LOCAL.COM CORPORATION LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (the “Agreement”) is entered into as of June 26, 2009, by and
between Square 1 Bank (“Bank”) and Xxxxx.xxx Corporation, and Xxxxx.xxx PG Acquisition Corporation,
collectively known as (“Borrower”).
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank desires to extend credit to
Borrower. This Agreement sets forth the terms on which Bank will advance credit to Borrower, and
Borrower will repay the amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, all capitalized terms shall have the definitions
set forth on Exhibit A. Any term used in the Code and not defined herein shall have the meaning
given to the term in the Code.
1.2 Accounting Terms. Any accounting term not specifically defined on Exhibit A shall be
construed in accordance with GAAP and all calculations shall be made in accordance with GAAP
(except for non-compliance with FAS 123R in monthly reporting). The term “financial statements”
shall include the accompanying notes and schedules.
2. LOAN AND TERMS OF PAYMENT.
2.1 Credit Extensions.
(a) Promise to Pay. Borrower promises to pay to Bank, in lawful money of the United States of
America, the aggregate unpaid principal amount of all Credit Extensions made by Bank to Borrower,
together with interest on the unpaid principal amount of such Credit Extensions at rates in
accordance with the terms hereof.
(b) Advances Under Formula Revolving Line.
(i) Amount. Subject to and upon the terms and conditions of this Agreement, including but
not limited to the restriction that under no circumstances shall the aggregate amount of
outstanding Advances exceed the Total Facility Cap, Borrower may request Formula Advances in an
aggregate outstanding principal amount not to exceed the lesser of: (A) the Formula Revolving
Line; or (B) the Borrowing Base. Amounts borrowed pursuant to this Section 2.1(b) may be repaid
and reborrowed at any time prior to the Formula Revolving Maturity Date, at which time all Formula
Advances under this Section 2.1(b) shall be immediately due and payable. Borrower may prepay any
Formula Advances without penalty or premium. Formula Advances shall be used to provide short-term
working capital for Borrower’s operations.
1.
(ii) Form of Request. Whenever Borrower desires a Formula Advance, Borrower will notify Bank
by facsimile transmission, telephone or email no later than 5:30 p.m. Eastern time (4:30 p.m.
Eastern time for wire transfers), on the Business Day that the Formula Advance is to be made.
Each such notification shall be promptly confirmed by a Loan Advance/Paydown Request Form in
substantially the form of Exhibit C. Bank is authorized to make Formula Advances under this
Agreement, based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank’s discretion such Formula Advances are
necessary to meet Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic or email notice given by a person whom Bank reasonably believes to be a
Responsible Officer or a designee thereof, and Borrower shall indemnify and hold Bank harmless for
any damages, loss, costs and expenses suffered by Bank as a result of such reliance. Bank will
credit the amount of Formula Advances made under this Section 2.1(b) to Borrower’s deposit
account.
(c) Advances Under Non-Formula Revolving Line.
(i) Amount. Subject to and upon the terms and conditions of this Agreement, including but
not limited to the restriction that under no circumstances shall the aggregate amount of
outstanding Advances exceed the Total Facility Cap, Borrower may request Non-Formula Advances in
an aggregate outstanding principal amount not to exceed the Non-Formula Revolving Line. Amounts
borrowed pursuant to this Section 2.1(c) may be repaid and reborrowed at any time prior to the
Non-Formula Revolving Maturity Date, at which time all Non-Formula Advances under this Section
2.1(c) shall be immediately due and payable; provided however, that if Borrower exercise the
Conversion Option, all Non-Formula Advances under this Section 2.1(c) shall instead be immediately
due and payable on the Conversion Maturity Date. Borrower may prepay any Non-Formula Advances
without penalty or premium. Non-Formula Advances shall be used to provide short-term working
capital for Borrower’s operations.
(ii) Conversion Option. If Borrower fulfills the Conversion Criteria on or before the
Conversion Notice Date, Borrower shall have the option (the “Conversion Option”) to convert a
principal amount of up to Three Million Dollars ($3,000,000) of Non-Formula Advances into a single
term loan (the “Term Loan”).
