MIVA, INC. BRIDGE BANK, NATIONAL ASSOCIATION LOAN AND SECURITY AGREEMENT
Exhibit 10.2
MIVA,
INC.
BRIDGE
BANK, NATIONAL ASSOCIATION
This
LOAN
AND SECURITY AGREEMENT is entered into as of November 7, 2008, by and
between Bridge
Bank, NATIONAL
ASSOCIATION (“Bank”) and MIVA, INC.
(“Borrower”).
Recitals
Borrower
wishes to obtain credit from time to time from Bank, and Bank desires to extend
credit to Borrower. This Agreement sets forth the terms on which Bank
will advance credit to Borrower, and Borrower will repay the amounts owing to
Bank.
Agreement
The
parties agree as follows:
1. Definitions
and Construction.
1.1 Definitions. As
used in this Agreement, the following terms shall have the following
definitions:
“Accounts”
means all presently existing and hereafter arising accounts, contract rights,
payment intangibles, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower’s Books relating to any of the
foregoing.
"Adjustments"
means all discounts, allowances, disputes, offsets, defenses, rights of
recoupment, rights of return, warranty claims, or short payments, asserted by or
on behalf of any account debtor with respect to any Account.
“Advance”
or “Advances” means a cash advance or cash advances under the Revolving
Facility.
“AEBITDA”
means earnings before interest, taxes, depreciation and amortization, one-time
restructuring costs and non-cash compensation and expenses, with restructuring
costs not to exceed $3,000,000 annually and expenses incurred in connection with
litigation matters as disclosed in accordance with Section 5.8 not to exceed
$3,000,000 annually.
“Affiliate”
means, with respect to any Person, any Person that owns or controls directly or
indirectly such Person, any Person that controls or is controlled by or is under
common control with such Person, and each of such Person’s senior executive
officers, directors, and partners.
“Asset
Coverage Ratio” means (a) all unrestricted cash and cash equivalents in which
Bank has a perfected security interest plus (b) Eligible Accounts, divided by
(x) all Obligations owed to Bank plus (y) employee-related accruals plus (z)
accounts payable over 90 days from invoice date (excluding those accounts
payable that are materially aged resulting from the inability to make such
payment because the account debtor has ceased operations).
“Bank
Expenses” means all: reasonable costs or expenses (including
reasonable attorneys’ fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
reasonable Collateral audit fees; and Bank’s reasonable attorneys’ fees and
expenses incurred in amending, enforcing or defending the Loan Documents
(including fees and expenses of appeal), incurred before, during and after an
Insolvency Proceeding, whether or not suit is brought.
“Borrower’s
Books” means all of Borrower’s books and records including: ledgers;
records concerning Borrower’s assets or liabilities, the Collateral, business
operations or financial condition; and all computer programs, or tape files, and
the equipment, containing such information.
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“Borrowing
Base” means an amount equal to (a) eighty percent (80%) of Eligible Accounts
plus (b) UK Eligible Accounts as determined by Bank with reference to the most
recent Borrowing Base Certificate delivered by Borrower.
“Business
Day” means any day that is not a Saturday, Sunday, or other day on which banks
in the State of California are authorized or required to close.
“Cash”
means unrestricted cash and cash equivalents.
“Capital
Stock” means (i) with respect to any Person that is a corporation, any and
all shares, interests, participations or other equivalents (however designated
and whether or not voting) of corporate stock, and (ii) with respect to any
Person that is not a corporation, any and all partnership, membership or other
equity interests of such Person.
“Change
in Control” shall mean a transaction in which any “person” or “group” (within
the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient number
of shares of all classes of stock then outstanding of Borrower ordinarily
entitled to vote in the election of directors, empowering such “person” or
“group” to elect a majority of the Board of Directors of Borrower, who did not
have such power before such transaction.
“Closing
Date” means the date of this Agreement.
“Code”
means the California Uniform Commercial Code.
“Collateral”
means the property described on Exhibit A attached
hereto.
"Collections"
means all payments from or on behalf of an account debtor with respect to
Accounts.
“Contingent
Obligation” means, as applied to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another;
(ii) any obligations with respect to undrawn letters of credit, corporate
credit cards, or merchant services issued or provided for the account of that
Person; and (iii) all obligations arising under any agreement or
arrangement designed to protect such Person against fluctuation in interest
rates, currency exchange rates or commodity prices; provided, however, that the
term “Contingent Obligation” shall not include endorsements for collection or
deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by Bank in good faith;
provided, however, that such amount shall not in any event exceed the maximum
amount of the obligations under the guarantee or other support
arrangement.
“Copyrights”
means any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and derivative
work thereof.
“Credit
Extension” means each Advance, Letter of Credit, use of Cash Management Services
or Foreign Exchange Facility or any other extension of credit by Bank for the
benefit of Borrower hereunder.
“Daily
Balance” means the amount of the Obligations owed at the end of a given
day.
“Domestic
Subsidiaries” means the following wholly owned subsidiaries of Borrower: MIVA
Direct, Inc. and B&B Advertising, Inc. (fka B&B Enterprises,
Inc.).
“Eligible
Accounts” means those Accounts that arise in the ordinary course of Borrower’s
business that comply with all of Borrower’s representations and warranties to
Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank’s reasonable judgment and upon discussion with Borrower prior to the
effectiveness of such revisions, in accordance with the provisions
hereof. Unless otherwise agreed to by Bank, Eligible Accounts shall
not include the following:
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(a) Accounts
that the account debtor has failed to pay within ninety (90) days of invoice
date;
(b) Accounts
with respect to an account debtor, thirty-five percent (35%) of whose Accounts
the account debtor has failed to pay within ninety (90) days of invoice
date;
(c) Accounts
with respect to which the account debtor is an officer, employee, or agent of
Borrower;
(d) Accounts
with respect to which goods are placed on consignment, guaranteed sale, sale or
return, sale on approval, ▇▇▇▇ and hold, pre-billed, or other terms by reason of
which the payment by the account debtor may be conditional;
(e) Accounts
with respect to which the account debtor is an Affiliate of
Borrower;
(f)
Accounts with respect to which the account debtor does not have its
principal place of business in the United States, except for Eligible Foreign
Accounts and Eligible UK Accounts;
(g) Accounts
with respect to which the account debtor is the United States or any department,
agency, or instrumentality of the United States, except for Accounts of the
United States if the payee has assigned its payment rights to Bank and the
assignment has been acknowledged under the Assignment of Claims Act of 1940 (31
U.S.C. 3727);
(h) Accounts
with respect to which Borrower is liable to the account debtor for goods sold or
services rendered by the account debtor to Borrower or for deposits or other
property of the account debtor held by Borrower, but only to the extent of any
amounts owing to the account debtor against amounts owed to
Borrower;
(i)
Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed thirty
percent (30%) of all Accounts (“Concentration Limit”), to the extent such
obligations exceed the aforementioned percentage, except as approved in writing
by Bank; provided,
however, the Concentration Limit with respect to Accounts in which the
account debtor is Google, Inc. shall be forty-five percent (45%) ;
(j)
Accounts with respect to which the account debtor
disputes liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute (but
only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(k)
Progress and retention ▇▇▇▇▇▇▇▇; and
(l)
Accounts the collection of which Bank reasonably
determines to be doubtful.
“Eligible
Foreign Accounts” means Accounts with respect to which the account debtor does
not have its principal place of business in the United States or United Kingdom,
and that (i) are supported by one or more letters of credit in an amount
and of a tenor, and issued by a financial institution, acceptable to Bank, or
(ii) that Bank reasonably approves on a case-by-case basis.
“Eligible
UK Accounts” means the lesser of $3,500,000 or sixty five percent (65%) of UK
Accounts; provided,
that Bank has perfected its first priority security interest in the assets of
MIVA UK, and provided further
that the standards of eligibility may be fixed and revised from time to
time by Bank in Bank’s reasonable judgment and upon notification thereof to
Borrower in accordance with the provisions hereof. Unless otherwise
agreed to by Bank, Eligible UK Accounts shall not include the
following:
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(a) UK
Accounts that the account debtor has failed to pay within ninety (90) days of
invoice date;
(b) UK
Accounts with respect to an account debtor, thirty-five percent (35%) of whose
Accounts the account debtor has failed to pay within ninety (90) days of invoice
date;
(c) UK
Accounts with respect to which the account debtor is an officer, employee, or
agent of Borrower;
(d) UK
Accounts with respect to which goods are placed on consignment, guaranteed sale,
sale or return, sale on approval, ▇▇▇▇ and hold, pre-billed or other terms by
reason of which the payment by the account debtor may be
conditional;
(e) UK
Accounts with respect to which the account debtor is an Affiliate of Borrower or
MIVA UK;
(f) UK
Accounts with respect to which the account debtor has its principal place of
business in the United States;
(g) UK
Accounts with respect to which Borrower is liable to the account debtor for
goods sold or services rendered by the account debtor to Borrower or for
deposits or other property of the account debtor held by Borrower, but only to
the extent of any amounts owing to the account debtor against amounts owed to
Borrower;
(h) UK
Accounts with respect to an account debtor, including Subsidiaries and
Affiliates, whose total obligations to Borrower exceed thirty percent (30%) of
all UK Accounts, to the extent such obligations exceed the aforementioned
percentage, except as approved in writing by Bank;
(i)
UK Accounts with respect to which the account debtor disputes liability or
makes any claim with respect thereto as to which Bank believes, in its sole
discretion, that there may be a basis for dispute (but only to the extent of the
amount subject to such dispute or claim), or is subject to any Insolvency
Proceeding, or becomes insolvent, or goes out of business; and
(j)
Progress and retention ▇▇▇▇▇▇▇▇; and
(k) UK
Accounts the collection of which Bank reasonably determines to be
doubtful.
“Equipment”
means all present and future machinery, equipment, tenant improvements,
furniture, fixtures, vehicles, tools, parts and attachments in which Borrower
has any interest.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the
regulations thereunder.
“Event of
Default” has the meaning assigned in Article 8.
“GAAP”
means generally accepted accounting principles as in effect from time to
time.
“Guarantor”
means MIVA UK.
“Indebtedness”
means (a) all indebtedness for borrowed money or the deferred purchase
price of property or services, including without limitation reimbursement and
other obligations with respect to surety bonds and letters of credit,
(b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
“Insolvency
Proceeding” means any proceeding commenced by or against any person or entity
under any provision of the United States Bankruptcy Code, as amended, or under
any other bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extension generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
relief.
