1042-00001 · Brightfield Cloud Services Inc · Closing

pro-forma-compliance-certificate.docx DOCUMENT Finance & Banking

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PRO FORMA COMPLIANCE CERTIFICATE

Closing Date — August 12, 2022

Delivered pursuant to Section 4.01(f) of the Term Loan Agreement dated as of July 28, 2022 (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the "Term Loan Agreement"), among Brightfield Cloud Services Inc., a Delaware corporation (the "Borrower"), Pinnacle National Bank, N.A., as lender (in such capacity, the "Lender") and as administrative agent for the Lender (in such capacity, the "Administrative Agent"), and Meridian Whitcomb LLC, as collateral agent (in such capacity, the "Collateral Agent").

Certificate Date: August 12, 2022

Delivered to:

Pinnacle National Bank, N.A., as Administrative Agent 600 Lexington Avenue, 35th Floor New York, NY 10022

Attention: Thomas Whitford, Senior Vice President, Technology Lending Group

Delivered by:

Brightfield Cloud Services Inc. 4200 Lone Star Parkway, Suite 800 Austin, TX 78731

Prepared with the assistance of:

Calderwood & Harkness LLP, counsel to the Borrower (C&H Matter No. 1042-00001)

Unless otherwise defined herein, capitalized terms used in this Pro Forma Compliance Certificate (this "Certificate") shall have the meanings assigned to such terms in the Term Loan Agreement. Certain key defined terms are reproduced for convenience of reference in Exhibit A attached hereto; in the event of any conflict between the definitions set forth in Exhibit A and the definitions set forth in the Term Loan Agreement, the definitions in the Term Loan Agreement shall control.

Section 1 — Certification and Authority

The undersigned, Priya Ramanathan, in her capacity as Chief Financial Officer of Brightfield Cloud Services Inc. ("BCS" or the "Borrower"), hereby certifies, in her capacity as a duly authorized Responsible Officer of the Borrower (and not in any individual or personal capacity), pursuant to Section 4.01(f) and Section 6.02(a) of the Term Loan Agreement, as follows:

1. This Pro Forma Compliance Certificate is being delivered to the Administrative Agent as a condition precedent to the initial funding of the $35,000,000 senior secured term loan (the "Term Loan") on the Closing Date, which is August 12, 2022 (the "Closing Date"). Pursuant to Section 4.01(f) of the Term Loan Agreement, the delivery of this Certificate, together with the calculations set forth herein, constitutes a condition to the obligation of the Lender to fund the Term Loan on the Closing Date.

2. The purpose of this Certificate is to demonstrate that, after giving pro forma effect to the transactions described below, the Borrower is in compliance with all financial covenants set forth in Article VII of the Term Loan Agreement. Specifically, the calculations herein give pro forma effect to:

(a) the borrowing of the $35,000,000 Term Loan on the Closing Date;

(b) the application of proceeds of the Term Loan as described in the Funds Flow Memorandum dated August 12, 2022 (the "Funds Flow Memorandum"), including, without limitation, the repayment in full and termination of the existing $15,000,000 revolving credit facility (the "Ridgeline Facility") with Ridgeline Commercial Bank (the "Ridgeline Payoff"), under which there was outstanding principal of $8,200,000 plus accrued and unpaid interest of $37,422 through the Closing Date, for a total payoff amount of $8,237,422; and

(c) the payment of all fees, costs, and expenses payable in connection with the closing of the transactions contemplated by the Term Loan Agreement, including, without limitation, the upfront fee payable to the Administrative Agent, legal fees and expenses, and other transaction costs.

3. The undersigned has reviewed and is familiar with the terms of the Term Loan Agreement and has made, or caused to be made under her supervision, a review of the transactions and financial condition of the Borrower during the applicable period and is satisfied that the information set forth in this Certificate is accurate and complete in all material respects.

Section 2 — Basis of Calculation

2.1 Measurement Period

For purposes of all financial covenant calculations set forth in this Certificate, the applicable measurement period is the trailing twelve months ("TTM") ended December 31, 2021 (constituting the most recently completed fiscal year for which audited financial statements of the Borrower have been prepared and are available). The audited financial statements for the fiscal year ended December 31, 2021, were prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), applied on a consistent basis, and were audited by Hartfield & Associates CPAs, PLLC (Engagement Partner: Neil Calderon, CPA), which issued an unqualified opinion thereon dated March 18, 2022. Such audited financial statements were previously delivered to the Administrative Agent pursuant to Section 4.01(d) of the Term Loan Agreement and form the basis of the financial data utilized in the calculations herein.

2.2 Reference Financial Statements

The reference financial statements underlying the calculations in this Certificate are the audited consolidated financial statements of Brightfield Cloud Services Inc. for the fiscal year ended December 31, 2021. The key financial metrics derived from such financial statements are as follows:

FY 2021 Total Revenue: $48,300,000, consisting of:

• Software-as-a-Service ("SaaS") Revenue: $31,400,000 (approximately 65.0% of total revenue)

• Hardware Revenue: $16,900,000 (approximately 35.0% of total revenue)

FY 2021 EBITDA: $12,800,000, calculated in accordance with the definition of "EBITDA" set forth in Section 1.01 of the Term Loan Agreement. A reconciliation of EBITDA from net income as reported in the audited financial statements is as follows:

The EBITDA figure set forth above is consistent with the definition of "EBITDA" in the Term Loan Agreement and includes all permitted add-backs and exclusions as specified therein. The Borrower confirms that no adjustments have been made to EBITDA other than those expressly permitted under the Term Loan Agreement.

2.3 Pro Forma Adjustments

All financial covenant calculations set forth in Section 3 below give pro forma effect to the following transactions as if they had occurred on the first day of the measurement period (in the case of income statement items) or on the Closing Date (in the case of balance sheet items), as applicable:

(a) Incurrence of the Term Loan. The incurrence of $35,000,000 of Total Funded Debt under the Term Loan Agreement, bearing interest at a rate per annum equal to the applicable Adjusted Term SOFR rate plus a margin of 3.50% (350 basis points), with a SOFR floor of 0.50%.

(b) Repayment and Termination of Ridgeline Facility. The repayment in full and termination of the outstanding principal balance of $8,200,000 under the Ridgeline Facility, together with accrued and unpaid interest of $37,422 through the Closing Date, for an aggregate payoff amount of $8,237,422. Upon receipt of the payoff amount, the Ridgeline Facility will be terminated, all liens securing the Ridgeline Facility will be released, and the Borrower shall have no further obligations thereunder.

(c) Payment of Upfront Fee. The payment of an upfront fee of $350,000 to Pinnacle National Bank, N.A. (calculated as 1.00% of the $35,000,000 Term Loan commitment amount), as required under Section 2.09(a) of the Term Loan Agreement.

(d) Payment of Transaction Costs. The payment of all other fees and expenses incurred in connection with the negotiation, documentation, and closing of the Term Loan, including legal fees, title and lien search fees, and other customary closing costs, which costs are funded from the proceeds of the Term Loan as reflected in the Funds Flow Memorandum.

