Exhibit 10.5
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
into as of March 22, 2001, by and among Network Commerce Inc., a Washington
corporation ("Borrower"), the financial institutions named on the signature
pages hereof (each, a "Lender" and collectively the "Lenders"), and Imperial
Bank, as Agent for the Lenders ("Agent"), with reference to the following facts:
A. Borrower, Agent, and Lenders are parties to that certain Credit
Agreement dated as of May 19, 2000, as amended (the "Credit Agreement").
B. The Borrower has asked the Lenders to amend certain provisions of the
Loan Documents, and the Lenders have agreed, all on the terms set forth herein.
NOW, THEREFORE, in consideration of the promises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
1. Defined Terms. Capitalized terms not otherwise defined herein shall have
the same meanings as set forth in the Loan Documents.
2. Cash Collateral. Borrower shall establish and maintain with the Agent a
money market account or other deposit account (the "Collateral Account"), for
the purpose of securing all indebtedness and obligations owing by Borrower to
Lenders. Borrower hereby grants to Agent, for the benefit of Agent and Lenders,
as additional security for the purpose of securing all indebtedness and
obligations owing by Borrower to Lenders, a valid, first priority security
interest in the Collateral Account, together with all proceeds and substitutions
of any thereof, all interest paid thereon, and all other cash and noncash
proceeds of the foregoing. The minimum principal amount of the Collateral
Account during the term of the Credit Agreement shall be at all times equal to
or greater than the sum of all outstanding Loans and any other indebtedness or
obligations owing by Borrower to Lenders under the Loan Documents or otherwise.
Borrower acknowledges that Agent shall place a "hold" on the Collateral Account.
Borrower hereby authorizes the Agent to charge the Collateral Account in order
to cause timely payment to be made to the Agent of all principal, interest, fees
and expenses due under the Loan Documents. Notwithstanding termination of the
Loan Documents, Agent's lien on the Collateral shall remain in effect for so
long as any indebtedness or obligations owed by Borrower to Lenders are
outstanding.
3. Amendments to Credit Agreement. The Credit Agreement is hereby amended
as follows:
(a) The following defined terms in Section 1.1 are amended in their
entirety to read as follows:
"Consolidated Quick Assets:" At any date of determination, the sum of (i)
unrestricted cash and unrestricted cash equivalents of the Borrower and its
consolidated Subsidiaries, plus (ii) any restricted cash held by the Agent as
security for the indebtedness and obligations owing hereunder, plus (iii)
Eligible Accounts, determined on a consolidated basis in accordance with GAAP.
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(b) The following new defined term is added to Section 1.1 in its proper
alphabetical order, which shall read as follows:
"Consolidated Gross Revenue:" For any period, the dollar amount of gross
revenue of the Borrower and its consolidated Subsidiaries during such period on
a consolidated basis in accordance with GAAP.
(c) Section 6.2(a) is amended to read as follows:
(a) Adjusted Quick Ratio. Permit the ratio of Consolidated Quick Assets to
Consolidated Current Liabilities at any time to be less than 1.0 to 1.0.
(d) Section 6.2(b) is amended to read as follows:
(b) Consolidated Tangible Net Worth. Permit Consolidated Tangible Net Worth
at any time to be less than $30,000,000.
(e) A new Section 6.2(w) is added to the Credit Agreement, immediately
following Section 6.2(v), which shall read as follows:
(w) Consolidated Gross Revenue. Permit Consolidated Gross Revenue to be
less than (a) $13,000,000 for the fiscal quarter ended March 31, 2001; (b)
$15,500,000 for the fiscal quarter ended June 30, 2001; (c) $19,500,000 for the
fiscal quarter ended September 30, 2001; or (d) $23,000,000 for the fiscal
quarter ended December 31, 2001. On or before November 30, 2001, Borrower shall
deliver to the Agent a revenue forecast for Borrower's 2002 fiscal year. On or
before December 31, 2001, Borrower and Lenders shall meet and agree upon minimum
Consolidated Gross Revenue levels to be achieved by Borrower during the 2002
fiscal year.