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“Intellectual Property Collateral”
means all of Borrower’s right, title, and interest in and to the following:
Copyrights, Trademarks and Patents; all trade secrets, all design rights, claims
for damages by way of past, present and future infringement of any of the rights
included above, all licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights; all amendments, renewals and
extensions of any of the Copyrights, Trademarks or Patents; and all proceeds and
products of the foregoing, including without limitation all payments under
insurance or any indemnity or warranty payable in respect of any of the
foregoing.
“Inventory”
means all inventory in which Borrower has or acquires any interest, including
work in process and finished products intended for sale or lease or to be
furnished under a contract of service, of every kind and description now or at
any time hereafter owned by or in the custody or possession, actual or
constructive, of Borrower, including such inventory as is temporarily out of its
custody or possession or in transit and including any returns upon any accounts
or other proceeds, including insurance proceeds, resulting from the sale or
disposition of any of the foregoing and any documents of title representing any
of the above, and Borrower’s Books relating to any of the
foregoing.
“Investment”
means any beneficial ownership of (including stock, partnership interest or
other securities) any Person, or any loan, advance or capital contribution to
any Person.
“IRC”
means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
“Lien”
means any mortgage, lien, deed of trust, charge, pledge, security interest or
other encumbrance.
“Loan
Documents” means, collectively, this Agreement, any note or notes executed by
Borrower, and any other agreement entered into in connection with this
Agreement, all as amended or extended from time to time.
“Material
Adverse Effect” means a material adverse effect on (i) the business
operations, condition (financial or otherwise) of Borrower and its Subsidiaries
taken as a whole or (ii) the ability of Borrower to repay the Obligations
or otherwise perform its obligations under the Loan Documents or (iii) the
value or priority of Bank’s security interests in the Collateral.
“Minimum
Cash Ratio” means a ratio of (a) all Cash maintained at Bank plus (b) 50% of
Cash held in an account in the United Kingdom under the name of MIVA UK in which
Bank has a perfected first priority security interest (in any event not to
exceed the lesser of 50% of such account’s balance or $600,000) to all
Obligations owed to Bank.
“MIVA UK”
means MIVA (UK) Limited., a company incorporated under the laws of England and
Wales.
“Negotiable
Collateral” means all letters of credit of which Borrower is a beneficiary,
notes, drafts, instruments, securities, documents of title, and chattel paper,
and Borrower’s Books relating to any of the foregoing.
“Obligations”
means all debt, principal, interest, Bank Expenses and other amounts owed to
Bank by Borrower pursuant to this Agreement or any other agreement, whether
absolute or contingent, due or to become due, now existing or hereafter arising,
including any interest that accrues after the commencement of an Insolvency
Proceeding and including any debt, liability, or obligation owing from Borrower
to others that Bank may have obtained by assignment or otherwise.
“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.
“Periodic
Payments” means all installments or similar recurring payments that Borrower may
now or hereafter become obligated to pay to Bank pursuant to the terms and
provisions of any instrument, or agreement now or hereafter in existence between
Borrower and Bank.
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“Permitted
Indebtedness” means:
(a) Indebtedness
of Borrower in favor of Bank arising under this Agreement or any other Loan
Document;
(b) Indebtedness
existing on the Closing Date and disclosed in the Schedule;
(c) Indebtedness
secured by a lien described in clause (c) of the defined term “Permitted
Liens,” provided (i) such Indebtedness does not exceed the lesser of the
cost or fair market value of the equipment financed with such Indebtedness and
(ii) such Indebtedness does not exceed $500,000 in the aggregate at any
given time;
(d) Subordinated
Debt;
(e) Indebtedness
to trade creditors, trade payables, accruals and accounts payable incurred in
the ordinary course of business, and contingent liabilities arising out of
endorsements of checks and other negotiable instruments for deposit or
collection in the ordinary course of business;
(f) Guaranties
of any Indebtedness permitted hereunder;
(g) Indebtedness
in respect of intercompany loans between Borrower and any Subsidiary of Borrower
which Bank has a perfected first priority security interest in such Subsidiary’s
assets;
(h) Indebtedness
of any Subsidiary to Borrower or another Subsidiary and Indebtedness of Borrower
to any Subsidiary not to exceed $500,000 in aggregate principal amount at any
time (including any amounts considered as investment into such entities under in
clause (i) of Permitted Investment);
(i) Obligations
to pay rentals; and
(j) Obligations
of Borrower under interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements, or any other agreements or arrangements
designed to protect Borrower against fluctuations in interest rates, currency
exchange rates or commodity prices.
“Permitted
Investment” means:
(a) Investments
existing on the Closing Date disclosed in the Schedule;
(b) Property
to be used in the ordinary course of business;
(c) Assets
arising from the sale of goods and services in the ordinary course of business
of Borrower or any of its Subsidiaries;
(d) Investments
in direct obligations of the United States of America, or any agency thereof or
obligations guaranteed by the United States of America; provided that such
obligations mature within one year from the date of acquisition
thereof;
(e) Investments
in certificates of deposit maturing within one year from the date of acquisition
and fully insured by the Federal Deposit Insurance Corporation;
(f) Investments
in commercial paper maturing not more than 270 days from the date of creation
thereof and currently having rating of at least A-2 or P-2 from either
Standard & Poor’s Corporation or ▇▇▇▇▇’▇ Investors
Service;
(g) Investments
in money market, mutual or similar funds having assets in excess of $100,000,000
and the investments of which are limited to investment grade
securities;
(h) Investments
by Borrower in any Subsidiary of Borrower in which Bank has a perfected first
priority security interest; and
(i) Investments
of Subsidiaries in or to other Subsidiaries or Borrower and Investments by
Borrower in Subsidiaries not to exceed $500,000 in the aggregate at any time
(including amounts considered as indebtedness of entities under clause (h) of
Permitted Indebtedness).
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“Permitted
Liens” means the following:
(a)
Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan
Documents;
(b)
Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank’s
security interests;
(c)
Liens (i) upon or in any equipment which was not financed by Bank
acquired or held by Borrower or any of its Subsidiaries to secure the purchase
price of such equipment or indebtedness incurred solely for the purpose of
financing the acquisition of such equipment, or (ii) existing on such
equipment at the time of its acquisition, provided that the Lien is confined
solely to the property so acquired and improvements thereon, and the proceeds of
such equipment;
(d)
Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (a) through (c) above, provided that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase
(e)
Liens arising in the ordinary course of the business of
Borrower or any of its Subsidiaries by operation of law or regulation (including without limitation, Liens of mechanics and
materialmen), if payment in respect of any such Lien is not at the time
required and such Liens do not, in the aggregate, materially detract from the
value of the Property of Borrower or any of its Subsidiaries or materially
impair the use thereof in the operation of the business of Borrower or any of
its Subsidiaries;
(f)
Liens
securing hedging obligations issued
on terms permitted by this
Agreement;
(g)
Liens incurred or deposits made in the ordinary course of business in
connection with (1) worker’s compensation, social security, unemployment
insurance and other like laws or (2) sales contracts, leases, statutory
obligations, work in progress advances and other similar obligations not
incurred in connection with the borrowing of money or the payment of the
deferred purchase price of property;
(h)
Reservations, covenants, zoning and other
land use regulations, title exceptions or encumbrances granted in the ordinary
course of business, affecting real property owned or leased by Borrower or one
of its Subsidiaries; provided that such
exceptions do not in the aggregate materially interfere with the use of such
property in the ordinary course of Borrower’s or such Subsidiary’s
business;
(i) Liens
arising from judgments that do not give rise to an Event of Default, including
under Section 8.7; and
(j)
Liens securing Subordinated Debt.
“Person”
means any individual, sole proprietorship, partnership, limited liability
company, joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, firm, joint stock company,
estate, entity or governmental agency.
"Prime
Rate" means the greater of 5.00% or the Prime Rate published in the Money Rates
section of the Western Edition of The Wall Street Journal, or such other rate of
interest publicly announced from time to time by Lender as its Prime
Rate. Lender may price loans to its customers at, above or below the
Prime Rate. Any change in the Prime Rate shall take effect at
the opening of business on the day specified in the public announcement of a
change in Prime Rate.
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“Responsible
Officer” means each of the Chief Executive Officer, the Chief Operating Officer,
the Chief Financial Officer, the General Counsel, Senior Vice President of
Finance, and the Controller of Borrower.
“Revolving
Facility” means the facility under which Borrower may request Bank to issue
Advances, as specified in Section 2.1(a) hereof.
“Revolving
Line” means a credit extension of up to Ten Million Dollars
($10,000,000).
“Revolving
Maturity Date” means the second anniversary of the Closing Date.
“Schedule”
means the schedule of exceptions attached hereto and approved by Bank, if
any.
“Shares”
means securities representing 65% of the aggregate voting power of the issued
and outstanding Capital Stock and ownership interests of MIVA
UK. Notwithstanding the foregoing, the term “Shares” shall not
include securities representing at any time more than 65% of the aggregate
voting power of the Capital Stock of a “controlled foreign corporation,” as
defined in Section 957 of the Code.
“Subordinated
Debt” means any debt incurred by Borrower that is subordinated to the debt owing
by Borrower to Bank in a manner reasonably acceptable to Bank (and identified as
being such by Borrower and Bank).
“Subsidiary”
means any corporation, company or partnership in which (i) any general
partnership interest or (ii) more than 50% of the stock or other units of
ownership which by the terms thereof has the ordinary voting power to elect the
Board of Directors, managers or trustees of the entity, at the time as of which
any determination is being made, is owned by Borrower, either directly or
through an Affiliate.
“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.
“UK
Accounts” means those means all presently existing and hereafter arising
accounts, contract rights, payment intangibles, and all other forms of
obligations owing to MIVA UK arising out of the sale or lease of goods
(including, without limitation, the licensing of software and other technology)
or the rendering of services by MIVA UK, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor, as
well as all merchandise returned to or reclaimed by MIVA UK and MIVA UK’s Books
relating to any of the foregoing, that (a) arise in the ordinary course of MIVA
UK’s business, (b) are bona fide existing obligations, (c) the property and
services giving rise to such Accounts has been delivered or rendered to the
account debtor or to the account debtor’s agent for immediate and unconditional
acceptance by the account debtor, and (d) neither Borrower nor MIVA UK has
received notice of actual or imminent Insolvency Proceeding of any account
debtor that is included in any Borrowing Base Certificate as an Eligible UK
Account.
