Working Capital Line of Credit) LOAN AND SECURITY AGREEMENT
(Working
Capital Line of Credit)
This
LOAN AND SECURITY AGREEMENT
(this
“Agreement”) dated as of October 9, 2008 (the “Effective Date”) is among (a)
SILICON
VALLEY BANK,
a
California corporation (“Bank”), with its principal place of business at 0000
Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 with a loan production office
located at One Xxxxxx Executive Park, Suite 200, 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000 (FAX 000-000-0000), and (b) INTERCLICK,
INC.,
a
Delaware corporation (“InterClick”), with its principal place of business
at 000 Xxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (FAX 000-000-0000),
and DESKTOP
ACQUISITION SUB, INC.,
a
Delaware corporation (“Desktop”), with its principal place of business
at 000 Xxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (FAX 000-000-0000)
(InterClick and Desktop are hereinafter jointly and severally, individually
and
collectively, referred to as “Borrower”), and provides the terms on which Bank
shall lend to Borrower, and Borrower shall repay Bank. The parties agree as
follows:
1
ACCOUNTING
AND OTHER TERMS
Accounting
terms not defined in this Agreement shall be construed following GAAP.
Calculations and determinations must be made following GAAP. The term “financial
statements” includes the notes and schedules. The terms “including” and
“includes” always mean “including (or includes) without limitation,” in this or
any Loan Document. Capitalized terms not otherwise defined in this Agreement
shall have the meanings set forth in Section 13. All other terms contained
in
this Agreement, unless otherwise indicated, shall have the meanings provided
by
the Code, to the extent such terms are defined therein.
2
LOAN
AND TERMS OF PAYMENT
2.1
Promise
to Pay.
Borrower hereby unconditionally promises to pay Bank the unpaid principal amount
of all Advances hereunder with all interest, fees and finance charges due
thereon as and when due in accordance with this Agreement.
2.1.1
Financing
of Accounts.
(a)
Availability.
Subject
to the terms of this Agreement, Borrower may request that Bank finance specific
Eligible Accounts. Bank may, in its good faith business discretion, finance
such
Eligible Accounts by extending credit to Borrower in an amount equal to the
result of the Advance Rate multiplied by the face amount of the Eligible Account
(the “Advance”). Bank may, in its sole discretion, change the percentage of the
Advance Rate for a particular Eligible Account on a case by case basis. When
Bank makes an Advance, the Eligible Account becomes a “Financed Receivable.”
(b)
Maximum
Advances.
The
aggregate face amount of all Financed Receivables outstanding at any time may
not exceed the Facility Amount.
(c)
Borrowing
Procedure.
Borrower will deliver an Invoice Transmittal for each Eligible Account it
offers. Bank may rely on information set forth in or provided with the Invoice
Transmittal.
(d)
Credit
Quality; Confirmations.
Bank
may, at its option, conduct a credit check of the Account Debtor for each
Account requested by Borrower for financing hereunder in order to approve any
such Account Debtor’s credit before agreeing to finance such Account. Bank may
also verify directly with the respective Account Debtors the validity, amount
and other matters relating to the Accounts (including confirmations of
Borrower’s representations in Section 5.3) by means of mail, telephone or
otherwise, either in the name of Borrower or Bank from time to time in its
sole
discretion.
(e) Accounts
Notification/Collection.
Bank
may notify any Person owing Borrower money of Bank’s security interest in the
funds and verify and/or collect the amount of the Account.
(f) Early
Termination.
This
Agreement may be terminated prior to the Maturity Date as follows: (i) by
Borrower, effective three Business Days after written notice of termination
is
given to Bank; or (ii) by Bank at any time after the occurrence of an Event
of
Default, without notice, effective immediately. If this Agreement is terminated
(A) by Bank in accordance with clause (ii) in the foregoing sentence, or (B)
by
Borrower for any reason, Borrower shall pay to Bank a termination fee in an
amount equal to Twenty Thousand Dollars ($20,000.00) (the “Early Termination
Fee”). The Early Termination Fee shall be due and payable on the effective date
of such termination and thereafter shall bear interest at a rate equal to the
highest rate applicable to any of the Obligations. Notwithstanding the
foregoing, Bank agrees to waive the Early Termination Fee if Bank agrees to
refinance and redocument this Agreement under another division of Bank (in
its
sole and exclusive discretion) prior to the Maturity Date.
(g) Maturity.
This
Agreement shall terminate and all Obligations outstanding hereunder shall be
immediately due and payable on the Maturity Date.
(h) Suspension
of Advances.
Borrower’s ability to request that Bank finance Eligible Accounts hereunder will
terminate if, in Bank’s sole discretion, there has been a material adverse
change in the general affairs, results of operation, condition (financial or
otherwise) or the prospect of repayment of the Obligations, or there has been
any material adverse deviation by Borrower from the most recent business plan
of
Borrower presented to and accepted by Bank prior to the execution of this
Agreement.
2.2 Collections,
Finance Charges, Remittances and Fees.
The
Obligations shall be subject to the following fees and Finance Charges. Unpaid
fees and Finance Charges may, in Bank’s discretion, accrue interest and fees as
described in Section 9.2 hereof.
2.2.1 Collections.
Collections will be credited to the Financed Receivable Balance for such
Financed Receivable, but if there is an Event of Default, Bank may apply
Collections to the Obligations in any order it chooses. If Bank receives a
payment for both a Financed Receivable and a non-Financed Receivable, the funds
will first be applied to the Financed Receivable and, if there is no Event
of
Default then existing, the excess will be remitted to Borrower, subject to
Section 2.2.7.
2.2.2 Facility
Fee.
A fully
earned, non-refundable facility fee of Thirty Thousand Dollars ($30,000.00)
is
due upon execution of this Agreement (the “Facility
Fee”).
2.2.3 Finance
Charges.
In
computing Finance Charges on the Obligations under this Agreement, all
Collections received by Bank shall be deemed applied by Bank on account of
the
Obligations three (3) Business Days after receipt
of the Collections. Borrower will pay a finance charge (the “Finance Charge”) on
the Financed Receivable Balance which is equal to the Applicable Rate
divided
by
360
multiplied
by
the
number of days each such Financed Receivable is outstanding multiplied
by
the
outstanding Financed Receivable Balance. The Finance Charge is payable when
the
Advance made based on such Financed Receivable is payable in accordance with
Section 2.3 hereof. After an Event of Default, the Applicable Rate will increase
an additional five percent (5.0%) per annum effective immediately upon the
occurrence of such Event of Default. Commencing
on October 1, 2008, and continuing for each fiscal quarter thereafter, in the
event that the aggregate amount of Finance Charges and Collateral Handling
Fees
earned by Bank in any fiscal quarter is less than the Minimum Finance Charge,
Borrower shall pay to Bank an additional Finance Charge equal to (i) the Minimum
Finance Charge minus (ii) the aggregate amount of all Finance Charges and
Collateral Handling Fees earned by Bank in such fiscal quarter. Such additional
Finance Charge shall be payable on the first day of the next fiscal
quarter.
2.2.4 Collateral
Handling Fee.
Borrower will pay to Bank a collateral handling fee equal to one-quarter of
one
percent (0.25%) per month of the Financed Receivable Balance for each Financed
Receivable outstanding based upon a 360 day year (the “Collateral Handling
Fee”). This fee is charged on a daily basis which is equal to the
Collateral Handling Fee divided by 30, multiplied by the number of days each
such Financed Receivable is outstanding, multiplied by the outstanding Financed
Receivable Balance. The Collateral Handling Fee is payable when the
Advance made based on such Financed Receivable is payable in accordance with
Section 2.3 hereof. In computing Collateral Handling Fees under this
Agreement, all Collections received by Bank shall be deemed applied by Bank
on
account of Obligations three (3) Business Days after receipt of the
Collections. After an Event of Default, the Collateral Handling Fee will
increase an additional 0.50% effective immediately upon such Event of
Default.
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2.2.5 Accounting.
After
each Reconciliation Period, Bank will provide an accounting of the transactions
for that Reconciliation Period, including the amount of all Financed
Receivables, all Collections, Adjustments, Finance Charges, Collateral Handling
Fee, and the Facility Fee. If Borrower does not object to the accounting in
writing within sixty (60) days it shall be considered accurate. All Finance
Charges and other interest and fees are calculated on the basis of a 360 day
year and actual days elapsed.
2.2.6 Deductions.
Bank
may deduct fees, Finance Charges, Advances which become due pursuant to Section
2.3, and other amounts due pursuant to this Agreement from any Advances made
or
Collections received by Bank.
2.2.7 Lockbox;
Account Collection Services.
(a) As
and
when directed by Bank from time to time, at Bank’s option and at the sole and
exclusive discretion of Bank (regardless of whether an Event of Default has
occurred), Borrower shall direct each Account Debtor (and each depository
institution where proceeds of Accounts are on deposit) to remit payments with
respect to the Accounts to a lockbox account established with Bank or to wire
transfer payments to a cash collateral account that Bank controls (collectively,
the “Lockbox”).
It
will be considered an immediate Event of Default if the Lockbox is not set-up
and operational on the Effective Date.
