REVOLVING CREDIT LOAN AGREEMENT
REVOLVING CREDIT LOAN AGREEMENT
This
Revolving Credit Loan Agreement (this “Agreement”) is made
and entered into on the 7th day of
December, 2010, to be effective as of the 3rd day of
December, 2010, by and between CyberDefender Corporation, a Delaware corporation
(the “Company”), and GR
Match, LLC, a Delaware limited liability company (the “Lender”).
WHEREAS,
the Company has requested that the Lender make available to the Company a
revolving credit facility in the principal amount not to exceed Five Million
Dollars ($5,000,000.00), and the Lender has agreed to make such revolving credit
facility available to the Company, on the terms and conditions set forth in the
Revolving Credit Note, the Security Agreement (each as defined below) and this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and Lender agree as follows:
ARTICLE
I.
DEFINITIONS
1.1 Definitions. In
addition to the terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to such terms in
the Revolving Credit Note, and (b) the following terms have the meanings
indicated in this Section
1.1:
“Action” shall have
the meaning ascribed to such term in Section
3.1(h).
“Advances” means
advances made by the Lender to the Company under the Revolving Credit
Facility.
“Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 144 under the Securities Act.
“Business Day” means
any day except Saturday, Sunday, any day which is a federal legal holiday in the
United States or any day on which banking institutions in the State of New York
are authorized or required by law or other governmental action to close and,
upon the Company becoming listed or quoted on a Trading Market, except any day
that the Common Stock is not traded on the Trading Market.
“Change of Control
Transaction” shall have the meaning given to such term in the Revolving
Credit Note.
“Closing” means the
closing of the transactions contemplated by this Agreement and the issuance of
the Revolving Credit Note.
“Closing Date” means
the Business Day when all conditions precedent to the parties' respective
obligation to effect the Closing have been satisfied or waived.
“Collateral” shall
have the meaning given to such term in the Security Agreement.
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means
the common stock of the Company, par value $0.001 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed into.
“Common Stock
Equivalents” means any securities of the Company which would entitle the
holder thereof to acquire at any time Common Stock, including, without
limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable
for, or otherwise entitles the holder thereof to receive, Common
Stock.
“ERISA” means the
Employee Retirement Income Security Act of 1974, and any regulations or rulings
issued pursuant thereto, as amended or replaced and as in effect from time to
time.
“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Fourth Amendment”
means that certain Fourth Amendment to Media and Marketing Services Agreement by
and between the Company and the Lender in the form attached hereto and made part
hereof as Exhibit
A.
“Fundamental
Transaction” shall have the meaning given to such term in the Revolving
Credit Note.
“GAAP” shall have the
meaning ascribed to such term in Section
3.1(f).
“Indebtedness” shall
mean (a) any liabilities for borrowed money or amounts owed (other than trade
accounts payable that are incurred in the ordinary course of business and that
are not more than one hundred twenty (120) days past due), (b) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness of
others, whether or not the same are or should be reflected in the Company's
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (c) the present value of any lease payments due
under leases required to be capitalized in accordance with GAAP.
“Indemnified Party”
shall have the meaning assigned to such term in Section
4.3(b).
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“Indemnifying Party”
shall have the meaning assigned to such term in Section
4.3(b).
“Intellectual Property
Rights” shall have the meaning assigned to such term in Section
3.1(k)(i).
“Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.
“Loan and Securities Purchase
Agreement Amendment” means that certain First Amendment to Loan and
Securities Purchase Agreement by and between the Company and the Lender in the
form attached hereto and made part hereof as Exhibit
B.
“Losses” shall have
the meaning assigned to such term in Section
4.3(a).
“Material Adverse
Effect” shall have the meaning assigned to such term in Section
3.1(b).
“Maximum Rate” shall
have the meaning ascribed to such term in Section
6.15.
“Media and Marketing Services
Agreement” shall mean that certain Media and Marketing Services
Agreement, dated March 24, 2009, by and between CyberDefender Corporation, a
California corporation (as predecessor in interest to the Company) and the
Lender, as amended by that certain First Amendment thereto, dated as of June 4,
2009, that certain Second Amendment thereto, dated as of October 26, 2009, that
certain Third Amendment thereto, dated as of October 22, 2010, to be effective
October 15, 2010, and the Fourth Amendment and as may be further amended from
time to time.
“Media Services
Invoice” shall have the meaning ascribed to such term in Section
2.3(b).
“Permitted
Indebtedness” shall have the meaning given to such term in the Security
Agreement.
“Permitted Lien” shall
have the meaning given to such term in the Security Agreement.
“Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Proceeding” means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.
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"Property" means any
interest in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible.
“Outstanding Invoices
Amount” shall have the meaning ascribed to such term in Section
2.3(a).
“Outstanding Invoices”
shall have the meaning ascribed to such term in Section
2.3(a).
“Qualified Offering”
means the sale and issuance by the Company following the date of this Agreement
of any debt or equity securities of the Company in an aggregate amount greater
than Ten Million Dollars ($10,000,000), whether in a single transaction or a
series of related transactions and whether as a private placement or a sale on
any Trading Market.
“Revolving Credit
Account” means the loan account maintained by the Lender with respect to
Advances and repayments of Advances, the accrual and payment of interest on
Advances and all other amounts and charges owing to the Lender in connection
with Advances.
“Revolving Credit
Amount” means an amount equal to Five Million Dollars
($5,000,000).
“Revolving Credit
Balance” means an amount equal to (i) the Revolving Credit Amount less
(ii) the outstanding principal amount of the Revolving Credit Facility from time
to time.
“Revolving Credit Expiration
Date” means, unless otherwise agreed to by the Lender in its sole
discretion, the earlier to occur of (i) March 31, 2011, or (ii) the closing of a
Qualified Offering.
“Revolving Credit
Facility” means the revolving credit facility in a maximum principal
amount at any one time outstanding equal to the Revolving Credit Amount, made
available to the Company pursuant to this Loan Agreement and the other Revolving
Credit Loan Documents.
“Revolving Credit Loan
Documents” means this Agreement, the Security Agreement, the Revolving
Credit Note, and any other documents or agreements executed by the Lender and
the Company in connection with the transactions contemplated
hereby.