1.2 Accounting
Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP and all calculations made hereunder
shall be made in accordance with GAAP. When used herein, the terms
“financial statements” shall include the notes and schedules
thereto.
2.
Loan and
Terms Of Payment.
2.1 Credit
Extensions.
Borrower
promises to pay to the order of Bank, in lawful money of the United States of
America, the aggregate unpaid principal amount of all Credit Extensions made by
Bank to Borrower hereunder. Borrower shall also pay interest on the
unpaid principal amount of such Credit Extensions at rates in accordance with
the terms hereof.
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(a)
Revolving Advances.
(i)
Subject to and upon the terms and conditions of this Agreement, Borrower may
request Advances in an aggregate outstanding amount not to exceed the lesser of
(i) the Revolving Line or (ii) the Borrowing Base, less any outstanding Letter
of Credit Outstandings, Cash Management Outstandings, and Foreign Exchange
Outstandings (all as defined below). Subject to the terms and conditions of this
Agreement, amounts borrowed pursuant to this Section 2.1(a) may be repaid and
reborrowed at any time prior to the Revolving Maturity Date, at which time all
Advances under this Section 2.1(a) shall be immediately due and
payable. Borrower may prepay any Advances without penalty or premium,
including in case of overadvances pursuant to Section 2.2.
(ii)
Whenever
Borrower desires an Advance, Borrower will notify Bank by facsimile transmission
or telephone no later than 3:00 p.m. Pacific time, on the Business Day that the
Advance is to be made. Each such notification shall be promptly
confirmed by a Payment/Advance Form in substantially the form of Exhibit B
hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank’s discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given
by a person who Bank reasonably believes to be a Responsible Officer or a
designee thereof, and Borrower shall indemnify and hold Bank harmless for any
damages or loss suffered by Bank as a result of such reliance. Bank
will credit the amount of Advances made under this Section 2.1(a) to Borrower’s
deposit account.
(b) Letter of Credit
Sublimit. Subject to the terms and conditions of this
Agreement, at any time prior to the Revolving Maturity Date, Bank agrees to
issue letters of credit for the account of Borrower (each, a “Letter of Credit”
and collectively, the “Letters of Credit”) in an aggregate outstanding face
amount (the “Letter of Credit Outstandings”) not to exceed the lesser of the
Revolving Line or the Borrowing Base minus, in each case, the aggregate amount
of the outstanding Advances, Cash Management Outstandings and the Foreign
Exchange Outstandings at any time, provided that the Letter of Credit Advances
Outstandings shall not exceed $750,000. All Letters of Credit shall
be, in form and substance, acceptable to Bank in its sole discretion and shall
be subject to the terms and conditions of Bank’s form of standard application
and letter of credit agreement (the “Application”), which Borrower hereby agrees
to execute, including payment of Bank’s standard fees based on the face amount
of each Letter of Credit. On any drawn but unreimbursed Letter of
Credit, the unreimbursed amount shall be deemed an Advance under Section
2.1(a). Prior to the Revolving Maturity Date, Borrower shall secure
in cash all obligations under any outstanding Letters of Credit on terms
acceptable to Bank. The obligation of Borrower to reimburse Bank for
drawings made under Letters of Credit shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, the Application, and such Letters of Credit, under all
circumstances whatsoever. Borrower shall indemnify, defend, protect,
and hold Bank harmless from any loss, cost, expense or liability, including,
without limitation, reasonable attorneys’ fees, arising out of or in connection
with any Letters of Credit, except for expenses caused by Bank’s gross
negligence or willful misconduct.
(c) Cash Management
Services. Subject to the terms and conditions of this
Agreement, Bank agrees to make available to Borrower up to $750,000 for Bank’s
cash management services, which may include merchant services, direct deposit of
payroll, business credit card, and check cashing services identified in various
cash management services agreements related to such services (the “Cash
Management Services”). All amounts Bank pays for any Cash Management
Services will be treated as Advances under Section 2.1(a) and the outstanding
amount thereof at any time (collectively, the “Cash Management Outstandings”)
shall reduce, on a dollar-for-dollar basis, the amount available for other
Advances. The Cash Management Services shall be subject to additional
terms set forth in applicable cash management services agreements.
(d)
Foreign Exchange
Facility. Subject to the terms and conditions of this
Agreement, Borrower may, at its option from time to time, enter into foreign
exchange forward contracts (collectively, the “Foreign Exchange Facility”) with
Bank, under which Borrower commits to purchase from or sell to Bank a set amount
of foreign currency more than one Business Day after the contract date (each
such contract a “FX Forward Contract”). Bank will subtract 10%, or
such greater amount as determined by Bank, of each outstanding FX Forward
Contract from a foreign exchange sublimit of $750,000 (the “FX
Reserve”). The total FX Forward Contracts at any one time may not exceed 10
times the amount of the FX Reserve. Ten percent (10%) of the amount
of each outstanding FX Forward Contract shall be treated as Advances under
Section 2.1(a) and shall reduce, so long as outstanding, on a dollar-for-dollar
basis, the amount available for other Advances. Bank may terminate
the FX Forward Contracts if an Event of Default occurs. Each FX
Forward Contract shall be subject to additional terms set forth in the
applicable FX Forward Contract or other agreements executed in connection with
the Foreign Exchange Facility.
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(e) Total Availability of Letter of
Credit Sublimit, Cash Management Services, and Foreign Exchange Facility.
The aggregate amount of (i) Letter of Credit Outstandings, (ii) Cash Management
Outstandings, and (iii) ten (10) times the amount of Foreign Exchange
Outstandings, shall not exceed the lesser of $750,000 or the Borrowing
Base.
2.2 Overadvances. If
the aggregate amount of the outstanding Advances plus the aggregate
face amount of all outstanding Letters of Credit, outstanding amounts under the
Cash Management Services, and outstsanding amounts under the Foreign Exchange
Facility exceeds the lesser of the Revolving Line or the Borrowing Base at any
time, Borrower shall immediately pay to Bank, in cash, the amount of such
excess.
2.3 Interest Rates, Payments, and
Calculations.
(a) Interest
Rates.
(i)
Advances. Except as
set forth in Section 2.3(b), the Advances shall bear interest, on the
outstanding Daily Balance thereof, at a rate equal to one and one half of one
percent (1.50%) above the Prime Rate, provided however, in no event shall the
rate be less than 6.5%.
(b) Late Fee; Default
Rate. If any payment is not made within ten (10) days after
the date such payment is due, Borrower shall pay Bank a late fee equal to the
lesser of (i) five percent (5%) of the amount of such unpaid amount or
(ii) the maximum amount permitted to be charged under applicable
law. No late fee shall be charged on any payments not timely made to
Bank solely due to Bank’s clerical or administrative error. All
Obligations shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.
(c) Payments. Interest
hereunder shall be due and payable on the tenth calendar day of each month
during the term hereof. Bank shall, at its option, charge such
interest, all Bank Expenses, and all Periodic Payments against any of Borrower’s
deposit accounts or against the Revolving Line, in which case those amounts
shall thereafter accrue interest at the rate then applicable
hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder. All payments shall be
free and clear of any taxes, withholdings, duties, impositions or other charges,
to the end that Bank will receive the entire amount of any Obligations payable
hereunder, regardless of source of payment. Payments will initially
be made via auto debit from the Borrower’s account at Bank.
(d) Computation. In the
event the Prime Rate is changed from time to time hereafter, the applicable rate
of interest hereunder shall be increased or decreased, effective as of the day
the Prime Rate is changed, by an amount equal to such change in the Prime
Rate. All interest chargeable under the Loan Documents shall be
computed on the basis of a three hundred sixty (360) day year for the actual
number of days elapsed.
2.4 Lockbox. Borrower
shall enter into a remittance processing services agreement (the “Lockbox
Agreement”) acceptable to Bank. Borrower shall instruct account
debtors on all invoices dated or sent 30 days or more after the Closing Date to
make payments only to the lockbox address. Bank or the lockbox
administrator is authorized to collect all envelopes delivered to the lockbox,
and endorse and deposit all checks into a cash collateral account managed by
Borrower. At any time that the Minimum Cash Ratio falls below 0.50 to
1.00, (a) such cash collateral account shall be managed and controlled solely by
Bank and Borrower will not have access to that account; (b) Bank shall have the
exclusive right to receive all Collections on the Accounts and no Adjustments
will be made without the Bank's consent; (c) Bank shall have, with respect to
any goods related to the Accounts, all the rights and remedies of an unpaid
seller under the California Uniform Commercial Code and other applicable law,
including the rights of replevin, claim and delivery, reclamation and stoppage
in transit; (d) if Borrower receives any payment from any Person, Borrower will
hold that payment in trust for Bank and immediately deliver it in the form
received to Bank; and (e) Bank may request that account debtors pay (by wire
transfer or otherwise) Collections to Bank directly.
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2.5 Crediting
Payments. Subject to the foregoing Section 2.4, prior to the
occurrence of an Event of Default, Bank shall credit a wire transfer of funds,
check or other item of payment to such deposit account or Obligation as Borrower
specifies. After the occurrence of an Event of Default, the receipt
by Bank of any wire transfer of funds, check, or other item of payment shall be
immediately applied to conditionally reduce Obligations, but shall not be
considered a payment on account unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary
contained herein, any wire transfer or payment received by Bank after
12:00 noon Pacific time shall be deemed to have been received by Bank as of
the opening of business on the immediately following Business
Day. Whenever any payment to Bank under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date that is not a
Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue and be payable for
the period of such extension.
2.6 Fees. Borrower
shall pay to Bank the following:
(a) Commitment Fee. On
the Closing Date and annually thereafter, a Facility Fee equal to $50,000, which
shall be nonrefundable;
(b) Warrant Fee. A fee in lieu of
warrant issuance as set forth in Section 3.1(g) below; and
(c) Bank Expenses. On
the Closing Date, all Bank Expenses incurred through the Closing Date, including
reasonable attorneys’ fees and expenses; provided, however, that such Bank
Expenses shall not exceed Thirty-Five Thousand and 00/100 Dollars and, after the
Closing Date, all Bank Expenses, including reasonable attorneys’ fees and
expenses, as and when they are incurred by Bank.
2.7 Term. This
Agreement shall become effective on the Closing Date and, subject to
Section 12.7, shall continue in full force and effect for so long as any
Obligations remain outstanding or Bank has any obligation to make Credit
Extensions under this Agreement. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Credit Extensions under
this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination,
Bank’s Lien on the Collateral shall remain in effect for so long as any
Obligations are outstanding.
