExhibit 10.1

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

(SENIOR)

 

THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of May 2, 2014 (the “Effective Date”) by and between SILICON VALLEY BANK, a California corporation with a loan production office located at 275 Grove Street, Suite 2-200, Newton, Massachusetts 02466 (“Bank”), and TELADOC, INC., a Delaware corporation (“Borrower”), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank.  The parties agree as follows:

 

1.                                      ACCOUNTING AND OTHER TERMS

 

Accounting terms not defined in this Agreement shall be construed following GAAP.  Calculations and determinations must be made following GAAP.  Notwithstanding the foregoing, all financial covenant calculations shall be computed with respect to the Borrower only, and not on a consolidated basis.  Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13.  All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.

 

2.                                      LOAN AND TERMS OF PAYMENT

 

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

 

2.1.1                     Revolving Advances.

 

(a)                                 Availability.  Subject to the terms and conditions of this Agreement and to the deduction of Reserves, Bank shall make Advances not exceeding the Availability Amount.  Amounts borrowed under the Revolving Line may be repaid (without penalty or prepayment fees) 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.

 

2.1.2                     Term Loan.

 

(a)                                 Availability.  Pursuant to the terms of the Prior Agreement, Bank has previously made term advances to Borrower in an original principal amount of, and with a current outstanding principal balance of, Five Million Dollars ($5,000,000.00) (each a “Term Loan Advance” and, collectively, the “Term Loan Advances”).  Borrower acknowledges and agrees that the full amount of term loans has been advanced and that Borrower has no further ability to request additional term loans.  After repayment, no Term Loan Advance may be reborrowed.

 

(b)                                 Interest Period.  Commencing on the first Payment Date of the month following the Effective Date and continuing on each Payment Date thereafter, Borrower shall make monthly payments of interest on the Term Loan Advances, in arrears, at the rate set forth in Section 2.3(a)(ii).

 

(c)                                  Repayment.  Commencing on the Amortization Date, and continuing on the Payment Date of each month thereafter, Borrower shall repay each Term Loan Advance in (i) forty-eight (48) equal monthly payments of principal, plus (ii) monthly payments of accrued interest at the rate set forth in Section 2.3(a)(ii).  All outstanding principal and accrued interest under each Term Loan Advance, and all other outstanding Obligations with respect to each Term Loan Advance, is due and payable in full on the Term Loan Maturity Date.

 

 

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

 

(e)                                  Permitted Prepayment of Term Loan Advances.  Borrower shall have the option to prepay all, but not less than all, of the Term Loan Advances advanced by Bank under this Agreement, provided Borrower (i) provides written notice to Bank of its election to prepay the Term Loan Advances at least thirty (30) days prior to such prepayment, and (ii) pays, on the date of such prepayment (A) all outstanding principal plus accrued and unpaid interest, (B) the Prepayment Premium, plus (C) all other sums, if any, that shall have become due and payable, including interest at the Default Rate with respect to any past due amounts.

 

2.2                               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.

 

2.3                               Payment of Interest on the Credit Extensions.

 

(a)                                 Interest Rate.

 

(i)                                     Revolving Line/Advances.  Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to three quarters of one percent (0.75%) above the Prime Rate, which interest shall be payable monthly in accordance with Section 2.3(d) below.

 

(ii)                                  Term Loan Advances.  Subject to Section 2.3(b), the principal amount outstanding for each Term Loan Advance shall accrue interest at a floating per annum rate equal to one percent (1.0%) above the Prime Rate, which interest shall be payable monthly in accordance with Section 2.3(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 five percent (5.0%) 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 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.

 

(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 Payment Date 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 2:00 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

 

2.4                               Fees.  Borrower shall pay to Bank:

 

(a)                                 Commitment Fee.  A fully earned, non-refundable commitment fee of Sixty Thousand Dollars ($60,000.00), on the Effective Date;

 

(b)                                 Prepayment Premium.  The Prepayment Premium, when due hereunder; and

 

(c)                                  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).

 

(d)                                 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 2.4 pursuant to the terms of Section 2.5(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 2.4.