(1) Borrower must notify Bank in writing (a “Conversion Notice”) on or before the Conversion
Notice Date that Borrower wishes to exercise the Conversion Option. Failure to deliver a Conversion
Notice on or before the Conversion Notice Date shall result in forfeiture by Borrower of any right,
regardless of whether meets the Conversion Criteria, to exercise the Conversion Option. Regardless
of when Borrower delivers a Conversion Notice to Bank, the conversion of Non-Formula Advances into
the Term Loan shall occur on the Non-Formula Revolving Maturity Date.
(2) Interest on the Term Loan shall accrue from the Non-Formula Revolving Maturity Date at the
rate specified in Section 2.3(a). Any Non-Formula Advances that are converted into Term Loans on
the Non-Formula Revolving Maturity Date shall be payable in 24 equal monthly installments of
principal, plus all accrued interest, beginning on the date one (1) month immediately following the
Non-Formula Revolving
Maturity Date, and continuing on the same day of each month thereafter through the Conversion
Maturity Date, at which time all amounts due in connection with the Term Loan and any other amounts
due under this Agreement shall be immediately due and payable.
2.
(3) The Term Loan, once repaid, may not be reborrowed. Borrower may prepay any portion of the
Term Loan without penalty or premium.
(iii) Form of Request. Whenever Borrower desires a Non-Formula Advance, Borrower will notify
Bank by facsimile transmission, telephone or email no later than 5:30 p.m. Eastern time (4:30 p.m.
Eastern time for wire transfers), on the Business Day that the Non-Formula Advance is to be made.
Each such notification shall be promptly confirmed by a Loan Advance/Paydown Request Form in
substantially the form of Exhibit C. Bank is authorized to make Non-Formula Advances under this
Agreement, based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank’s discretion such Non-Formula Advances are
necessary to meet Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic or email notice given by a person whom Bank reasonably believes to be a
Responsible Officer or a designee thereof, and Borrower shall indemnify and hold Bank harmless for
any damages, loss, costs and expenses suffered by Bank as a result of such reliance. Bank will
credit the amount of Non-Formula Advances made under this Section 2.1(c) to Borrower’s deposit
account.
2.2 Overadvances. If the aggregate amount of the outstanding Advances exceeds the lesser of
the Formula Revolving Line or the Borrowing Base at any time, Borrower shall immediately pay to
Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rates.
(i) Formula Line Advances. Except as set forth in Section 2.3(b), the Formula Advances shall
bear interest, on the outstanding daily balance thereof, at a variable annual rate equal to the
greater of: (A) 1.75% above the Prime Rate then in effect; or (B) 5.00%.
(ii) Non-Formula Line Advances and Term Loan. Except as set forth in Section 2.3(b), the
Non-Formula Advances (and the Term Loan if Borrower exercises the Conversion Option) shall bear
interest, on the outstanding daily balance thereof, at a variable annual rate equal to the greater
of: (A) 2.00% above the Prime Rate then in effect; or (B) 5.25%.
(b) Late Fee; Default Rate. If any payment is not made within 15 days after the date such
payment is due, Borrower shall pay Bank a late fee equal to the lesser of (i) 5% of the amount of
such unpaid amount or (ii) the maximum amount permitted to be charged under applicable law. All
Obligations shall bear interest, from and after the occurrence and during the continuance of an
Event of Default, at a rate equal to 5 percentage points above the interest rate applicable
immediately prior to the occurrence of the Event of Default.
3.
(c) Payments. Interest under the Formula Revolving Line and under the Non-Formula Revolving
Line shall be due and payable on the first calendar day of each month during the term hereof. Bank
shall, at its option, charge such interest, all Bank Expenses, and all Periodic Payments against
any of Borrower’s deposit accounts or against the Formula Revolving Line and the Non-Formula
Revolving Line, in which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then applicable
hereunder.