3.
Conditions
of Loans.
3.1 Conditions Precedent to Initial
Credit Extension. The obligation of Bank to make the initial
Credit Extension is subject to the condition precedent that Bank shall have
received, in form and substance satisfactory to Bank, the
following:
(a) this
Agreement;
(b) a
certificate of the Secretary of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this
Agreement;
(c) UCC
National Form Financing Statement;
(d) an
intellectual property security agreement;
(e) a
lockbox agreement;
(f) side
letter regarding the judgment set forth in the Memorandum Opinion issued by the
Court of Chancery of the State of Delaware decided on October 22, 2008, as
previously provided to Bank;
(g) a fee of
$150,000 paid to Bank in lieu of the issuance of a warrant to purchase
stock;
(h) agreement
to provide insurance or certificate(s) of insurance naming Bank as loss payee
and additional insured;
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(i) executed
stock powers and share certificates representing Borrower’s interest in
Guarantor;
(j)
UCC-3 Financing Statement with respect to Fifth Third
Bank;
(k) Guaranty,
Debenture and Charge Over Shares executed by Guarantor, perfecting Bank’s
security interest in Guarantor’s assets;
(l)
payment of the fees and Bank Expenses then due specified in
Section 2.6 hereof;
(m) current
financial statements of Borrower;
(n)
an audit of the Collateral and UK Accounts, the results of which have been
provided and are satisfactory to Bank; and
(o) such
other documents, and completion of such other matters, as Bank may reasonably
deem necessary or appropriate.
3.2 Conditions Precedent to all Credit
Extensions. The obligation of Bank to make each Credit
Extension, including the initial Credit Extension, is further subject to the
following conditions:
(a) timely
receipt by Bank of the Payment/Advance Form as provided in Section 2.1;
and
(b) the
representations and warranties contained in Section 5 shall be true and
correct in all material respects on and as of the date of such Payment/Advance
Form and on the effective date of each Credit Extension as though made at and as
of each such date, and no Event of Default shall have occurred and be
continuing, or would exist after giving effect to such Credit
Extension. The making of each Credit Extension shall be deemed to be
a representation and warranty by Borrower on the date of such Credit Extension
as to the accuracy of the facts referred to in this
Section 3.2.
4.
Creation of
Security Interest.
4.1 Grant of Security
Interest. Borrower grants and pledges to Bank a continuing
security interest in all presently existing and hereafter acquired or arising
Collateral in order to secure prompt repayment of any and all Obligations and in
order to secure prompt performance by Borrower of each of its covenants and
duties under the Loan Documents. Except as set forth in the Schedule,
such security interest constitutes a valid, first priority security interest in
the presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof.
4.2 Delivery of Additional Documentation
Required. Borrower shall from time to time execute and deliver
to Bank, at the request of Bank, all Negotiable Collateral, all financing
statements and other documents that Bank may reasonably request, in form
satisfactory to Bank and Borrower, to perfect and continue the perfection of
Bank’s security interests in the Collateral and in order to fully consummate all
of the transactions contemplated under the Loan Documents. Borrower
from time to time may deposit with Bank specific time deposit accounts to secure
specific Obligations. Borrower authorizes Bank to hold such balances in pledge
and to decline to honor any drafts thereon or any request by Borrower or any
other Person to pay or otherwise transfer any part of such balances for so long
as the Obligations are outstanding.
4.3 Pledge of
Shares. Borrower pledges, assigns and grants to Bank a
security interest in all the Shares held or owned of record by Borrower,
together with all proceeds and substitutions thereof, all cash, stock and other
moneys and property paid thereon, all rights to subscribe for securities
declared or granted in connection therewith, and all other cash and noncash
proceeds of the foregoing, as security for the performance of the
Obligations. On the Closing Date, the certificate or certificates for
the Shares will be delivered to Bank, accompanied by an instrument of assignment
duly executed in blank by Borrower. To the extent required by the
terms and conditions governing the Shares, Borrower shall cause the books of
each entity whose Shares are part of the Collateral and any transfer Bank to
reflect the pledge of the Shares. Unless an Event of Default shall
have occurred and be continuing, Borrower shall be entitled to receive and
exercise any benefits accruing to the owner of the Shares, including receive any
proceeds from the Shares, exercise any voting rights with respect to the
relevant Shares and to give consents, waivers and ratifications in respect
thereof, provided that no vote shall be cast or consent, waiver or ratification
given or action taken which would be inconsistent with any of the terms of this
Agreement or which would constitute or create any violation of any of such
terms. All such rights to vote and give consents, waivers and
ratifications shall be suspended upon the occurrence and continuance of an Event
of Default.
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4.4 Right to
Inspect. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower’s usual business hours but no more than once a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower’s Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower’s financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. Representations
and Warranties.
Borrower
represents and warrants as follows:
5.1 Due Organization and
Qualification. Borrower and each Subsidiary is a corporation
duly existing under the laws of its state of incorporation and qualified and
licensed to do business in any state in which the conduct of its business or its
ownership of property requires that it be so qualified or in which the failure
of Borrower or any of its Subsidiaries to be so qualified could reasonably be
expected to have a material adverse effect.
5.2 Due Authorization; No
Conflict. The execution, delivery, and performance of the Loan
Documents are within Borrower’s powers, have been duly authorized, and are not
in conflict with nor constitute a breach of any provision contained in
Borrower’s Articles of Incorporation or Bylaws, nor will they constitute an
event of default under any material agreement to which Borrower is a party or by
which Borrower is bound. Borrower is not in default under any
material agreement to which it is a party or by which it is bound.
5.3 No Prior
Encumbrances. Borrower has good and marketable title to its
property (excluding Equipment subject to Liens permitted under subsection (c) of
the definition of Permitted Liens), free and clear of Liens, except for
Permitted Liens.
5.4 Bona Fide Eligible
Accounts. The Eligible Accounts are bona fide existing
obligations. The property and services giving rise to such Eligible
Accounts has been delivered or rendered to the account debtor or to the account
debtor’s agent for immediate and unconditional acceptance by the account
debtor. Borrower has not received notice of actual or imminent
Insolvency Proceeding of any account debtor that is included in any Borrowing
Base Certificate as an Eligible Account.
5.5 Merchantable
Inventory. All Inventory is in all material respects of good
and marketable quality, free from all material defects, except for Inventory for
which adequate reserves have been made.
5.6 Intellectual Property
Collateral. Borrower is the sole owner of the Intellectual
Property Collateral, except for non-exclusive licenses granted by Borrower to
its customers in the ordinary course of business. To the best of
Borrower’s knowledge, each of the Patents is valid and
enforceable. No part of the Intellectual Property Collateral has been
judged invalid or unenforceable, in whole or in part, and no claim has been made
that any part of the Intellectual Property Collateral violates the rights of any
third party. Except as set forth in the Schedule, Borrower’s rights
as a licensee of intellectual property do not give rise to more than five
percent (5%) of its gross revenue in any given month, including without
limitation revenue derived from the sale, licensing, rendering or disposition of
any product or service. Except as set forth in the Schedule, Borrower
is not a party to, or bound by, any agreement that restricts the grant by
Borrower of a security interest in Borrower’s rights under such
agreement.
5.7 Name; Location of Chief Executive
Office. Except as disclosed in the Schedule, Borrower has not
done business under any name other than that specified on the signature page
hereof. The chief executive office of Borrower is located at the
address indicated in Section 10 hereof. All Borrower’s Inventory
and Equipment is located only at the locations set forth in the
Schedule.
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5.8 Litigation. Except
as set forth in the Schedule, there are no actions or proceedings pending by or
against Borrower or any Subsidiary before any court or administrative agency in
which an adverse decision could have a Material Adverse Effect, or a material
adverse effect on Borrower’s interest or Bank’s security interest in the
Collateral.
5.9
No Material Adverse Change in
Financial Statements. All consolidated and consolidating
financial statements related to Borrower and any Subsidiary that Bank has
received from Borrower fairly present in all material respects Borrower’s
financial condition as of the date thereof and Borrower’s consolidated and
consolidating results of operations for the period then ended. There
has not been a material adverse change in the consolidated or the consolidating
financial condition of Borrower since the date of the most recent of such
financial statements submitted to Bank.
5.10 Solvency, Payment of
Debts. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.11 Regulatory
Compliance. Borrower and each Subsidiary have met the minimum
funding requirements of ERISA with respect to any employee benefit plans subject
to ERISA, and no event has occurred resulting from Borrower’s failure to comply
with ERISA that could result in Borrower’s incurring any material
liability. Borrower is not an “investment company” or a company
“controlled” by an “investment company” within the meaning of the Investment
Company Act of 1940. Borrower is not engaged principally, or as one
of the important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulations T
and U of the Board of Governors of the Federal Reserve
System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes,
laws, ordinances or rules applicable to it, violation of which could have a
Material Adverse Effect.
5.12 Environmental
Condition. Except as disclosed in the Schedule, none of
Borrower’s or any Subsidiary’s properties or assets has ever been used by
Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous
owners or operators, in the disposal of, or to produce, store, handle, treat,
release, or transport, any hazardous waste or hazardous substance other than in
accordance with applicable law; to the best of Borrower’s knowledge, none of
Borrower’s properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.13 Taxes. Borrower and
each Subsidiary have filed or caused to be filed all tax returns required to be
filed, and have paid, or have made adequate provision for the payment of, all
taxes reflected therein, except where such failure to file or pay could not have
a material adverse effect on the Company.
5.14 Subsidiaries. Borrower
does not own any stock, partnership interest or other equity securities of any
Person, except for Permitted Investments.
5.15 Government
Consents. Borrower and each Subsidiary have obtained all
material consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower’s business as currently
conducted.
5.16 Accounts. Except as
set forth on the Schedule, none of Borrower’s nor any domestic Subsidiary’s
property is maintained or invested with a Person other than
Bank.
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5.17 Shares. Borrower
has full power and authority to create a first lien on the Shares and no
disability or contractual obligation exists that would prohibit Borrower from
pledging the Shares pursuant to this Agreement. There are no
subscriptions, warrants, rights of first refusal or other restrictions on
transfer relative to, or options exercisable with respect to the
Shares. The Shares have been and will be duly authorized and validly
issued, and are fully paid and non-assessable. The Shares are not the
subject of any present or threatened suit, action, arbitration, administrative
or other proceeding, and Borrower knows of no reasonable grounds for the
institution of any such proceedings.