 

2.5                               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 2:00 p.m.  Eastern time on the date when due.  Payments of principal and/or interest received after 2:00 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, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation:

 

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

 

(b)                                 the Subordinated Loan Agreement and all documents required in connection therewith and all conditions precedent thereto;

 

(c)                                  the Operating Documents and long-form good standing certificates of Borrower certified by the Secretary of State (or equivalent agency) of Delaware, Connecticut and Texas, each as of a date no earlier than thirty (30) days prior to the Effective Date;

 

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

 

(e)                                  certified copies, dated as of a recent date, of financing statement searches, as Bank may request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in

 

3

 

any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;

 

(f)                                   intellectual property search results and completed exhibits to the IP Agreement;

 

thereto;

 

(g)                                  the Perfection Certificate of Borrower, together with the duly executed original signature

 

(h)                                 a legal opinion of Borrower’s in-house counsel dated as of the Effective Date together with the duly executed original signature thereto;

 

(i)                                     evidence acceptable to Bank in its sole discretion that all conditions to the Permitted Merger have occurred (other than the payment of the portion of the purchase price that is being funded with Credit Extensions of Bank) and that the Permitted Merger will close contemporaneously with the making of the initial Credit Extension, together with copies of the documents in connection with the Permitted Merger;

 

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

 

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

 

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

 

(a)                                 except as otherwise provided in Section 3.4, timely receipt of an executed Payment/Advance Form and also, with respect to requests for Advances, a 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/or Payment/Advance Form, as applicable, and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension.  Each Credit Extension is Borrower’s representation and warranty on that date that the representations and 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 any material impairment in the general affairs, management, results of operation, financial condition or the prospect of repayment of the Obligations, or any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank.

 

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

 

3.4                               Procedures for Borrowing.  Subject to the prior satisfaction of all other applicable conditions to the making of a Credit Extension set forth in this Agreement, to obtain a Credit Extension, Borrower shall notify

 

4

 

Bank (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m.  Eastern time two (2) Business Days before the proposed Funding Date of the Credit Extension.  Together with any such electronic or facsimile notification, Borrower shall deliver to Bank by electronic mail or facsimile a completed Payment/Advance Form (and, for a request for an Advance, a Transaction Report) executed by a Responsible Officer or his or her designee.  Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee.  Bank shall credit the Credit Extension to the Designated Deposit Account.  Bank may make Credit Extensions under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if the Credit Extensions are necessary to meet Obligations which have become due.

 

4.                                      CREATION OF SECURITY INTEREST

 

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

 

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 good faith business judgment 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 percent (100.0%); and (y) if such Letters of Credit are denominated in a Foreign Currency, then at least one hundred five percent (105.0%), 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.

 

5.                                      REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants as follows (for clarity, until the occurrence of the Permitted Merger, such representations and warranties shall not include AmeriDoc Target or TeleMedServices Target):

 

5

 

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 therein, pursuant to the term of Section 6.6(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.

 

Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers in the ordinary course of business, (b) over-the-counter software that is commercially available to the public, and (c) material Intellectual Property licensed to Borrower and noted on the Perfection Certificate.  Each Patent which it owns or purports to own and which is material to Borrower’s business is valid and enforceable, and, to the best of Borrower’s knowledge, no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrower’s business has been judged invalid or unenforceable, in whole or in part.  To the best of Borrower’s knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party except to the extent such claim would not reasonably be expected to have a material adverse effect on Borrower’s business.

 

Except as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound by, any Restricted License.

 

6

 

5.3                               Customer Accounts.  For any customer Account that generates Recurring Revenue, all statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing such customer Accounts are and shall be true and correct 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 customer Account that generates Recurring Revenue 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 customer Accounts that generate Recurring Revenue.  To the best of Borrower’s knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all customer Accounts are genuine, and all such documents, instruments and agreements are legally enforceable in accordance with their terms.  Borrower is the owner of and has the legal right to sell, transfer, assign and encumber each customer Account, and, there are no defenses, offsets, or counterclaims for which the Account Debtor may claim any deduction or discount.

 

5.4                               Litigation.  Except as set forth in Schedule 5.4, 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, Fifty Thousand Dollars ($50,000.00).

 

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

 

5.6                               Solvency.  The fair salable value of Borrower’s 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 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 local taxes, assessments, deposits and contributions owed by Borrower except (a) 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, or (b) if such taxes, assessments, deposits and contributions do not, individually or in the aggregate, exceed Five Thousand Dollars ($5,000.00).

 

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.

 

7

 

Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

 

5.10                        Use of Proceeds.  Borrower shall use the proceeds of the Credit Extensions 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 the Loan Documents or the transactions contemplated thereby, 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, in light of the circumstances in which it was made, 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 obtained Governmental Approvals to Bank.