“Revolving Credit
Note” means that certain Revolving Credit Note issued by the Company in
favor of the Lender pursuant to this Agreement in the form attached hereto and
made part hereof as Exhibit
C.
“Rule 144” means Rule
144 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.
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“SEC Documents” shall
have the meaning ascribed to such term in Section
3.1(f).
“Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated hereunder.
“Security Agreement”
means that certain Security Agreement executed by the Company in favor of the
Lender in the form attached hereto and made part hereof as Exhibit
D.
“Senior Business
Advisor” shall have the meaning ascribed to such term in Section
4.6(a).
“Senior Convertible Note
Amendment” means that certain First Amendment to 9% Secured Convertible
Promissory Note by and between the Company and the Lender in the form attached
hereto and made part hereof as Exhibit E
“Senior Loan
Documents” means, collectively, (i) that certain 9% Secured Convertible
Promissory Note, dated March 31, 2010, issued by CyberDefender Corporation, a
California corporation (as predecessor in interest to the Company) in favor of
the Lender, as amended, (ii) that certain Loan and Securities Purchase
Agreement, dated as of March 31, 2010, by and between CyberDefender Corporation,
a California corporation (as predecessor in interest to the Company) and the
Lender, as amended, and (iii) that certain Security Agreement, dated as of March
31, 2010, executed by CyberDefender Corporation, a California corporation (as
predecessor in interest to the Company) in favor of the Lender.
“Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the American Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board.
“Weekly Maximum” shall
have the meaning ascribed to such term in Section
2.3(b).
ARTICLE
II.
REVOLVING
CREDIT FACILITY; CLOSING
2.1 Advances.
(a) Subject
to and upon the terms and conditions of this Agreement and the Revolving Credit
Note, the Lender agrees to make Advances to the Company during the term of the
Revolving Credit Facility in an aggregate principal amount at any time
outstanding not to exceed the Revolving Credit Amount without the Lender's prior
written consent, which Advances shall be repaid in accordance with the terms and
conditions of this Agreement and the Revolving Credit Note. Unless
otherwise agreed to by the Lender in writing, all Advances shall be applied
solely in accordance with Section 2.3 below, and the
Company shall have no right to demand or request Advances under the Revolving
Credit Facility other than as provided herein. Unless sooner
terminated pursuant to the provisions of the Revolving Credit Loan Documents,
the Revolving Credit Facility and the obligation of the Lender to make Advances
hereunder shall automatically terminate on the Revolving Credit Expiration Date
without further action by, or notice of any kind from, the
Lender.
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(b) The
Company may borrow, repay and re-borrow under the Revolving Credit Facility on
the terms and conditions of this Agreement and the Revolving Credit
Note. The fact that there may be no Advances outstanding at any
particular time shall not affect the continuing validity of this
Agreement. The Lender will maintain on its books the Revolving Credit
Account with respect to Advances, repayments and prepayments of Advances, the
accrual and payment of interest on Advances and all other amounts and charges
owing to the Lender in connection with Advances. Except for manifest
error, the Revolving Credit Account shall be conclusive as to all amounts owing
by the Company to the Lender in connection with and on account of
Advances.
2.2 Use of
Proceeds. The proceeds of any Advances hereunder shall be used
by the Company solely for the purpose of paying any amounts owing by the Company
to the Lender pursuant to Section 2.2 of the Media and
Marketing Services Agreement.
2.3 Advance
Procedures.
(a) The parties acknowledge and agree that
the Lender has previously issued to the Company invoice numbers 10020479,
10020503, 10020510, 10020534, 10020621, 10020648, 10020682, 10020717, 10020816,
10020821, 10020822, 10020823 and 10020824 (collectively, the “Outstanding
Invoices”) in the
aggregate amount of Four Million Two Hundred Eighty Seven Thousand Six Hundred
Sixty and 05/100 Dollars ($4,287,660.05) (the “Outstanding
Invoices Amount”) for
amounts owing by the Company to the Lender pursuant to Section
2.2 of the Media and
Marketing Services Agreement, which amounts remain payable in full by the
Company as of the date hereof. Effective as of the Closing, (i) the
Lender shall be deemed to have made an Advance to the Company in an amount equal
to the Outstanding Invoices Amount such that the initial outstanding principal
amount advanced under the Revolving Credit Facility shall be an amount equal to
the Outstanding Invoices Amount and (ii) the Outstanding Invoices shall be
treated as no longer outstanding for purposes of the Media and Marketing
Services Agreement.
(b) Simultaneously
with the Lender's delivery to the Company of each invoice contemplated by Section 2.2 of the Media and
Marketing Services Agreement during the term of the Revolving Credit Facility
(each, a “Media Services
Invoice”), subject to Section 2.3(d) below, (i) the
Lender shall automatically, and without further notice or demand to the Company,
be deemed to have made an Advance to the Company in an amount equal to the
Reimbursement Amount (as defined in the Media and Marketing Services Agreement)
set forth in such Media Services Invoice and (ii) the portion of the applicable Media Invoice that is deemed
paid as an Advance hereunder shall be treated as no longer outstanding for
purposes of the Media and Marketing Services Agreement; provided,
however, that, unless otherwise agreed to by the Lender in writing, in no
event shall the amount of Advances provided under the Revolving
Credit Facility exceed an amount equal to Five Hundred Thousand Dollars
($500,000) per week (the “Weekly
Maximum”). The
amount of any Reimbursement Amount owing by the Company to the Lender
pursuant to a Media
Services Invoice in excess
of the Weekly Maximum shall be payable by the Company to the Lender pursuant to
the terms and conditions of the Media and Marketing Services Agreement and shall
not be treated as an Advance hereunder unless otherwise agreed to by the
Lender in writing.
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(c) Simultaneously
with the Lender's delivery of each Media Services Invoice to the Company during
the term of the Revolving Credit Facility, the Lender shall deliver to the
Company a reasonably detailed summary of the Revolving Credit Account as of the
date of such invoice (after applying any applicable Advance in accordance with
Section 2.3(b) relating
to the Reimbursement Amount set forth in such invoice) which shall include,
without limitation, (i) the outstanding principal amount advanced under the
Revolving Credit Facility and (ii) the aggregate amount of accrued but unpaid
interest on the principal amounts advanced under the Revolving Credit Facility
as of the date of such invoice.