5.18 Full Disclosure. No
representation, warranty or other statement made by Borrower in any certificate
or written statement furnished to Bank contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained in such certificates or statements not
misleading.
6.
Affirmative
Covenants.
Borrower
shall do all of the following:
6.1 Good
Standing. Borrower shall maintain its and each of its
Subsidiaries’ corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which it is
required under applicable law. Borrower shall maintain, and shall
cause each of its Subsidiaries to maintain, in force all licenses, approvals and
agreements, the loss of which could have a Material Adverse Effect.
6.2 Government
Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply,
and shall cause each Subsidiary to comply, with all statutes, laws, ordinances
and government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect.
6.3 Financial Statements, Reports,
Certificates. Borrower shall deliver the following to
Bank: (a) as soon as available, but in any event within thirty
(30) days after the end of each calendar month, a company prepared consolidated
balance sheet, income, and cash flow statement covering Borrower’s consolidated
operations during such period, prepared in accordance with GAAP, consistently
applied, in a form acceptable to Bank and certified by a Responsible Officer;
(b) as soon as available, but in any event within one hundred and twenty
(120) days after the end of Borrower’s fiscal year, consolidated financial
statements of Borrower prepared in accordance with GAAP, consistently applied,
together with an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank; (c)
copies of all statements, reports and notices sent or made available generally
by Borrower to its security holders or to any holders of Subordinated Debt and,
if applicable, all reports on Forms 10-K and 10-Q filed with the Securities
and Exchange Commission; (d) promptly upon receipt of notice thereof, a
report of any legal actions pending or threatened against Borrower or any
Subsidiary that could result in damages or costs to Borrower or any Subsidiary
of Two Hundred Fifty Thousand Dollars ($250,000) or more; (e) within fifteen
(15) days prior to Borrower’s fiscal year end, an annual operating budget for
the upcoming fiscal year approved by Borrower’s board of directors, and in a
form acceptable to Bank, and (f) such budgets, sales projections, operating
plans or other financial information as Bank may reasonably request from time to
time.
(g) Within
thirty (30) days after the last day of each month, Borrower shall deliver to
Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C-1 and Exhibit C-2 hereto, together
with aged listings of accounts receivable and accounts payable; provided however, that at all
times when the Minimum Cash Ratio falls below 0.50 to 1.00, Borrower shall
deliver the Borrowing Base Certificate and aged listings of accounts receivable
and accounts payable twice per month, no later than five days following the
1st
and the 15th of each
month.
(h) Borrower
shall deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in substantially the form of Exhibit D
hereto.
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(i) Bank
shall have a right from time to time hereafter to audit Borrower’s Accounts and
appraise Collateral at Borrower’s expense, provided that such audits will be
conducted at least every twelve (12) months (and no more than once per year)
unless an Event of Default has occurred and is continuing. Notwithstanding the
foregoing, at all times that the Minimum Cash Ratio falls below 0.50 to 1.00,
Bank shall have a right to (i) audit and appraise Borrower’s Collateral at
Borrower’s expense twice per year and (ii) independently verify Borrower’s
Accounts as Bank deems reasonably necessary, including the review of any and all
records pertaining to the Accounts, contacting account debtors and other persons
obligated or knowledgeable in respect of Accounts to confirm the receivable
amount of such Accounts, to determine whether Accounts constitute Eligible
Accounts, and for any other purpose in connection with this
Agreement.
6.4 Inventory;
Returns. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects except for Inventory for
which adequate reserves have been made. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Two
Hundred Fifty Thousand Dollars ($250,000).
6.5 Taxes. Borrower
shall make, and shall cause each Subsidiary to make, due and timely payment or
deposit of all material federal, state, and local taxes, assessments, or
contributions required of it by law, and will execute and deliver to Bank, on
demand, appropriate certificates attesting to the payment or deposit thereof;
and Borrower will make, and will cause each Subsidiary to make, timely payment
or deposit of all material tax payments and withholding taxes required of it by
applicable laws, including, but not limited to, those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Bank with proof satisfactory to Bank indicating that
Borrower or a Subsidiary has made such payments or deposits; provided that
Borrower or a Subsidiary need not make any payment if the amount or validity of
such payment is contested in good faith by appropriate proceedings and is
reserved against (to the extent required by GAAP) by Borrower.
6.6 Insurance.
(a) Borrower,
at its expense, shall keep the Collateral insured against loss or damage by
fire, theft, explosion, sprinklers, and all other hazards and risks, and in such
amounts, as ordinarily insured against by other owners in similar businesses
conducted in the locations where Borrower’s business is conducted on the date
hereof. Borrower shall also maintain insurance relating to Borrower’s
business, ownership and use of the Collateral in amounts and of a type that are
customary to businesses similar to Borrower’s.
(b) All
such policies of insurance shall be in such form, with such companies, and in
such amounts as are reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender’s loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof, and all liability insurance policies shall show the Bank as an
additional insured and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any
reason. Upon Bank’s request, Borrower shall deliver to Bank
certificates evidencing such policies of insurance and evidence of the payments
of all premiums therefor. All proceeds payable under any such policy
shall, at the option of Bank, be payable to Bank to be applied on account of the
Obligations.
6.7 Accounts. Within 60
days of the Closing Date, Borrower shall transfer and maintain, and shall cause
each of its domestic Subsidiaries to transfer and maintain, all of its primary
depository and investment accounts with Bank. Any deposit, operating
or short-term investment accounts not held at Bank or Bank’s affiliates shall be
subject to an account control agreement or other appropriate instrument
satisfactory to Bank to perfect Bank’s Lien in such account in accordance with
the terms hereunder.
6.8 Asset Coverage
Ratio. Borrower shall maintain at all times an Asset Coverage
Ratio of at least 1.50 to 1.00, to be measured on a monthly basis.
6.9 AEBITDA. Borrower
shall maintain a maximum AEBITDA loss of ($500,000) for the quarter ending March
31, 2009, and for each quarter thereafter, a minimum AEBITDA of
$1,000,000.
16
6.10 Intellectual Property
Rights.
(a) Borrower
shall promptly give Bank written notice of any applications or registrations of
intellectual property rights filed with the United States Patent and Trademark
Office, including the date of such filing and the registration or application
numbers, if any. Borrower shall (i) give Bank not less than 30 days
prior written notice of the filing of any applications or registrations with the
United States Copyright Office, including the title of such intellectual
property rights to be registered, as such title will appear on such applications
or registrations, and the date such applications or registrations will be filed,
and (ii) prior to the filing of any such applications or registrations, shall
execute such documents as Bank may reasonably request for Bank to maintain its
perfection in such intellectual property rights to be registered by Borrower,
and upon the request of Bank, shall file such documents simultaneously with the
filing of any such applications or registrations. Upon filing any
such applications or registrations with the United States Copyright Office,
Borrower shall promptly provide Bank with (i) a copy of such applications or
registrations, without the exhibits, if any, thereto, (ii) evidence of the
filing of any documents requested by Bank to be filed for Bank to maintain the
perfection and priority of its security interest in such intellectual property
rights, and (iii) the date of such filing.
(b) Bank
may audit Borrower's Intellectual Property Collateral to confirm compliance with
this Section, provided such audit may not occur more often than twice per year,
unless an Event of Default has occurred and is continuing. Bank shall
have the right, but not the obligation, to take, at Borrower's sole expense, any
actions that Borrower is required under this Section to take but which Borrower
fails to take, after 15 days' notice to Borrower. Borrower shall
reimburse and indemnify Bank for all reasonable costs and reasonable expenses
incurred in the reasonable exercise of its rights under this
Section.
6.11 Domestic Subsidiary Guarantees.
Within thirty (30) days of the Closing Date, Borrower shall cause its
Domestic Subsidiaries to enter into secured guarantees for the benefit of Bank,
in form and substance previously provided to Borrower and acceptable to
Bank.
6.12 Further
Assurances. At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this
Agreement.
7.
Negative
Covenants.
Borrower
will not do any of the following:
7.1 Dispositions. Convey,
sell, lease, transfer or otherwise dispose of (collectively, a “Transfer”), or
permit any of its Subsidiaries to Transfer, all or any part of its business or
property, other than: (i) Transfers of Inventory in the ordinary
course of business; (ii) Transfers between Borrower and its Subsidiaries,
provided that Bank maintains a perfected security interest in such Subsidiary’s
assets; (iii) Transfers of web properties or domain names in the ordinary course
of business not in excess of Five Million Dollars ($5,000,000), provided that
Bank maintains its perfected security interest in the proceeds of such
Transfers; (iv) Transfers
of non-exclusive licenses and similar arrangements for the use of the property
of Borrower or its Subsidiaries in the ordinary course of business; or
(v) Transfers of worn-out or obsolete Equipment which was not financed by
Bank.
7.2 Change in Business; Change in Control
or Executive Office. Engage in any business, or permit any of
its Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto); or cease to conduct business in the manner conducted by
Borrower as of the Closing Date; or suffer or permit a Change in Control; or
without thirty (30) days prior written notification to Bank, relocate its chief
executive office or state of incorporation or change its legal name; or without
Bank’s prior written consent, change the date on which its fiscal year
ends.
7.3 Mergers or
Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person, except
mergers of any Subsidiary of Borrower into another wholly-owned Subsidiary of
Borrower.
17
7.4 Indebtedness. Create,
incur, assume or be or remain liable with respect to any Indebtedness, or permit
any Subsidiary so to do, other than Permitted Indebtedness.
7.5 Encumbrances. Create,
incur, assume or suffer to exist any Lien with respect to any of its property,
or assign or otherwise convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries so to do, except for Permitted
Liens, or agree with any Person other than Bank not to grant a security interest
in, or otherwise encumber, any of its property, including intellectual property,
or permit any Subsidiary to do so.
7.6 Distributions. Pay
any dividends or make any other distribution or payment on account of or in
redemption, retirement or purchase of any capital stock, or permit any of its
Subsidiaries to do so, except that (i) Borrower may repurchase the stock of
former employees pursuant to stock repurchase agreements, (ii) Borrower may
repurchase the stock of employees or directors upon vesting of restricted stock,
restricted stock units or other stock-based awards or upon exercise of stock
options granted under equity compensation plans maintained by the Borrower in
the ordinary course of business, as long as an Event of Default does not exist
prior to such repurchase or would not exist after giving effect to such
repurchase.