(d) Computation. In the event the Prime Rate is changed from time to time hereafter, the
applicable rate of interest hereunder shall be increased or decreased, effective as of the day the
Prime Rate is changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a 360 day year for the actual
number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default, Bank shall credit a
wire transfer of funds, check or other item of payment to such deposit account or Obligation as
Borrower specifies. After the occurrence and during the continuance of an Event of Default, Bank
shall have the right, in its sole discretion, to immediately apply any wire transfer of funds,
check, or other item of payment Bank may receive to conditionally reduce Obligations, but such
applications of funds shall not be considered a payment on account unless such payment is of
immediately available federal funds or unless and until such check or other item of payment is
honored when presented for payment. Notwithstanding anything to the contrary contained herein, any
wire transfer or payment received by Bank after 5:30 p.m. Eastern time shall be deemed to have been
received by Bank as of the opening of business on the immediately following Business Day. Whenever
any payment to Bank under the Loan Documents would otherwise be due (except by reason of
acceleration) on a date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for
the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. On or before the Closing Date, a fee equal to $55,000, which shall be
nonrefundable;
(b) Bank Expenses. On the Closing Date, all Bank Expenses incurred through the Closing Date,
with legal expenses to equal no more than $15,000, provided that there are no more than 2 turns of
the Loan Documents drafts. After the Closing Date, all Bank Expenses, as and when they become due.
2.6 Term. This Agreement shall become effective on the Closing Date and, subject to Section
12.7, shall continue in full force and effect for so long as any Obligations remain outstanding or
Bank has any obligation to make Credit Extensions under this Agreement. Notwithstanding the
foregoing, Bank shall have the right to terminate its obligation to make Credit Extensions under
this Agreement immediately and without notice upon the occurrence and during the continuance of an
Event of Default.
4.
3. CONDITIONS OF LOANS.
3.1 Conditions Precedent to Closing. The agreement of Bank to enter into this Agreement on
the Closing Date is subject to the condition precedent that Bank shall have received, in form and
substance satisfactory to Bank, each the following items and completed each of the following
requirements:
(a) this Agreement;
(b) an officer’s certificate of Borrower with respect to incumbency and resolutions
authorizing the execution and delivery of this Agreement;
(c) a financing statement (Form UCC-1);
(d) intentionally omitted;
(e) payment of the fees and Bank Expenses then due specified in Section 2.5, which may be
debited from any of Borrower’s accounts with Bank;
(f) current SOS Reports indicating that except for Permitted Liens, there are no other
security interests or Liens of record in the Collateral;
(g) intentionally omitted;
(h) current financial statements, including audited statements for Borrower’s most recently
ended fiscal year, together with an unqualified opinion (or an opinion qualified only for going
concern so long as Borrower’s investors provide additional equity as needed), company prepared
consolidated and consolidating balance sheets and income statements for the most recently ended
month in accordance with Section 6.2, and such other updated financial information as Bank may
reasonably request;
(i) current Compliance Certificate in accordance with Section 6.2;
(j) a Borrower Information Certificate;
(k) Borrower shall have opened and funded not less than $50,000 in deposit accounts held with
Bank;
(l) delivery by Borrower to Bank of copies of all of Borrower material contracts and Bank’s
satisfactory review thereof;
(m) Intentionally omitted; and
(n) such other documents or certificates, and completion of such other matters, as Bank may
reasonably request.
5.