 

6.2                               Financial Statements, Reports, Certificates.  Provide Bank with the following:

 

(a)                                 Transaction Reports.  A Transaction Report (and any schedules related thereto) (i) with each request for an Advance, and (ii) within thirty (30) days after the end of each month;

 

(b)                                 Agings/Deferred Revenue.  Within thirty (30) days after the last day of each month, (i) aged listings of accounts receivable and accounts payable (by invoice date), (ii) outstanding or held check registers, if any, (iii) reconciliations of accounts receivable agings (aged by invoice date), transaction reports and general ledger and (iv) Deferred Revenue report;

 

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

 

8

 

and together with the Monthly Financial Statements, a duly completed Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Bank may reasonably request;

 

(d)                                 Board-Approved Projections.  As soon as available, but no later than the earlier to occur of (i) forty-five (45) days after the last day of Borrower’s fiscal year and (ii) ten (10) days following approval of the Board, and in each case contemporaneously with any updates or changes thereto, Board-approved projections as to the then current fiscal year in a form acceptable to Bank;

 

(e)                                  Annual Audited Financial Statements.  As soon as available, but no later than one hundred eighty (180) days after the last day of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank;

 

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

 

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

 

(h)                                 Legal Action Notice.  A prompt report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, Fifty Thousand Dollars ($50,000.00) or more;

 

(i)                                     Account Statements.  As soon as available, but no later than thirty (30) days after the last day of each month, copies of the month-end account statements for each deposit account or securities account maintained by Borrower, PA, or any of Borrower’s VIEs, which statements may be provided to Bank by Borrower or directly from the applicable institution(s); and

 

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

 

6.3                               Intentionally omitted.

 

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

 

6.5                               Insurance.

 

(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

 

9

 

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.

 

(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 6.5 shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to Bank, that it will give Bank thirty (30) days prior written notice before any such policy or policies shall be materially altered or canceled.  If Borrower fails to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Bank deems prudent.

 

6.6                               Accounts.

 

(a)                                 Maintain its, its Subsidiaries’ and PA’s operating, depository and securities accounts with Bank and Bank’s Affiliates; provided that (i) Borrower may maintain deposit account #000000858147937 with JPMorgan Chase for a period of sixty (60) days following the Effective Date, at which point such account must be closed and all funds therein must be transferred to an account of Borrower with Bank and (ii) TelaDoc Texas may maintain its deposit account #000000877444208 with JPMorgan Chase for a period of seventy-five (75) days following the Effective Date, at which point such account must be closed and all funds therein must be transferred to an account of TelaDoc Texas with Bank.

 

(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.  For each Collateral Account that Borrower at any time maintains, Borrower shall cause the applicable bank or financial institution (other than Bank) at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Bank’s Lien in such Collateral Account in accordance with the terms hereunder which Control Agreement may not be terminated without the prior written consent of Bank.  The provisions of the previous sentence shall not apply to (i) deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s employees and identified to Bank by Borrower as such or (ii) the account at JPMorgan Chase referenced in (a) above for a period of sixty (60) days following the Effective Date.

 

(c)                                  Any cash that is owned by Borrower shall be maintained in accounts in the name of Borrower with Bank and Bank’s Affiliates.

 

(d)                                 Be the sole owner of all funds held in accounts in the name of Borrower.

 

(e)                                  Cause PA to (i) maintain a lockbox account or such other collections account with Bank and (ii) direct Account Debtors of PA to deliver or transmit all proceeds of Accounts of PA to such account.

 

6.7                               Financial Covenants.

 

(a)                                 Adjusted Quick Ratio.  Maintain at all times upon and after the occurrence of the Equity Event, with respect to Borrower only, to be tested as of the last day of each month, an Adjusted Quick Ratio of at least 1.15 to 1.00.

 

(b)                                 Recurring Revenue Growth.  Maintain at all times, with respect to Borrower only, to be tested as of March 31, 2015 and as of March 31’1 of each year thereafter, Recurring Revenue Growth of at least 0.30.

 

(c)                                  Equity Event.  Provide satisfactory evidence to Bank, on or prior to September 30, 2014, that the Equity Event has occurred by such date.

 

10

 

Borrower only, to be tested as of the last day of each month, Liquidity of at least Two Million Dollars ($2,000,000.00).