(f) Exhibit C is replaced with Exhibit C hereto.
4. Conditions to Effectiveness.
This Amendment shall become effective as of March 22, 2001 (the "Effective
Date"), only upon:
(a) receipt by the Agent of the following (each of which shall be in form
and substance satisfactory to the Agent and its counsel):
(i) counterparts of this Amendment duly executed on behalf of the Borrower,
the Agent and the Lenders;
(ii) copies of resolutions of the Board of Directors or other authorizing
documents of the Borrower, authorizing the execution and delivery of this
Amendment;
(b) Borrower shall have established with the Agent and funded the
Collateral Account; and
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(c) completion of such other matters, and delivery of such other
agreements, documents and certificates as the Agent may reasonably request.
5. No Borrowings. From and after the effective date of this Amendment, the
Borrower shall not request or receive any additional Loans.
6. Representations and Warranties. In order to induce the Lenders to enter
into this Amendment, the Borrower represents and warrants to the Lenders that
the following statements are true, correct and complete as of the effective date
of this Amendment:
(a) Corporate Power and Authority. The Borrower has all requisite corporate
power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "Amended Agreement"). The Articles
of Incorporation and Bylaws of the Borrower have not been amended since the
copies previously delivered to the Lenders.
(b) Authorization of Agreements. The execution and delivery of this
Amendment and the performance by the Borrower of the Amended Agreement have been
duly authorized by all necessary corporate action on the part of the Borrower.
(c) No Conflict. The execution and delivery by the Borrower of this
Amendment do not and will not contravene (i) any law or any governmental rule or
regulation applicable to the Borrower, (ii) the Articles of Incorporation or
Bylaws of the Borrower, (iii) any order, judgment or decree of any court or
other agency of government binding on the Borrower, or (iv) any material
agreement or instrument binding on the Borrower.
(d) Governmental Consents. The execution and delivery by the Borrower of
this Amendment and the performance by the Borrower of the Amended Agreement do
not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
(e) Binding Obligation. This Amendment and the Amended Agreement have been
duly executed and delivered by the Borrower and are the binding obligations of
the Borrower, enforceable against the Borrower in accordance with their
respective terms, except in each case as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws and equitable principles relating to or affecting creditors' rights.
(f) Incorporation of Representations and Warranties From Credit Agreement.
The representations and warranties contained in Section 5.1 of the Credit
Agreement are correct on and as of the effective date of this Amendment as
though made on and as of such date.
(g) Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Potential Event of Default.
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7. Miscellaneous.
(a) Reference to and Effect on the Credit Agreement and the Other Loan
Documents.
(i) On and after the Effective Date, each reference in the Credit Agreement
to "this Agreement," "hereunder," "hereof," "herein" or words of like import
referring to the Credit Agreement, and each reference in the other Loan
Documents to the "Credit Agreement," "thereunder," "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Amended Agreement.
(ii) Except as specifically amended by this Amendment, the Credit Agreement
and the other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall not,
except as expressly provided herein, constitute a waiver of any provision of, or
operate as a waiver of any right, power or remedy of the Agent or Lenders under
the Credit Agreement or any of the other Loan Documents.
(b) Fees and Expenses. All costs and expenses of the Agent and Lenders,
including, but not limited to, reasonable attorneys' fees, incurred by the Agent
and Lenders in the preparation and negotiation of this Amendment constitute
costs and expenses in connection with the amendment and restructuring of the
Loan Documents, and as such are payable by the Borrower in accordance with
Section 9.5 of the Credit Agreement.