(e) No Other Indebtedness. Following the consummation of the transactions described above, no Indebtedness of the Borrower (other than the Term Loan and ordinary course trade payables and accrued liabilities excluded from the definition of "Total Funded Debt") shall be outstanding.

Section 3 — Pro Forma Financial Covenant Calculations

Set forth below are the pro forma calculations demonstrating the Borrower's compliance with each financial covenant contained in Article VII of the Term Loan Agreement, after giving effect to the borrowing of the Term Loan and the other transactions described in Section 2.3 above.

3.1 Maximum Total Leverage Ratio (Section 7.01(a) of the Term Loan Agreement)

Covenant Requirement: Pursuant to Section 7.01(a) of the Term Loan Agreement, the Total Leverage Ratio (defined as the ratio of Total Funded Debt to TTM EBITDA) shall not exceed 3.50 to 1.00 at any time.

Calculation:

(i) Total Funded Debt (pro forma, as of the Closing Date):

For purposes of clarification, the $8,200,000 outstanding principal under the Ridgeline Facility is repaid in full from the proceeds of the Term Loan on the Closing Date. The Ridgeline Facility is fully retired and terminated, and the Term Loan constitutes the sole outstanding funded debt obligation of the Borrower as of the Closing Date. The Borrower has no outstanding capital lease obligations, subordinated indebtedness, or other funded debt obligations as of the Closing Date.

(ii) TTM EBITDA (FY 2021, audited): $12,800,000

(iii) Pro Forma Total Leverage Ratio:

$35,000,000 ÷ $12,800,000 = 2.73x

(iv) Maximum Permitted: 3.50x

(v) In Compliance: Yes — The pro forma Total Leverage Ratio of 2.73x is less than the maximum permitted ratio of 3.50x.

(vi) Headroom Analysis: At the maximum permitted Total Leverage Ratio of 3.50x, the Borrower could support Total Funded Debt of up to $44,800,000 (calculated as 3.50 × $12,800,000). Accordingly, the Borrower has approximately $9,800,000 of additional debt capacity under the Total Leverage Ratio covenant (calculated as $44,800,000 − $35,000,000 = $9,800,000), representing approximately 28.0% of current TTM EBITDA.

3.2 Minimum Interest Coverage Ratio (Section 7.01(b) of the Term Loan Agreement)

Covenant Requirement: Pursuant to Section 7.01(b) of the Term Loan Agreement, the Interest Coverage Ratio (defined as the ratio of TTM EBITDA to TTM Interest Expense) shall not be less than 3.00 to 1.00 at any time.

Calculation:

(i) TTM EBITDA (FY 2021, audited): $12,800,000

(ii) Estimated Annual Interest Expense (pro forma, Year 1):

The estimated annual pro forma Interest Expense on the Term Loan is calculated as follows:

Note regarding conservatism of estimate: The estimated annual Interest Expense of approximately $2,026,500 assumes that the full $35,000,000 principal balance of the Term Loan remains outstanding for the entire twelve-month period, without giving effect to any reduction resulting from the scheduled quarterly amortization payments of $87,500 per quarter (representing annual amortization of $350,000, or 1.00% of the original principal amount of the Term Loan). The actual Interest Expense over the first twelve months following the Closing Date is expected to be slightly lower than $2,026,500 due to the modest reduction in the outstanding principal balance resulting from such amortization payments. The use of the higher figure for purposes of this pro forma calculation is therefore conservative and results in a lower (more conservative) Interest Coverage Ratio.

(iii) Pro Forma Interest Coverage Ratio:

$12,800,000 ÷ $2,026,500 = approximately 6.32x

(iv) Minimum Required: 3.00x

(v) In Compliance: Yes — The pro forma Interest Coverage Ratio of approximately 6.32x exceeds the minimum required ratio of 3.00x.

(vi) Cushion Analysis: The pro forma Interest Coverage Ratio of approximately 6.32x exceeds the minimum required ratio of 3.00x by approximately 3.32x. This cushion indicates that EBITDA could decline by approximately $6,720,500 (i.e., from $12,800,000 to $6,079,500) before the Interest Coverage Ratio would fall below the 3.00x minimum threshold, holding all other variables constant. This represents a decline cushion of approximately 52.5% of current TTM EBITDA, providing a substantial margin of safety with respect to this covenant.

3.3 Minimum Liquidity (Section 7.01(c) of the Term Loan Agreement)

Covenant Requirement: Pursuant to Section 7.01(c) of the Term Loan Agreement, the Borrower shall maintain, at all times, Unrestricted Cash and cash equivalents of not less than $5,000,000.

Calculation:

(i) Pro Forma Unrestricted Cash as of the Closing Date (after giving effect to all disbursements described in the Funds Flow Memorandum):

The Borrower's treasury department has confirmed that the pre-existing unrestricted cash balances of BCS (held in operating and other deposit accounts, exclusive of any restricted cash) are sufficient, when combined with the $1,612,578 of Term Loan proceeds deposited to the Borrower's operating account at Pinnacle National Bank, N.A., to maintain total Unrestricted Cash in excess of the $5,000,000 minimum requirement on and after the Closing Date.

(ii) Minimum Required: $5,000,000

(iii) In Compliance: Yes — Pro forma Unrestricted Cash as of the Closing Date is in excess of $5,000,000.

3.4 Maximum Capital Expenditures (Section 7.01(d) of the Term Loan Agreement)

Covenant Requirement: Pursuant to Section 7.01(d) of the Term Loan Agreement, Capital Expenditures of the Borrower shall not exceed $18,000,000 in any fiscal year. Unused amounts of the Capital Expenditure basket up to $3,000,000 are permitted to be carried forward to the immediately succeeding fiscal year, provided that any such carryforward amounts shall be deemed utilized first in such succeeding fiscal year.

Status as of the Closing Date:

(i) FY 2022 Capital Expenditures Incurred Through August 12, 2022: The Borrower has incurred Capital Expenditures during the period from January 1, 2022 through August 12, 2022 that are well within the $18,000,000 annual limit. Such Capital Expenditures consist primarily of routine maintenance capital expenditures, equipment purchases in the ordinary course of business, and initial project costs associated with the Dallas and Phoenix data center build-outs.

(ii) Planned Capital Expenditures for the Remainder of FY 2022: The Borrower plans to incur additional Capital Expenditures during the remainder of fiscal year 2022, which will include amounts funded from the proceeds of the Term Loan for the following projects:

• Dallas Data Center Build-Out: $11,500,000 allocated from Term Loan proceeds (to be deposited into a segregated project account). The Dallas data center project is expected to span FY 2022 and FY 2023, with approximately $6,500,000 of expenditures anticipated in FY 2022 and the balance in FY 2023.

• Phoenix Data Center Build-Out: $9,800,000 allocated from Term Loan proceeds (to be deposited into a segregated project account). The Phoenix data center project is similarly expected to span FY 2022 and FY 2023, with approximately $4,200,000 of expenditures anticipated in FY 2022 and the balance in FY 2023.