(b) For
any
time at which such Lockbox is not established, the proceeds of the Accounts
shall be paid by the Account Debtors to an address consented to by Bank. Upon
receipt by Borrower of such proceeds, Borrower shall immediately transfer and
deliver same to Bank, along with a detailed cash receipts journal. Provided
no
Event of Default exists or an event that with notice or lapse of time will
be an
Event of Default, within three (3) days of receipt of such amounts by Bank,
Bank
will turn over to Borrower the proceeds of the Accounts other than Collections
with respect to Financed Receivables and the amount of Collections in excess
of
the amounts for which Bank has made an Advance to Borrower, less any amounts
due
to Bank, such as the Finance Charge, the Facility Fee, payments due to Bank,
other fees and expenses, or otherwise; provided, however, Bank may hold such
excess amount with respect to Financed Receivables as a reserve until the end
of
the applicable Reconciliation Period if Bank, in its discretion, determines
that
other Financed Receivable(s) may no longer qualify as an Eligible Account at
any
time prior to the end of the subject Reconciliation Period. This Section does
not impose any affirmative duty on Bank to perform any act other than as
specifically set forth herein. All Accounts and the proceeds thereof are
Collateral and if an Event of Default occurs, Bank may apply the proceeds of
such Accounts to the Obligations.
2.2.8 Bank
Expenses.
Borrower shall pay all Bank Expenses (including reasonable attorneys’ fees and
expenses, plus expenses, for documentation and negotiation of this Agreement)
incurred through and after the Effective Date, when due.
2.2.9 Good
Faith Deposit.
Borrower has paid to Bank a deposit of Ten Thousand Dollars ($10,000.00) (the
“Good
Faith Deposit”)
to
initiate Bank’s due diligence review process. Any portion of the Good Faith
Deposit not utilized to pay Bank Expenses will be applied to the Facility
Fee.
2.3 Repayment
of Obligations; Adjustments.
2.3.1 Repayment.
Borrower will repay each Advance on the earliest of: (a) the date on which
payment is received of the Financed Receivable with respect to which the Advance
was made, (b) the date on which the Financed Receivable is no longer an Eligible
Account, (c) the date on which any Adjustment is asserted to the Financed
Receivable (but only to the extent of the Adjustment if the Financed Receivable
remains otherwise an Eligible Account), (d) the date on which there is a breach
of any warranty or representation set forth in Section 5.3, or a breach of
any
covenant in this Agreement or (e) the Maturity Date (including any early
termination). Each payment will also include all accrued Finance Charges and
Collateral Handling Fees with
respect to such Advance and all other amounts then due and payable hereunder.
3
2.3.2 Repayment
on Event of Default.
When
there is an Event of Default, Borrower will, if Bank demands (or, upon the
occurrence of an Event of Default under Section 8.5, immediately without notice
or demand from Bank) repay all of the Advances. The demand may, at Bank’s
option, include the Advance for each Financed Receivable then outstanding and
all accrued Finance Charges, the
Early
Termination Fee, Collateral Handling Fee, attorneys’ and professional fees,
court costs and expenses, and any other Obligations.
2.3.3 Debit
of Accounts.
Bank
may debit any of Borrower’s deposit accounts for payments or any amounts
Borrower owes Bank hereunder. Bank shall promptly notify Borrower when it debits
Borrower’s accounts. These debits shall not constitute a set-off.
2.3.4 Adjustments.
If, at
any time during the term of this Agreement, any Account Debtor asserts an
Adjustment, Borrower issues a credit memorandum, or any of the representations
and warranties in Section 5.3 or covenants in this Agreement are no longer
true
in all material respects, Borrower will promptly advise Bank.
2.4 Power
of Attorney.
Borrower irrevocably appoints Bank and its successors and assigns as
attorney-in-fact and authorizes Bank, to: (a) following the occurrence of an
Event of Default, (i) sell, assign, transfer, pledge, compromise, or discharge
all or any part of the Financed Receivables; (ii) demand, collect, xxx, and
give
releases to any Account Debtor for monies due and compromise, prosecute, or
defend any action, claim, case or proceeding about the Financed Receivables,
including filing a claim or voting a claim in any bankruptcy case in Bank’s or
Borrower’s name, as Bank chooses; and (iii) prepare, file and sign Borrower’s
name on any notice, claim, assignment, demand, draft, or notice of or
satisfaction of lien or mechanics’ lien or similar document; and
(b) regardless of whether there has been an Event of Default, (i) notify
all Account Debtors to pay Bank directly; (ii) receive, open, and dispose of
mail addressed to Borrower; (iii) endorse Borrower’s name on checks or other
instruments (to the extent necessary to pay amounts owed pursuant to this
Agreement); and (iv) execute on Borrower’s behalf any instruments, documents,
financing statements to perfect Bank’s interests in the Financed Receivables and
Collateral and do all acts and things necessary or expedient, as determined
solely and exclusively by Bank, to protect or preserve, Bank’s rights and
remedies under this Agreement, as directed by Bank.
3 CONDITIONS
OF LOANS
3.1 Conditions
Precedent to Initial Advance.
Bank’s
agreement to make the initial Advance is subject to the condition precedent
that
Bank shall have received, in form and substance satisfactory to Bank, such
documents, and completion of such other matters, as Bank may reasonably deem
necessary or appropriate, including, without limitation:
(a) a
certificate of the Secretary of Borrower with respect to articles, bylaws,
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(b) subordination
agreements/intercreditor agreements by certain Persons;
(c) Perfection
Certificates by Borrower;
(d) a
legal
opinion of Borrower’s counsel (authority/enforceability), in form and substance
acceptable to Bank;
(e) a
landlord’s consent executed by the applicable landlord in favor of Bank for each
of Borrower’s locations;
(f) Account
Control Agreements/Investment Account Control Agreements;
(g) evidence
satisfactory to Bank that the insurance policies required by Section 6.4 hereof
are in full force and effect, together with appropriate evidence showing lender
loss payable and/or additional insured clauses or endorsements in favor of
Bank;
(h) evidence
of payoff of, and lien release by, Viking Asset Management;
(i) payment
of the fees and Bank Expenses then due and payable;
4
(j) Certificates
of Foreign Qualification (if applicable);
(k) Certificates
of Good Standing/Legal Existence; and
(l) such
other documents, and completion of such other matters, as Bank may reasonably
deem necessary or appropriate.
3.2 Conditions
Precedent to all Advances.
Bank’s
agreement to make each Advance, including the initial Advance, is subject to
the
following:
(a) receipt
of the Invoice Transmittal;
(b) Bank
shall have (at its option) conducted the confirmations and verifications as
described in Section 2.1.1 (d); and
(c) each
of
the representations and warranties in Section 5 shall be true on the date of
the
Invoice Transmittal and on the effective date of each Advance and no Event
of
Default shall have occurred and be continuing, or result from the Advance.
Each
Advance is Borrower’s representation and warranty on that date that the
representations and warranties in Section 5 remain true.
4 CREATION
OF SECURITY INTEREST
4.1 Grant
of Security Interest.
Borrower hereby grants Bank, to secure the payment and performance in full
of
all of the Obligations and the performance of each of Borrower’s duties under
the Loan Documents, a continuing security interest in, and pledges to Bank,
the
Collateral, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof. Borrower represents, warrants,
and covenants that the security interest granted herein shall be a first
priority security interest in the Collateral. If Borrower shall at any time,
acquire a commercial tort claim, Borrower shall promptly notify Bank in a
writing signed by Borrower of the general details thereof and grant to Bank
in
such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
satisfactory to Bank.
If
this
Agreement is terminated, Bank’s Lien in the Collateral shall continue until the
Obligations (other than inchoate indemnity obligations) are repaid in full
in
cash. Upon payment in full in cash of the Obligations and
at
such time this Agreement has been terminated, Bank shall, at Borrower’s sole
cost and expense, release its Liens in the Collateral and all rights therein
shall revert to Borrower.
4.2 Authorization
to File Financing Statements.
Borrower hereby authorizes Bank to file financing statements, without notice
to
Borrower, with all appropriate jurisdictions to perfect or protect Bank’s
interest or rights hereunder, including a notice that any disposition of the
Collateral, by either Borrower or any other Person, shall be deemed to violate
the rights of Bank under the Code. Any such financing statements may indicate
the Collateral as “all assets of the Debtor” or words of similar effect, or as
being of an equal or lesser scope, or with greater detail, all in Bank’s
discretion.
5 REPRESENTATIONS
AND WARRANTIES
Borrower
represents and warrants as follows:
5.1 Due
Organization and Authorization.
Borrower and each of its Subsidiaries are duly existing and in good standing
as
Registered Organizations in their respective jurisdictions of formation and
are
qualified and licensed to do business and are in good standing in any
jurisdiction in which the conduct of their respective business or ownership
of
property requires that they be qualified except where the failure to do so
could
not reasonably be expected to have a material adverse effect on Borrower’s
business. In connection with this Agreement, Borrower has delivered to Bank
completed certificates signed by Borrower (the “Perfection Certificate”).
Borrower represents and warrants to Bank that (a) Borrower’s exact legal name is
that indicated on the Perfection Certificate and on the signature page hereof;
(b) Borrower is an organization of the type and is organized in the
jurisdiction set forth in the Perfection Certificate; (c) the Perfection
Certificate accurately sets forth Borrower’s organizational identification
number or accurately states that Borrower has none; (d) the Perfection
Certificate accurately sets forth Borrower’s place of business, or, if more than
one, its chief executive office as well as Borrower’s mailing address (if
different than its chief executive office); (e) Borrower (and each of its
predecessors) has not, in the past five (5) years, changed its jurisdiction
of
formation, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on the
Perfection Certificate pertaining to Borrower and each of its Subsidiaries
is
accurate and complete (it being understood and agreed that Borrower may from
time to time update certain information in the Perfection Certificate after
the
Effective Date to the extent permitted by one or more specific provisions in
this Agreement). If Borrower is not now a Registered Organization but later
becomes one, Borrower shall promptly notify Bank of such occurrence and provide
Bank with Borrower’s organizational identification number.