 

6.8                               Protection and Registration of Intellectual Property Rights.

 

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

 

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

 

(b)                                 If Borrower (i) obtains any Patent, registered Trademark, registered Copyright, registered mask work, or any pending application for any of the foregoing, whether as owner, licensee or otherwise, or (ii) applies for any Patent or the registration of any Trademark, then Borrower shall immediately provide written notice thereof to Bank and shall execute such intellectual property security agreements and other documents and take such other actions as Bank may request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Bank in such property.  If Borrower decides to register any Copyrights or mask works in the United States Copyright Office, Borrower shall: (x) provide Bank with at least fifteen (15) days prior written notice of Borrower’s intent to register such Copyrights or mask works together with a copy of the application it intends to file with the United States Copyright Office (excluding exhibits thereto); (y) execute an intellectual property security agreement and such other documents and take such other actions as Bank may request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Bank in the Copyrights or mask works intended to be registered with the United States Copyright Office; and (z) record such intellectual property security agreement with the United States Copyright Office contemporaneously with filing the Copyright or mask work application(s) with the United States Copyright Office.  Borrower shall promptly provide to Bank copies of all applications that it files for Patents or for the registration of Trademarks, Copyrights or mask works, together with evidence of the recording of the intellectual property security agreement required for Bank to perfect and maintain a first priority perfected security interest in such property.

 

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

 

6.10                        Access to Collateral; Books and Records.  Allow Bank, or its agents, at reasonable times, on one (1) Business Days’ notice (provided no notice is required if an Event of Default has occurred and is continuing), to inspect the Collateral and audit and copy Borrower’s Books.  The foregoing inspections and audits shall be 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 often as Bank shall determine is necessary.  Borrower acknowledges that the first such inspection and audit will occur within thirty (30) days of the Effective Date.

 

6.11                        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.  Deliver to Bank, within five (5) days after the same are sent or received, except with respect to franchise tax and annual report filings with the Delaware Secretary of State, copies of all correspondence, reports, documents and other filings with any Governmental Authority regarding compliance with or maintenance of Governmental Approvals or

 

11

 

Requirements of Law or that could reasonably be expected to have a material effect on any of the Governmental Approvals or otherwise on the operations of Borrower or any of its Subsidiaries.

 

6.12                        Ownership in PA or VIEs.  Borrower shall have no ownership interests in (a) PA or (b) any of the VIEs.

 

6.13                        Accounts Receivable.

 

(a)                                 Schedules and Documents Relating to Accounts.  Borrower shall deliver to Bank transaction reports and schedules of collections, as provided in Section 6.2, on Bank’s standard forms; 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.  If 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 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.  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 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 in its own name, unless and until an Event of Default (or any event which with notice or passage of time or both, would constitute an Event of Default) has occurred and is continuing.  Borrower shall direct Account Debtors to deliver or transmit all proceeds of Accounts received into a lockbox account or such other “blocked account” maintained with Bank (collectively, the “Collections Account”), pursuant to a blocked account agreement in form and substance satisfactory to Bank.  All such proceeds received by Bank in the Collections Account shall (i) prior to the occurrence and continuance of an Event of Default, be transferred to an account of Borrower maintained at Bank or, at Borrower’s direction, be applied to reduce the outstanding Obligations under the Revolving Line; and (ii) after the occurrence and during the continuance of an Event of Default, be applied to the outstanding Obligations in accordance with Section 9.4.

 

(d)                                 Intentionally Omitted.

 

(e)                                  Verification.  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.

 

6.14                        Remittance of Proceeds.  Except as otherwise provided in Section 6.13(c), deliver, in kind, all proceeds arising from the disposition of any Collateral to Bank in the original form in which received by Borrower

 

12

 

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 2.5(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 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 Twenty Five Thousand Dollars ($25,000.00) 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 6.14 limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.

 

7.                                      NEGATIVE COVENANTS

 

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

 

7.1                               Dispositions.  Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of 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; (b) consisting of Permitted Liens and Permitted Investments; (c) consisting of the sale or issuance of any stock of Borrower permitted under Section 7.2 of this Agreement; (d) consisting of Borrower’s use or transfer of money or Cash Equivalents in the ordinary course of its business for the payment of ordinary course business expenses in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents; and (e) of non-exclusive licenses for the use of the property of Borrower or its Subsidiaries in the ordinary course of business.

 

7.2                               Changes in Business, Management, Ownership, or Business Locations.  (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) fail to provide notice to Bank of any Key Person departing from or ceasing to be employed by Borrower within five (5) days after his or her departure from Borrower; or (ii) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than forty percent (40%) of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering or to venture capital 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).

 

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 One Hundred Thousand Dollars ($100,000.00) in Borrower’s assets or property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Twenty-Five Thousand Dollars ($25,000.00) 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 Twenty-Five Thousand Dollars ($25,000.00) 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), with the exception of the Permitted Merger.  A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.