• Hardware Procurement (Proprietary Server Appliances): $3,500,000 allocated from Term Loan proceeds. Hardware procurement is expected to occur in the second half of FY 2022, with the majority of such expenditures expected to be incurred in FY 2022.

Based on the Borrower's current capital budget and project timelines, the total Capital Expenditures for FY 2022 (including both amounts incurred prior to the Closing Date and amounts expected to be incurred during the remainder of FY 2022) are expected to remain within the $18,000,000 annual limit. Not all of the Term Loan proceeds allocated to the data center build-outs will constitute FY 2022 Capital Expenditures, as a substantial portion of such proceeds will fund Capital Expenditures occurring in FY 2023.

(iii) In Compliance: Yes — Total Capital Expenditures for FY 2022 are expected to remain within the $18,000,000 annual limit.

Section 4 — Summary Compliance Table

The following table summarizes the Borrower's pro forma compliance with each financial covenant set forth in Article VII of the Term Loan Agreement as of the Closing Date, after giving effect to the borrowing of the Term Loan and the application of proceeds as described herein:

As demonstrated by the foregoing calculations and the summary table above, the Borrower is in pro forma compliance with all financial covenants contained in Article VII of the Term Loan Agreement as of the Closing Date, after giving effect to the borrowing of the Term Loan and the application of proceeds therefrom.

Section 5 — Use of Proceeds Confirmation

The undersigned hereby confirms that the proceeds of the $35,000,000 Term Loan are being applied on the Closing Date in accordance with Section 6.11 of the Term Loan Agreement and the Funds Flow Memorandum dated August 12, 2022. The application of proceeds is as follows:

The undersigned confirms that the foregoing application of proceeds is consistent with the permitted uses set forth in the Term Loan Agreement and that no portion of the proceeds of the Term Loan is being applied for any purpose not expressly permitted under the Term Loan Agreement.

Section 6 — Additional Representations

In connection with the delivery of this Certificate and the borrowing of the Term Loan on the Closing Date, the undersigned, in her capacity as a Responsible Officer of the Borrower, hereby further represents and certifies as follows:

1. No Default. No Default or Event of Default (each as defined in the Term Loan Agreement) has occurred and is continuing as of the Closing Date, or would result from the borrowing of the Term Loan and the application of proceeds as described in this Certificate and the Funds Flow Memorandum.

2. Representations and Warranties. All representations and warranties of the Borrower set forth in Article V of the Term Loan Agreement and in the other Loan Documents are true and correct in all material respects as of the Closing Date (or, in the case of representations and warranties qualified by materiality or Material Adverse Change, true and correct in all respects), except to the extent that any such representation or warranty expressly relates to an earlier date, in which case such representation or warranty was true and correct in all material respects (or in all respects, as applicable) as of such earlier date. Without limiting the generality of the foregoing, the representations and warranties set forth in Sections 5.01 through 5.22 of the Term Loan Agreement (including, without limitation, representations regarding corporate existence and authority, enforceability of Loan Documents, absence of conflicts, material litigation, financial condition, solvency, compliance with laws, and environmental matters) are hereby reaffirmed as of the Closing Date.

3. No Material Adverse Change. No Material Adverse Change (as defined in the Term Loan Agreement) has occurred since December 31, 2021. The business, operations, properties, condition (financial or otherwise), and prospects of the Borrower and its subsidiaries, taken as a whole, have not experienced any material adverse change since December 31, 2021 that would reasonably be expected to have a material adverse effect on (a) the business, assets, operations, or financial condition of the Borrower and its subsidiaries, taken as a whole, (b) the ability of the Borrower to perform its obligations under the Term Loan Agreement or the other Loan Documents, or (c) the rights and remedies of the Administrative Agent, the Collateral Agent, or the Lender under the Term Loan Agreement or the other Loan Documents.

4. Covenant Compliance. The Borrower is in compliance with all covenants, conditions, and obligations set forth in the Term Loan Agreement and the other Loan Documents, including, without limitation, all affirmative covenants set forth in Article VI and all negative covenants set forth in Article VII thereof.

5. Conditions Precedent. To the best knowledge of the undersigned, all conditions precedent to the making of the Term Loan set forth in Section 4.01 of the Term Loan Agreement have been satisfied (or, where applicable, waived by the Administrative Agent in writing) as of the Closing Date.

Section 7 — Supporting Documentation Reference

This Certificate is delivered in reliance upon, and the calculations and representations set forth herein are based upon, the following documents and information, copies of which have been previously delivered to the Administrative Agent (or are being delivered concurrently with this Certificate):

(a) Audited Financial Statements. Audited consolidated financial statements of Brightfield Cloud Services Inc. for the fiscal years ended December 31, 2020 and December 31, 2021, including the balance sheet, income statement, statement of cash flows, and notes thereto, prepared in accordance with GAAP and audited by Hartfield & Associates CPAs, PLLC (Engagement Partner: Neil Calderon, CPA), with unqualified audit opinions issued thereon.

(b) Funds Flow Memorandum. Funds Flow Memorandum dated August 12, 2022, executed by the Borrower and the Administrative Agent, setting forth the wire transfer instructions and the application of the proceeds of the Term Loan on the Closing Date.

(c) Ridgeline Payoff Letter. Payoff letter from Ridgeline Commercial Bank dated August 9, 2022, setting forth the payoff amount of $8,237,422 (comprising outstanding principal of $8,200,000 and estimated accrued and unpaid interest of $37,422 through August 12, 2022), together with instructions for the remittance of the payoff amount and the agreement of Ridgeline Commercial Bank to release all liens and security interests upon receipt thereof.

(d) Term Loan Agreement. Term Loan Agreement dated as of July 28, 2022, among the Borrower, the Administrative Agent, the Lender, and the Collateral Agent, together with all schedules, exhibits, and annexes thereto.

The undersigned reserves the right to supplement this Certificate with additional supporting documentation as may be reasonably requested by the Administrative Agent.

Section 8 — Certification and Signature

The undersigned hereby certifies that the foregoing calculations and statements are true, correct, and complete in all material respects as of the date hereof. This Certificate is delivered to the Administrative Agent in satisfaction of the condition precedent set forth in Section 4.01(f) of the Term Loan Agreement and in compliance with the Borrower's obligations under Section 6.02(a) thereof. The undersigned acknowledges that the Administrative Agent and the Lender are relying on the accuracy and completeness of the information contained herein in connection with the funding of the Term Loan on the Closing Date.

IN WITNESS WHEREOF, the undersigned has executed this Pro Forma Compliance Certificate as of the date first set forth above.

BRIGHTFIELD CLOUD SERVICES INC.

By: ________

Name: Priya Ramanathan

Title: Chief Financial Officer

Date: August 12, 2022

EXHIBIT A

Definitions (For Reference Only)

The following key defined terms are used in this Certificate and are defined in the Term Loan Agreement. The definitions set forth below are reproduced for convenience of reference only and are qualified in their entirety by reference to the full definitions set forth in Section 1.01 of the Term Loan Agreement. In the event of any conflict between the definitions set forth in this Exhibit A and the definitions set forth in the Term Loan Agreement, the definitions in the Term Loan Agreement shall govern and control.