5
The
execution, delivery and performance by
Borrower of
the
Loan Documents to which it is a party have been duly authorized, and do not
(i)
conflict
with any
of
Borrower’s
organizational
documents, (ii) contravene,
conflict with, constitute a default under or violate any material Requirement
of
Law, (iii) contravene, conflict or violate any applicable order, writ,
judgment, injunction, decree, determination or award of any Governmental
Authority by which Borrower or any its Subsidiaries or any of their property
or
assets may be bound or affected, (iv) require any action by, filing,
registration, or qualification with, or Governmental Approval from, any
Governmental Authority (except such Governmental Approvals which have already
been obtained and are in full force and effect), or (v) constitute
an event of default under any material agreement by which Borrower is
bound.
Borrower
is
not
in
default under any agreement to which it is a party or by which it is bound
in
which the default could have a material adverse effect on Borrower’s
business.
5.2 Collateral.
Borrower has good title, has rights in, and the power to transfer each item
of
the Collateral upon which it purports to xxxxx x Xxxx hereunder, free and clear
of any and all Liens except Permitted Liens. Borrower has no deposit accounts
other than the deposit accounts with Bank, the deposit accounts, if any,
described in the Perfection Certificate delivered to Bank in connection
herewith, or of which Borrower has given Bank notice and taken such actions
as
are necessary to give Bank a perfected security interest therein. The Accounts
are bona fide, existing obligations of the Account Debtors. All Inventory is
in
all material respects of good and marketable quality, free from material
defects.
The
Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate. None
of
the components of the Collateral shall be maintained at locations other than
as
provided in the Perfection Certificate or as permitted pursuant to Section
7.2.
In the event that Borrower, after the date hereof, intends to store or otherwise
deliver any portion of the Collateral to a bailee, then Borrower will first
receive the written consent of Bank and such bailee must execute and deliver
a
bailee agreement in form and substance satisfactory to Bank in its sole
discretion.
Except
as
noted on the Perfection Certificate, Borrower is not a party to, nor is bound
by, any material license or other agreement with respect to which Borrower
is
the licensee (a) that prohibits or otherwise restricts Borrower from
granting a security interest in Borrower’s interest in such license or agreement
or any other property, or (b) for which a default under or termination of
could interfere with Bank’s right to sell any Collateral. Without prior consent
from Bank, Borrower shall not enter into, or become bound by, any such license
or agreement which is reasonably likely to have a material impact on Borrower’s
business or financial condition. Borrower shall take such steps as Bank requests
to obtain the consent of, or waiver by, any person whose consent or waiver
is
necessary for all such licenses or contract rights to be deemed “Collateral” and
for Bank to have a security interest in it that might otherwise be restricted
or
prohibited by law or by the terms of any such license or agreement, whether
now
existing or entered into in the future.
5.3 Financed
Receivables.
Borrower represents and warrants for each Financed Receivable:
(a) Such
Financed Receivable is an Eligible Account;
(b) Borrower
is the owner of and has the legal right to sell, transfer, assign and encumber
such Financed Receivable;
(c) The
correct amount is on the Invoice Transmittal and is not disputed;
6
(d) Payment
is not contingent on any obligation or contract and Borrower has fulfilled
all
its obligations as of the Invoice Transmittal date;
(e) Such
Financed Receivable is based on an actual sale and delivery of goods and/or
services rendered, is due to Borrower, is not past due or in default, has not
been previously sold, assigned, transferred, or pledged and is free of any
liens, security interests and encumbrances other than Permitted
Liens;
(f) There
are
no defenses, offsets, counterclaims or agreements for which the Account Debtor
may claim any deduction or discount;
(g) Borrower
reasonably believes no Account Debtor is insolvent or subject to any Insolvency
Proceedings;
(h) Borrower
has not filed or had filed against it Insolvency Proceedings and does not
anticipate any filing;
(i) Bank
has
the right to endorse and/ or require Borrower to endorse all payments received
on Financed Receivables and all proceeds of Collateral; and
(j) No
representation, warranty or other statement of Borrower in any certificate
or
written statement given to Bank contains any untrue statement of a material
fact
or omits to state a material fact necessary to make the statement contained
in
the certificates or statement not misleading.
5.4 Litigation.
There
are no actions or proceedings pending or, to the knowledge of Borrower’s
Responsible Officers, threatened in writing by or against Borrower or any
Subsidiary in which an adverse decision could reasonably be expected to cause
a
Material Adverse Change.
5.5 No
Material Deterioration in Financial Statements.
All
consolidated financial statements for Borrower and any Subsidiaries delivered
to
Bank fairly present in all material respects Borrower’s consolidated financial
condition and Borrower’s consolidated results of operations. There has not been
any material deterioration in Borrower’s consolidated financial condition since
the date of the most recent financial statements submitted to Bank.
5.6 Solvency.
The
fair salable value of Borrower’s assets (including goodwill minus disposition
costs) exceeds the fair value of its liabilities; Borrower is not left with
unreasonably small capital after the transactions in this Agreement; and
Borrower is able to pay its debts (including trade debts) as they
mature.
5.7 Regulatory
Compliance.
Borrower is not an “investment company” or a company “controlled” by an
“investment company” under the Investment Company Act of 1940, as amended.
Borrower is not engaged as one of its important activities in extending credit
for margin stock (under Regulations X, T and U of the Federal Reserve Board
of
Governors). Neither Borrower nor any of its Subsidiaries is a “holding company”
or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding
company” as each term is defined and used in the Public Utility Holding Company
Act of 2005. Borrower has complied in all material respects with the Federal
Fair Labor Standards Act. Borrower has not violated any laws, ordinances or
rules, the violation of which could reasonably be expected to cause a Material
Adverse Change. None of Borrower’s or any Subsidiary’s properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge,
by previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each of its
Subsidiaries have obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all Government
Authorities that are necessary to continue their respective businesses as
currently conducted.
5.8 Subsidiaries.
Borrower does not own any stock, partnership interest or other equity securities
except for Permitted Investments.
5.9 Tax
Returns and Payments; Pension Contributions.
Borrower and each Subsidiary have timely filed all required tax returns and
reports, and Borrower and each Subsidiary have timely paid all foreign, federal,
state and local taxes, assessments, deposits and contributions owed by Borrower
and each Subsidiary. Borrower may defer payment of any contested taxes, provided
that Borrower (a) in good faith contests its obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted, (b)
notifies Bank in writing of the commencement of, and any material development
in, the proceedings, (c) posts bonds or takes any other steps required to
prevent the governmental authority levying such contested taxes from obtaining
a
Lien upon any of the Collateral that is other than a “Permitted Lien”. Borrower
is unaware of any claims or adjustments proposed for any of Borrower's prior
tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid all amounts necessary to fund all present pension,
profit sharing and deferred compensation plans in accordance with their terms,
and Borrower has not withdrawn from participation in, and has not permitted
partial or complete termination of, or permitted the occurrence of any other
event with respect to, any such plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental
agency.
7
5.10 Full
Disclosure.
No
written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank, as of the date such
representation, warranty, or other statement was made, taken together with
all
such written certificates and written statements given to Bank, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the certificates or statements not
misleading (it being recognized by Bank that projections and forecasts provided
by Borrower in good faith and based upon reasonable assumptions are not viewed
as facts and that actual results during the period or periods covered by such
projections and forecasts may differ from the projected or forecasted
results).
6 AFFIRMATIVE
COVENANTS
Borrower
shall do all of the following:
6.1Government
Compliance.
(a)Maintain
its and all its Subsidiaries’ legal existence and good standing in their
respective jurisdictions of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected
to
have a material adverse effect on Borrower’s business or operations. Borrower
shall comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower’s business.
(b) Obtain
all of the Governmental Approvals necessary for the performance by Borrower
of
its obligations under the Loan Documents to which it is a party and the grant
of
a security interest to Bank in all of its property. Borrower shall promptly
provide copies of any such obtained Governmental Approvals to Bank.
6.2 Financial
Statements, Reports, Certificates.
(a) Deliver
to Bank: (i) as soon as available, but no later than thirty (30)
days after
the
last day of each month, a company prepared consolidated and consolidating
balance sheet and income statement covering Borrower’s and each of its
Subsidiary’s operations during the period certified by a Responsible Officer and
in a form acceptable to Bank; (ii) as soon as available, but no later than
one
hundred fifty (150) days
after the last day of Borrower’s fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm reasonably acceptable to Bank; (iii) in the event that
Borrower’s stock becomes publicly held, within five (5) days of filing, copies
of all statements, reports and notices made available to Borrower’s security
holders or to any holders of Subordinated Debt and all reports on Form 10-K,
10-Q and 8-K filed with the Securities and Exchange Commission; (iv) a prompt
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 One Hundred Thousand Dollars ($100,000.00) or more; and (v) budgets,
sales projections, operating plans or other
financial information reasonably requested by Bank.
(b) Within
thirty (30) days
after the last day of each month, deliver to Bank with the monthly financial
statements a Compliance Certificate signed by a Responsible Officer in the
form
of Exhibit
B.
(c) Allow
Bank to audit Borrower’s Collateral, including, but not limited to, Borrower’s
Accounts at Borrower’s expense, upon reasonable notice to Borrower; provided,
however, prior to the occurrence of an Event of Default, Borrower shall be
obligated to pay for not more than one (1) audit per year. Borrower hereby
acknowledges that the first such audit will be conducted within ninety (90)
days
after the Effective Date. After
the
occurrence of an Event of Default, Bank may audit Borrower’s Collateral,
including, but not limited to, Borrower’s Accounts at Borrower’s expense and at
Bank’s sole and exclusive discretion and without notification and authorization
from Borrower.
8
(d) Upon
Bank’s request, provide a written report respecting any Financed Receivable, if
payment of any Financed Receivable does not occur by its due date and include
the reasons for the delay.