 

13

 

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 6.6(b) hereof.

 

7.7                               Distributions; Investments.  (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock, except (i) that Borrower may repurchase stock from an officer, director, employee, or consultant upon cessation of such person’s employment or engagement with Borrower so long as an Event of Default does not exist at the time of any such repurchase and would not exist after giving effect to any such repurchase, provided such repurchases do not exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate per fiscal year and (ii) pursuant to the exercise of Borrower’s right of first refusal set forth in that certain Fourth Amended and Restated Investors’ Rights Agreement of Borrower, as amended, so long as an Event of Default does not exist at the time of any such exercise and would not exist after giving effect to any such exercise, provided that the aggregate amount of funds used by Borrower in connection therewith does not exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate per fiscal year; or (b) directly or indirectly make any 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 (i) 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, and (ii) with respect to the term loan made by the Borrower to its Chief Executive Officer in the original principal amount of Two Hundred Fifty Thousand Dollars ($250,000.00).

 

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 (a) meet the minimum funding requirements of ERISA, (b) prevent a Reportable Event or Prohibited Transaction, as defined in ERISA, from occurring, or (c) comply with the Federal Fair Labor Standards Act, the failure of any of the conditions described in clauses (a) through (c) which could reasonably be expected to have a material adverse effect on Borrower’s business; or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

 

14

 

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 three (3) Business Days after such Obligations are due and payable (which three (3) Business Day cure period shall not apply to payments due on the Revolving Line Maturity Date and/or the Term Loan Maturity Date).  During the cure period, the failure to make or pay any payment specified under clause (b) hereunder is not an Event of Default (but no Credit Extension will be made during the cure period);

 

8.2                               Covenant Default.

 

(a)                                 Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4, 6.5, 6.6, 6.7, 6.8(b), 6.12, 6.13, or 6.14, or violates any covenant in Section 7; or

 

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

 

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

 

8.5                               Insolvency.  (a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and is not dismissed or stayed within thirty (30) days (but no 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, (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Fifty Thousand Dollars ($50,000.00); or (b) any breach or default by Borrower, the result of which could have a material adverse effect on Borrower’s business;

 

8.7                               Judgments; Penalties.  One or more fines, penalties or final judgments, orders or decrees for the payment of money in an amount, individually or in the aggregate, of at least Fifty Thousand Dollars ($50,000.00)

 

15

 

(not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower by any Governmental Authority, and the same are not, within ten (10) 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 no 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 evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement; or

 

8.10                        Subordinated Loan Agreement.  The occurrence of an Event of Default (as defined in the Subordinated Loan Agreement) under the Subordinated Loan Agreement.

 

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 at least (A) one hundred percent (100.0%) of the Dollar Equivalent of the aggregate face amount of all Letters of Credit denominated in Dollars remaining undrawn, and (B) one hundred five percent (105.0%) of the Dollar Equivalent of the aggregate face amount of all Letters of Credit denominated in a Foreign Currency remaining undrawn, (plus, in each case, all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment)), 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;

 

(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

 

16

 

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.  Upon the occurrence and continuance of an Event of Default, Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact 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 (t) transfer the Collateral into the name of Bank or a third party as the Code permits.  Borrower hereby appoints Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or continue the perfection of Bank’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations 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 6.5 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other 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 Upon Default.  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.

 

17

 

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.

 

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

 

10.                               NOTICES

 

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

 

18

 

If to Borrower:                                                               Teladoc, Inc.

One Sound Shore Drive, Suite 300

Greenwich, Connecticut 06830

Attn:  Mark Hirschhorn, Chief Financial Officer

Fax:  1-203-769-1544

Email:  mhirschhorn @teladoc.com

 

With a copy to:                                                            Teladoc, Inc.

One Sound Shore Drive, Suite 300

Greenwich, Connecticut 06830

Attn: Mark Hirschhorn, Chief Financial Officer

Fax: 1-203-769-1544

Email:  Email:  tseaman@teladoc.com

 

and with a copy to:                                       Jackson Walker L.L.P.

901 Main St., Suite 6000

Dallas, Texas 75202

Attn: Jim Ryan

Fax: (214) 661-6688

Email: jryan@jw.com

 

If to Bank:                                                                                   Silicon Valley Bank

275 Grove Street, Suite 2-200

Newton, Massachusetts 02466

Attn: Kate Walsh

Fax: (617) 796-6966

Email:  kwalsh@svb.com

 

with a copy to:                                                               Riemer & Braunstein LLP

Three Center Plaza

Boston, Massachusetts 02108

Attn:  David A.  Ephraim, Esquire

Fax:                       (617) 692-3455

Email:  DEphraim@riemerlaw.com

 

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

 

Except as otherwise expressly provided in any of the Loan Documents, New York 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 New York, New York; 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, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

 

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING 

 

19

 

OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS.  THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

This Section 11 shall survive the termination of this Agreement.

