This FIRST AMENDMENT
to Loan and Security Agreement (this “Amendment”) is entered into as of June 1, 2020, by and among Silicon
Valley Bank, a California corporation (“Bank”), LEAF GROUP LTD., a Delaware corporation (“Parent”),
SOCIETY6, LLC, a Delaware limited liability company, WELL+GOOD LLC, a New York limited liability company, LS MEDIA
HOLDINGS, LLC, a Delaware limited liability company, DENY DESIGNS, LLC, a Delaware limited liability company, SAATCHI
ONLINE, INC., a Delaware corporation, OTHER ART FAIRS, LLC, a Delaware limited liability company, LEAF GROUP SERVICES,
LLC, a Delaware limited liability company and LEAF OIYS, LLC, a Delaware limited liability company (together with Parent,
each a “Co-Borrower” and collectively, “Co-Borrowers”).
A. Bank and Co-Borrowers have entered into that certain Loan and Security Agreement dated as of November 7, 2019 (as the
same may from time to time be amended, modified, supplemented or restated, the “Loan Agreement”).
B. Bank has extended credit to Co-Borrowers for the purposes permitted in the Loan Agreement.
C. Co-Borrowers have requested that Bank amend the Loan Agreement to (i) modify the borrowing formula, (ii) add a financial
covenant, (iii) extend the maturity date, and (iv) make certain other revisions to the Loan Agreement as more fully set forth herein.
D. Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the
terms, subject to the conditions and in reliance upon the representations and warranties set forth below.
Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to
them in the Loan Agreement.
2. Amendments to Loan Agreement.
2.1 Section 2.3 (Overadvances). Section 2.3 of the Loan Agreement hereby is amended and restated in its entirety to read
If, at any time, the outstanding principal amount of any Advances exceeds the lesser of either (a) the Revolving Line or (b) the
sum of (i) the Borrowing Base plus (ii) the Non-Formula Sublimit, Co-Borrowers shall immediately pay to Bank in cash the amount
of such excess (such excess, the “Overadvance”). Without limiting Co-Borrowers’ obligation to repay Bank
any Overadvance, Co-Borrowers agree to pay Bank interest on the outstanding amount of any Overadvance, on demand, at a per annum
rate equal to the rate that is otherwise applicable to Advances plus five percent (5.0%).”
2.2 Section 6.3 (Accounts Receivable). Sections 6.3(b) and 6.3(c) of the Loan Agreement hereby are amended and restated
in their entirety to read as follows:
Co-Borrowers shall promptly notify Bank of all disputes or claims in excess of Fifty Thousand Dollars ($50,000) relating to Accounts.
Co-Borrowers 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) Co-Borrowers do so in good faith, in a commercially reasonable manner, in the ordinary course
of business, in arm’s-length transactions, and, to the extent such Accounts exceed Fifty Thousand Dollars ($50,000) 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 (i) the Revolving Line or (ii) the sum of (A) the Borrowing Base plus (B) the Non-Formula Sublimit.
of Accounts. Co-Borrowers shall direct Account Debtors to deliver or transmit all proceeds of Accounts into a lockbox account,
or via electronic deposit capture into a “blocked account” as specified by Bank (either such account, the “Cash
Collateral Account”). Whether or not an Event of Default has occurred and is continuing, Co-Borrowers shall promptly
deliver all payments on and proceeds of Accounts to the Cash Collateral Account. Subject to Bank’s right to maintain a reserve
pursuant to Section 6.3(d), all amounts received in the Cash Collateral Account shall be (i) when a Streamline Period is not in
effect, applied to immediately reduce the Obligations (other than Obligations owing under the Non-Formula Sublimit) under the Revolving
Line (unless Bank, in its sole discretion, at times when an Event of Default exists, elects not to so apply such amounts), or (ii)
when a Streamline Period is in effect, transferred on a daily basis to Co-Borrowers’ operating account with Bank. Co-Borrowers
hereby authorize Bank to transfer to the Cash Collateral Account any amounts that Bank reasonably determines are proceeds of the
Accounts (provided that Bank is under no obligation to do so and this allowance shall in no event relieve Co-Borrowers of their
2.3 Section 6.9 (Financial Covenant). Section 6.9 of the Loan Agreement hereby is amended and restated in its entirety to
read as follows:
Covenant. Co-Borrowers shall, at all times, but tested as of the last day of each calendar month, maintain a Liquidity Ratio
of at least 1.50 to 1.00.”
2.4 Section 6.15 (Post-Closing Deliverables). Section 6.15(c) of the Loan Agreement hereby is amended and restated in its
entirety to read as follows:
shall, on or prior to August 31, 2020, close the Barclay’s Account and the NAB Account and transfer all amounts therein
to Co-Borrowers accounts at Bank or Bank’s Affiliates. Notwithstanding the foregoing, any failure to complete such
closure and transfer of the Barclay’s Account and/or the NAB Account within the timeframe set forth herein that is
solely a result of Bank’s or its Affiliates’ failure to timely open and make available substantially equivalent
replacement accounts shall not constitute an Event of Default hereunder.”
2.5 Section 8.2 (Covenant Default). Section 8.2(a) of the Loan Agreement hereby is amended and restated in its entirety
to read as follows:
A Co-Borrower fails or neglects to perform any obligation in Sections 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.10, 6.12, 6.14 or 6.15
or violates any covenant in Section 7, or (ii) Co-Borrowers fail to maintain compliance with the financial covenant set forth in
Section 6.9 hereof, unless any such failure to comply is cured within three (3) Business Days after the occurrence thereof; or”
2.6 Section 13 (Definitions). The following terms and their respective definitions hereby are added or amended and restated
in their entirety in Section 13.1 of the Loan Agreement, as appropriate, as follows:
Amount” is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the Borrowing Base plus
the Non-Formula Sublimit, minus, in each case, (b) the outstanding principal balance of any Advances.