(e) Provide
Bank with, as soon as available, but no later than thirty (30) days following
each Reconciliation Period, an aged listing of accounts receivable and accounts
payable by invoice date, in form acceptable to Bank.
(f) Provide
Bank with, as soon as available, but no later than thirty (30) days following
each Reconciliation Period, a Deferred Revenue report, in form acceptable to
Bank.
6.3 Taxes.
Borrower shall make, and cause each Subsidiary to make, timely payment of all
federal, state, and local taxes or assessments (other than taxes and assessments
which Borrower is contesting in good faith, with adequate reserves maintained
in
accordance with GAAP) and will deliver to Bank, on demand, appropriate
certificates attesting to such payments.
6.4 Insurance.
Keep
its business and the Collateral insured for risks and in amounts standard for
companies in Borrower’s industry and location, and as Bank may reasonably
request. Insurance policies shall be in a form, with companies, and in amounts
that are satisfactory to Bank. All property policies shall have a lender’s loss
payable endorsement showing Bank as the sole lender loss payee and waive
subrogation against Bank, and all liability policies shall show, or have
endorsements showing, Bank as an additional insured. All policies (or the loss
payable and additional insured endorsements) shall provide that the insurer
must
give Bank at least twenty (20) days notice before canceling, amending, or
declining to renew its policy. At Bank’s request, Borrower shall deliver
certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy shall, at Bank’s option, be payable to Bank on account
of the Obligations. If Borrower fails to obtain insurance as required under
this
Section 6.4 or to pay any amount or furnish any required proof of payment to
third persons and Bank, Bank may make all or part of such payment or obtain
such
insurance policies required in this Section 6.4, and take any action under
the
policies Bank deems prudent.
6.5 Accounts.
(a) To
permit
Bank to monitor Borrower’s financial performance and condition, Borrower, and
all Borrower’s Subsidiaries, shall maintain Borrower’s and such Subsidiaries’,
depository and operating accounts and securities accounts with Bank and Bank’s
affiliates. Any Guarantor
shall maintain all
depository and operating accounts with Bank, and, with respect to securities
accounts, with an affiliate of Bank.
(b) Borrower
shall identify to Bank, in writing, any deposit or securities account opened
by
Borrower with any institution other than Bank. In addition, for each such
account that Borrower or Guarantor at any time opens or maintains, Borrower
shall, at Bank’s request and option, pursuant to an agreement in form and
substance acceptable to Bank, cause the depository bank or securities
intermediary to agree that such account is the collateral of Bank pursuant
to
the terms hereunder, which control agreement may not be terminated without
the
prior written consent of Bank. The provisions of the previous sentence shall
not
apply to deposit accounts exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the benefit of Borrower’s
employees.
6.6 Inventory;
Returns.
Keep
all Inventory in good and marketable condition, free from material defects.
Returns and allowances between Borrower and its Account Debtors shall follow
Borrower’s customary practices as they exist at the Effective Date. Borrower
must promptly notify Bank of all returns, recoveries, disputes and claims that
involve more than One Hundred Thousand Dollars ($100,000.00).
6.7 Financial
Covenants.
Borrower
shall maintain at all times, to be tested as
of the
last day of each month, unless
otherwise noted:
9
(a) Liquidity.
Unrestricted cash at Bank plus Excess Availability of at least One Million
Dollars ($1,000,000.00).
(b) EBITDA.
Commencing on February 1, 2009, and continuing for each month thereafter, EBITDA
for each month of at least One Dollar ($1.00).
6.8 Protection
of Intellectual Property Rights.
Borrower shall: (a) protect, defend and maintain the validity and enforceability
of its intellectual property; (b) promptly advise Bank in writing of material
infringements of its intellectual property; and (c) not allow any intellectual
property material to Borrower’s business to be abandoned, forfeited or dedicated
to the public without Bank’s written consent.
6.9 Litigation
Cooperation.
From
the date hereof and continuing through the termination of this Agreement,
make
available to Bank, without expense to Bank, Borrower and its officers, employees
and agents and Borrower's books and records, to the extent that Bank may deem
them reasonably necessary to prosecute or defend any third-party suit or
proceeding instituted by or against Bank with respect to any Collateral or
relating to Borrower.
6.10 Further
Assurances.
Borrower shall execute any further instruments and take further action as Bank
reasonably requests to perfect or continue Bank’s security interest in the
Collateral or to effect the purposes of this Agreement.
7 NEGATIVE
COVENANTS
Borrower
shall not do any of the following without Bank’s prior written
consent.
7.1 Dispositions.
Convey,
sell, lease, transfer, assign, or otherwise dispose of (collectively a
“Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers (a) of Inventory in the ordinary
course of business; (b) of worn-out or obsolete Equipment; (c) in connection
with Permitted Liens and Permitted Investments; and (d) of stock in Options
Media Group Holdings, Inc. (together with all cash dividends, stock dividends,
interest, profits, premiums, redemptions, warrants, subscription rights,
options, substitutions, exchanges and other distributions made after such
transfer with respect to such stock) for fair consideration.
7.2 Changes
in Business, Ownership, Management or Business
Locations.
Engage
in or permit any of its Subsidiaries to engage in any business other than the
businesses currently engaged in by Borrower or reasonably related thereto,
enter
into any transaction or series of related transactions in which the stockholders
of Borrower
who were not stockholders immediately prior to the first such transaction own
more than fifty percent (50%) of the voting stock of Borrower
immediately after giving effect to such transaction or related series of such
transactions
(other
than by the sale of Borrower’s equity securities in a public offering or to
venture capital investors so long as Borrower identifies to Bank the venture
capital investors prior to the closing of the investment), or
suffer
the resignation or departure of any Key Person and not hire a replacement
reasonably acceptable to Bank for such Key Person within ninety (90) days of
such Key Person’s resignation or departure.
Borrower shall not, without at least thirty (30) days prior written notice
to
Bank: (a) relocate its chief executive office, or add any new offices or
business locations, including warehouses (unless such new offices or business
locations contain less than Five Thousand Dollars ($5,000.00) in Borrower’s
assets or property), or (b) change its jurisdiction of organization, or (c)
change its organizational structure or type, or (d) change its legal name,
or
(e) change any organizational number (if any) assigned by its jurisdiction
of
organization.
7.3 Mergers
or Acquisitions.
Merge
or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with
any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all
or substantially all of the capital stock or property of another Person. A
Subsidiary may merge or consolidate into another Subsidiary or into
Borrower.
7.4 Indebtedness.
Create,
incur, assume, or be liable for any Indebtedness, or permit any Subsidiary
to do
so, other than Permitted Indebtedness.
10
7.5 Encumbrance.
Create,
incur, allow, or suffer any Lien on any of its property, or assign or convey
any
right to receive income, including the sale of any Accounts, or permit any
of
its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral
not to be subject to the first priority security interest granted herein,
or
enter
into any agreement, document, instrument or other arrangement (except with
or in
favor of Bank) with any Person which directly or indirectly prohibits or has
the
effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging,
pledging, granting a security interest in or upon, or encumbering any of
Borrower’s or any Subsidiary’s intellectual property, except as is otherwise
permitted in Section 7.1 hereof and the definition of “Permitted Liens”
herein.
7.6 Distributions;
Investments.
(a)
Directly or indirectly acquire or own any Person, or make any Investment in
any
Person, other than Permitted Investments, or permit any of its Subsidiaries
to
do so; or (b) pay any dividends or make any distribution or payment or redeem,
retire or purchase any capital stock.
7.7 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.
7.8 Subordinated
Debt.
(a)
Make or permit any payment on any Subordinated Debt, except under the terms
of
the subordination, intercreditor, or other similar agreement to which such
Subordinated Debt is subject, or (b) amend any provision in any document
relating to the Subordinated Debt which would increase the amount thereof or
adversely affect the subordination thereof to Obligations owed to
Bank.
7.9 Compliance.
Become
an “investment company” or a company controlled by an “investment company”,
under the Investment Company Act of 1940, as amended, or undertake as one of
its
important activities extending credit to purchase or carry margin stock (as
defined in Regulation U of the Board of Governors of the Federal Reserve
System), or use the proceeds of any Advance for that purpose; fail to meet
the
minimum funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, each as defined in ERISA, to occur; fail to comply with the Federal
Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or
permit any Subsidiary to withdraw from participation in, permit partial or
complete termination of, or permit the occurrence of any other event with
respect to, any present pension, profit sharing and deferred compensation plan
which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.
8 EVENTS
OF DEFAULT
Any
one
of the following shall constitute an event of default (an “Event of Default”)
under this Agreement:
8.1 Payment
Default.
Borrower fails to pay any of the Obligations when due;
8.2 Covenant
Default. Borrower
fails or neglects to perform any obligation in Section 6 or violates any
covenant in Section 7 or fails or neglects to perform, keep, or observe any
other material term, provision, condition, covenant or agreement contained
in
this Agreement, any Loan Documents and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure the default within ten (10) days after the occurrence thereof; provided,
however, grace and cure periods provided under this section shall not apply
to
financial covenants or any other covenants that are required to be satisfied,
completed or tested by a date certain;
8.3 Material
Adverse Change.
A
Material Adverse Change occurs;
8.4 Attachment;
Levy; Restraint on Business.