"Capital Expenditures" means, for any period, all expenditures of the Borrower and its subsidiaries that would be classified as capital expenditures in accordance with GAAP, including, without limitation, expenditures for property, plant, and equipment, software development costs that are capitalized in accordance with GAAP, and expenditures incurred in connection with the acquisition of assets that are capitalized on the balance sheet of the Borrower, but excluding (a) expenditures funded with the proceeds of insurance or condemnation awards, (b) expenditures constituting Permitted Acquisitions, and (c) expenditures funded solely with equity contributions received by the Borrower after the Closing Date and designated in writing by the Borrower as "Excluded Capital Expenditures."

"EBITDA" means, for any measurement period, an amount equal to the net income (or net loss) of the Borrower and its subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, plus (to the extent deducted in computing such net income or net loss) (a) interest expense, (b) income tax expense, (c) depreciation and amortization expense, and (d) other non-cash charges and expenses (including, without limitation, non-cash stock-based compensation expense), minus non-cash income, in each case for the applicable measurement period, calculated on a trailing twelve-month basis. For the avoidance of doubt, EBITDA shall be calculated in accordance with the Term Loan Agreement definition, which may include additional permitted add-backs or exclusions not summarized herein.

"Interest Coverage Ratio" means, for any measurement period, the ratio of (a) TTM EBITDA for such period to (b) TTM Interest Expense for such period.

"Interest Expense" means, for any measurement period, all cash interest paid or accrued by the Borrower and its subsidiaries on Total Funded Debt during such period, determined on a consolidated basis in accordance with GAAP, including, without limitation, commitment fees, unused line fees, and letter of credit fees, but excluding (a) amortization of deferred financing costs, (b) amortization of upfront fees and original issue discount, and (c) any non-cash interest charges.

"Material Adverse Change" means any event, condition, development, circumstance, or change that, individually or in the aggregate, has had, or would reasonably be expected to have, a material adverse effect on (a) the business, assets, operations, condition (financial or otherwise), or prospects of the Borrower and its subsidiaries, taken as a whole, (b) the ability of the Borrower to perform its obligations under the Term Loan Agreement or any other Loan Document, or (c) the rights and remedies of the Administrative Agent, the Collateral Agent, or the Lender under the Term Loan Agreement or any other Loan Document, in each case, measured from and after December 31, 2021 (or such other reference date as may be specified in the Term Loan Agreement).

"Total Funded Debt" means, as of any date of determination, the aggregate outstanding principal amount of all indebtedness for borrowed money of the Borrower and its subsidiaries, determined on a consolidated basis, including, without limitation, (a) the outstanding principal amount of the Term Loan, (b) all outstanding obligations under capital leases (determined in accordance with GAAP as in effect on the date of the Term Loan Agreement), (c) all outstanding obligations under any other credit facility, term loan, or note purchase agreement, (d) all outstanding obligations in respect of letters of credit (to the extent drawn), and (e) all other funded debt obligations, but excluding (i) trade payables and accrued liabilities arising in the ordinary course of business and (ii) contingent obligations (including undrawn letters of credit) except to the extent drawn or otherwise constituting funded indebtedness.

"Total Leverage Ratio" means, as of any date of determination, the ratio of (a) Total Funded Debt as of such date to (b) TTM EBITDA for the most recently completed measurement period.

"Unrestricted Cash" means, as of any date of determination, all cash and cash equivalents of the Borrower and its subsidiaries held in deposit accounts or securities accounts that are not subject to any lien, encumbrance, or restriction on use (other than (a) liens in favor of the Collateral Agent pursuant to the Loan Documents and (b) customary banker's liens and rights of set-off), and that are freely available for use by the Borrower in the ordinary course of business.

[Remainder of Page Intentionally Left Blank]

Line Item	Amount
Net Income (FY 2021, audited)	$5,420,000
Plus: Interest Expense	$612,000
Plus: Income Tax Expense	$1,838,000
Plus: Depreciation and Amortization	$4,180,000
Plus: Non-Cash Stock Compensation Expense	$750,000
Less: Non-Cash Income Items	$0
EBITDA	$12,800,000
Component	Amount
New Term Loan funded on Closing Date	$35,000,000
Less: Ridgeline revolving credit facility — repaid at closing	($8,200,000)
Plus: Other Indebtedness (capital leases, subordinated notes, etc.)	$0
Pro Forma Total Funded Debt	$35,000,000
Component	Detail
Term Loan Principal (outstanding on Closing Date)	$35,000,000
Applicable Interest Rate	Adjusted Term SOFR + 3.50% (350 bps)
SOFR Floor	0.50%
1-Month Term SOFR as of Closing Date (August 12, 2022)	Approximately 2.29%
Applicable SOFR Rate (greater of actual SOFR and SOFR floor)	2.29% (actual rate exceeds the 0.50% floor)
All-In Interest Rate	2.29% + 3.50% = 5.79%
Estimated Annual Interest Expense ($35,000,000 × 5.79%)	Approximately $2,026,500
Source / (Use)	Amount
Proceeds of Term Loan deposited to BCS operating account at Pinnacle National Bank, N.A. (Account No. 7841-0029-3356) (net of amounts disbursed to other uses per the Funds Flow Memorandum)	$1,612,578
Plus: Pre-existing unrestricted cash balances of BCS held in operating and other deposit accounts immediately prior to closing (as confirmed by BCS treasury department)	In excess of $3,387,422
Total Pro Forma Unrestricted Cash	In excess of $5,000,000

Financial Covenant	Required Level	Pro Forma Actual	In Compliance?
Maximum Total Leverage Ratio (§ 7.01(a))	≤ 3.50x	2.73x	Yes
Minimum Interest Coverage Ratio (§ 7.01(b))	≥ 3.00x	~6.32x	Yes
Minimum Liquidity (§ 7.01(c))	≥ $5,000,000	In excess of $5,000,000	Yes
Maximum Capital Expenditures — FY 2022 (§ 7.01(d))	≤ $18,000,000	Within limit	Yes
Use of Proceeds	Amount
Repayment of Ridgeline Commercial Bank revolving credit facility (payoff amount: $8,200,000 outstanding principal + $37,422 accrued and unpaid interest through August 12, 2022)	$8,237,422
Dallas data center build-out (deposited to segregated project account)	$11,500,000
Phoenix data center build-out (deposited to segregated project account)	$9,800,000
Hardware procurement — proprietary server appliances	$3,500,000
Upfront fee payable to Pinnacle National Bank, N.A. (1.00% × $35,000,000 commitment)	$350,000
Working capital and general corporate purposes (deposited to BCS operating account at Pinnacle National Bank, N.A., Account No. 7841-0029-3356)	$1,612,578
Total Proceeds Applied	$35,000,000