3.2 Conditions Precedent to all Credit Extensions. The obligation of Bank to make each Credit
Extension, including the initial Credit Extension, is contingent upon the Borrower’s compliance
with Section 3.1 above, and is further subject to the following conditions:
(a) timely receipt by Bank of the Loan Advance/Paydown Request Form as provided in Section
2.1;
(b) Borrower shall have transferred substantially all of its Cash assets into operating
accounts held with Bank and otherwise be in compliance with Section 6.6 hereof;
(c) the representations and warranties contained in Section 5 shall be true and correct in all
material respects on and as of the date of such Loan Advance/Paydown Request Form and on the
effective date of each Credit Extension as though made at and as of each such date, and no Event of
Default shall have occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties expressly referring to
another date shall be true, correct and complete in all material respects as of such date). The
making of each Credit Extension shall be deemed to be a representation and warranty by Borrower on
the date of such Credit Extension as to the accuracy of the facts referred to in this Section 3.2;
(d) completion of an initial audit of the Collateral, the results of which shall be
satisfactory to Bank; and
(e) confirmation acceptable to Bank that Hearst Communications, Inc. has all agreed to the
termination of UCC the Financing Statement (filed in Delaware under File Number 2007 2301611)
encumbering the assets of Borrower.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a continuing security
interest in the Collateral to secure prompt repayment of any and all Obligations and to secure
prompt performance by Borrower of each of its covenants and duties under the Loan Documents.
Except for Permitted Liens or as disclosed in the Schedule, such security interest constitutes a
valid, first priority security interest in the presently existing Collateral, and will constitute a
valid, first priority security interest in later-acquired Collateral. Borrower also hereby agrees
not to sell, transfer, assign, mortgage, pledge, lease, grant a security interest in, license
(other than in the ordinary course of Borrower’s business), or encumber any of its Intellectual
Property. Notwithstanding any termination, of this Agreement or of any filings undertaken related
to Bank’s rights under the Code, Bank’s Lien on the Collateral shall remain in effect for so long
as any Obligations are outstanding.
6.
4.2 Perfection of Security Interest. Borrower authorizes Bank to file at any time financing
statements, continuation statements, and amendments thereto that (i) either specifically describe
the Collateral or describe the Collateral as all assets of Borrower of the kind pledged hereunder,
and (ii) contain any other information required by the Code for the
sufficiency of filing office acceptance of any financing statement, continuation statement, or
amendment, including whether Borrower is an organization, the type of organization and any
organizational identification number issued to Borrower, if applicable. Borrower shall have
possession of the Collateral, except where expressly otherwise provided in this Agreement or where
Bank chooses to perfect its security interest by possession in addition to the filing of a
financing statement. Where Collateral is in possession of a third party bailee, Borrower shall
take such steps as Bank reasonably requests for Bank to (i) subject to Section 7.10 below, obtain
an acknowledgment, in form and substance satisfactory to Bank, of the bailee that the bailee holds
such Collateral for the benefit of Bank, and (ii) obtain “control” of any Collateral consisting of
investment property, deposit accounts, letter-of-credit rights or electronic chattel paper (as such
items and the term “control” are defined in Revised Article 9 of the Code) by causing the
securities intermediary or depositary institution or issuing bank to execute a control agreement in
form and substance satisfactory to Bank. Borrower will not create any chattel paper without
placing a legend on the chattel paper acceptable to Bank indicating that Bank has a security
interest in the chattel paper. Borrower from time to time may deposit with Bank specific cash
collateral to secure specific Obligations; Borrower authorizes Bank to hold such specific balances
in pledge and to decline to honor any drafts thereon or any request by Borrower or any other Person
to pay or otherwise transfer any part of such balances for so long as the specific Obligations are
outstanding. Borrower shall take such other actions as Bank requests to perfect its security
interests granted under this Agreement.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary is a corporation duly
existing under the laws of the state in which it is organized and qualified and licensed to do
business in any state in which the conduct of its business or its ownership of property requires
that it be so qualified, except where the failure to do so would not reasonably be expected to
cause a Material Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and performance of the Loan
Documents are within Borrower’s powers, have been duly authorized, and are not in conflict with nor
constitute a breach of any provision contained in Borrower’s Articles of Incorporation or Bylaws,
nor will they constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement by which it is bound, except to the extent
such default would not reasonably be expected to cause a Material Adverse Effect.
7.