(a) (i)
The service of process seeking to attach, by trustee or similar process, any
funds of Borrower or of any entity under control of Borrower (including a
Subsidiary) on deposit with Bank or any Bank Affiliate, or (ii) a notice of
lien, levy, or assessment is filed against any of Borrower’s assets by any
government agency, and the same under subclauses (i) and (ii) hereof are not,
within ten (10) days after the occurrence thereof, discharged or stayed (whether
through the posting of a bond or otherwise); provided, however, no Credit
Extensions shall be made during any ten (10) day cure period; and (b) (i) any
material portion of Borrower’s assets is attached, seized, levied on, or comes
into possession of a trustee or receiver, or (ii) any court order enjoins,
restrains, or prevents Borrower from conducting any part of its
business;
11
8.5 Insolvency.
(a)
Borrower is unable to pay its debts (including trade debts) as they become
due
or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding;
or
(c) an Insolvency Proceeding is begun against Borrower and not dismissed or
stayed within thirty (30) days (but no Advances shall be made while of any
of
the conditions described in clause (a) exist and/or until any Insolvency
Proceeding is dismissed);
8.6 Other
Agreements.
If
there is a default in any agreement to which Borrower is a party with a third
party or parties resulting in a right by such third party or parties, whether
or
not exercised, to accelerate the maturity of any Indebtedness in an amount
in
excess of One Hundred Thousand Dollars ($100,000.00) or that could result in
a
Material Adverse Change;
8.7 Judgments.
One or
more judgments, orders, or decrees for the payment of money in an amount,
individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000.00) (not covered by independent third-party insurance as to which
liability has been accepted by such insurance carrier) shall be rendered against
Borrower and shall remain unsatisfied, unvacated, or unstayed for a period
of
ten (10) days after the entry thereof (provided that no Advances will be made
prior to the satisfaction, vacation, or stay of such judgment, order, or
decree);
8.8 Misrepresentations.
Borrower or any Person acting for Borrower makes any representation, warranty,
or other statement now or later in this Agreement, any Loan Document or in
writing delivered to Bank or to induce Bank to enter this Agreement or any
Loan
Document, and such representation, warranty, or other statement is incorrect
in
any material respect when made;
8.9 Subordinated
Debt.
A
default or breach occurs under any agreement between Borrower and any creditor
of Borrower that signed a subordination agreement, intercreditor agreement,
or
other similar agreement with Bank, or any creditor that has signed such an
agreement with Bank breaches any terms of the agreement;
8.10 Guaranty.
(a)
Any
guaranty of any Obligations terminates or ceases for any reason to be in full
force and effect; (b) any Guarantor does not perform any obligation or covenant
under any guaranty of the Obligations; (c) any circumstance described in
Sections 8.3, 8.4, 8.5, 8.7, or 8.8. occurs with respect to any Guarantor;
(d) the death, liquidation, winding up, or termination of existence of any
Guarantor; or (e) (i) a material impairment in the perfection or
priority of Bank’s Lien in the collateral provided by Guarantor or in the value
of such collateral, or (ii) a material adverse change in the general
affairs, management, results of operation, condition (financial or otherwise)
or
the prospect of repayment of the Obligations occurs with respect to any
Guarantor; or
8.11 Governmental
Approvals.
Any
Governmental Approval shall have been (a) revoked, rescinded, suspended,
modified in an adverse manner or not renewed in the ordinary course for a full
term or (b) subject to any decision by a Governmental Authority that
designates a hearing with respect to any applications for renewal of any of
such
Governmental Approval or that could result in the Governmental Authority taking
any of the actions described in clause (a) above, and such decision or such
revocation, rescission, suspension, modification or non-renewal (i) has, or
could reasonably be expected to have, a Material Adverse Change, or
(ii) adversely affects the legal qualifications of Borrower or any of its
Subsidiaries to hold such Governmental Approval in any applicable jurisdiction
and such revocation, rescission, suspension, modification or non-renewal could
reasonably be expected to affect the status of or legal qualifications of
Borrower or any of its Subsidiaries to hold any Governmental Approval in any
other jurisdiction.
9 BANK’S
RIGHTS AND REMEDIES
9.1 Rights
and Remedies.
When an
Event of Default occurs and continues Bank may, without notice or demand, do
any
or all of the following:
(a) declare
all Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 occurs all Obligations are immediately due and payable
without any action by Bank);
(b) stop
advancing money or extending credit for Borrower’s benefit under this Agreement
or under any other agreement between Borrower and Bank;
12
(c) demand
that Borrower (i) deposits cash with Bank in an amount equal to the aggregate
amount of any Letters of Credit remaining undrawn, as collateral security for
the repayment of any future drawings under such Letters of Credit, and Borrower
shall forthwith deposit and pay such amounts, and (ii) pay in advance all Letter
of Credit fees scheduled to be paid or payable over the remaining term of any
Letters of Credit;
(d) settle
or
adjust disputes and claims directly with Account Debtors for amounts, on terms
and in any order that Bank considers advisable and notify any Person owing
Borrower money of Bank’s security interest in such funds and verify the amount
of such account. Borrower shall collect all payments in trust for Bank and,
if
requested by Bank, immediately deliver the payments to Bank in the form received
from the Account Debtor, with proper endorsements for deposit;
(e) make
any
payments and do any acts it considers necessary or reasonable to protect its
security interest in the Collateral. Borrower shall assemble the Collateral
if
Bank requests and make it available as Bank designates. Bank may enter premises
where the Collateral is located, take and maintain possession of any part of
the
Collateral, and pay, purchase, contest, or compromise any Lien which appears
to
be prior or superior to its security interest and pay all expenses incurred.
Borrower grants Bank a license to enter and occupy any of its premises, without
charge, to exercise any of Bank’s rights or remedies;
(f) apply
to
the Obligations any (i) balances and deposits of Borrower it holds, or (ii)
any
amount held by Bank owing to or for the credit or the account of
Borrower;
(g) ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell the Collateral. Bank is hereby granted a non-exclusive,
royalty-free license or other right to use, without charge, Borrower’s labels,
patents, copyrights, mask works, rights of use of any name, trade secrets,
trade
names, trademarks, service marks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section, Borrower’s rights under all licenses
and all franchise agreements inure to Bank’s benefit;
(h) place
a
“hold” on any account maintained with Bank and/or deliver a notice of exclusive
control, any entitlement order, or other directions or instructions pursuant
to
any control agreement or similar agreements providing control of any
Collateral;
(i) demand
and receive possession of Borrower’s Books; and
(j) exercise
all rights and remedies available to Bank under the Loan Documents or at law
or
equity, including all remedies provided under the Code (including disposal
of
the Collateral pursuant to the terms thereof).
9.2 Protective
Payments.
If
Borrower fails to obtain insurance called for by Section 6.4 or fails to pay
any
premium thereon or fails to pay any other amount which Borrower is obligated
to
pay under this Agreement or by any other Loan Document, Bank may obtain such
insurance or make such payment, and all amounts so paid by Bank are Bank
Expenses and immediately due and payable, bearing interest at the then highest
applicable rate, and secured by the Collateral. Bank will make reasonable effort
to provide Borrower with notice of Bank obtaining such insurance at the time
it
is obtained or within a reasonable time thereafter. No payments by Bank are
deemed an agreement to make similar payments in the future or Bank’s waiver of
any Event of Default.
9.3 Bank’s
Liability for Collateral.
So long
as Bank complies with reasonable banking practices regarding the safekeeping
of
Collateral in possession or under the control of Bank, Bank shall not be liable
or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
damage to the Collateral; (c) any diminution in the value of the Collateral;
or
(d) any act or default of any carrier, warehouseman, bailee, or other Person.
Borrower bears all risk of loss, damage or destruction of the
Collateral.
9.4 Remedies
Cumulative.
Bank’s
failure, at any time or times, to require strict performance by Borrower of
any
provision of this Agreement or any other Loan Document shall not waive, affect,
or diminish any right of Bank thereafter to demand strict performance and
compliance herewith or therewith. No waiver hereunder shall be effective unless
signed by Bank and then is only effective for the specific instance and purpose
for which it is given. Bank’s rights and remedies under this Agreement and the
other Loan Documents are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank’s exercise of one right or remedy is
not an election, and Bank’s waiver of any Event of Default is not a continuing
waiver. Bank’s delay in exercising any remedy is not a waiver, election, or
acquiescence.
13
9.5 Demand
Waiver.
Borrower waives demand, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees held by Bank on which Borrower is liable.
10 NOTICES.
All
notices, consents, requests, approvals, demands, or other communication by
any
party to this Agreement or any other Loan Document must be in writing and shall
be deemed to have been validly served, given, or delivered: (a) upon the earlier
of actual receipt and three (3) Business Days after deposit in the U.S. mail,
first class, registered or certified mail return receipt requested, with proper
postage prepaid; (b) upon transmission, when sent by facsimile transmission;
(c)
one (1) Business Day after deposit with a reputable overnight courier with
all
charges prepaid; or (d) when delivered, if hand-delivered by messenger, all
of
which shall be addressed to the party to be notified and sent to the address
or
facsimile number provided at the beginning of this Agreement. Bank or Borrower
may change its address or facsimile number by giving the other party written
notice thereof in accordance with the terms of this Section 10.
11 CHOICE
OF LAW, VENUE AND JURY TRIAL WAIVER
New
York
law governs the Loan Documents without regard to principles of conflicts of
law.
Borrower and Bank each submit to the exclusive jurisdiction of the State and
Federal courts in New York; provided, however, that if for any reason Bank
cannot avail itself of such courts in the State of New York, Borrower accepts
jurisdiction of the courts and venue in Santa Xxxxx County, California.
Notwithstanding the foregoing, nothing in this Agreement shall be deemed to
operate to preclude Bank from bringing suit or taking other legal action in
any
other jurisdiction to realize on the Collateral or any other security for the
Obligations, or to enforce a judgment or other court order in favor of Bank.