(c) Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
(d) Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
(e) Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[REMAINDER INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
NETWORK COMMERCE INC.
by: /s/Xxxxxx Xxxxxx
Title: Chairman and CEO
AGENT:
Imperial Bank
By: /s/ Xxxx Xxxxx
Title: VP
LENDERS:
IMPERIAL BANK
by: /s/ Xxxx Xxxxx
Title: VP
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EXHIBIT C
[FORM OF COMPLIANCE CERTIFICATE]
COMPLIANCE CERTIFICATE
1. This Compliance Certificate ("Compliance Certificate") is executed and
delivered by Network Commerce Inc., a Washington corporation (the "Borrower") to
Imperial Bank (the "Agent") pursuant to Section 6.1(a)(iv)(B) of the Credit
Agreement dated as of May 19, 2000 among the Borrower, the financial
institutions named therein and the Agent. Any terms used herein and not defined
herein shall have the meanings defined in the Credit Agreement. This Compliance
Certificate covers the Borrower's:
Calendar month ended _________, ____
Fiscal quarter ended _________, ____
Fiscal year ended ________, ____
2. The following paragraphs set forth calculations in compliance with
obligations pursuant to Section 6.2(a), (b), and (w) of the Credit Agreement, as
of the end of the fiscal period set forth in paragraph 1 hereof.
A. Adjusted Quick Ratio (Sec. 6.2(a)):
(a) Consolidated Quick Assets $ ___________
(b) Consolidated Current Liabilities $ ___________
Ratio (a) : (b) ____________
Minimum Permitted Ratio 1.0 to 1.0
B. Consolidated Tangible Net Worth (Sec. 6.2(b)):
Minimum required Consolidated Tangible Net Worth:
$30,000,000
Actual Consolidated Tangible Net Worth: $ ___________
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C. Consolidated Gross Revenue (Sec. 6.2(w)):
Consolidated Gross Revenue for the current fiscal quarter: $ ___________
Minimum permitted Consolidated Gross Revenue: (a) $ ___________
$13,000,000 for the fiscal quarter ended March 31, 2001;
(b) $15,500,000 for the fiscal quarter ended June 30,
2001; (c) $19,500,000 for the fiscal quarter ended
September 30, 2001; or (d) $23,000,000 for the fiscal
quarter ended December 31, 2001.
3. The undersigned has reviewed the terms of the Credit Agreement and has
made, or caused to be made under his/her supervision, a review in reasonable
detail of the transactions and condition of the Borrower and its Subsidiaries
during the fiscal period covered by this Compliance Certificate. The undersigned
does not (either as a result of such review or otherwise) have any knowledge of
the existence as of the date of this Compliance Certificate of any condition or
event that constitutes an Event of Default or a Potential Event of Default, with
the exception set forth below in response to which the Borrower is taking or
proposes to take the following actions (if none, so state):
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4. The undersigned hereby certifies that the representations and warranties
contained in the Agreement and the other Loan Documents are true and correct in
all material respects on and as of the date hereof (except to the extent they
relate specifically to any earlier date, in which case such representations and
warranties shall continue to have been correct as of such date).
5. This Compliance Certificate is executed on _______________, ____ by the
Chief Executive Officer, Chief Financial Officer, or Controller of the Borrower.
The undersigned hereby certifies that each and every matter contained herein is
derived from the Borrower's books and records and is, to the best knowledge of
the undersigned, true and correct.
NETWORK COMMERCE INC.,
a Washington corporation
By:
Title:
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AFFIRMATION OF GUARANTY
The undersigned Guarantors hereby acknowledge and agree to the terms of the
foregoing Second Amendment to Credit Agreement (the "Amendment"), and further
acknowledge and agree that nothing contained in the Amendment in any way affects
the validity and enforceability of that certain Subsidiary Guaranty (the
"Guaranty") dated as of May 19, 2000, executed by each of the undersigned
Guarantors in favor of Lenders, the validity and effectiveness of which Guaranty
is hereby reaffirmed as of the Effective Date of the Amendment.
CORTIX INC.
by: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: President
XXXXXXXXXXXX.XXX, INC.
by: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: CEO
XXXXXXX.XXX, INC. (F/K/A/ SHAMU ACQUISITION, INC.)
by: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: CEO
NETWORK COMMERCE EBUSINESS SERVICES INC. (F/K/A/ SHOPNOW
EBUSINESS SOLUTIONS, INC.)
by: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: CEO
SPEEDYCLICK, CORP.
by: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: President
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WEBCENTRIC, INC.
by: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: President
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