5.3 Collateral. Borrower has rights in or the power to transfer the Collateral, and its title
to the Collateral is free and clear of Liens, adverse claims, and restrictions on transfer or
pledge except for Permitted Liens. Other than movable items of personal property such as laptop
computers, all Collateral having an aggregate book value not in excess of $100,000, is located
solely in the Collateral States. The Eligible Accounts are bona fide existing obligations. The
property or services giving rise to such Eligible Accounts has been delivered or rendered to the
account debtor or its agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has not received notice of actual or imminent
Insolvency Proceeding of any account debtor whose accounts are included in any Borrowing Base
Certificate as an Eligible Account. All Inventory is in all material respects of good and
merchantable quality, free from all material defects, except for Inventory for which adequate
reserves have been made. Except as set forth in the Schedule, none of the Borrower’s Cash is
maintained or invested with a Person other than Bank or Bank’s affiliates.
5.4 Intellectual Property Collateral. Borrower is the sole owner of the intellectual property
created or purchased by Borrower, except for licenses granted by Borrower to its customers in the
ordinary course of business. To the best of Borrower’s knowledge, each of the Copyrights,
Trademarks and Patents is valid and enforceable, and no part of the intellectual property created
or purchased by Borrower has been judged invalid or unenforceable, in whole or in part, and no
claim has been made to Borrower that any part of the intellectual property created or purchased by
Borrower violates the rights of any third party except to the extent such claim would not
reasonably be expected to cause a Material Adverse Effect.
5.5 Name; Location of Chief Executive Office. Except as disclosed in the Schedule, Borrower
has not done business under any name other than that specified on the signature page hereof, and
its exact legal name is as set forth in the first paragraph of this Agreement. The chief executive
office of Borrower is located at the address indicated in Section 10 hereof.
5.6 Litigation. Except as set forth in the Schedule, there are no actions or proceedings
pending by or against Borrower or any Subsidiary before any court or administrative agency in which
a likely adverse decision would reasonably be expected to have a Material Adverse Effect.
5.7 No Material Adverse Change in Financial Statements. All consolidated and consolidating
financial statements related to Borrower and any Subsidiary that are delivered by Borrower to Bank
fairly present in all material respects Borrower’s consolidated and consolidating financial
condition as of the date thereof and Borrower’s consolidated and consolidating results of
operations for the period then ended. There has not been a material adverse change in the
consolidated or in the consolidating financial condition of Borrower since the date of the most
recent of such financial statements submitted to Bank.
5.8 Solvency, Payment of Debts. Borrower is able to pay its debts (including trade debts) as
they mature; the fair saleable value of Borrower’s assets (including goodwill minus disposition
costs) exceeds the fair value of its liabilities; and Borrower is not left with unreasonably small
capital after the transactions contemplated by this Agreement.
8.
5.9 Compliance with Laws and Regulations. Borrower and each Subsidiary have met the minimum
funding requirements of ERISA with respect to any employee benefit plans subject to ERISA. No
event has occurred resulting from Borrower’s failure to comply with ERISA that is reasonably likely
to result in Borrower’s incurring any liability that could have a Material Adverse Effect.
Borrower is not an “investment company” or a company “controlled” by an “investment company” within
the meaning of the Investment Company Act of 1940. Borrower is not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning
of Regulations T and U of the Board of Governors of the Federal Reserve System). Borrower has
not violated any statutes, laws, ordinances or rules applicable to it, the violation of which would
reasonably be expected to have a Material Adverse Effect. Borrower and each Subsidiary have filed
or caused to be filed all tax returns required to be filed, and have paid, or have made adequate
provision for the payment of, all taxes reflected therein except those being contested in good
faith with adequate reserves under GAAP or where the failure to file such returns or pay such taxes
would not reasonably be expected to have a Material Adverse Effect.
5.10 Subsidiaries. Borrower does not own any stock, partnership interest or other equity
securities of any Person, except for Permitted Investments.
5.11 Government Consents. Borrower and each Subsidiary have obtained all consents, approvals
and authorizations of, made all declarations or filings with, and given all notices to, all
governmental authorities that are necessary for the continued operation of Borrower’s business as
currently conducted, except where the failure to do so would not reasonably be expected to cause a
Material Adverse Effect.