Borrower expressly submits and consents in advance to such jurisdiction in
any
action or suit commenced in any such court, and Borrower hereby waives any
objection that it may have based upon lack of personal jurisdiction, improper
venue, or forum non conveniens and hereby consents to the granting of such
legal
or equitable relief as is deemed appropriate by such court. Borrower hereby
waives personal service of the summons, complaints, and other process issued
in
such action or suit and agrees that service of such summons, complaints, and
other process may be made by registered or certified mail addressed to Borrower
at the address set forth in Section 10 of this Agreement and that service so
made shall be deemed completed upon the earlier to occur of Borrower’s actual
receipt thereof or three (3) days after deposit in the U.S. mails, proper
postage prepaid.
BORROWER
AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL
OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO
THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS
COUNSEL.
12 GENERAL
PROVISIONS
12.1 Successors
and Assigns.
This
Agreement binds and is for the benefit of the successors and permitted assigns
of each party. Borrower may not assign this Agreement or any rights or
obligations under it without Bank’s prior written consent which may be granted
or withheld in Bank’s discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in
all
or any part of, or any interest in, Bank’s obligations, rights and benefits
under this Agreement, the Loan Documents or any related agreement.
12.2 Indemnification.
Borrower agrees to indemnify, defend, and hold Bank and its officers, directors,
employees, agents, attorneys or any other Person affiliated with or representing
Bank (each, an “Indemnified Person”) harmless against: (a) all obligations,
demands, claims, and liabilities (collectively, “Claims”) asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses incurred, or paid by such Indemnified Person
from, following, or arising from transactions between Bank and Borrower
(including reasonable attorneys’ fees and expenses), except for Claims and/or
losses directly caused by such Indemnified Person’s gross negligence or willful
misconduct.
14
12.3 Right
of Set-Off.
Borrower hereby grants to Bank, a lien, security interest and right of setoff
as
security for all Obligations to Bank, whether now existing or hereafter arising
upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of Bank or any
entity under the control of Bank (including a Bank subsidiary) or in transit
to
any of them. At any time after the occurrence and during the continuance of
an
Event of Default, without demand or notice, Bank may set off the same or any
part thereof and apply the same to any liability or obligation of Borrower
even
though unmatured and regardless of the adequacy of any other collateral securing
the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS
OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS,
PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.
12.4 Time
of Essence.
Time is
of the essence for the performance of all Obligations in this
Agreement.
12.5 Severability
of Provisions.
Each
provision of this Agreement is severable from every other provision in
determining the enforceability of any provision.
12.6 Correction
of Loan Documents.
Bank
may correct patent errors and fill in any blanks in this Agreement and the
other
Loan Documents consistent with the agreement of the parties.
12.7 Amendments
in Writing; Integration.
All
amendments to this Agreement must be in writing signed by both Bank and
Borrower. This Agreement and the Loan Documents represent the entire agreement
about this subject matter, and supersede prior negotiations or agreements.
All
prior agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement and the Loan
Documents merge into this Agreement and the Loan Documents.
12.7 Counterparts.
This
Agreement may be executed in any number of counterparts and by different parties
on separate counterparts, each of which, when executed and delivered, are an
original, and all taken together, constitute one Agreement.
12.8 Borrower
Liability. Either
Borrower may, acting singly, request Advances hereunder. Each Borrower hereby
appoints the other as agent for the other for all purposes hereunder, including
with respect to requesting Advances hereunder. Each Borrower hereunder shall
be
obligated to repay all Advances made hereunder, regardless of which Borrower
actually receives said Advance, as if each Borrower hereunder directly received
all
Advances. Notwithstanding any other provision of this Agreement or other related
document, each Borrower irrevocably waives all rights that it may have at law
or
in equity (including, without limitation, any law subrogating Borrower to the
rights of Bank under this Agreement) to seek contribution, indemnification
or
any other form of reimbursement from any other Borrower, or any other Person
now
or hereafter primarily or secondarily liable for any of the Obligations, for
any
payment made by Borrower with respect to the Obligations in connection with
this
Agreement or otherwise and all rights that it might have to benefit from, or
to
participate in, any security for the Obligations as a result of any payment
made
by Borrower with respect to the Obligations in connection with this Agreement
or
otherwise. Any agreement providing for indemnification, reimbursement or any
other arrangement prohibited under this Section shall be null and void. If
any
payment is made to a Borrower in contravention of this Section, such Borrower
shall hold such payment in trust for Bank and such payment shall be promptly
delivered to Bank for application to the Obligations, whether matured or
unmatured.
Each
Borrower waives any suretyship defenses available to it under the Code or any
other applicable law. Each Borrower waives any right to require Bank to:
(a) proceed against any Borrower or any other person; (b) proceed against
or exhaust any security; or (c) pursue any other remedy. Bank may exercise
or not exercise any right or remedy it has against any Borrower or any security
it holds (including the right to foreclose by judicial or non-judicial sale)
without affecting any Borrower’s liability.
15
12.9 Survival.
All
covenants, representations and warranties made in this Agreement continue in
full force until this Agreement has terminated pursuant to its terms and all
Obligations (other than inchoate indemnity obligations and any other obligations
which, by their terms, are to survive the termination of this Agreement) have
been satisfied. The obligation of Borrower in Section 12.2 to indemnify Bank
shall survive until the statute of limitations with respect to such claim or
cause of action shall have run.
Bank
may
use confidential information for any purpose, including, without limitation,
for
the development of client databases, reporting purposes, and market analysis,
so
long as Bank does not disclose Borrower’s identity or the identity of any person
associated with Borrower unless otherwise expressly permitted by this Agreement.
The provisions of the immediately preceding sentence shall survive the
termination of this Agreement.
13 DEFINITIONS
13.1 Definitions.
In this
Agreement:
“Account”
is
any
“account” as defined in the Code with such additions to such term as may
hereafter be made, and includes, without limitation, all accounts receivable
and
other sums owing to Borrower.
“Account
Debtor”
is
as
defined in the Code and shall include, without limitation, any person liable
on
any Financed Receivable, such as, a guarantor of the Financed Receivable and
any
issuer of a letter of credit or banker’s acceptance.
“Adjustments”
are
all
discounts, allowances, returns, disputes, counterclaims, offsets, defenses,
rights of recoupment, rights of return, warranty claims, or short payments,
asserted by or on behalf of any Account Debtor for any Financed
Receivable.
“Advance”
is
defined in Section 2.1.1.
“Advance
Rate” is
eighty
percent (80.0%), net of any offsets related to each specific Account Debtor,
including, without limitation, Deferred Revenue, or such other percentage as
Bank establishes under Section 2.1.1.
“Affiliate”
of
any
Person is a Person that owns or controls directly or indirectly the Person,
any
Person that controls or is controlled by or is under common control with the
Person, and each of that Person’s senior executive officers, directors, partners
and, for any Person that is a limited liability company, that Person’s managers
and members.
“Applicable
Rate”
is
a
per annum rate equal to the Prime Rate plus one and three-quarters of one
percent (1.75%).
“Bank
Expenses”
are
all
audit fees and expenses, costs, and expenses (including reasonable attorneys’
fees and expenses) for preparing, amending, negotiating, administering,
defending and enforcing the Loan Documents (including, without limitation,
those
incurred in connection with appeals or Insolvency Proceedings) or otherwise
incurred with respect to Borrower.
16
“Borrower’s
Books”
are
all
Borrower’s books and records including ledgers, federal and state tax returns,
records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition, and all computer programs or storage or
any
equipment containing such information.
“Business
Day”
is
any
day that is not a Saturday, Sunday or a day on which Bank is
closed.
“Claims”
are
defined in Section 12.2.
“Code”
is
the
Uniform Commercial Code, as the same may, from time to time, be enacted and
in
effect in the State
of
New York;
provided, that, to the extent that the Code is used to define any term herein
or
in any Loan Document and such term is defined differently in different Articles
or Divisions of the Code, the definition of such term contained in Article
or
Division 9 shall govern; provided further, that in the event that, by reason
of
mandatory provisions of law, any or all of the attachment, perfection, or
priority of, or remedies with respect to, Bank’s Lien on any Collateral is
governed by the Uniform Commercial Code in effect in a jurisdiction other than
the State
of
New York,
the
term “Code”
shall
mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes on the provisions thereof relating to such
attachment, perfection, priority, or remedies and for purposes of definitions
relating to such provisions.
“Collateral”
is
any
and all properties, rights and assets of Borrower described on Exhibit
A.
“Collateral
Handling Fee” is
defined in Section 2.2.4.
“Collections” are
all
funds received by Bank from or on behalf of an Account Debtor for Financed
Receivables.
“Compliance
Certificate”
is
attached as Exhibit
B.
“Contingent
Obligation”
is,
for
any Person, any direct or indirect liability, contingent or not, of that Person
for (a) any indebtedness, lease, dividend, letter of credit or other obligation
of another such as an obligation directly or indirectly guaranteed, endorsed,
co-made, discounted or sold with recourse by that Person, or for which that
Person is directly or indirectly liable; (b) any obligations for undrawn letters
of credit for the account of that Person; and (c) all obligations from any
interest rate, currency or commodity swap agreement, interest rate cap or collar
agreement, or other agreement or arrangement designated to protect a Person
against fluctuation in interest rates, currency exchange rates or commodity
prices; but “Contingent Obligation” does not include endorsements in the
ordinary course of business. The amount of a Contingent Obligation is the stated
or determined amount of the primary obligation for which the Contingent
Obligation is made or, if not determinable, the maximum reasonably anticipated
liability for it determined by the Person in good faith; but the amount may
not
exceed the maximum of the obligations under any guarantee or other support
arrangement.
“Deferred
Revenue”
is
all
amounts received or invoiced, as appropriate, in advance of performance under
contracts and not yet recognized as revenue.
“Early
Termination Fee” is
defined in Section 2.1.1.
“EBITDA” means
earnings before interest, taxes, depreciation and amortization in accordance
with GAAP.
“Effective
Date”
is
defined in the preamble of this Agreement.