Effective Date” means June 1, 2020.
Ratio” means a ratio of (a) (i) unrestricted cash and Cash Equivalents held by Co-Borrowers in accounts at Bank, plus
(ii) an amount equal to the product of (A) Co-Borrower’s net trade accounts receivable (determined in accordance with GAAP),
multiplied by (B) sixty percent (60%), to (b) (i) the outstanding principal balance of any Advances (other than amounts
outstanding in connection with the PPP Loan), plus (ii) Co-Borrowers’ accounts payable owing to artists selling works
on Co-Borrowers’ platforms, as defined in Financial Statements delivered in accordance with Section 6.2.
Sublimit” is availability for Advances under the Revolving Line without regard to Eligible Accounts in an aggregate
amount equal to (a) at all times during the period of time from the First Amendment Effective Date through and including December
1, 2020, One Million Dollars ($1,000,000), and (b) at all times after December 1, 2020, Zero Dollars ($0.00).
means that certain loan made by Bank to Parent under the Paycheck Protection Program established pursuant to the Coronavirus Aid,
Relief and Economic Security Act (as amended, and the related rules and regulations).
Line Maturity Date” is May 5, 2021.
Period” is, on and after the First Amendment Effective Date, provided no Event of Default has occurred and is
continuing, the period (a) commencing on the first day of the month following the day that Co-Borrowers provide to Bank a
written report confirming that Co-Borrowers have, for each consecutive day in the immediately preceding month maintained a
Liquidity Ratio no less than 1.75:1.00, as determined by Bank in its good faith business discretion, (the
“Streamline Ratio”); and (b) terminating on the earlier to occur of (i) the occurrence of an Event of
Default, and (ii) the first day thereafter on which Co-Borrowers fail to maintain the Streamline Ratio, as calculated by
Bank. Upon termination of a Streamline Period, Co-Borrowers must maintain the required Streamline Ratio each consecutive day
for one (1) fiscal quarter as determined by Bank, prior to entering into a subsequent Streamline Period. Each Streamline
Period shall commence on the first day of the monthly period following the date Bank determines that the conditions set forth
herein have been achieved.
Ratio” is defined in the definition of Streamline Period.
2.7 Section 13 (Definitions). Subsection (a) of the defined term “Permitted Indebtedness” set forth in Section
13.1 of the Loan Agreement hereby is amended and restated to read as follows:
Indebtedness to Bank under this Agreement, the other Loan Documents and in connection with the PPP Loan;”
2.8 Exhibit B of the Loan Agreement hereby is replaced with Exhibit B attached hereto.
3. Limitation of Amendments.
3.1 The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited
precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or
condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future
under or in connection with any Loan Document.
3.2 This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed
and shall remain in full force and effect.
4. Representations and Warranties. To induce Bank to enter into this Amendment, each Co-Borrower hereby represents
and warrants to Bank as follows:
4.1 Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents
are true and correct in all material respects as of the date hereof (except to the extent such representations and warranties relate
to an earlier date, in which case they are true and correct in all material respects as of such date), and (b) no Event of Default
has occurred and is continuing;
4.2 Co-Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the
Loan Agreement, as amended by this Amendment;
4.3 The organizational documents of Co-Borrower delivered to Bank on the Effective Date remain true, accurate and complete
and have not been amended, supplemented or restated and are and continue to be in full force and effect;
4.4 The execution and delivery by Co-Borrower of this Amendment and the performance by Co-Borrower of its obligations under
the Loan Agreement, as amended by this Amendment, have been duly authorized;
4.5 The execution and delivery by Co-Borrower of this Amendment and the performance by Co-Borrower of its obligations under
the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any material Requirement of Law, (b) any material
agreement binding on Co-Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority,
or subdivision thereof, binding on Co-Borrower, or (d) the organizational documents of Co-Borrower;
4.6 The execution and delivery by Co-Borrower of this Amendment and the performance by Co-Borrower of its obligations under
the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation
of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof,
binding on Co-Borrower, except as already has been obtained or made; and
4.7 This Amendment has been duly executed and delivered by Co-Borrower and is the binding obligation of Co-Borrower, enforceable
against Co-Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization,
liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’
5. Ratification of Intellectual Property Security Agreement. Each Co-Borrower hereby ratifies, confirms and
reaffirms, all and singular, the terms and conditions of those certain Intellectual Property Security Agreements dated as of the
Effective Date between each Co-Borrower and Bank, and acknowledges, confirms and agrees that said Intellectual Property Security
Agreement (a) except as set forth on Schedule 1 hereto, contains an accurate and complete listing of all Intellectual Property
Collateral (as defined therein) and (b) shall remain in full force and effect.
6. Ratification of Perfection Certificate. Each Co-Borrower hereby ratifies, confirms and reaffirms,
all and singular, the terms and disclosures contained in those certain Perfection Certificates dated on or prior to the Effective
Date and acknowledges, confirms and agrees that, except as set forth on Schedule 1 hereto, the disclosures and information
such Co-Borrower provided to Bank in such Perfection Certificate have not changed, as of the date hereof.
7. Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts
taken together shall be deemed to constitute one and the same instrument.
8. Effectiveness. This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank
of this Amendment by each party hereto, and (b) Co-Borrowers’ payment to Bank of (i) a commitment fee in an amount equal
to Twenty Five Thousand Dollars ($25,000), and (ii) all Bank Expenses due and owing as of the date hereof, which may be debited
from any of Co-Borrowers’ accounts at Bank.
[Balance of Page
Intentionally Left Blank]
Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first