PRO FORMA COMPLIANCE CERTIFICATE
Closing Date — August 12, 2022
Delivered pursuant to Section 4.01(f) of the Term Loan Agreement dated as of July 28, 2022 (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the "Term Loan Agreement"), among Brightfield Cloud Services Inc., a Delaware corporation (the "Borrower"), Pinnacle National Bank, N.A., as lender (in such capacity, the "Lender") and as administrative agent for the Lender (in such capacity, the "Administrative Agent"), and Meridian Whitcomb LLC, as collateral agent (in such capacity, the "Collateral Agent").
Certificate Date: August 12, 2022
Delivered to:
Pinnacle National Bank, N.A., as Administrative Agent 600 Lexington Avenue, 35th Floor New York, NY 10022
Attention: Thomas Whitford, Senior Vice President, Technology Lending Group
Delivered by:
Brightfield Cloud Services Inc. 4200 Lone Star Parkway, Suite 800 Austin, TX 78731
Prepared with the assistance of:
Calderwood & Harkness LLP, counsel to the Borrower (C&H Matter No. 1042-00001)
Unless otherwise defined herein, capitalized terms used in this Pro Forma Compliance Certificate (this "Certificate") shall have the meanings assigned to such terms in the Term Loan Agreement. Certain key defined terms are reproduced for convenience of reference in Exhibit A attached hereto; in the event of any conflict between the definitions set forth in Exhibit A and the definitions set forth in the Term Loan Agreement, the definitions in the Term Loan Agreement shall control.
Section 1 — Certification and Authority
The undersigned, Priya Ramanathan, in her capacity as Chief Financial Officer of Brightfield Cloud Services Inc. ("BCS" or the "Borrower"), hereby certifies, in her capacity as a duly authorized Responsible Officer of the Borrower (and not in any individual or personal capacity), pursuant to Section 4.01(f) and Section 6.02(a) of the Term Loan Agreement, as follows:
1.  This Pro Forma Compliance Certificate is being delivered to the Administrative Agent as a condition precedent to the initial funding of the $35,000,000 senior secured term loan (the "Term Loan") on the Closing Date, which is August 12, 2022 (the "Closing Date"). Pursuant to Section 4.01(f) of the Term Loan Agreement, the delivery of this Certificate, together with the calculations set forth herein, constitutes a condition to the obligation of the Lender to fund the Term Loan on the Closing Date.
2.  The purpose of this Certificate is to demonstrate that, after giving pro forma effect to the transactions described below, the Borrower is in compliance with all financial covenants set forth in Article VII of the Term Loan Agreement. Specifically, the calculations herein give pro forma effect to:
(a) the borrowing of the $35,000,000 Term Loan on the Closing Date;
(b) the application of proceeds of the Term Loan as described in the Funds Flow Memorandum dated August 12, 2022 (the "Funds Flow Memorandum"), including, without limitation, the repayment in full and termination of the existing $15,000,000 revolving credit facility (the "Ridgeline Facility") with Ridgeline Commercial Bank (the "Ridgeline Payoff"), under which there was outstanding principal of $8,200,000 plus accrued and unpaid interest of $37,422 through the Closing Date, for a total payoff amount of $8,237,422; and
(c) the payment of all fees, costs, and expenses payable in connection with the closing of the transactions contemplated by the Term Loan Agreement, including, without limitation, the upfront fee payable to the Administrative Agent, legal fees and expenses, and other transaction costs.
3.  The undersigned has reviewed and is familiar with the terms of the Term Loan Agreement and has made, or caused to be made under her supervision, a review of the transactions and financial condition of the Borrower during the applicable period and is satisfied that the information set forth in this Certificate is accurate and complete in all material respects.
Section 2 — Basis of Calculation
2.1 Measurement Period
For purposes of all financial covenant calculations set forth in this Certificate, the applicable measurement period is the trailing twelve months ("TTM") ended December 31, 2021 (constituting the most recently completed fiscal year for which audited financial statements of the Borrower have been prepared and are available). The audited financial statements for the fiscal year ended December 31, 2021, were prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), applied on a consistent basis, and were audited by Hartfield & Associates CPAs, PLLC (Engagement Partner: Neil Calderon, CPA), which issued an unqualified opinion thereon dated March 18, 2022. Such audited financial statements were previously delivered to the Administrative Agent pursuant to Section 4.01(d) of the Term Loan Agreement and form the basis of the financial data utilized in the calculations herein.
2.2 Reference Financial Statements
The reference financial statements underlying the calculations in this Certificate are the audited consolidated financial statements of Brightfield Cloud Services Inc. for the fiscal year ended December 31, 2021. The key financial metrics derived from such financial statements are as follows:
FY 2021 Total Revenue: $48,300,000, consisting of:
•  Software-as-a-Service ("SaaS") Revenue: $31,400,000 (approximately 65.0% of total revenue)
•  Hardware Revenue: $16,900,000 (approximately 35.0% of total revenue)
FY 2021 EBITDA: $12,800,000, calculated in accordance with the definition of "EBITDA" set forth in Section 1.01 of the Term Loan Agreement. A reconciliation of EBITDA from net income as reported in the audited financial statements is as follows:
The EBITDA figure set forth above is consistent with the definition of "EBITDA" in the Term Loan Agreement and includes all permitted add-backs and exclusions as specified therein. The Borrower confirms that no adjustments have been made to EBITDA other than those expressly permitted under the Term Loan Agreement.
2.3 Pro Forma Adjustments
All financial covenant calculations set forth in Section 3 below give pro forma effect to the following transactions as if they had occurred on the first day of the measurement period (in the case of income statement items) or on the Closing Date (in the case of balance sheet items), as applicable:
(a) Incurrence of the Term Loan. The incurrence of $35,000,000 of Total Funded Debt under the Term Loan Agreement, bearing interest at a rate per annum equal to the applicable Adjusted Term SOFR rate plus a margin of 3.50% (350 basis points), with a SOFR floor of 0.50%.
(b) Repayment and Termination of Ridgeline Facility. The repayment in full and termination of the outstanding principal balance of $8,200,000 under the Ridgeline Facility, together with accrued and unpaid interest of $37,422 through the Closing Date, for an aggregate payoff amount of $8,237,422. Upon receipt of the payoff amount, the Ridgeline Facility will be terminated, all liens securing the Ridgeline Facility will be released, and the Borrower shall have no further obligations thereunder.
(c) Payment of Upfront Fee. The payment of an upfront fee of $350,000 to Pinnacle National Bank, N.A. (calculated as 1.00% of the $35,000,000 Term Loan commitment amount), as required under Section 2.09(a) of the Term Loan Agreement.
(d) Payment of Transaction Costs. The payment of all other fees and expenses incurred in connection with the negotiation, documentation, and closing of the Term Loan, including legal fees, title and lien search fees, and other customary closing costs, which costs are funded from the proceeds of the Term Loan as reflected in the Funds Flow Memorandum.