(d) Notwithstanding
anything herein to the contrary, in the event that the Reimbursement Amount owing by the Company to the Lender
pursuant to any Media Services Invoice exceeds an amount equal to the
Revolving Credit Balance as of the date that the applicable Media
Services Invoice is
delivered by the Lender to the Company, then unless otherwise agreed to by the Lender
in writing, the Lender shall be deemed to Advance to the Company only an amount
equal to the Revolving Credit Balance pursuant to Section 2.3(b) above, and the balance of the
Reimbursement Amount owing
by the Company to the Lender pursuant to such Media Services Invoice shall be payable by the Company to the
Lender pursuant to the terms and conditions of the Media and Marketing Services
Agreement. In the event that (i) an Event of Default shall
have occurred and be continuing or (ii) the Revolving Credit Balance is zero (0) as
of the date that an applicable Media Services Invoice is delivered by the Lender to the
Company, then the Lender
shall not be deemed to make any Advance to the Company with respect to all or
any portion of the Reimbursement Amount set forth on such Media Services Invoice, and the entire amount of the
Reimbursement Amount owing
by the Company to the Lender pursuant to such Media Services Invoice shall be payable by the Company to the
Lender pursuant to the terms and conditions of the Media and Marketing Services
Agreement. If
for any reason the sum of the outstanding Advances shall nevertheless exceed the
Revolving Credit Amount, the Company shall remain liable for the entire amount
outstanding, with interest, fees, and charges thereon as provided herein, and
the Company shall immediately upon demand pay to the Lender the amount of such
excess, with interest thereon as provided herein.
2.4 Closing. The
Closing shall occur upon satisfaction of the conditions set forth in Section
2.6.
2.5 Deliveries.
(a) At
or prior to the Closing, the Company shall deliver to the Lender the
following:
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(i)
|
this
Agreement, duly executed by the
Company;
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(ii)
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the
Revolving Credit Note, duly executed by the
Company;
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(iii)
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the
Security Agreement, duly executed by the
Company;
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(iv)
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the
Fourth Amendment, duly executed by the
Company;
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(v)
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the
Senior Convertible Note Amendment, duly executed by the
Company;
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(vi)
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the
Loan and Securities Purchase Agreement Amendment, duly executed by the
Company; and
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(vii)
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resolutions
duly adopted by the Company's board of directors approving the
transactions contemplated by the Revolving Credit Loan Documents in the
form attached hereto and made part hereof as Exhibit
F
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(b) At
or prior to the Closing, the Lender shall deliver to the Company the
following:
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(i)
|
this
Agreement, duly executed by the
Lender;
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(ii)
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the
Fourth Amendment, duly executed by the
Lender;
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(iii)
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the
Senior Convertible Note Amendment, duly executed by the Lender;
and
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(iv)
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the
Loan and Securities Purchase Agreement Amendment, duly executed by the
Lender.
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2.6 Closing
Conditions.
(a) The
obligations of the Company to effect the Closing are subject to the following
conditions being met:
(i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Lender contained herein;
(ii) all
obligations, covenants and agreements of the Lender required to be performed at
or prior to the Closing Date shall have been performed; and
(iii) the
delivery by the Lender to the Company of the items set forth in Section 2.5(b) of this
Agreement.
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(b) The
obligations of the Lender to effect the Closing are subject to the following
conditions being met:
(i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein;
(ii) all
obligations, covenants and agreements of the Company required to be performed at
or prior to the Closing Date shall have been performed;
(iii) the
delivery by the Company to the Lender of the items set forth in Section 2.5(a) of this
Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the Company since the
date hereof; and
(v) from
the date hereof to the Closing Date, a banking moratorium shall not have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of the Lender, makes it impracticable or inadvisable to
purchase the Revolving Credit Note at the Closing.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1 Representations and
Warranties of the Company. Except as set forth in the SEC
Documents (defined below) or specifically disclosed herein, the Company hereby
makes the following representations and warranties to the Lender:
(a) Subsidiaries. The
Company has no (and has never had any) subsidiaries and does not presently own,
of record or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or other equity interest in any
Person, nor is the Company, directly or indirectly, a participant in any joint
venture or partnership with any Person.
(b) Organization and
Qualification. The Company is duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware. The Company has the requisite power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. The Company is not in violation or default of any of the
provisions of its certificate of incorporation, bylaws or other organizational
or charter documents. The Company is duly qualified to conduct
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not have or
reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Revolving Credit Loan Document, (ii)
a material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company, taken as a
whole, or (iii) a material adverse effect on the Company’s ability to perform in
any material respect on a timely basis its obligations under any Revolving
Credit Loan Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.
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(c) Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Revolving Credit Loan Documents, to issue the Revolving Credit Note to
the Lender and to otherwise carry out its obligations hereunder and
thereunder. The execution and delivery of each of the Revolving
Credit Loan Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, its board of directors or its shareholders in connection
therewith. Each Revolving Credit Loan Document has been (or upon
delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.
(d) No Conflicts; Third Party
Rights. The execution, delivery and performance of the
Revolving Credit Loan Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby do not and will not:
(i) conflict with or violate any provision of the Company’s articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company debt or otherwise) or other understanding to
which the Company is a party or by which any property or asset of the Company is
bound or affected (or result in the imposition of any material Liens upon any of
the Company’s Property or assets), or (iii) conflict with or result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company is
subject (including federal and state securities laws and regulations), or by
which any Property or asset of the Company is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect. Except for the right
of first offer granted to the Lender pursuant to the Senior Loan Documents, (i)
no Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Revolving Credit Loan Documents and (ii) the transactions
contemplated by the Revolving Credit Loan Documents do not conflict with any
rights granted to any third parties to purchase any debt or equity securities of
the Company.
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(e) Filings, Consents and
Approvals. The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Revolving Credit Loan Documents,
other than the consent of the Company's board of directors to the transactions
contemplated by the Revolving Credit Loan Documents.