 

12.                               GENERAL PROVISIONS

 

12.1                        Termination Prior to Maturity Date; Survival.  All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations have been satisfied.  So long as Borrower has satisfied the Obligations (other than inchoate indemnity obligations, and 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 and the Term Loan 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.

 

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

 

20

 

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

 

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

 

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

 

12.10                 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.

 

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

 

12.12                 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.

 

12.13                 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.

 

12.14                 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.

 

21

 

12.15                 Amended and Restated Agreement.  This Agreement amends and restates, and replaces, in its entirety, the Prior Agreement.

 

13.                               DEFINITIONS

 

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

 

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

 

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

 

“Adjusted Quick Ratio” is the ratio of (a) Quick Assets, to (b) (i) Current Liabilities, minus (ii) the current portion of the preferred stock dividends, minus (iii) the current portion of Deferred Revenue.

 

“Advance” or “Advances” means a revolving credit loan (or revolving credit loans) under the Revolving line.

 

“Advance Rate” is the product of (a) three hundred percent (300.0%) multiplied by (b) (i) one hundred percent (100%) minus (ii) the Churn Percentage, provided that Bank may, in its good faith business discretion, in consultation with Borrower, change the Advance Rate and/or Churn Percentage.  Advance Rate and Churn Percentage shall be calculated by Bank based on information provided by Borrower and acceptable to Bank, in its reasonable discretion, quarterly, on the last day of each calendar quarter for the immediately succeeding calendar quarter, or such earlier time as Bank may determine necessary in its reasonable discretion.

 

“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.

 

“AmeriDoc Target” is defined in the definition of Permitted Merger.  “Amortization Date” is May 1, 2015.

 

“Authorized Signer” is any individual listed in Borrower’s Borrowing Resolution who is authorized to execute the Loan Documents, including any Credit Extension 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 12.8.

 

“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 

 

22

 

limitation, any letters of credit, cash management 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.  “Board” is Borrower’s board of directors.

 

“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 the product of (a) Borrower’s monthly Recurring Revenue, as determined by Bank from Borrower’s most recent Transaction Report by (b) the Advance Rate.

 

“Borrowing Resolutions” are, with respect to any Person, those resolutions adopted by such Person’s board of directors (and, if required under the terms of such Person’s Operating Documents, stockholders) 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 Credit Extension 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.

 

“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed, and if any determination of a “Business Day” shall relate to an FX Contract, the term “Business Day” shall mean a day on which dealings are carried on in the country of settlement of the Foreign Currency.

 

“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.; and (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue.

 

“Churn Percentage” is, expressed as a percentage, (a) the amount of Recurring Revenue lost or not retained (including in each case by customer attrition and reduced usage by a customer) in a Measurement Period (as determined by subtracting the amount of Recurring Revenue during such Measurement Period from the amount of Recurring Revenue during the previous Measurement Period) (provided, however, if such amount is less than zero (0), then such amount shall be deemed to be zero (0)), multiplied by four (4), divided by (b) the amount of Recurring Revenue during such calendar quarter, multiplied by four (4).

 

“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 State of New York provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of New 

 

23

 

York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.

 

“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A.  “Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.  “Collections Account” is defined in Section 6.13(c) of this Agreement.

 

“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, 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, Overadvance, Term Loan Advance, 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.

 

“Current Liabilities” are (a) all obligations and liabilities of Borrower to Bank (other than, with respect to (a) only, Borrower’s obligations and liabilities solely with respect to the Mezzanine Term Loans as defined in the Subordinated Loan Agreement), plus (b) without duplication of (a), the aggregate amount of Borrower’s Total Liabilities that mature within one (1) year.

 

“Default Rate” is defined in Section 2.3(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 3300576294, maintained by Borrower with Bank.

 

24

 

“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.

 

“Effective Date” is defined in the preamble hereof.

 

“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.

 

“Equity Event” is the receipt by Borrower in the Designated Deposit Account, after the Effective Date but on or before September 30, 2014, of unrestricted net cash proceeds in an aggregate amount of at least Forty Million Dollars ($40,000,000.00) from the sale of Borrower’s equity securities to investors satisfactory to Bank in Bank’s reasonable discretion.