(e) No Other Indebtedness. Following the consummation of the transactions described above, no Indebtedness of the Borrower (other than the Term Loan and ordinary course trade payables and accrued liabilities excluded from the definition of "Total Funded Debt") shall be outstanding.
Section 3 — Pro Forma Financial Covenant Calculations
Set forth below are the pro forma calculations demonstrating the Borrower's compliance with each financial covenant contained in Article VII of the Term Loan Agreement, after giving effect to the borrowing of the Term Loan and the other transactions described in Section 2.3 above.
3.1 Maximum Total Leverage Ratio (Section 7.01(a) of the Term Loan Agreement)
Covenant Requirement: Pursuant to Section 7.01(a) of the Term Loan Agreement, the Total Leverage Ratio (defined as the ratio of Total Funded Debt to TTM EBITDA) shall not exceed 3.50 to 1.00 at any time.
Calculation:
(i) Total Funded Debt (pro forma, as of the Closing Date):
For purposes of clarification, the $8,200,000 outstanding principal under the Ridgeline Facility is repaid in full from the proceeds of the Term Loan on the Closing Date. The Ridgeline Facility is fully retired and terminated, and the Term Loan constitutes the sole outstanding funded debt obligation of the Borrower as of the Closing Date. The Borrower has no outstanding capital lease obligations, subordinated indebtedness, or other funded debt obligations as of the Closing Date.
(ii) TTM EBITDA (FY 2021, audited): $12,800,000
(iii) Pro Forma Total Leverage Ratio:
$35,000,000 ÷ $12,800,000 = 2.73x
(iv) Maximum Permitted: 3.50x
(v) In Compliance: Yes — The pro forma Total Leverage Ratio of 2.73x is less than the maximum permitted ratio of 3.50x.
(vi) Headroom Analysis: At the maximum permitted Total Leverage Ratio of 3.50x, the Borrower could support Total Funded Debt of up to $44,800,000 (calculated as 3.50 × $12,800,000). Accordingly, the Borrower has approximately $9,800,000 of additional debt capacity under the Total Leverage Ratio covenant (calculated as $44,800,000 − $35,000,000 = $9,800,000), representing approximately 28.0% of current TTM EBITDA.
3.2 Minimum Interest Coverage Ratio (Section 7.01(b) of the Term Loan Agreement)
Covenant Requirement: Pursuant to Section 7.01(b) of the Term Loan Agreement, the Interest Coverage Ratio (defined as the ratio of TTM EBITDA to TTM Interest Expense) shall not be less than 3.00 to 1.00 at any time.
Calculation:
(i) TTM EBITDA (FY 2021, audited): $12,800,000
(ii) Estimated Annual Interest Expense (pro forma, Year 1):
The estimated annual pro forma Interest Expense on the Term Loan is calculated as follows:
Note regarding conservatism of estimate: The estimated annual Interest Expense of approximately $2,026,500 assumes that the full $35,000,000 principal balance of the Term Loan remains outstanding for the entire twelve-month period, without giving effect to any reduction resulting from the scheduled quarterly amortization payments of $87,500 per quarter (representing annual amortization of $350,000, or 1.00% of the original principal amount of the Term Loan). The actual Interest Expense over the first twelve months following the Closing Date is expected to be slightly lower than $2,026,500 due to the modest reduction in the outstanding principal balance resulting from such amortization payments. The use of the higher figure for purposes of this pro forma calculation is therefore conservative and results in a lower (more conservative) Interest Coverage Ratio.
(iii) Pro Forma Interest Coverage Ratio:
$12,800,000 ÷ $2,026,500 = approximately 6.32x
(iv) Minimum Required: 3.00x
(v) In Compliance: Yes — The pro forma Interest Coverage Ratio of approximately 6.32x exceeds the minimum required ratio of 3.00x.
(vi) Cushion Analysis: The pro forma Interest Coverage Ratio of approximately 6.32x exceeds the minimum required ratio of 3.00x by approximately 3.32x. This cushion indicates that EBITDA could decline by approximately $6,720,500 (i.e., from $12,800,000 to $6,079,500) before the Interest Coverage Ratio would fall below the 3.00x minimum threshold, holding all other variables constant. This represents a decline cushion of approximately 52.5% of current TTM EBITDA, providing a substantial margin of safety with respect to this covenant.
3.3 Minimum Liquidity (Section 7.01(c) of the Term Loan Agreement)
Covenant Requirement: Pursuant to Section 7.01(c) of the Term Loan Agreement, the Borrower shall maintain, at all times, Unrestricted Cash and cash equivalents of not less than $5,000,000.
Calculation:
(i) Pro Forma Unrestricted Cash as of the Closing Date (after giving effect to all disbursements described in the Funds Flow Memorandum):
The Borrower's treasury department has confirmed that the pre-existing unrestricted cash balances of BCS (held in operating and other deposit accounts, exclusive of any restricted cash) are sufficient, when combined with the $1,612,578 of Term Loan proceeds deposited to the Borrower's operating account at Pinnacle National Bank, N.A., to maintain total Unrestricted Cash in excess of the $5,000,000 minimum requirement on and after the Closing Date.
(ii) Minimum Required: $5,000,000
(iii) In Compliance: Yes — Pro forma Unrestricted Cash as of the Closing Date is in excess of $5,000,000.
3.4 Maximum Capital Expenditures (Section 7.01(d) of the Term Loan Agreement)
Covenant Requirement: Pursuant to Section 7.01(d) of the Term Loan Agreement, Capital Expenditures of the Borrower shall not exceed $18,000,000 in any fiscal year. Unused amounts of the Capital Expenditure basket up to $3,000,000 are permitted to be carried forward to the immediately succeeding fiscal year, provided that any such carryforward amounts shall be deemed utilized first in such succeeding fiscal year.
Status as of the Closing Date:
(i) FY 2022 Capital Expenditures Incurred Through August 12, 2022: The Borrower has incurred Capital Expenditures during the period from January 1, 2022 through August 12, 2022 that are well within the $18,000,000 annual limit. Such Capital Expenditures consist primarily of routine maintenance capital expenditures, equipment purchases in the ordinary course of business, and initial project costs associated with the Dallas and Phoenix data center build-outs.
(ii) Planned Capital Expenditures for the Remainder of FY 2022: The Borrower plans to incur additional Capital Expenditures during the remainder of fiscal year 2022, which will include amounts funded from the proceeds of the Term Loan for the following projects:
•  Dallas Data Center Build-Out: $11,500,000 allocated from Term Loan proceeds (to be deposited into a segregated project account). The Dallas data center project is expected to span FY 2022 and FY 2023, with approximately $6,500,000 of expenditures anticipated in FY 2022 and the balance in FY 2023.
•  Phoenix Data Center Build-Out: $9,800,000 allocated from Term Loan proceeds (to be deposited into a segregated project account). The Phoenix data center project is similarly expected to span FY 2022 and FY 2023, with approximately $4,200,000 of expenditures anticipated in FY 2022 and the balance in FY 2023.
•  Hardware Procurement (Proprietary Server Appliances): $3,500,000 allocated from Term Loan proceeds. Hardware procurement is expected to occur in the second half of FY 2022, with the majority of such expenditures expected to be incurred in FY 2022.