5.12 Inbound Licenses. Except as disclosed on the Schedule, Borrower is not a party to, nor
is bound by, any material license or other agreement important for the conduct of Borrower’s
business that prohibits or otherwise restricts Borrower from granting a security interest in
Borrower’s interest in such license or agreement or any other property important for the conduct of
Borrower’s business, other than this Agreement or the other Loan Documents.
5.13 Full Disclosure. No representation, warranty or other statement made by Borrower in any
certificate or written statement furnished to Bank taken together with all such certificates and
written statements furnished to Bank contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained in such certificates or
statements not misleading in light of the circumstances in which they were made, it being
recognized by Bank that the projections and forecasts provided by Borrower in good faith and based
upon reasonable assumptions are not to be viewed as facts and that actual results during the period
or periods covered by any such projections and forecasts may differ from the projected or
forecasted results.
6. AFFIRMATIVE COVENANTS.
Borrower covenants that, until payment in full of all outstanding Obligations, and for so long
as Bank may have any commitment to make a Credit Extension hereunder, Borrower shall do all of the
following:
6.1 Good Standing and Government Compliance. Borrower shall maintain its and each of its
Subsidiaries’ corporate existence and good standing in the respective states of formation, shall
maintain qualification and good standing in each other jurisdiction in which the failure to so
qualify would reasonably be expected to have a Material Adverse Effect, and shall furnish to Bank
the organizational identification number issued to Borrower by the authorities of the state in
which Borrower is organized, if applicable. Borrower shall meet, and shall cause each Subsidiary
to meet, the minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. Borrower shall comply, and shall cause each
Subsidiary to comply, with all statutes, laws, ordinances and government rules and regulations
to which it is subject, and shall maintain, and shall cause each of its Subsidiaries to maintain,
in force all licenses, approvals and agreements, the loss of which or failure to comply with which
would reasonably be expected to have a Material Adverse Effect.
9.
6.2 Financial Statements, Reports, Certificates. Borrower shall deliver to Bank: (i) as soon
as available, but in any event within 30 days after the end of each calendar month, a company
prepared consolidated and consolidating balance sheet and income statement covering Borrower’s
operations during such period, in a form reasonably acceptable to Bank and certified by a
Responsible Officer; (ii) as soon as available, but in any event within 150 days after the end of
Borrower’s fiscal year, audited consolidated and consolidating financial statements of Borrower
prepared in accordance with GAAP, consistently applied, together with an opinion which is either
unqualified, qualified only for going concern so long as Borrower’s investors provide additional
equity as needed or otherwise consented to in writing by Bank on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank; (iii) annual budget
approved by Borrower’s Board of Directors as soon as available but not later than 60 days after the
beginning of the applicable fiscal year; (iv) if applicable, copies of all statements, reports and
notices sent or made available generally by Borrower to its security holders or to any holders of
Subordinated Debt and all reports on Forms 10-K and 10-Q filed with the Securities and Exchange
Commission; (v) promptly upon receipt of notice thereof, a report of any legal actions pending or
threatened against Borrower or any Subsidiary that could reasonably be expected to result in
damages or costs to Borrower or any Subsidiary of $250,000 or more; (vi) promptly upon receipt,
each management letter prepared by Borrower’s independent certified public accounting firm
regarding Borrower’s management control systems, and (vii) such budgets, sales projections,
operating plans or other financial information generally prepared by Borrower in the ordinary
course of business as Bank may reasonably request from time to time.
(a) Within 10 days after both the 1st day and the 15th day of each
month, Borrower shall deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer
in substantially the form of Exhibit D hereto, together with aged listings by invoice date of
accounts receivable and accounts payable and an updated schedule of deferred revenue.
(b) Within 30 days after the last day of each month, Borrower shall deliver to Bank with the
monthly financial statements a Compliance Certificate certified as of the last day of the
applicable month and signed by a Responsible Officer in substantially the form of Exhibit E hereto.