(f) SEC
Documents. The Company hereby makes reference to the Annual
Report on Form 10-K for the fiscal year ended December 31, 2009 and the
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2010, and
any amendments thereto, filed by the Company with the Commission, and the
Current Report on Form 8-K filed by the Company with the Commission on November
23, 2010 (the “Restatement 8-K”),
which are available for review on the Commission’s website, xxx.xxx.xxx:
(collectively, the “SEC
Documents”). As of the date thereof, except as set forth in
the Restatement 8-K, the SEC Documents complied in all material respects with
the requirements of the Exchange Act, and the rules and regulations promulgated
thereunder and none of the SEC Documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Except as set forth in the
Restatement 8-K, the financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles in the United States (“GAAP”) (except, in
the case of unaudited statements, as permitted by the applicable form under the
Exchange Act) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present the financial
position of the Company as of the dates thereof and its consolidated statements
of operations, shareholder equity and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal and recurring year-end
audit adjustments which were and are not expected to have a Material Adverse
Effect). Except as and to the extent set forth on the balance sheet
of the Company as of June 30, 2010, including the notes thereto, or as otherwise
set forth in the Restatement 8-K, the Company has no liability or obligation of
any nature (whether accrued, absolute, contingent or otherwise and whether
required to be reflected on a balance sheet or not).
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(g) Material
Changes. Since June 30, 2010, (i) except as set forth in the
Restatement 8-K, there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material Adverse Effect,
(ii) except as set forth in the Restatement 8-K, the Company has not incurred
any liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made with the
Commission, (iii) except as set forth in the Restatement 8-K, the Company has
not altered its method of accounting, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its shareholder or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock, (v) the Company has not sold any assets, individually or in
the aggregate, outside of the ordinary course of business, (vi) except as set
forth in the SEC Documents and up to an additional One Million Dollars
($1,000,000), the Company has not made any material capital expenditures,
individually or in the aggregate and (vii) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company equity incentive plans. The Company does not have pending
before the Commission any request for confidential treatment of
information.
(h) Litigation. Except
as previously disclosed to GRM in writing, there is no action, suit, inquiry,
notice of violation, Proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company, or any of its
properties before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign)
(collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Revolving Credit Loan Documents or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any director or officer
thereof, is or has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of
the Company.
(i) Compliance. The
Company is not (i) in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company under), nor has the Company received
notice of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) in violation of any order
of any court, arbitrator or governmental body, or (iii) except as set forth in
the Restatement 8-K, in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws applicable to its business, all rules and regulations of the
applicable Trading Market on which the Company's Common Stock is listed or
quoted for trading, and all such laws that affect the environment, except in
each case as could not have or reasonably be expected to result in a Material
Adverse Effect.
12
(j) Title to Assets. The
Company has good and marketable title in fee simple to all real property owned
by it that is material to the business of the Company and good and marketable
title in all personal property owned by it that is material to the business of
the Company, in each case free and clear of all Liens, except for (i) Permitted
Liens, (ii) Liens as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made of such
property by the Company and (iii) Liens for the payment of federal, state or
other taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the Company are
held by it under valid, subsisting and enforceable leases with which the Company
is in compliance.
(k) Intellectual
Property.
(i) Patents and
Trademarks. Except as set forth in the Schedule 3(k)(i)
hereto, the Company has, or has the rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
trade secrets, inventions, copyrights, licenses and other intellectual property
rights and similar rights necessary or material for use in connection with its
business and which the failure to so have could have a Material Adverse Effect
(collectively, the "Intellectual Property
Rights"). The Company has not received a notice (written or otherwise)
that the Intellectual Property Rights used by the Company violate or infringe
upon the rights of any Person. To the knowledge of the Company, all
such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights. The
Company has taken reasonable security measures to protect the secrecy,
confidentiality and value of all of its intellectual properties, except where
failure to do so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(ii) Know-How Necessary for the
Business. The Intellectual Property Rights are all those necessary for
the operation of the Company's businesses as it is currently conducted or as
reflected in SEC Documents. The Company is the owner of all right, title, and
interest in and to each of the Intellectual Property Rights, free and clear of
all liens, security interests, charges, encumbrances, equities, and other
adverse claims, other than Permitted Liens, and has the right to use all of the
Intellectual Property Rights.
(l) Broker’s Fees. The
Lender shall not be obligated to pay any commission, brokerage fee, or finder’s
fee based on any alleged agreement or understanding between the Company and a
third person in respect of the transactions contemplated hereby. The
Company hereby agrees to indemnify the Lender against any claim by any third
person for any commission, brokerage fee, finder’s fee, or other payment with
respect to this Agreement or the transactions contemplated hereby based on any
alleged agreement or understanding between the Company and any such third
person, whether express or implied from the actions of the Company or anyone
acting or purporting to act on behalf of the Company.
13
(m) Solvency. After
giving effect to the debt incurred by the Company in connection with this
Agreement and the Revolving Credit Loan Documents: (i) the Company will not be
left with remaining assets which would constitute unreasonably small capital
after giving effect to the nature of the Company's business; (ii) the Company
does not intend to, and does not believe that it will, incur debts beyond its
ability to pay as such debts mature; and (iii) the Company will be able to pay
its debts as they become due.
(n) No Bankruptcy
Filing. The Company is not (i) a debtor in any outstanding or
pending action or proceeding pursuant to any bankruptcy law, (ii) contemplating
either the filing of a petition under any bankruptcy law or the liquidation of
all or any portion of its assets or property, or (iii) aware that any other
Person is contemplating the filing a petition under any bankruptcy law against
the Company.
(o) Foreign Corrupt
Practices. Neither the Company nor any director, officer,
agent, employee or other Person acting on behalf of the Company has, in the
course of its actions for, or on behalf of, the Company (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
(p) Tax
Status. The Company (i) has timely made or filed all foreign,
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has timely paid all
taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim. The Company is not operated in such a manner as
to qualify as a passive foreign investment company, as defined in Section 1297
of the U.S. Internal Revenue Code of 1986, as amended.
