CAPITAL CALL LINES OF CREDIT

Explaining the terms in our capital call loan and security agreement

When you apply for a capital call line from Carta, you can sign in as little as one business day. With most banks, approval for a capital call loan takes weeks.

One reason we’re able to accelerate this timeline is by eliminating negotiations. Everyone gets our best offer from the get-go, including fair and transparent terms.

To help explain what we mean by fair and transparent terms, we’ve outlined the important sections of our Loan and Security Agreement (“Agreement”) in plain English below. We recommend you review the Agreement with your lawyer before signing, but hope this document helps you get comfortable.

We’re partnering with Coastal Community Bank, Member FDIC, to bring you these loans; Coastal will be your lender.

SECTION 1: DEFINITIONS & CONSTRUCTION

This section outlines key terms that are referred to throughout the Agreement. While they’re all important, there are some key definitions to understand the terms of your line of credit.

Revolving Line

This tells you the total amount that you can borrow from the Bank at any one time. For funds that are closed, this is usually a fixed amount, say $5MM, but for funds that are still fundraising, it may be the lesser of a fixed amount or 15% of Closed Commitments.

Availability Amount

This calculates how much you can borrow at any given time. It is the lesser of the Revolving Line and the Borrowing Base, minus any amounts you’ve already borrowed and are yet to repay.

Borrowing Base

Generally speaking, this is the amount of money a lender will loan to you, based on the value of the collateral. In this Agreement, we calculate it as 50% of your Uncalled Committed Capital minus your debt.

Uncalled Committed Capital

This is the amount of capital contributions that you are yet to call from your limited partners (“LPs”), with several key exclusions that are important to understand.

Permitted Indebtedness

This includes debt that you are allowed to incur while the Agreement is effective. It generally includes (i) the revolving line the Bank is providing to you under the Agreement, (ii) debt that you’ve already incurred and disclosed to the Bank, and (iii) guarantees of your portfolio companies’ debt.

Permitted Liens

This section defines the liens that you disclose to the Bank, which are essential to avoid additional security interests on your assets except those permitted by the Agreement.

Included Investors

The Bank requests a list of your general partner(s) and LPs, which it reviews and approves, called an “Included Investor”.

Alternative Investment Vehicle

An AIV is any entity that can enforce or receive capital calls from your partners. If you form an AIV that can do this without notifying the Bank, it could be an “Event of Default”.

Initial Capital Contribution

Before you can receive an Advance on your line of credit, you need to call and receive at least 5% of your capital commitments from your partners.

SECTION 2: LOAN AND TERMS OF PAYMENT

Section 2.1(b): Advances Funds can be deposited into your account on the same business day if you submit a valid Advance request before 12PM PST. Each Advance must be repaid in full within 90 days.

Section 2.1(d): Extended Maturity Date We provide an option to extend the line for an additional year. This section explains the process for submitting this request to the Bank.

Section 2.2(a): Interest Rates All of the loans bear interest at the annual rate of Prime Rate, minus 0.50%.

Section 2.2(b): Default Rate If an Event of Default occurs, your interest rate will increase by 3% until it is cured.

Section 2.2(c): Payments You agree to pay the unpaid amounts borrowed under the Agreement and all interest on the first day of each month.

Section 2.2(d): Computation We use a 360-day year for calculating interest.

Section 2.3(a): Subscription Fees We charge only a simple annual subscription fee, paid quarterly.

Section 2.3(b): Bank Expenses We estimate closing costs to be around $3k for Carta Fund Administration customers and $10k - $15k for non-Carta Fund Administration customers based on deal complexity.

SECTION 3: CONDITIONS OF LOANS

Section 3.1: Conditions Precedent to Initial Advance Several items are needed before the Bank can process your first Advance.

Section 3.2: Conditions Precedent to all Advances Highlights ongoing representations and warranties that you attest to each time you submit an Advance request.

SECTION 4: CREATION OF SECURITY INTEREST

Section 4.1: Grant of a Security Interest You and your General Partner grant the Bank a security interest in the Collateral.

Section 4.4: Right to Inspect The Bank may inspect your books and records related to the Collateral.

SECTION 5: REPRESENTATIONS AND WARRANTIES

Section 5.2: Due Authorization; No Conflict You warrant that you’re allowed to enter into this Agreement.

Section 5.3: Encumbrances You warrant that you own your assets and that, if the Collateral is subject to any liens, those liens are permitted by the Agreement.

Section 5.5: Capital Calls You warrant that there are no restrictions on the right to make capital calls.

Section 5.7: Litigation You warrant that there is no material litigation against you.

Section 5.8: No Material Adverse Change in Financial Statements You warrant that all financial statements provided to the Bank are accurate.

SECTION 6: AFFIRMATIVE COVENANTS

Section 6.2: Government Compliance You must comply with applicable laws, rules and regulations.

Section 6.3: Financial Statements, Reports, Certificates Deliver quarterly Financial Statements to the Bank.

Section 6.4: Fund Agreement If you amend your LPA, it must not adversely affect your or the General Partner’s rights to enforce capital calls.

Section 6.5: Taxes You must pay your taxes.

Section 6.6: Deposit Accounts Maintain the same accounts disclosed to the Bank at closing.

Section 6.7: Use of Proceeds Use your loan proceeds solely to fund investments and cover investment-related expenses.

SECTION 7: NEGATIVE COVENANTS

Section 7.1: Dispositions You must not sell, transfer or dispose of your business or property.

Section 7.2: Change in Business You must not relocate your principal office without notifying the Bank.

Section 7.4: Indebtedness You can’t incur debt unless it’s permitted.

SECTION 8: EVENTS OF DEFAULT

Section 8.1: Payment Default You must make your payments when due.

Section 8.2: Covenant Default Failure to fulfil Affirmative Covenants or breach Negative Covenants will cause an Event of Default.

SECTION 9: BANK’S RIGHTS AND REMEDIES

Section 9.1: Rights and Remedies This section outlines the actions that the Bank can take if an Event of Default occurs.

SECTION 10: NOTICES

This section outlines physical mailing addresses and email addresses for notifications and other communications for you as well as the General Partner.

SECTION 11: CHOICE OF LAW AND VENUE, JURY TRIAL WAIVER

This section notes that the Agreement is governed by New York law and involves a waiver of a jury trial.

SECTION 12: GENERAL PROVISIONS

Section 12.2: Indemnification You are only required to indemnify the Bank against claims that were not caused by the Bank’s gross negligence.

Section 12.9: Advice of Counsel You should still consult an attorney before signing the Agreement.

Section 12.10: Confidentiality The Bank will hold your information in confidence.

EXHIBIT A

This exhibit describes the collateral, the Bank’s security for your line of credit.

EXHIBIT C

Each Advance request must be accompanied by a “Borrowing Base Certificate”.