Based on the Borrower's current capital budget and project timelines, the total Capital Expenditures for FY 2022 (including both amounts incurred prior to the Closing Date and amounts expected to be incurred during the remainder of FY 2022) are expected to remain within the $18,000,000 annual limit. Not all of the Term Loan proceeds allocated to the data center build-outs will constitute FY 2022 Capital Expenditures, as a substantial portion of such proceeds will fund Capital Expenditures occurring in FY 2023.
(iii) In Compliance: Yes — Total Capital Expenditures for FY 2022 are expected to remain within the $18,000,000 annual limit.
Section 4 — Summary Compliance Table
The following table summarizes the Borrower's pro forma compliance with each financial covenant set forth in Article VII of the Term Loan Agreement as of the Closing Date, after giving effect to the borrowing of the Term Loan and the application of proceeds as described herein:
As demonstrated by the foregoing calculations and the summary table above, the Borrower is in pro forma compliance with all financial covenants contained in Article VII of the Term Loan Agreement as of the Closing Date, after giving effect to the borrowing of the Term Loan and the application of proceeds therefrom.
Section 5 — Use of Proceeds Confirmation
The undersigned hereby confirms that the proceeds of the $35,000,000 Term Loan are being applied on the Closing Date in accordance with Section 6.11 of the Term Loan Agreement and the Funds Flow Memorandum dated August 12, 2022. The application of proceeds is as follows:
The undersigned confirms that the foregoing application of proceeds is consistent with the permitted uses set forth in the Term Loan Agreement and that no portion of the proceeds of the Term Loan is being applied for any purpose not expressly permitted under the Term Loan Agreement.
Section 6 — Additional Representations
In connection with the delivery of this Certificate and the borrowing of the Term Loan on the Closing Date, the undersigned, in her capacity as a Responsible Officer of the Borrower, hereby further represents and certifies as follows:
1.  No Default. No Default or Event of Default (each as defined in the Term Loan Agreement) has occurred and is continuing as of the Closing Date, or would result from the borrowing of the Term Loan and the application of proceeds as described in this Certificate and the Funds Flow Memorandum.
2.  Representations and Warranties. All representations and warranties of the Borrower set forth in Article V of the Term Loan Agreement and in the other Loan Documents are true and correct in all material respects as of the Closing Date (or, in the case of representations and warranties qualified by materiality or Material Adverse Change, true and correct in all respects), except to the extent that any such representation or warranty expressly relates to an earlier date, in which case such representation or warranty was true and correct in all material respects (or in all respects, as applicable) as of such earlier date. Without limiting the generality of the foregoing, the representations and warranties set forth in Sections 5.01 through 5.22 of the Term Loan Agreement (including, without limitation, representations regarding corporate existence and authority, enforceability of Loan Documents, absence of conflicts, material litigation, financial condition, solvency, compliance with laws, and environmental matters) are hereby reaffirmed as of the Closing Date.
3.  No Material Adverse Change. No Material Adverse Change (as defined in the Term Loan Agreement) has occurred since December 31, 2021. The business, operations, properties, condition (financial or otherwise), and prospects of the Borrower and its subsidiaries, taken as a whole, have not experienced any material adverse change since December 31, 2021 that would reasonably be expected to have a material adverse effect on (a) the business, assets, operations, or financial condition of the Borrower and its subsidiaries, taken as a whole, (b) the ability of the Borrower to perform its obligations under the Term Loan Agreement or the other Loan Documents, or (c) the rights and remedies of the Administrative Agent, the Collateral Agent, or the Lender under the Term Loan Agreement or the other Loan Documents.
4.  Covenant Compliance. The Borrower is in compliance with all covenants, conditions, and obligations set forth in the Term Loan Agreement and the other Loan Documents, including, without limitation, all affirmative covenants set forth in Article VI and all negative covenants set forth in Article VII thereof.
5.  Conditions Precedent. To the best knowledge of the undersigned, all conditions precedent to the making of the Term Loan set forth in Section 4.01 of the Term Loan Agreement have been satisfied (or, where applicable, waived by the Administrative Agent in writing) as of the Closing Date.
Section 7 — Supporting Documentation Reference
This Certificate is delivered in reliance upon, and the calculations and representations set forth herein are based upon, the following documents and information, copies of which have been previously delivered to the Administrative Agent (or are being delivered concurrently with this Certificate):
(a) Audited Financial Statements. Audited consolidated financial statements of Brightfield Cloud Services Inc. for the fiscal years ended December 31, 2020 and December 31, 2021, including the balance sheet, income statement, statement of cash flows, and notes thereto, prepared in accordance with GAAP and audited by Hartfield & Associates CPAs, PLLC (Engagement Partner: Neil Calderon, CPA), with unqualified audit opinions issued thereon.
(b) Funds Flow Memorandum. Funds Flow Memorandum dated August 12, 2022, executed by the Borrower and the Administrative Agent, setting forth the wire transfer instructions and the application of the proceeds of the Term Loan on the Closing Date.
(c) Ridgeline Payoff Letter. Payoff letter from Ridgeline Commercial Bank dated August 9, 2022, setting forth the payoff amount of $8,237,422 (comprising outstanding principal of $8,200,000 and estimated accrued and unpaid interest of $37,422 through August 12, 2022), together with instructions for the remittance of the payoff amount and the agreement of Ridgeline Commercial Bank to release all liens and security interests upon receipt thereof.
(d) Term Loan Agreement. Term Loan Agreement dated as of July 28, 2022, among the Borrower, the Administrative Agent, the Lender, and the Collateral Agent, together with all schedules, exhibits, and annexes thereto.
The undersigned reserves the right to supplement this Certificate with additional supporting documentation as may be reasonably requested by the Administrative Agent.
Section 8 — Certification and Signature
The undersigned hereby certifies that the foregoing calculations and statements are true, correct, and complete in all material respects as of the date hereof. This Certificate is delivered to the Administrative Agent in satisfaction of the condition precedent set forth in Section 4.01(f) of the Term Loan Agreement and in compliance with the Borrower's obligations under Section 6.02(a) thereof. The undersigned acknowledges that the Administrative Agent and the Lender are relying on the accuracy and completeness of the information contained herein in connection with the funding of the Term Loan on the Closing Date.
IN WITNESS WHEREOF, the undersigned has executed this Pro Forma Compliance Certificate as of the date first set forth above.
BRIGHTFIELD CLOUD SERVICES INC.
By: ________
Name: Priya Ramanathan
Title: Chief Financial Officer
Date: August 12, 2022
EXHIBIT A
Definitions (For Reference Only)