7.7 Investments. Directly
or indirectly acquire or own, or make any Investment in or to any Person, or
permit any of its Subsidiaries so to do, other than Permitted Investments; or
maintain or invest any of its property with a Person other than Bank or permit
any of its Subsidiaries to do so unless such Person has entered into an account
control agreement with Bank in form and substance satisfactory to Bank; or
suffer or permit any Subsidiary to be a party to, or be bound by, an agreement
that restricts such Subsidiary from paying dividends or otherwise distributing
property to Borrower.
7.8 Transactions with
Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower except for
transactions that are in the ordinary course of Borrower’s business, upon fair
and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated
Person. Anything to the contrary in the foregoing notwithstanding,
Borrower and Bank acknowledge that Borrower has entered into and will continue
to enter into certain transactions with Steakmedia and Racepoint Group, entities
in which certain members of Borrower’s Board of Directors act as owners or
executives; such transactions are in the ordinary course of Borrower’s business,
and are upon fair and reasonable terms no less favorable to Borrower than would
be obtained in an arm’s length transaction with a non-affiliated
Person.
7.9 Subordinated
Debt. Make any payment in respect of any Subordinated Debt, or
permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt, or amend any provision contained in
any documentation relating to the Subordinated Debt without Bank’s prior written
consent, not to be unreasonably withheld or delayed.
7.10 Inventory and Equipment. Store
the Inventory or the Equipment with a bailee, warehouseman, or other third party
unless the third party has been notified of Bank’s security interest and Bank
(a) has received an acknowledgment from the third party that it is holding or
will hold the Inventory or Equipment for Bank’s benefit or (b) is in pledge
possession of the warehouse receipt, where negotiable, covering such Inventory
or Equipment. Store or maintain any Equipment or Inventory at a location other
than the location set forth in Section 10 of this Agreement.
7.11 Compliance. Become
an “investment company” or be controlled by an “investment company,” within the
meaning of the Investment Company Act of 1940, or become principally engaged in,
or undertake as one of its important activities, the business of extending
credit for the purpose of purchasing or carrying margin stock, or use the
proceeds of any Credit Extension for such purpose. Fail to meet the
minimum funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur, fail to comply with the Federal Fair
Labor Standards Act or violate any law or regulation, which violation could have
a Material Adverse Effect, or a material adverse effect on the Collateral or the
priority of Bank’s Lien on the Collateral, or permit any of its Subsidiaries to
do any of the foregoing.
18
8.
Events of
Default.
Any one
or more of the following events shall constitute an Event of Default by Borrower
under this Agreement:
8.1 Payment Default. If
Borrower fails to pay, when due, any of the Obligations; provided however,
Borrower’s failure to pay due solely to Bank’s clerical or administrative error
in executing the auto-debit from Borrower’s account in a timely manner shall not
be considered an Event of Default under this Section 8.1;
8.2 Covenant Default.
(a) If
Borrower fails to perform any obligation under Article 6 or violates any of the
covenants contained in Article 7 of this Agreement; or
(b) If
Borrower fails or neglects to perform or observe any other material term,
provision, condition, covenant contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and Bank
and as to any default under such other term, provision, condition or covenant
that can be cured, has failed to cure such default within twenty days after
Borrower receives notice thereof or any officer of Borrower becomes aware
thereof; provided, however, that if the default cannot by its nature be cured
within the ten day period or cannot after diligent attempts by Borrower be cured
within such ten day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed 40 days) to attempt to cure such default, and
within such reasonable time period the failure to have cured such default shall
not be deemed an Event of Default but no Credit Extensions will be
made.
8.3 Material Adverse
Effect. If there occurs any circumstance or circumstances that
could reasonably be expected to have a Material Adverse Effect;
8.4 Attachment. If any
portion of Borrower’s assets is attached, seized, subjected to a writ or
distress warrant, or is levied upon, or comes into the possession of any
trustee, receiver or person acting in a similar capacity and such attachment,
seizure, writ or distress warrant or levy has not been removed, discharged or
rescinded within ten (10) days, or if Borrower is enjoined, restrained, or in
any way prevented by court order from continuing to conduct all or any material
part of its business affairs, or if a judgment or other claim becomes a lien or
encumbrance upon any material portion of Borrower’s assets, or if a notice of
lien, levy, or assessment is filed of record with respect to any of Borrower’s
assets by the United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid within ten (10) days after Borrower receives
notice thereof, provided that none of the foregoing shall constitute an Event of
Default where such action or event is stayed or an adequate bond has been posted
pending a good faith contest by Borrower (provided that no Credit Extensions
will be required to be made during such cure period);
8.5 Insolvency. If
Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by
Borrower, or if an Insolvency Proceeding is commenced against Borrower and is
not dismissed or stayed within thirty (30) days (provided that no Credit
Extensions will be made prior to the dismissal of such Insolvency
Proceeding);
8.6 Other
Agreements. If there is a default or other failure to perform
in any agreement to which Borrower is a party or by which it is bound resulting
in a right by a third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness in an amount in excess of Five Hundred Thousand
Dollars ($500,000) or which could have a Material Adverse Effect;
8.7 Judgments. If a
judgment or judgments for the payment of money in an amount, individually or in
the aggregate, of at least Five Hundred Thousand Dollars ($500,000) shall be
rendered against Borrower and shall remain unsatisfied and unstayed for a period
of thirty (30) days (provided that no Credit Extensions will be made prior to
the satisfaction or stay of such judgment);
19
8.8 Misrepresentations. If
any material misrepresentation or material misstatement exists now or hereafter
in any warranty or representation set forth herein or in any certificate
delivered to Bank by any Responsible Officer pursuant to this Agreement or to
induce Bank to enter into this Agreement or any other Loan Document;
or
8.9
Guaranty. If
any guaranty of all or a portion of the Obligations (a “Guaranty”) ceases for
any reason to be in full force and effect, or any guarantor fails to perform any
obligation under any Guaranty or a security agreement securing any Guaranty
(collectively, the “Guaranty Documents”), or any event of default occurs under
any Guaranty Document or any guarantor revokes or purports to revoke a Guaranty,
or any material misrepresentation or material misstatement exists now or
hereafter in any warranty or representation set forth in any Guaranty Document
or in any certificate delivered to Bank in connection with any Guaranty
Document, or if any of the circumstances described in Sections 8.3 through 8.8
occur with respect to any guarantor or any guarantor dies or becomes subject to
any criminal prosecution, or any circumstances arise causing Bank, in good
faith, to become insecure as to the satisfaction of any of any guarantor’s
obligations under the Guaranty Documents.
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, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by Borrower:
(a) Declare
all Obligations, whether evidenced by this Agreement, by any of the other Loan
Documents, or otherwise, immediately due and payable (provided that upon the
occurrence of an Event of Default described in Section 8.5, all Obligations
shall become immediately due and payable without any action by
Bank);
(b) Demand
that Borrower (i) deposit cash with Bank in an amount equal to the
amount of any Letters of Credit remaining undrawn, as collateral security for
the repayment of any future drawings under such Letters of Credit, and (ii) pay
in advance all Letter of Credit fees scheduled to be paid or payable over the
remaining term of the Letters of Credit, and Borrower shall promptly deposit and
pay such amounts;
(c) Cease
advancing money or extending credit to or for the benefit of Borrower under this
Agreement or under any other agreement between Borrower and Bank;
(d) Settle
or adjust disputes and claims directly with account debtors for amounts, upon
terms and in whatever order that Bank reasonably considers
advisable;
(e) Make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to
assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank’s determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower’s
owned premises, Borrower hereby grants Bank a license to enter into possession
of such premises and to occupy the same, without charge, in order to exercise
any of Bank’s rights or remedies provided herein, at law, in equity, or
otherwise;
(f) Set
off and apply to the Obligations any and all (i) balances and deposits of
Borrower held by Bank, or (ii) indebtedness at any time owing to or for the
credit or the account of Borrower held by Bank;
(g) Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell (in the manner provided for herein) the
Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower’s labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, 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 9.1, Borrower’s
rights under all licenses and all franchise agreements shall inure to Bank’s
benefit;
20
(h) Dispose
of the Collateral by way of one or more contracts or transactions, for cash or
on terms, in such manner and at such places (including Borrower’s premises) as
Bank determines is commercially reasonable, and apply any proceeds to the
Obligations in whatever manner or order Bank deems appropriate;
(i) Bank
may credit bid and purchase at any public sale; and
(j) Any
deficiency that exists after disposition of the Collateral as provided above
will be paid immediately by Borrower.
9.2 Power of
Attorney. Borrower irrevocably appoints Bank and its
successors and assigns as Borrower's true and lawful attorney in fact, and
authorizes Bank, at Borrower's sole expense, whether or not there has been an
Event of Default and at any time the Minimum Cash Ratio is below 0.50 to 1.00,
to (a) receive and open all mail addressed to Borrower for the purpose of
collecting the Accounts; (b) endorse Borrower's name on any checks or other
forms of payment on the Accounts; (c) sign Borrower’s name on any invoice or
▇▇▇▇ of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) execute on behalf of Borrower any and all instruments,
documents, financing statements and the like to perfect Bank's interests in the
Accounts and Collections; (e) to notify all account debtors with respect to the
Accounts to pay Bank directly; (f) demand, collect, receive, ▇▇▇, and give
releases to any account debtor for the monies due or which may become due upon
or with respect to the Accounts and to compromise, prosecute, or defend any
action, claim, case or proceeding relating to the Accounts; and (g) do all acts
and things necessary or expedient, in furtherance of any such
purposes. Furthermore, effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank’s designated officers, or employees) as Borrower’s true
and lawful attorney to: (h) endorse Borrower’s name on any checks or
other forms of payment or security that may come into Bank’s possession; (i)
sell, assign, transfer, pledge, compromise, discharge or otherwise dispose the
whole or any part of the Collateral; (j) make, settle, and adjust all claims
under and decisions with respect to Borrower’s policies of insurance; (k) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; and
(l) to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the
Collateral. The appointment of Bank as Borrower’s attorney in fact,
and each and every one of Bank’s rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully repaid and
performed and Bank’s obligation to provide Credit Extensions hereunder is
terminated.