(q) Disclosure. All
disclosures furnished by or on behalf of the Company to the Lender regarding the
Company, its business and the transactions contemplated hereby with respect to
the representations and warranties made herein are true and correct with respect
to such representations and warranties and do not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading. Each press release issued by the Company during the twelve
(12) months preceding the date of this Agreement did not at the time of release
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. No event or circumstance has occurred or information
exists with respect to the Company or its business, properties, liabilities,
prospects, operations (including results thereof) or conditions (financial or
otherwise), which, under applicable law, rule or regulation, requires public
disclosure at or before the date hereof or announcement by the Company but which
has not been so publicly disclosed. The Company acknowledges and
agrees that the Lender does not make and has not made any representations or
warranties with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2
hereof.
14
(r) Acknowledgment of the
Lender’s Reliance. The Company acknowledges that the Lender is
entering into the transactions contemplated by this Agreement in reliance upon
the representations and warranties contained herein. The Lender shall
be entitled to such reliance notwithstanding any investigation which has been or
will be conducted by the Lender or on its behalf.
3.2 Representations and
Warranties of the Lender. The Lender hereby represents and
warrants as of the date hereof and as of the Closing Date to the Company as
follows:
(a) Organization;
Authority. The Lender is a limited liability company, duly
formed, validly existing and in good standing under the laws of the State of
Delaware, with full right, power and authority to enter into and to consummate
the transactions contemplated by the Revolving Credit Loan Documents and
otherwise to carry out its obligations hereunder and thereunder. The
execution, delivery and performance by the Lender of the transactions
contemplated by this Agreement have been duly authorized by all necessary
limited liability company action on the part of the Lender. Each
Revolving Credit Loan Document to which the Lender is a party has been duly
executed by the Lender, and when delivered by the Lender in accordance with the
terms hereof, will constitute the valid and legally binding obligation of the
Lender, enforceable against it in accordance with its terms, except (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b) Access to Company
Information. The Lender acknowledges that it has been afforded
access and the opportunity to obtain all financial and other information
concerning the Company that the Lender desires (including the opportunity to
meet with the Company’s executive officers, either in person or
telephonically). The Lender has reviewed copies of the SEC Documents
and is familiar with the contents thereof, including, without limitation, the
risk factors contained in the SEC Documents, and there is no further information
about the Company that the Lender desires in determining whether to enter into
the transactions contemplated by this Agreement.
15
(c) Broker’s Fees. The
Company shall not be obligated to pay any commission, brokerage fee, or finder’s
fee based on any alleged agreement or understanding between the Lender and a
third party in respect of the transactions contemplated hereby. The
Lender hereby agrees to indemnify the Company against any claim by any third
person for any commission, brokerage fee, finder’s fee, or other payment with
respect to this Agreement or the transactions contemplated hereby based on any
alleged agreement or understanding between the Lender and any such third party,
whether express or implied from the actions of the Lender or anyone acting or
purporting to act on behalf of the Lender.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Non-Public
Information. The Lender acknowledges that it may have access
to material non-public information of the Company so long as one more of its
principals or designees serves as a director, board observer or officer of the
Company.
4.2 Affirmative
Covenants. Until the later to occur of (i) the payment in full
of all principal, interest and any other amounts outstanding under the Revolving
Credit Note and (ii) the expiration or earlier termination of the Revolving
Credit Facility, the Company shall, and shall cause its Subsidiaries, if any,
to:
(a) comply
with all laws, statutes, ordinances, orders, rules or regulations applicable to
the Company or any Subsidiary or to the Collateral (or any part thereof) or to
any other property owned, leased, operated or used by the Company or any
Subsidiary, including, without limitation all rules and regulations of the
applicable Trading Market on which the Company's Common Stock is listed or
quoted for trading from time to time, except as set forth in the Current Report
on Form 8-K filed by the Company with the Commission on November 30, 2010 and
except where such violations would not result, either individually or in the
aggregate, in a Material Adverse Effect;
(b) continue
to engage in business of the same general type as now being conducted by it, and
do and cause to be done all things necessary to maintain and keep in full force
and effect its corporate or company, as applicable, existence in good standing
in each jurisdiction in which it conducts business; and
(c)
comply with any agreement or undertaking to which the Company or any Subsidiary,
if applicable, is a party and maintain in full force and effect all contracts
and leases to which such Company or any Subsidiary, if applicable, is or becomes
a party, except where the failure to do so would not result, either individually
or in the aggregate, in a Material Adverse Effect.
16
4.3 Indemnification.
(a) Indemnification by the
Company. The Company shall, notwithstanding any termination of this
Agreement, indemnify, defend and hold the Lender and its Affiliates, and each of
their directors, managers, officers, shareholders, members, employees,
investment advisors, brokers and agents, as the case may be, harmless to the
fullest extent permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, costs and expenses (including, without limitation,
reasonable attorneys’ fees) and expenses (collectively, “Losses”), as
incurred, to the extent arising out of or relating to (1) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act or any
state securities law, or any rule or regulation thereunder, in connection with
the performance of its obligations under this Agreement, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding the Lender furnished in writing to the Company
by the Lender expressly for use therein or (2) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Revolving Credit Loan Documents, provided that the
Company’s liability under this Section for a breach of any representations or
warranties made by the Company in this Agreement shall in no event exceed the
amount of all amounts owing by the Company to the Lender under the Revolving
Credit Loan Documents and/or the Senior Loan Documents. The Company shall notify
the Lender promptly of the institution, threat or assertion of any Proceeding
arising from or in connection with the transactions contemplated by this
Agreement of which the Company is aware.
(b) Conduct of Indemnification
Proceedings. If any Proceeding shall be brought or asserted against any
Person entitled to indemnity hereunder (an “Indemnified Party”),
such Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying Party”)
in writing, and the Indemnifying Party shall have the right to assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have prejudiced the Indemnifying Party.