 

“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.

 

“Foreign Currency” means lawful money of a country other than the United States.

 

“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.

 

“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.

 

“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.

 

25

 

“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.

 

“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:

 

(a)                                 its Copyrights, Trademarks and Patents;

 

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

 

(c)                                  any and all source code;

 

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

 

“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 dated as of the Effective Date between Borrower and Bank, as may be amended, modified or restated from time to time.

 

“Key Person” is each of Borrower’s (a) Chief Executive Officer, who is Jason Gorevic, as of the Effective Date, (b) Chief Financial Officer, who is Mark Hirschhorn, as of the Effective Date, and (c) Chief Medical Officer, who is Dr.  Henry DePhillips, as of the Effective Date.

 

“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.

 

“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” is the aggregate amount of (a) unrestricted and unencumbered cash and Cash Equivalents, in each case to the extent maintained with Bank plus (b) the Availability Amount.

 

26

 

“Loan Documents” are, collectively, this Agreement and any schedules, exhibits, certificates, notices, and any other documents related to this Agreement, the Perfection Certificate, the IP Agreement, any Bank Services Agreement, the Subordinated Loan 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, the Subordinated Loan Agreement, or Bank Services, all as amended, restated, or otherwise modified.

 

“Material Adverse Change” is (a) a material impairment in the perfection or priority of Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; (c) a material impairment of the prospect of repayment of any portion of the Obligations; or (d) Bank determines, based upon information available to it and in its reasonable judgment, that there is a reasonable likelihood that Borrower shall fail to comply with one or more of the financial covenants in Section 6 during the next succeeding financial reporting period.

 

“Measurement Period” is each calendar quarter.

 

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

 

“Obligations” are Borrower’s obligations to pay when due any debts, principal, interest, fees, the Prepayment Premium, Bank Expenses, and other amounts Borrower owes Bank now or later, whether under this Agreement, the other Loan Documents, or otherwise, including, without limitation, any 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 2.2.

 

“PA” means, individually and collectively, the following professional entities: TelaDoc Texas, TelaDoc Physicians, P.C., an Alaska professional corporation, TelaDoc Physicians, P.C., a California professional corporation, TelaDoc Physicians, P.C., a Colorado professional corporation, TelaDoc Physicians, P.C., a Michigan professional services corporation, TelaDoc Physicians, P.C., a New Jersey professional corporation, and TelaDoc Physician, P.C., a New York professional service corporation.

 

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

 

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

 

“Payment Date” is (a) with respect to Term Loan Advances, the first (1st) Business Day of each calendar month and (b) with respect to Advances, the last of each calendar month.

 

“Perfection Certificate” is defined in Section 5.1.

 

“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;

 

27

 

(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 (t) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.

 

“Permitted Investments” are:

 

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

 

(b)                                 Investments consisting of Cash Equivalents; and

 

(c)                                  Investments in PA for the ordinary and necessary current operating expenses of PA in an aggregate amount not to exceed Three Million Dollars ($3,000,000.00) in a calendar year.

 

“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 or 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 ($250,000.00) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment; and

 

(d)                                 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.

 

“Permitted Merger” is, collectively, the mergers of:

 

(a)                                 AmeriDoc, LLC, a Florida limited liability company (“AmeriDoc Target”) with and into Borrower, pursuant to that certain Agreement and Plan of Merger dated as of May 1, 2014, provided that: (a) the Borrower shall be the surviving legal entity, (b) the total consideration (inclusive of the assumption of indebtedness for borrowed money) does not exceed Sixteen Million Nine Hundred Ninety-Thousand Dollars ($16,990,000.00) subject to adjustment in accordance with such Agreement and Plan of Merger, (c) the consummation of the merger will not otherwise result in an Event of Default, after giving effect to such merger, (d) Borrower provides Bank with evidence that the assets of AmeriDoc Target are free and clear of all Liens (other than Permitted Liens and purchase money Liens solely on specific equipment owned by or leases by AmeriDoc Target) and (e) the merger occurs on or before May 2, 2014; and

 

28

 

(b)                                 TeleMedServices, LLC, a Texas limited liability company (“TeleMedServices Target”) with and into Borrower, pursuant to that certain Agreement and Plan of Merger dated as of May 1, 2014, provided that: (a) the Borrower shall be the surviving legal entity, (b) the total consideration (inclusive of the assumption of indebtedness for borrowed money) does not exceed Ten Thousand Dollars ($10,000.00) subject to adjustment in accordance with such Agreement and Plan of Merger, (c) the consummation of the merger will not otherwise result in an Event of Default, after giving effect to such merger, (d) Borrower provides Bank with evidence that the assets of TeleMedServices Target Target are free and clear of all Liens (other than Permitted Liens and purchase money Liens solely on specific equipment owned by or leases by TeleMedServices Target) and (e) the merger occurs on or before May 2, 2014.