“Eligible
Accounts”
are
billed Accounts in the ordinary course of Borrower’s business that meet all
Borrower’s representations and warranties in Section 5.3, have been, at the
option of Bank, confirmed in accordance with Section 2.1.1(d), and are due
and
owing from Account Debtors deemed creditworthy by Bank in its sole discretion.
Without limiting the fact that the determina-tion of which Accounts are eligible
hereunder is a matter of Bank discretion in each instance, Eligible Accounts
shall not include the following Accounts (which listing may be amended or
changed in Bank’s discretion with notice to Borrower):
(a) Accounts
that the Account Debtor has not paid within ninety (90) days of invoice date
regardless of invoice payment period terms;
17
(b) Accounts
owing from an Account Debtor which does not have its principal place of business
in the United States, unless otherwise approved by Bank in writing on a
case-by-case basis in its sole discretion;
(c) Accounts
billed and/or payable outside of the United States, unless otherwise approved
by
Bank in writing on a case-by-case basis in its sole discretion;
(d) Accounts
owing from an Account Debtor to the extent that Borrower is indebted or
obligated in any manner to the Account Debtor (as creditor, lessor, supplier
or
otherwise - sometimes called “contra” accounts, accounts payable, customer
deposits or credit accounts), with the exception of customary credits,
adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;
(e) Accounts
for which the Account Debtor is Borrower’s Affiliate, officer, employee, or
agent;
(f) Accounts
owing from an Account Debtor which is a United States government entity or
any
department, agency, or instrumentality thereof unless Borrower has assigned
its
payment rights to Bank and the assignment has been acknowledged under the
Federal Assignment of Claims Act of 1940, as amended;
(g) Accounts
for demonstration or promotional equipment, or in which goods are consigned,
or
sold on a “sale guaranteed”, “sale or return”, “sale on approval”, or other
terms if Account Debtor’s payment may be conditional;
(h) Accounts
owing from an Account Debtor that has not been invoiced or where goods or
services have not yet been rendered to the Account Debtor (sometimes called
memo
xxxxxxxx or pre-xxxxxxxx);
(i) Accounts
subject to contractual arrangements between Borrower and an Account Debtor
where
payments shall be scheduled or due according to completion or fulfillment
requirements where the Account Debtor has a right of offset for damages suffered
as a result of Borrower’s failure to perform in accordance with the contract
(sometimes called contracts accounts receivable, progress xxxxxxxx, milestone
xxxxxxxx, or fulfillment contracts);
(j) Accounts
owing from an Account Debtor the amount of which may be subject to withholding
based on the Account Debtor’s satisfaction of Borrower’s complete performance
(but only to the extent of the amount withheld; sometimes called retainage
xxxxxxxx);
(k) Accounts
subject to trust provisions, subrogation rights of a bonding company, or a
statutory trust;
(l) Accounts
owing from an Account Debtor that has been invoiced for goods that have not
been
shipped to the Account Debtor unless Bank, Borrower, and the Account Debtor
have
entered into an agreement acceptable to Bank in its sole discretion wherein
the
Account Debtor acknowledges that (i) it has title to and has ownership of the
goods wherever located, (ii) a bona fide sale of the goods has occurred, and
(iii) it owes payment for such goods in accordance with invoices from Borrower
(sometimes called “xxxx and hold” accounts);
(m) Accounts
for which the Account Debtor has not been invoiced;
(n) Accounts
that represent non-trade receivables or that are derived by means other than
in
the ordinary course of Borrower’s business;
(o) Accounts
subject to chargebacks or others payment deductions taken by an Account Debtor
(but only to the extent the chargeback is determined invalid and subsequently
collected by Borrower);
(p) Accounts
owing from an Account Debtor with respect to which Borrower has received
Deferred Revenue (but only to the extent of such Deferred Revenue);
(q) Accounts
in which the Account Debtor disputes liability or makes any claim (but only
up
to the disputed or claimed amount), or if the Account Debtor is subject to
an
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(r) Accounts
for which Bank in its good faith business judgment determines collection to
be
doubtful.
18
“ERISA”
is
the
Employee Retirement Income Security Act of 1974, and its
regulations.
“Events
of Default”
are
set
forth in Article 8.
“Excess
Availability”
means,
as the date of determination, an amount equal to (a) eighty percent (80%) of
Eligible Accounts, minus (b) the outstanding Obligations.
“Facility
Amount”
is
Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000.00).
“Facility
Fee”
is
defined in Section 2.2.2.
“Finance
Charges”
is
defined in Section 2.2.3.
“Financed
Receivables”
are all
those Eligible Accounts, including their proceeds which Bank finances and makes
an Advance, as set forth in Section 2.1.1. A Financed Receivable stops being
a
Financed Receivable (but remains Collateral) when the Advance made for the
Financed Receivable has been fully paid.
“Financed
Receivable Balance” is
the
total outstanding gross face amount, at any time, of any Financed
Receivable.
“GAAP”
is
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute
of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person
as
may be approved by a significant segment of the accounting profession, which
are
applicable to the circumstances as of the date of determination.
“General
Intangibles”
is
all
“general intangibles” as defined in the Code in effect on the date hereof with
such additions to such term as may hereafter be made, and includes without
limitation, all copyright
rights, copyright applications, copyright registrations and like protections
in
each work of authorship and derivative work, whether published or unpublished,
any patents, trademarks, service marks and, to the extent permitted under
applicable law, any applications therefor, whether registered or not, any trade
secret rights, including any rights to unpatented inventions,
payment
intangibles, royalties, contract rights, goodwill, franchise agreements,
purchase orders, customer lists, route lists, telephone numbers, domain names,
claims, income and other tax refunds, security and other deposits, options
to
purchase or sell real or personal property, rights in all litigation presently
or hereafter pending (whether in contract, tort or otherwise), insurance
policies (including without limitation key man, property damage, and business
interruption insurance), payments of insurance and rights to payment of any
kind.
“Good
Faith Deposit”
is
defined in Section 2.2.8.
“Governmental
Approval”
is
any
consent, authorization, approval, order, license, franchise, permit,
certificate, accreditation, registration, filing or notice, of, issued by,
from
or to, or other act by or in respect of, any Governmental
Authority.
“Governmental
Authority”
is
any
nation or government, any state or other political subdivision thereof, any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory
or
administrative functions of or pertaining to government, any securities exchange
and any self-regulatory organization.
“Guarantor” is
any
present or future guarantor of the Obligations.
“Indebtedness”
is
(a)
indebtedness for borrowed money or the deferred price of property or services,
such as reimbursement and other obligations for surety bonds and letters of
credit, (b) obligations evidenced by notes, bonds, debentures or similar
instruments, (c) capital lease obligations and (d) Contingent
Obligations.
“Indemnified
Person”
is
defined in Section 12.2.
19
“Insolvency
Proceeding”
is
any
proceeding by or against any Person under the United States Bankruptcy Code,
or
any other bankruptcy or insolvency law, including assignments for the benefit
of
creditors, compositions, extensions generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
“Inventory”
is
all
“inventory” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products, including without limitation such
inventory as is temporarily out of Borrower’s custody or possession or in
transit and including any returned goods and any documents of title representing
any of the above.
“Investment”
is
any
beneficial ownership of (including stock, partnership interest or other
securities) any Person, or any loan, advance or capital contribution to any
Person.
“Invoice
Transmittal”
shows
Eligible Accounts which Bank may finance and, for each such Account, includes
the Account Debtor’s, name, address, invoice amount, invoice date and invoice
number.
“Key
Person”
is
either of the Chief Executive Officer or Chief Financial Officer of
Borrower.
“Letter
of Credit”
means
a
standby letter of credit issued by Bank or another institution based upon an
application, guarantee, indemnity or similar agreement on the part of
Bank.
“Lien”
is
a
claim, mortgage, deed of trust, levy, charge, pledge, security interest or
other
encumbrance of any kind, whether voluntarily incurred or arising by operation
of
law or otherwise against any property.
“Loan
Documents”
are,
collectively, this Agreement, the Perfection Certificate, any subordination
agreement, any note, or notes or guaranties executed by Borrower or any
Guarantor, and any other present or future agreement between Borrower any
Guarantor and/or for the benefit of Bank in connection with this Agreement,
all
as amended, restated, or otherwise modified.
“Lockbox” is
defined in Section 2.2.7.
“Material
Adverse Change” is:
(a) a
material impairment in the perfection or priority of Bank’s security interest in
the Collateral or in the value of such Collateral; (b) a material adverse change
in the business, operations, or condition (financial or otherwise) of Borrower;
(c) a
material impairment of the prospect of repayment of any portion of the
Obligations; or (d) Bank determines, based upon information available to it
and
in its reasonable judgment, that there is a reasonable likelihood that Borrower
shall fail to comply with one or more of the financial covenants in Section
6
during the next succeeding financial reporting period.
“Maturity
Date”
is
364
days from the Effective Date.
“Minimum
Finance Charge” is
an
amount equal to the Finance Charges and Collateral Handling Fees Bank would
have
earned during a particular fiscal quarter if the amount of Advances outstanding
during such fiscal quarter was Seven Hundred Fifty Thousand Dollars
($750,000.00) at all times.
“Obligations”
are
Borrower’s obligation to pay when due any debts, principal, interest, Bank
Expenses, and other amounts Borrower owes Bank now or later, whether under
this
Agreement, the Loan Documents, or otherwise, including, without limitation,
any
interest accruing after Insolvency Proceedings begin and debts, liabilities,
or
obligations of Borrower assigned to Bank, and the performance of Borrower’s
duties under the Loan Documents.
“Perfection
Certificate”
is
defined in Section 5.1.