An Indemnified Party shall have the
right to employ separate counsel in any such Proceeding and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party
has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party
shall have failed promptly to assume the defense of such Proceeding and to
employ counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and counsel to the Indemnified Party shall reasonably believe that a
material conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which case, if
such Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
the reasonable fees and expenses of no more than one separate counsel shall be
at the expense of the Indemnifying Party). The Indemnifying Party shall not be
liable for any settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld or delayed. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
17
Subject to the terms of this Agreement,
all reasonable fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party; provided,
that the Indemnified Party shall promptly reimburse the Indemnifying Party for
that portion of such fees and expenses applicable to such actions for which such
Indemnified Party is judicially determined to be not entitled to indemnification
hereunder.
4.4 Securities Laws Disclosure;
Publicity. Subject to the terms and conditions of this Section 4.4, the Company shall, on or before
8:30 a.m., New York time, on the fourth (4th) Business Day after the date of this
Agreement, (i) issue a press release disclosing the transactions contemplated by
the Revolving Credit Loan
Documents and (ii)
file a Current Report on Form 8-K describing all the material terms of
the transactions contemplated by the Revolving Credit Loan Documents in the form
required by the Exchange Act and attaching all the material Revolving Credit
Loan Documents (including, without limitation, this Agreement (and all schedules
to this Agreement)). The Company and the Lender shall consult with
each other in issuing any press releases with respect to the transactions
contemplated hereby, and neither the Company nor the Lender shall issue any such
press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of the Lender, or
without the prior consent of the Lender, with respect to any press release of
the Company, which consent shall not unreasonably be withheld or delayed, except
if such disclosure is required by law or regulation, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of the Lender, or include the name
of the Lender in any filing with the Commission or any regulatory agency or
Trading Market, without the prior written consent of the Lender, except (i) as
required by federal securities law or regulation in connection with the filing
with the Commission on Form 8-K of the final Revolving Credit Loan Documents
(including signature pages thereto) and a summary thereof and (ii) to the extent
such disclosure is required by law or Trading Market regulations, in which case
the Company shall provide the Lender with prior notice of such disclosure
permitted under this subclause (ii).
4.5 Management. The
Company agrees to provide Lender with notice of any change in the senior
executive officers or other senior management of the Company within five (5)
Business Days of such change becoming effective.
18
4.6 Engagement of Senior
Business Advisor.
(a) In
the event of an Event of Default, in addition to all remedies available to the
Lender under the Revolving Credit Loan Documents and/or applicable law, the
Lender shall have the right (but not the obligation), exercisable upon written
notice to the Company at any time during which such Event of Default shall be
continuing, to cause the Company to retain a consultant or a Company executive,
selected by the Lender in its sole discretion, to oversee the management and
operations of the Company (such person, the “Senior Business
Advisor”), at the Company’s sole cost and expense; provided that the
Senior Business Advisor’s compensation shall not exceed that of the Company’s
Chief Financial Officer at the time of the Company's engagement of the Senior
Business Advisor. The Company shall approve, execute, deliver and
file, and shall cause its shareholders, Board of Directors and officers, as the
case may be, to approve, execute, deliver and file, any consents, amendments,
filings, or other agreements or documents necessary to cause the Senior Business
Advisor to be retained by the Company as provided above not later than three (3)
Business Days following the Company's receipt of the above-referenced notice
from the Lender. The Company shall retain the Senior Business Advisor
for so long as, and only for so long as, an Event of Default shall occur and be
continuing.
(b) The
Senior Business Advisor shall report directly to, and be subject to the
direction of, the Company's Board of Directors. The Senior Business
Advisor shall be senior to the Company's senior executive officers, including,
without limitation, the Company's Chief Executive Officer and Chief Financial
Officer, each of whom shall report to, and be subject to the direction of, the
Senior Business Advisor during the Company’s engagement of the Senior Business
Advisor. The Senior Business Advisor shall have the same power and
authority to bind the Company as is granted to the Company's senior executive
officers. The Company shall (i) invite the Senior Business Advisor to attend all
meetings of its Board of Directors in a nonvoting observer capacity and, in this
respect, shall give the Senior Business Advisor copies of all notices, minutes,
consents and other materials that the Company provides to its directors and
officers at the same time and in the same manner as provided to such directors
and officers, as the case may be and (ii) provide the Senior Advisor with access
to all financial information of the Company, including, without limitation,
budgets, projections, plans and results of operations; provided, however, that
the Senior Business Advisor shall agree to hold in confidence and trust all
information so provided and provided further that the Company reserves the right
to withhold any information and to exclude the Senior Business Advisor from any
Board of Directors meeting or portion thereof if access to such information or
attendance at such meeting could adversely affect the attorney-client privilege
between the Company and its counsel.
(c) The
Company shall enter into an indemnification agreement with the Senior Business
Advisor on terms reasonably satisfactory to the Senior Business Advisor
indemnifying the Senior Business Advisor for any losses, damages or other
expenses incurred by the Senior Business Advisor relating to or arising out of
the Senior Business Advisor's performance of services as an advisor to the
Company. The Company shall add the Senior Business Advisor as an
additional insured under the Company's directors and officers liability
insurance policy to the extent such coverage is available on commercially
reasonable terms.
19
(d) The
Lender may elect, in its sole discretion, to advance, on the Company's behalf,
any fees or other compensation owing by the Company to the Senior Business
Advisor in connection with the Senior Business Advisor's performance of services
as an advisor to the Company. Any such advances shall be treated as
Advances made hereunder and shall be repaid by the Company to the Lender in
accordance with the terms and conditions of this Agreement and the other
Revolving Credit Loan Documents, notwithstanding the fact that the then outstanding sum of Advances made hereunder
may nevertheless equal or exceed the Revolving Credit Amount.
ARTICLE
V.
NEGATIVE
COVENANTS
The
Company covenants and agrees that, until the later to occur of (i) the payment
in full of all principal, interest and any other amounts outstanding under the
Revolving Credit Note and (ii) the expiration or earlier termination of the
Revolving Credit Facility, it will not do, directly or indirectly, any of the
following without the Lender's prior written consent:
5.1 Issuance of
Indebtedness. Other than Permitted Indebtedness, enter into,
create, incur, assume, guarantee or suffer to exist any
Indebtedness.