The following key defined terms are used in this Certificate and are defined in the Term Loan Agreement. The definitions set forth below are reproduced for convenience of reference only and are qualified in their entirety by reference to the full definitions set forth in Section 1.01 of the Term Loan Agreement. In the event of any conflict between the definitions set forth in this Exhibit A and the definitions set forth in the Term Loan Agreement, the definitions in the Term Loan Agreement shall govern and control.
"Capital Expenditures" means, for any period, all expenditures of the Borrower and its subsidiaries that would be classified as capital expenditures in accordance with GAAP, including, without limitation, expenditures for property, plant, and equipment, software development costs that are capitalized in accordance with GAAP, and expenditures incurred in connection with the acquisition of assets that are capitalized on the balance sheet of the Borrower, but excluding (a) expenditures funded with the proceeds of insurance or condemnation awards, (b) expenditures constituting Permitted Acquisitions, and (c) expenditures funded solely with equity contributions received by the Borrower after the Closing Date and designated in writing by the Borrower as "Excluded Capital Expenditures."
"EBITDA" means, for any measurement period, an amount equal to the net income (or net loss) of the Borrower and its subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, plus (to the extent deducted in computing such net income or net loss) (a) interest expense, (b) income tax expense, (c) depreciation and amortization expense, and (d) other non-cash charges and expenses (including, without limitation, non-cash stock-based compensation expense), minus non-cash income, in each case for the applicable measurement period, calculated on a trailing twelve-month basis. For the avoidance of doubt, EBITDA shall be calculated in accordance with the Term Loan Agreement definition, which may include additional permitted add-backs or exclusions not summarized herein.
"Interest Coverage Ratio" means, for any measurement period, the ratio of (a) TTM EBITDA for such period to (b) TTM Interest Expense for such period.
"Interest Expense" means, for any measurement period, all cash interest paid or accrued by the Borrower and its subsidiaries on Total Funded Debt during such period, determined on a consolidated basis in accordance with GAAP, including, without limitation, commitment fees, unused line fees, and letter of credit fees, but excluding (a) amortization of deferred financing costs, (b) amortization of upfront fees and original issue discount, and (c) any non-cash interest charges.
"Material Adverse Change" means any event, condition, development, circumstance, or change that, individually or in the aggregate, has had, or would reasonably be expected to have, a material adverse effect on (a) the business, assets, operations, condition (financial or otherwise), or prospects of the Borrower and its subsidiaries, taken as a whole, (b) the ability of the Borrower to perform its obligations under the Term Loan Agreement or any other Loan Document, or (c) the rights and remedies of the Administrative Agent, the Collateral Agent, or the Lender under the Term Loan Agreement or any other Loan Document, in each case, measured from and after December 31, 2021 (or such other reference date as may be specified in the Term Loan Agreement).
"Total Funded Debt" means, as of any date of determination, the aggregate outstanding principal amount of all indebtedness for borrowed money of the Borrower and its subsidiaries, determined on a consolidated basis, including, without limitation, (a) the outstanding principal amount of the Term Loan, (b) all outstanding obligations under capital leases (determined in accordance with GAAP as in effect on the date of the Term Loan Agreement), (c) all outstanding obligations under any other credit facility, term loan, or note purchase agreement, (d) all outstanding obligations in respect of letters of credit (to the extent drawn), and (e) all other funded debt obligations, but excluding (i) trade payables and accrued liabilities arising in the ordinary course of business and (ii) contingent obligations (including undrawn letters of credit) except to the extent drawn or otherwise constituting funded indebtedness.
"Total Leverage Ratio" means, as of any date of determination, the ratio of (a) Total Funded Debt as of such date to (b) TTM EBITDA for the most recently completed measurement period.
"Unrestricted Cash" means, as of any date of determination, all cash and cash equivalents of the Borrower and its subsidiaries held in deposit accounts or securities accounts that are not subject to any lien, encumbrance, or restriction on use (other than (a) liens in favor of the Collateral Agent pursuant to the Loan Documents and (b) customary banker's liens and rights of set-off), and that are freely available for use by the Borrower in the ordinary course of business.
[Remainder of Page Intentionally Left Blank]
Line Item | Amount
Net Income (FY 2021, audited) | $5,420,000
Plus: Interest Expense | $612,000
Plus: Income Tax Expense | $1,838,000
Plus: Depreciation and Amortization | $4,180,000
Plus: Non-Cash Stock Compensation Expense | $750,000
Less: Non-Cash Income Items | $0
EBITDA | $12,800,000
Component | Amount
New Term Loan funded on Closing Date | $35,000,000
Less: Ridgeline revolving credit facility — repaid at closing | ($8,200,000)
Plus: Other Indebtedness (capital leases, subordinated notes, etc.) | $0
Pro Forma Total Funded Debt | $35,000,000
Component | Detail
Term Loan Principal (outstanding on Closing Date) | $35,000,000
Applicable Interest Rate | Adjusted Term SOFR + 3.50% (350 bps)
SOFR Floor | 0.50%
1-Month Term SOFR as of Closing Date (August 12, 2022) | Approximately 2.29%
Applicable SOFR Rate (greater of actual SOFR and SOFR floor) | 2.29% (actual rate exceeds the 0.50% floor)
All-In Interest Rate | 2.29% + 3.50% = 5.79%
Estimated Annual Interest Expense ($35,000,000 × 5.79%) | Approximately $2,026,500
Source / (Use) | Amount
Proceeds of Term Loan deposited to BCS operating account at Pinnacle National Bank, N.A. (Account No. 7841-0029-3356) (net of amounts disbursed to other uses per the Funds Flow Memorandum) | $1,612,578
Plus: Pre-existing unrestricted cash balances of BCS held in operating and other deposit accounts immediately prior to closing (as confirmed by BCS treasury department) | In excess of $3,387,422
Total Pro Forma Unrestricted Cash | In excess of $5,000,000
Financial Covenant | Required Level | Pro Forma Actual | In Compliance?
Maximum Total Leverage Ratio (§ 7.01(a)) | ≤ 3.50x | 2.73x | Yes
Minimum Interest Coverage Ratio (§ 7.01(b)) | ≥ 3.00x | ~6.32x | Yes
Minimum Liquidity (§ 7.01(c)) | ≥ $5,000,000 | In excess of $5,000,000 | Yes
Maximum Capital Expenditures — FY 2022 (§ 7.01(d)) | ≤ $18,000,000 | Within limit | Yes
Use of Proceeds | Amount
Repayment of Ridgeline Commercial Bank revolving credit facility (payoff amount: $8,200,000 outstanding principal + $37,422 accrued and unpaid interest through August 12, 2022) | $8,237,422
Dallas data center build-out (deposited to segregated project account) | $11,500,000
Phoenix data center build-out (deposited to segregated project account) | $9,800,000
Hardware procurement — proprietary server appliances | $3,500,000
Upfront fee payable to Pinnacle National Bank, N.A. (1.00% × $35,000,000 commitment) | $350,000
Working capital and general corporate purposes (deposited to BCS operating account at Pinnacle National Bank, N.A., Account No. 7841-0029-3356) | $1,612,578
Total Proceeds Applied | $35,000,000

PRO FORMA COMPLIANCE CERTIFICATE

BRIGHTFIELD CLOUD SERVICES INC.

EXHIBIT A

Record

Parties

Dates

Amounts