 

“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.

 

“Prepayment Premium” shall be an additional fee payable to Bank in amount equal to:

 

(a)                                 for a prepayment of the Term Loan Advances made prior to August 30, 2017, one percent (1.0%) of the then outstanding principal amount of such Term Loan Advances as of the date immediately and prior to such prepayment; and

 

(b)                                 for a prepayment made on or after August 30, 2017, three quarters of one percent (0.75%) of the then outstanding principal amount of the Term Loan Advances as of the date immediately and prior to such prepayment.

 

“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).

 

“Prior Agreement” is that certain Loan and Security Agreement dated as of August 30, 2013 between Borrower and Bank.

 

“Quick Assets” is, on any date, Borrower’s unrestricted cash maintained with Bank, plus net billed accounts receivable, in each case determined according to GAAP.

 

“Recurring Revenue” is, for any period of determination, the difference of (a) Borrower’s revenue determined in accordance with GAAP attributable to services, software licenses and any other recurring services offered by Borrower on a direct basis provided pursuant to binding, written agreements which arise in the ordinary course of Borrower’s business and are payable on a monthly, quarterly or annual basis, that in each case (i) meets all of Borrower’s representations and warranties described in Section 5.3 and (ii) is or may be due and owing from Account Debtors deemed acceptable to Bank in its sole discretion minus (b) any discounts, credits, reserves for bad debt and other customer adjustments or other offsets; provided that Bank reserves the right at any time and from time to time to exclude and/or remove any Account, or portion thereof, from the definition of Recurring Revenue, in its sole discretion.

 

“Recurring Revenue Growth” is (a) (i) Recurring Revenue for the quarter ending March 31st of a particular calendar year multiplied by four (4) minus (ii) Recurring Revenue for the quarter ending March 31st of the prior calendar year multiplied by four (4), divided by (b) Recurring Revenue for the quarter ending March 31st of the prior calendar year multiplied by four (4).

 

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

 

29

 

“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 any guarantor, 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 or any guarantor 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 Bank’s right to sell any Collateral.

 

“Revolving Line” is an aggregate principal amount equal to Twelve Million Dollars ($12,000,000.00).

 

“Revolving Line Maturity Date” is two (2) years following the Effective Date.

 

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

 

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

 

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

 

“Subordinated Loan Agreement” is that certain Subordinated Loan and Security Agreement between Bank and Borrower dated as of May 2, 2014, as amended, modified, supplemented, or restated from time to time.

 

“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.  Subsidiary shall not include VIEs, provided that the Borrower does not have any ownership interest in such VIEs.

 

“TelaDoc Texas” is TelaDoc Physicians, P.A., a Texas professional association.

 

“TeleMedServices Target” is defined in the definition of Permitted Merger.

 

30

 

“Term Loan Advance” and “Term Loan Advances” are each defined in Section 2.1.2(a).

 

“Term Loan Maturity Date” is April 1, 2019.

 

“Total Liabilities” is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower’s balance sheet, including all Indebtedness.

 

“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 Bank’s standard reporting package provided by Bank to Borrower which shall include, without limitation, details of Borrower’s Recurring Revenue including, without limitation, total Recurring Revenue and the Churn Percentage.

 

“Transfer” is defined in Section 7.1.

 

“VIEs” means Borrower’s affiliated variable interest entities.

 

[Signature page follows]

 

31

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under the laws of the State of New York as of the Effective Date.

 

 

	
BORROWER:
    	
 
    
	
 
    	
 
    
	
TELADOC, INC.
    	
 
    
	
 
    	
 
    
	
By:
    	
/s   Mark Hirschhorn
    	
 
    
	
Name:   Mark Hirschhorn
    	
 
    
	
Title:   EVP & CFO
    	
 
    
	
 
    	
 
    
	
BANK:
    	
 
    
	
 
    	
 
    
	
SILICON   VALLEY BANK
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Michael Quinn
    	
 
    
	
Name:   Michael Quinn
    	
 
    
	
Title:  VP

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00246-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00246-of-00352.parquet"}]]