5.2 Payment of
Indebtedness. (i) Make any lease payments or payments of
principal, interest, fees, or penalties under any Indebtedness other than (1)
regularly scheduled payments of principal and interest and lease payments (at
the rates and on the terms set forth in the agreement evidencing such
Indebtedness) or (2) the repayment of Permitted Indebtedness; (ii) purchase or
redeem (or offer to purchase or redeem) any Indebtedness other than Permitted
Indebtedness; or (iii) deposit any monies, securities or other Property with any
trustee or other Person to provide assurance that the principal or any portion
thereof of any Indebtedness will be paid when due or otherwise to provide for
the defeasance of any Indebtedness.
5.3 Liens. Other
than Permitted Liens, enter into, create, incur, assume or suffer to exist any
Liens of any kind, on or with respect to any of its property or assets now owned
or hereafter acquired or any interest therein or any income or profits
therefrom.
5.4 Organizational
Documents. Amend its organizational documents, including
without limitation, the articles of incorporation and bylaws, in any manner that
materially and adversely affects any rights of the Lender.
5.5 Dissolution; Merger or
Consolidation. Dissolve, terminate, liquidate, merge with or
consolidate into another Person.
5.6 Acquisitions. Make
any purchase or other acquisition of any stock or other securities of any other
Person (whether by means of a loan, advance creating a debt, capital
contribution, guaranty or other debt or equity participation or interest in any
other Person) including, without limitation, any partnership and joint venture
interests of any Person other than those of another Person engaged in a line of
business substantially the same as the line of business of the Company provided
that: (i) such purchase or acquisition shall have been approved by the board of
directors and/or managers of the Company and the target company, as applicable;
and (ii) the total purchase or acquisition consideration for such acquisitions
shall not exceed Two Million Dollars ($2,000,000) in any fiscal
year.
20
5.7 ERISA. At any time,
(i) knowingly engage in any nonexempt "prohibited transaction" (as defined in
Section 4975 of the Code) that could reasonably be expected to have a Material
Adverse Effect; (ii) fail to comply with ERISA or any other applicable laws in
any respect that could reasonably be expected to have a Material Adverse Effect;
(iii) incur any "accumulated funding deficiency" (as defined in Section 302 of
ERISA) that could reasonably be expected to have a Material Adverse Effect; or
(iv) terminate any pension plan, if such termination could reasonably be
expected to have a Material Adverse Effect.
5.8 Change in Nature of
Business. Make any material change in the nature of the business of the
Company, taken as a whole, except for an acquisition permitted pursuant to Section
5.6.
5.9 Distributions. Repay,
repurchase or offer to repay, repurchase or otherwise acquire for cash any
shares of its Common Stock or Common Stock Equivalents or any other security,
including preferred stock, or Indebtedness of the Company that is pari passu with, or junior
or subordinate to the Indebtedness evidenced by the Revolving Credit Loan
Documents (unless otherwise permitted pursuant to a written subordination
agreement with the Lender) other than as to (a) the Note Shares (as defined in
the Senior Loan Documents) as permitted or required under the Senior Loan
Documents and (b) repurchases of Common Stock or Common Stock Equivalents of
departing officers and directors of the Company, provided that such repurchases
shall not exceed an aggregate of One Hundred Thousand Dollars ($100,000) for all
officers and directors during the term of the Revolving Credit
Facility.
5.10 Dividends. Pay
cash dividends or distributions on any equity securities of the
Company.
5.11 Debt
Cancellation. Cancel or otherwise forgive or release any
material claim or debt owed to the Company by any Person, except for adequate
consideration or in the ordinary course of the Company’s business.
5.12 Certain
Restrictions. Enter into any agreement which expressly
restricts the ability of the Company to enter into amendments, modifications or
waivers of any of the Revolving Credit Loan Documents (other than pursuant to
the Revolving Credit Loan Documents).
5.13 Assignment of Intellectual
Property Rights. Assign or transfer any of the Company’s
intellectual property rights other than assignments or transfers to the
Lender.
5.14 Transactions with
Affiliates. Enter into any transaction with any Affiliate of
the Company which would be required to be disclosed in any public filing with
the Commission, unless such transaction is made on an arm’s-length basis and
expressly approved by a majority of the disinterested directors of the Company
(even if less than a quorum otherwise required for board
approval).
21
5.15 Transfer Ownership
Interests. Enter into any Change of Control Transaction or
Fundamental Transaction.
5.16 Changes in Company Name,
Location of Chief Executive Office; Termination of Chief
Executive Officer or Chief Financial Officer. Make any change to the
corporate name of the Company or the location of the Company’s assets, principal
place of business or chief executive office or elect to terminate the Company's Chief Executive Officer
or Chief Financial Officer, whether with or without cause.
5.17 Issuance of Senior Equity
Securities. Issue any shares of preferred stock or any other
equity securities with rights, privileges or preferences senior to the Common
Stock.
5.18 Issuance of Common Stock
Equivalents. Issue any Common Stock Equivalents except for the
issuance of any Common Stock Equivalents to employees of the Company (i)
pursuant to the terms of any existing Company employee equity incentive plans or
(ii) which have been approved by the Company’s board of directors (or a duly
designated committee thereof), which approval must include the approval of the
Lender’s designated member of the Company’s board of directors.
ARTICLE
VI.
MISCELLANEOUS
6.1 Fees and
Expenses. At the Closing, the Company shall reimburse the
Lender for all legal fees and expenses incurred by the Lender incident to the
negotiation, preparation, execution and delivery of the Revolving Credit Loan
Documents (up to a maximum of $50,000.00). Except as set forth in the
preceding sentence, each party shall pay the fees and expenses of its advisers,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of the Revolving Credit Loan Documents.
6.2 Entire
Agreement. The Revolving Credit Loan Documents, together with
the exhibits and schedules thereto, contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.
6.3 Notices. Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (Eastern Standard Time)
on a Business Day, (b) the next Business Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is not a Business
Day or later than 5:30 p.m. (Eastern Standard Time) on any Business Day, (c) the
2nd
Business Day following the date of mailing, if sent by a U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by the party to
whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
22
6.4 Amendments;
Waivers. Except as otherwise set forth herein, any provision
of this Agreement may be waived, modified, supplemented or amended in a written
instrument signed by the Company and the Lender. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such
right.