9.3 Accounts
Collection. At any time that the Minimum Cash Ratio is below
0.50 to 1.00, Bank may notify any Person owing funds to Borrower of Bank’s
security interest in such funds and verify the amount of such
Account. Borrower shall collect all amounts owing to Borrower for
Bank, receive in trust all payments as Bank’s trustee, and immediately deliver
such payments to Bank in their original form as received from the account
debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If
Borrower fails to pay any amounts or furnish any required proof of payment due
to third persons or entities, as required under the terms of this Agreement,
then Bank may do any or all of the following after reasonable notice to
Borrower: (a) make payment of the same or any part thereof;
(b) set up such reserves under a loan facility in Section 2.1 as Bank deems
necessary to protect Bank from the exposure created by such failure; or
(c) obtain and maintain insurance policies of the type discussed in
Section 6.6 of this Agreement, and take any action with respect to such
policies as Bank deems prudent. Any amounts so paid or deposited by
Bank shall constitute Bank Expenses, shall be immediately due and payable, and
shall bear interest at the then applicable rate hereinabove provided, and shall
be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
9.5 Bank’s Liability for
Collateral. So long as Bank complies with reasonable banking
practices, Bank shall not in any way or manner be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or
damage thereto occurring or arising in any manner or fashion from any cause;
(c) any diminution in the value thereof; or (d) any act or default of
any carrier, warehouseman, bailee, forwarding agency, or other person
whomsoever. All risk of loss, damage or destruction of the Collateral
shall be borne by Borrower.
21
9.6 Shares. Borrower
recognizes that Bank may be unable to effect a public sale of any or all the
Shares, by reason of certain prohibitions contained in federal securities laws
and applicable state securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of purchasers
which will be obliged to agree, among other things, to acquire such securities
for their own account for investment and not with a view to the distribution or
resale thereof. Borrower acknowledges and agrees that any such
private sale may result in prices and other terms less favorable than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner. Bank shall be under no obligation to delay a sale of any of
the Shares for the period of time necessary to permit the issuer thereof to
register such securities for public sale under federal securities laws or under
applicable state securities laws, even if such issuer would agree to do
so. Upon the occurrence of an Event of Default which continues, Bank
shall have the right to exercise all such rights as a secured party under the
California Uniform Commercial Code as it, in its sole judgment, shall deem
necessary or appropriate, including without limitation the right to liquidate
the Shares and apply the proceeds thereof to reduce the
Obligations. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank’s designated officers, or employees) as Borrower’s true and
lawful attorney to enforce Borrower’s rights against any Subsidiary, including
the right to compel any Subsidiary to make payments or distributions owing to
Borrower.
9.7 Remedies
Cumulative. Bank’s rights and remedies under this Agreement,
the Loan Documents, and all other agreements shall be
cumulative. Bank shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in
equity. No exercise by Bank of one right or remedy shall be deemed an
election, and no waiver by Bank of any Event of Default on Borrower’s part shall
be deemed a continuing waiver. No delay by Bank shall constitute a
waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.
9.8 Demand;
Protest. Borrower waives demand, protest, notice of protest,
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 at
any time held by Bank on which Borrower may in any way be liable.
10. Notices.
Unless
otherwise provided in this Agreement, all notices or demands by any party
relating to this Agreement or any other agreement entered into in connection
herewith shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by a recognized overnight delivery
service, certified mail, postage prepaid, return receipt requested, or by
telefacsimile to Borrower or to Bank, as the case may be, at its addresses set
forth below:
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If
to Borrower:
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MIVA,
INC.
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|
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
|
|
|
▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|
|
Attn: ▇▇▇▇
▇▇▇▇▇▇▇
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|
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FAX: (▇▇▇)
▇▇▇-▇▇▇▇
|
|
|
with
a copy to:
|
▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ LLP
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One
Prudential Plaza
|
|
|
▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
|
|
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▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
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Attn: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
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FAX: (▇▇▇)
▇▇▇-▇▇▇▇
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If
to Bank:
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Bridge
Bank, National Association
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▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
|
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▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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|
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Attn: Technology
Division
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|
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FAX: (▇▇▇)
▇▇▇-▇▇▇▇
|
The
parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the
other.
22
11.
CHOICE OF
LAW AND VENUE; JURY TRIAL WAIVER.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of California, without regard to principles of conflicts of
law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
▇▇▇▇▇, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND
AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO
ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT
HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
If the
jury waiver set forth in Section is not enforceable, then any dispute,
controversy or claim arising out of or relating to this Agreement, the Loan
Documents or any of the transactions contemplated therein shall be settled by
judicial reference pursuant to Code of Civil Procedure Section 638 et seq.
before a referee sitting without a jury, such referee to be mutually acceptable
to the parties or, if no agreement is reached, by a referee appointed by the
Presiding Judge of the California Superior Court for Santa ▇▇▇▇▇
County. This Section shall not restrict a party from exercising
remedies under the Code or from exercising pre-judgment remedies under
applicable law.
12.
General
Provisions.
12.1 Successors and
Assigns. This Agreement shall bind and inure to the benefit of
the respective successors and permitted assigns of each of the parties;
provided, however, that neither this Agreement nor any rights hereunder may be
assigned by Borrower without Bank’s prior written consent, which consent may be
granted or withheld in Bank’s sole discretion. Bank shall have the
right without the consent of or notice to Borrower to sell, transfer, negotiate,
or grant participation in all or any part of, or any interest in, Bank’s
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower
shall defend, indemnify and hold harmless Bank and its officers, employees, and
agents against: (a) all obligations, demands, claims, losses,
Bank Expenses and liabilities claimed or asserted by any other party in
connection with the transactions contemplated in this Agreement (including
without limitation reasonable attorneys' fees and expenses)except to the extent
caused by Bank’s gross negligence or willful misconduct.
12.3 Time of
Essence. Time is of the essence for the performance of all
obligations set forth in this Agreement.
12.4 Severability of
Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.5 Amendments in Writing,
Integration. Neither this Agreement nor the Loan Documents can
be amended or terminated orally. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties hereto with respect to the subject matter of this Agreement and the Loan
Documents, if any, are merged into this Agreement and the Loan
Documents.
12.6 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, shall be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement.
12.7 Survival. All
covenants, representations and warranties made in this Agreement shall continue
in full force and effect so long as any Obligations remain outstanding or Bank
has any obligation to make Credit Extensions to Borrower. The
obligations of Borrower to indemnify Bank with respect to the expenses, damages,
losses, costs and liabilities described in Section 12.2 shall survive until
all applicable statute of limitations periods with respect to actions that may
be brought against Bank have run.
23
12.8 Confidentiality. In
handling any confidential information Bank and all employees and agents of Bank,
including but not limited to accountants and attorneys, shall exercise the same
degree of care that it exercises with respect to its own proprietary information
of the same types to maintain the confidentiality of any non-public information
thereby received or received pursuant to this Agreement except that disclosure
of such information may be made (i) to the subsidiaries or affiliates of
Bank in connection with their present or prospective business relations with
Borrower, (ii) to prospective transferees or purchasers of any interest in
the Loans, provided that they have entered into a comparable confidentiality
agreement in favor of Borrower and have delivered a copy to Borrower,
(iii) as required by law, regulations, rule or order, subpoena, judicial
order or similar order, (iv) as may be required in connection with the
examination, audit or similar investigation of Bank and (v) as Bank may
determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include
information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such
information.
12.9 Patriot Act. To
help the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify,
and record information that identifies each person who opens an
account. WHAT THIS MEANS FOR YOU: when you open an
account, we will ask your name, address, date of birth, and other information
that will allow us to identify you. We may also ask to see your
driver’s license or other identifying documents.
[remainder
of this page intentionally left blank]
24
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as
of the date first above written.
|
MIVA,
INC.
|
|
|
By:
|
|
|
Title:
|
|
|
By:
|
|
|
Title:
|
|
|
BRIDGE
BANK, NATIONAL ASSOCIATION
|
|
|
By:
|
|
|
Title:
|
|
25
|
DEBTOR:
|
MIVA,
INC.
|
|
SECURED
PARTY:
|
BRIDGE
BANK, NATIONAL
ASSOCIATION
|
EXHIBIT
A
COLLATERAL
DESCRIPTION ATTACHMENT
All
personal property of Borrower (herein referred to as “Borrower”
or “Debtor”) whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:
(a)
all accounts (including health-care-insurance receivables), chattel paper
(including tangible and electronic chattel paper), deposit accounts, documents
(including negotiable documents), equipment (including all accessions and
additions thereto), general intangibles (including intellectual property,
payment intangibles and software), goods (including fixtures), instruments
(including promissory notes), inventory (including all goods held for sale or lease or to be furnished under
a contract of service, and including returns and repossessions), investment
property (including securities and securities entitlements), letter of credit
rights, money, and all of Debtor’s
books and records with respect to any of the foregoing, and the computers and
equipment containing said books and records;
(a)
any and all cash proceeds and/or noncash proceeds of any of the foregoing,
including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the California Uniform Commercial Code,
as amended or supplemented from time to time.
Notwithstanding
the foregoing, the Collateral shall not include any such property that (i)
constitutes the capital stock of a controlled foreign corporation (as defined in
the Internal Revenue Code) in excess of 65% of the voting power
of all classes of capital stock of such controlled foreign corporation entitled
to vote, or (ii) consists of property financed by a third party permitted by
clause (c) of the definition of “Permitted Liens” to the extent prohibited by
the terms of such agreement, for so long as such prohibition remains in
effect.
EXHIBIT
B
ADVANCE
REQUEST
(To
be submitted no later than 2:00 PM to be considered for same day
processing)
|
To:
|
Bridge Bank, National
Association
|
|
Fax:
|
(▇▇▇) ▇▇▇-▇▇▇▇
|
|
Date:
|
|
|
From:
|
MIVA,
INC.
|
|
Borrower’s
Name
|
|
|
Authorized
Signature
|
|
|
Authorized
Signer’s Name (please print)
|
|
|
Phone
Number
|
| To Account # | |
Borrower
hereby requests funding in the amount of $ ____________ in accordance
with the Advance as defined in the Loan and Security Agreement dated November 7,
2008.
Borrower
hereby authorizes Lender to rely on facsimile stamp signatures and treat them as
authorized by Borrower for the purpose of requesting the above
advance.
All
representations and warranties of Borrower stated in the Loan and Security
Agreement are true, correct and complete in all material respects as of the date
of this Advance Request; provided that those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of such
date.
Capitalized
terms used herein and not otherwise defined have the meanings set forth in the
Loan and Security Agreement.
EXHIBIT
C-1
DOMESTIC
ACCOUNTS - BORROWING BASE CERTIFICATE
BRIDGE
BANK
▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
|
Company:
MIVA, INC.