“Permitted
Indebtedness”
is:
(a) Borrower’s
indebtedness to Bank under this Agreement or the Loan Documents;
(b) Subordinated
Debt;
20
(c) Indebtedness
to trade creditors incurred in the ordinary course of business; and
(d) Indebtedness
secured by Permitted Liens.
“Permitted
Investments”
are:
(i) marketable direct obligations issued or unconditionally guaranteed by the
United States or its agency or any state maturing within 1 year from its
acquisition, (ii) commercial paper maturing no more than 1 year after its
creation and having the highest rating from either Standard & Poor’s
Corporation or Xxxxx’x Investors Service, Inc., (iii) Bank’s certificates of
deposit issued maturing no more than 1 year after issue, and (iv) any other
investments administered through Bank.
“Permitted
Liens”
are:
(a) Liens
arising under this Agreement or other Loan Documents;
(b) Liens
for
taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Borrower maintains
adequate reserves on its Books, if they have no priority over any of Bank’s
security interests;
(c) Purchase
money Liens securing no more than One Hundred Thousand Dollars ($100,000.00)
in
the aggregate amount outstanding (i) on equipment acquired or held by Borrower
incurred for financing the acquisition of the equipment, or (ii) existing
on equipment when acquired, if
the Lien
is confined to the property and improvements and the proceeds of the
equipment;
(d) Leases
or
subleases and non-exclusive licenses or sublicenses granted in the ordinary
course of Borrower’s business, if
the
leases, subleases, licenses and sublicenses permit granting Bank a security
interest; and
(e) Liens
incurred in the extension, renewal or refinancing of the indebtedness secured
by
Liens described in (a) through (d), but
any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
may
not increase.
“Person”
is
any
individual, sole proprietorship, partnership, limited liability company, joint
venture, company, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate,
entity or government agency.
“Prime
Rate”
is
Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest
rate.
“Reconciliation
Period”
is
each
calendar month.
“Registered
Organization”
is
any
“registered organization” as defined in the Code with such additions to such
term as may hereafter be made.
“Requirement
of Law”
is
as
to any Person, the organizational or governing documents of such Person, and
any
law (statutory or common), treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person
or
any of its property is subject.
“Responsible Officer”
is
each
of the Chief Executive Officer, President, Chief Financial Officer and
Controller of Borrower.
“Subordinated
Debt”
is
indebtedness incurred by Borrower subordinated to all of Borrower’s now or
hereafter indebtedness to Bank (pursuant to a subordination, intercreditor,
or
other similar agreement in form and substance satisfactory to Bank entered
into
between Bank and the other creditor), on terms acceptable to Bank.
“Subsidiary”
is,
with respect to any Person, any Person of which more than fifty percent (50.0%)
of the voting stock or other equity interests (in the case of Persons other
than
corporations) is owned or controlled directly or indirectly by such Person
or
one or more of Affiliates of such Person.
21
[signature
page follows]
22
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of the Effective Date.
BORROWER:
By:
/s/ Xxxxx X. Xxxxxxx
Name:
Xxxxx X. Xxxxxxx
Title:
CFO
DESKTOP
ACQUISITION SUB, INC.
By:
/s/ Xxxxxxx Xxxxxxx
Name:
Xxxxxxx Xxxxxxx
Title:
President
BANK:
SILICON
VALLEY BANK
By:
/s/ Xxxxxxxxx Xxxxxx
Name:
Xxxxxxxxx Xxxxxx
Title:
VP
23
EXHIBIT
A
The
Collateral consists of all of Borrower’s right, title and interest in and to the
following:
All
goods, equipment, inventory, contract rights or rights to payment of money,
leases, license agreements, franchise agreements, general intangibles (including
payment intangibles) accounts (including health-care receivables), documents,
instruments (including any promissory notes), chattel paper (whether tangible
or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), commercial tort claims,
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located;
and
any copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work, whether published
or
unpublished, now owned or later acquired; any patents, trademarks, service
marks
and applications therefor; trade styles, trade names, any trade secret rights,
including any rights to unpatented inventions, know-how, operating manuals,
license rights and agreements and confidential information, now owned or
hereafter acquired; or any claims for damages by way of any past, present and
future infringement of any of the foregoing; and
All
Borrower’s books relating to the foregoing and any and all claims, rights and
interests in any of the above and all substitutions for, additions, attachments,
accessories, accessions and improvements to and replacements, products, proceeds
and insurance proceeds of any or all of the foregoing.
Notwithstanding
the foregoing, the Collateral shall not be deemed to include any copyrights
(including computer programs, blueprints and drawings), copyright applications,
copyright registration and like protection in each work of authorship and
derivative work thereof, whether published or unpublished, now owned or
hereafter acquired; any design rights; any patents, patent applications and
like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same,
trademarks, servicemarks and applications therefor, whether registered or not,
except that the Collateral shall include all accounts, license and royalty
fees
and other revenues, proceeds, or income arising out of or relating to any of
the
foregoing.
Notwithstanding
anything herein to the contrary, the Collateral shall exclude 7,800,000 shares
of common stock of Options Media Group Holdings, Inc. currently held by Borrower
(the “Permitted Pledged Shares”). The Permitted Pledged Shares may be pledged to
Xxxxx Xxxxx and/or GRQ Consultants, Inc., or any affiliates thereof, in
connection with any and all loans to Borrower.
Borrower
and Bank are parties to that certain negative pledge arrangement whereby
Borrower, in connection with Bank’s loan(s) to Borrower, has agreed not to sell,
transfer, assign, mortgage, pledge, lease, grant a security interest in, or
encumber any of its intellectual property without Bank’s prior written
consent.
1
EXHIBIT
B
SPECIALTY
FINANCE DIVISION
Compliance
Certificate
I,
an
authorized officer of INTERCLICK, INC. and DESKTOP ACQUISITION SUB, INC.
(jointly and severally, individually and collectively, “Borrower”) certify under
the Loan and Security Agreement (as amended, the “Agreement”) between Borrower
and Silicon Valley Bank (“Bank”) as follows (all capitalized terms used herein
shall have the meaning set forth in the Agreement):
Borrower
represents and warrants for each Financed Receivable:
Each
Financed Receivable is an Eligible Account.
Borrower
is the owner with legal right to sell, transfer, assign and encumber such
Financed Receivable;
The
correct amount is on the Invoice Transmittal and is not disputed;
Payment
is not contingent on any obligation or contract and Borrower has fulfilled
all
its obligations as of the Invoice Transmittal date;
Each
Financed Receivable is based on an actual sale and delivery of goods and/or
services rendered, is due to Borrower, is not past due or in default, has not
been previously sold, assigned, transferred, or pledged and is free of any
liens, security interests and encumbrances other than Permitted
Liens;
There
are
no defenses, offsets, counterclaims or agreements for which the Account Debtor
may claim any deduction or discount;
It
reasonably believes no Account Debtor is insolvent or subject to any Insolvency
Proceedings;
It
has
not filed or had filed against it Insolvency Proceedings and does not anticipate
any filing;
Bank
has
the right to endorse and/ or require Borrower to endorse all payments received
on Financed Receivables and all proceeds of Collateral.
No
representation, warranty or other statement of Borrower in any certificate
or
written statement given to Bank contains any untrue statement of a material
fact
or omits to state a material fact necessary to make the statement contained
in
the certificates or statement not misleading.
Additionally,
Borrower represents and warrants as follows:
Borrower
and each Subsidiary is duly existing and in good standing in its state of
formation and qualified and licensed to do business in, and in good standing
in,
any state in which the conduct of its business or its ownership of property
requires that it be qualified except where the failure to do so could not
reasonably be expected to cause a Material Adverse Change. The execution,
delivery and performance of the Loan Documents have been duly authorized, and
do
not conflict with Borrower’s organizational documents, nor constitute an event
of default under any material agreement by which Borrower is bound. Borrower
is
not in default under any agreement to which or by which it is bound in which
the
default could reasonably be expected to cause a Material Adverse
Change.
Borrower
has good title to the Collateral, free of Liens except Permitted Liens. All
inventory is in all material respects of good and marketable quality, free
from
material defects.
1
Borrower
is not an “investment company” or a company “controlled” by an “investment
company” under the Investment Company Act of 1940, as amended. Neither Borrower
nor any of its Subsidiaries is a “holding company” or an “affiliate” of a
“holding company” or a “subsidiary company” of a “holding company” as each term
is defined and used in the Public Utility Holding Company Act of 2005. Borrower
is not engaged as one of its important activities in extending credit for margin
stock (under Regulations X, T and U of the Federal Reserve Board of Governors).
Borrower has complied in all material respects with the Federal Fair Labor
Standards Act. Borrower has not violated any laws, ordinances or rules, the
violation of which could reasonably be expected to cause a Material Adverse
Change. None of Borrower’s or any Subsidiary’s properties or assets has been
used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by
previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each Subsidiary has
timely filed all required tax returns and paid, or made adequate provision
to
pay, all material taxes, except those being contested in good faith with
adequate reserves under GAAP. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary
to
continue its business as currently conducted except where the failure to obtain
or make such consents, declarations, notices or filings would not reasonably
be
expected to cause a Material Adverse Change.
Borrower
is in compliance with the financial covenants set forth in Section 6.7 of the
Agreement.
All
representations and warranties in the Agreement are true and correct in all
material respects on this date, and Borrower represents that there is no
existing Event of Default.
Financial
Covenants
|
Required
|
Actual
|
Compliance
|
|
|
Liquidity
|
$1,000,000*
|
$______
|
Yes
No
|
|
Monthly
EBIDTA
|
$1.00*
|
$______
|
Yes
No
|
*As
set
forth in Section 6.7 of the Agreement.
Sincerely,
_________________
________________________
Signature
________________________
Title
________________________
Date
2