6.5 Headings. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
6.6 Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns. Neither the Company nor the Lender may assign this Agreement
or any rights or obligations hereunder without the prior written consent of the
other (other than by merger).
6.7 No Third-Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
6.8 Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of the Revolving Credit Loan Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of California, without regard to the principles of conflicts of law
thereof. Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Revolving Credit Loan Documents (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced exclusively in the state
or federal courts sitting in the City of Los Angeles. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of Los Angeles for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Revolving Credit Loan Documents), and hereby irrevocably waives, and agrees
not to assert in any Proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such Proceeding is improper or is an
inconvenient venue for such Proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by law. The
parties hereby waive all rights to a trial by jury. If either party
shall commence a Proceeding to enforce any provisions of the Revolving Credit
Loan Documents, then the prevailing party in such Proceeding shall be reimbursed
by the other party for its reasonable attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
Proceeding.
23
6.9 Execution. This
Agreement may be executed in multiple counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.
6.10 Severability. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
6.11 Rescission and Withdrawal
Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Revolving
Credit Loan Documents, whenever the Lender exercises a right, election, demand
or option under a Revolving Credit Loan Document and the Company does not timely
perform its related obligations within the periods therein provided, then the
Lender may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
6.13 Remedies. In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, the Lender and the Company will be entitled
to specific performance under the Revolving Credit Loan
Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Revolving Credit Loan Documents and hereby agrees
to waive and not to assert in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
6.14 Payment Set Aside. To
the extent that the Company makes a payment or payments to the Lender pursuant
to any Revolving Credit Loan Document or the Lender enforces or exercises its
rights thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
24
6.15 Usury. To
the extent it may lawfully do so, the Company hereby agrees not to insist upon
or plead or in any manner whatsoever claim, and will resist any and all efforts
to be compelled to take the benefit or advantage of, usury laws wherever
enacted, now or at any time hereafter in force, in connection with any
Proceeding that may be brought by the Lender in order to enforce any right or
remedy under any Revolving Credit Loan Document to which the Lender is a
party. Notwithstanding any provision to the contrary contained in any
Revolving Credit Loan Document, it is expressly agreed and provided that the
total liability of the Company under the Revolving Credit Loan Documents for
payments in the nature of interest shall not exceed the maximum lawful rate
authorized under applicable law (the “Maximum Rate”), and,
without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the Revolving
Credit Loan Documents exceed such Maximum Rate. It is agreed that if
the maximum contract rate of interest allowed by law and applicable to the
Revolving Credit Loan Documents is increased or decreased by statute or any
official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate applicable to
the Revolving Credit Loan Documents from the effective date forward, unless such
application is precluded by applicable law. If under any
circumstances whatsoever, interest in excess of the Maximum Rate is paid by the
Company to the Lender with respect to indebtedness evidenced by the Lender’s
Revolving Credit Loan Documents, such excess shall be applied by the Lender to
the unpaid principal balance of any such indebtedness or be refunded to the
Company, the manner of handling such excess to be at the Lender’s
election.
6.16 Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Revolving Credit Loan Documents and, therefore,
the normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Revolving Credit Loan Documents or any amendments hereto.
(Signature
Pages Follow)
25
IN
WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
CYBERDEFENDER
CORPORATION,
|
Address for Notice:
|
||
a
Delaware corporation
|
|||
By:
|
/s/ Xxxx Xxxxxxxx
|
000
Xxxx 0xx Xxxxxx, Xxxxx 0000
|
|
Name: Xxxx
Xxxxxxxx
|
Xxx
Xxxxxxx, XX 00000
|
||
Title: Chief
Executive Officer
|
Attention:
Xx. Xxxx Xxxxxxxx
|
||
Fax:
(000) 000-0000
|
|||
With
a copy to (which shall not constitute notice):
|
|||
Xxxxxxxxxx
& Xxxxx, LLP
|
|||
000
Xxxxx Xxxxxx, 0xx
Xxxxx
|
|||
Xxx
Xxxx, XX 00000
|
|||
Attention: Xxxxx
Xxxxxxxxx
|
|||
Fax:
(000) 000-0000
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR LENDER FOLLOWS]
26
[LENDER
SIGNATURE PAGE TO
LOAN
AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Loan Agreement to be duly
executed by its/his/her respective authorized signatories as of the date first
indicated above.
GR
MATCH, LLC,
|
Address for Notice:
|
||
a
Delaware limited liability company
|
|||
By:
|
/s/ Dirk van de Xxxx
|
XX
Match, LLC
|
|
Name:
Dirk van xx Xxxx
|
c/o
Xxxxx-Xxxxxx LLC
|
||
Title:
Assistant Secretary
|
0000
Xxxxx Xxxx Xxxxxxxxx
|
||
Xxxxx
0000
|
|||
Xxxxx
Xxxxxx, XX 00000
|
|||
Attention:
Business Affairs
|
|||
Fax:
000-000-0000
|
|||
With
a copy to (which shall not constitute notice):
|
|||
Xxxxx-Xxxxxx
LLC
|
|||
0000
Xxxxx Xxxx Xxxxxxxxx, Xxxxx 0000
|
|||
Xxxxx
Xxxxxx, XX 00000
|
|||
Fax: 000-000-0000
|
|||
Attention:
General Counsel
|
27
Schedule 3(k)(i) – Patents
and Trademarks
The
Lender has filed applications for the following trademarks: CYBERPD, RAMPMYSPEED
and MAXMYSPEED. The Lender has agreed to transfer the Lender's
rights in these trademarks to the Company.
28
EXHIBIT
A
Form of Fourth Amendment to
Media and
Marketing Services Agreement
See
attached
29
EXHIBIT
B
Form of Loan and Securities
Purchase Agreement Amendment
See
attached
30
EXHIBIT
C
Form of Revolving Credit
Note
See
attached
31
EXHIBIT
D
Form of Security
Agreement
See
attached
32
EXHIBIT
E
Form of Senior Convertible
Note Amendment
See
attached
33
EXHIBIT
F
Form of CyberDefender Board
of Directors Resolutions
See
attached
34