DOMESTIC
ACCOUNTS RECEIVABLE BORROWING BASE CALCULATION:
|
As
of Date:
|
||||||||||||||||
|
1.
|
Add:
Accounts Receivable Aged Current to 30 Days
|
$ | 0 | ||||||||||||||
|
2.
|
Add:
Accounts Receivable Aged 31 to 60 Days
|
$ | 0 | ||||||||||||||
|
3.
|
Add:
Accounts Receivable Aged 61 to 90 Days
|
$ | 0 | ||||||||||||||
|
4.
|
Add:
Accounts
Receivable Aged 91 Days and Over
|
$ | 0 | ||||||||||||||
|
5.
|
GROSS
ACCOUNTS RECEIVABLE
|
$ | 0 | ||||||||||||||
|
6.
|
Less:
Accounts Receivable Aged over
|
90 |
days
|
|
$ | 0 | |||||||||||
|
7.
|
Less:
U.S. Government Receivables (Net of > 90s)
|
$ | 0 | ||||||||||||||
|
8.
|
Less:
Foreign Receivables (Net of > 90s)
|
$ | 0 | ||||||||||||||
|
9.
|
Less:
Affiliate or Related Accounts Receivables (Net of >
90s)
|
$ | 0 | ||||||||||||||
|
10.
|
Less:
Account concentration in excess of
|
30 | % | $ | 0 | $ | 0 | ||||||||||
|
(Google
Accounts in excess of 45%)
|
|||||||||||||||||
|
11.
|
Less:
Cross Aging
|
35 | % | $ | 0 | ||||||||||||
|
12.
|
Less:
Contra Accounts, ▇▇▇▇ & Hold, Prebilled, Progress and Retention
Accounts
|
$ | 0 | ||||||||||||||
|
13.
|
Less:
Over 90 day A/R credits
|
$ | 0 | ||||||||||||||
|
14.
|
Add:
Lines 6 through 13 - Total Ineligible Accounts
|
$ | 0 | ||||||||||||||
|
15.
|
NET
ELIGIBLE ACCOUNTS RECEIVABLE (#5 minus #14)
|
$ | 0 | ||||||||||||||
|
16.
|
Account
Receivable Advance Rate
|
80 | % | ||||||||||||||
|
17.
|
ELIGIBLE
ACCOUNTS (#15
multiplied
by #16)
|
$ | 0 | ||||||||||||||
|
18.
|
ACCOUNTS
RECEIVABLE BORROWING BASE (#17 plus
#18
from Exhibit C-2)
|
$ | 0 | ||||||||||||||
|
19.
|
MAXIMUM
AVAILABLE LINE OF CREDIT
|
$ | 10,000,000 | ||||||||||||||
|
20a.
|
Less: Outstanding
Loan Balance
|
$ | 0 | ||||||||||||||
|
20b.
|
Less:
Outstanding under Sublimits (Letters of Credit, F/X, and Cash
Management)
|
$ | 0 | ||||||||||||||
|
21.
|
AVAILABLE
FOR DRAW/NEED TO PAY (lesser
of
#18
or #19
minus #20a/20b)
|
$ | 0 | ||||||||||||||
If line #20 is a negative number, this amount must be
remitted to the Bank immediately to bring loan balance into compliance.
By signing this form you authorize the bank to deduct any advance amounts
directly from the company’s checking
account at Bridge Bank
in the event there is an Overadvance.
The
undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Bridge Bank, National
Association.
|
Date:
|
||||||
|
By.
|
By:
|
|||||
|
Date:
|
||||||
|
Bank
Reviewed:
|
|
|||||
EXHIBIT
C-2
UK
ACCOUNTS - BORROWING BASE CERTIFICATE
BRIDGE
BANK
▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
|
Company: MIVA,
INC.
UK ACCOUNTS
RECEIVABLE BORROWING BASE
CALCULATION:
|
As
of Date:
|
||||||||||||||||
|
1..
|
Add:
UK Accounts Receivable Aged Current to 30 Days
|
$ | 0 | ||||||||||||||
|
2.
|
Add:
UK Accounts Receivable Aged 31 to 60 Days
|
$ | 0 | ||||||||||||||
|
3.
|
Add:
UK Accounts Receivable Aged 61 to 90 Days
|
$ | 0 | ||||||||||||||
|
4.
|
Add:
UK Accounts Receivable Aged 91 Days and Over
|
$ | 0 | ||||||||||||||
|
5.
|
GROSS
ACCOUNTS RECEIVABLE
|
$ | 0 | ||||||||||||||
|
6.
|
Less:
UK Accounts Receivable Aged over
|
90 | days |
|
$ | 0 | |||||||||||
|
7.
|
Less:
U.S. Accounts Receivables (Net of > 90s)
|
$ | 0 | ||||||||||||||
|
8.
|
Less:
Affiliate or Related UK Accounts Receivables (Net of >
90s)
|
$ | 0 | ||||||||||||||
|
9.
|
Less:
UK Account concentrations in excess of
|
30 | % | $ | 0 | $ | 0 | ||||||||||
|
10.
|
Less:
UK Cross Aging
|
35 | % | $ | 0 | ||||||||||||
|
11.
|
Less:
UK Contra Accounts, ▇▇▇▇ & Hold, Prebilled, Progress and Retention
Accounts
|
$ | 0 | ||||||||||||||
|
12.
|
Less:
Over 90 day UK A/R credits
|
$ | 0 | ||||||||||||||
|
13.
|
Add:
Lines 6 through 12 - Total Ineligible UK Accounts
|
- | $ | 0 | |||||||||||||
|
14.
|
NET
ELIGIBLE UK
ACCOUNTS
RECEIVABLE
|
$ | 0 | ||||||||||||||
|
15.
|
Account
Receivable Advance Rate
|
65 | % | ||||||||||||||
|
16.
|
AVAILABLE
UK ACCOUNTS
(#14 multiplied by
#15)
|
$ | 0 | ||||||||||||||
|
17.
|
MAXIMUM
ALLOWABLE FOR
UK
ACCOUNTS
|
$ | 3,500,000 | ||||||||||||||
|
18.
|
ELIGIBLE
UK
ACCOUNTS
(the lesser of #15 or
#16)
|
$ | 0 | ||||||||||||||
|
19.
|
ACCOUNTS
RECEIVABLE BORROWING BASE (#18
+ #17 from Exhibit C-1)
|
$ | 0 | ||||||||||||||
|
20.
|
MAXIMUM
AVAILABLE LINE OF
CREDIT
|
$ | 10,000,000 | ||||||||||||||
|
21a.
|
Less:
Outstanding Loan Balance
|
$ | 0 | ||||||||||||||
|
21b.
|
Less:
Outstanding under Sublimits (Letters of Credit, F/X, and Cash
Management)
|
$ | 0 | ||||||||||||||
|
22.
|
AVAILABLE
FOR DRAW/NEED TO PAY (the
lesser of #19
or #20 minus #21a/21b)
|
$ | 0 | ||||||||||||||
If
line #22 is a negative number, this amount must be remitted to the Bank
immediately to bring loan balance into compliance. By signing this form you
authorize the bank to deduct any advance amounts directly from the company’s checking account at Bridge Bank in the event
there is an Overadvance.
The
undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Bridge Bank, National
Association.
|
Date:
|
||||||
|
By.
|
By:
|
|||||
|
Date:
|
||||||
|
Bank
Reviewed:
|
|
|||||
EXHIBIT
D
COMPLIANCE
CERTIFICATE
TO:
BRIDGE BANK, NATIONAL ASSOCIATION
FROM:
MIVA, INC.
The
undersigned authorized officer of MIVA, Inc. hereby certifies that in accordance
with the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the “Agreement”), (i) Borrower is in complete compliance for
the period ending _____________ with all required covenants except as noted
below and (ii) all representations and warranties of Borrower stated in the
Agreement are true and correct as of the date hereof. Attached herewith are the
required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes.
Please
indicate compliance status by circling Yes/No under “Complies”
column.
|
Reporting
Covenant
|
Required
|
Complies
|
||||
|
Annual
financial statements (CPA Audited)
|
FYE
within 120 days
|
Yes
|
No
|
|||
|
Monthly
financial statements + Compliance
|
Monthly
within 30 days
|
Yes
|
No
|
|||
|
Certificate
10K and 10Q
|
(as
applicable)
|
Yes
|
No
|
|||
|
Annual
operating budget, sales projections and operating
plans approved by board of directors
|
Annually
no later than 15 days prior to the
beginning of each fiscal year
|
Yes
|
No
|
|||
|
A/R
& A/P Agings, Borrowing Base Certificate *
|
Monthly
within 30 days *
|
Yes
|
No
|
|||
|
A/R
Audit
|
Initial
and Annual
|
Yes
|
No
|
|||
|
IP
report
|
Quarterly
w/in 30 days
|
Yes
|
No
|
|||
|
Deposit
balances with Bank
|
$
__________________
|
|||||
|
Deposit
balance outside Bank
|
$
__________________
|
|||||
* to be
delivered twice monthly (within 5 and 20 days) when Minimum Cash Ratio falls
below 0.50 to 1.00
|
Financial
Covenant
|
Required
|
Actual
|
Complies
|
|||||
|
Minimum
Cash Ratio
|
0.50
to 1.00
|
______:1.00
|
N/A
|
|||||
|
Asset
Coverage Ratio (measured monthly)
|
1.50
to 1.00
|
______:1.00
|
Yes
|
No
|
||||
|
AEBITDA
for quarter ending 3/31/09
|
Max.
loss of $500,000
|
$
_________
|
Yes
|
No
|
||||
|
Minimum
AEBITDA for quarter ending 6/30/09 and thereafter
|
$1,000,000
|
$
_________
|
Yes
|
No
|
||||
|
Comments
Regarding Exceptions: See
Attached.
|
BANK
USE ONLY
|
|||||||
|
Received
by: ______________________________________________
|
||||||||
|
Sincerely,
|
AUTHORIZED SIGNER
|
|||||||
|
Date:
____________________________________________________
|
||||||||
|
SIGNATURE
|
||||||||
|
Verified:
__________________________________________________
|
||||||||
|
TITLE
|
AUTHORIZED SIGNER
|
|||||||
|
Date:
____________________________________________________
|
||||||||
|
SIGNATURE
|
||||||||
|
Compliance
Status
|
Yes
|
No
|
||||||
|
TITLE
|
||||||||
|
DATE
|
||||||||