(c) As soon as possible and in any event within 5 calendar days after becoming aware of the
occurrence or existence of an Event of Default hereunder, a written statement of a Responsible
Officer setting forth details of the Event of Default, and the action which Borrower has taken or
proposes to take with respect thereto.
(d) Not including the initial audit required by Section 3.2(d) hereof, Bank (through any of
its officers, employees, or agents) shall have the right, upon reasonable prior notice (but in no
instance less than 5 days prior written notice), from time to time during Borrower’s usual business
hours but no more than once in any 6 month period (unless an Event
of Default has occurred and is continuing), to inspect Borrower’s Books and to make copies
thereof and to check, test, inspect, audit and appraise the Collateral at Borrower’s expense in
order to verify Borrower’s financial condition or the amount, condition of, or any other matter
relating to, the Collateral.
10.
Borrower may deliver to Bank on an electronic basis any certificates, reports or information
required pursuant to this Section 6.2, and Bank shall be entitled to rely on the information
contained in the electronic files, provided that Bank in good faith believes that the files were
delivered by a Responsible Officer. Borrower shall include a submission date on any certificates
and reports to be delivered electronically.
6.3 Inventory and Equipment; Returns. Borrower shall keep all Inventory and Equipment in good
and merchantable condition, free from all material defects except for Inventory and Equipment (i)
sold in the ordinary course of business, and (ii) for which adequate reserves have been made, in
all cases in the United States and such other locations as to which Borrower gives prior written
notice. Returns and allowances, if any, as between Borrower and its account debtors shall be on
the same basis and in accordance with the usual customary practices of Borrower, as they exist on
the Closing Date. Borrower shall promptly notify Bank of all returns and recoveries and of all
disputes and claims involving inventory having a book value of more than $100,000.
6.4 Taxes. Borrower shall make, and cause each Subsidiary to make, due and timely payment or
deposit of all material federal, state, and local taxes, assessments, or contributions required of
it by law, including, but not limited to, those laws concerning income taxes, F.I.C.A., F.U.T.A.
and state disability, and will execute and deliver to Bank, on demand, proof satisfactory to Bank
indicating that Borrower or a Subsidiary has made such payments or deposits and any appropriate
certificates attesting to the payment or deposit thereof; provided that Borrower or a Subsidiary
need not make any payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP) by Borrower or
such Subsidiary.
6.5 Insurance. Borrower, at its expense, shall (i) keep the Collateral insured against loss
or damage, and (ii) maintain liability and other insurance, in each case in as ordinarily insured
against by other owners in businesses similar to Borrower’s. All such policies of insurance shall
be in such form, with such companies, and in such amounts as reasonably satisfactory to Bank. No
later than 15 days after the Closing Date, all policies of property insurance shall contain a
lender’s loss payable endorsement, in a form satisfactory to Bank, showing Bank as an additional
loss payee, and all liability insurance policies shall show Bank as an additional insured and
specify that the insurer must give at least 20 days notice to Bank before canceling its policy for
any reason. Within 30 days of the Closing Date, Borrower shall cause to be furnished to Bank a
copy of its policies or certificate of insurance including any endorsements covering Bank or
showing Bank as an additional insured. Upon Bank’s request, Borrower shall deliver to Bank
certified copies of the policies of insurance and evidence of all premium payments. Proceeds
payable under any casualty policy will, at Borrower’s option, be payable to Borrower to replace the
property subject to the claim, provided that any such replacement property shall be deemed
Collateral in which Bank has been granted a first priority security interest, provided that if an
Event of Default has occurred and is continuing, all proceeds payable
under any such policy shall, at Bank’s option, be payable to Bank to be applied on account of
the Obligations.
11.
6.6 “Primary Depository”. Subject to the provisions of Section 3.1(k) and 3.2(b), Borrower
within 30 days of the Closing Date shall maintain all its depository and operating accounts with
Bank and its primary investment accounts with Bank or Bank’s affiliates.
6.7 Financial Covenants. Borrower shall at all times maintain the following financial ratios
and covenants:
(a) EBITDA. For the corresponding months set forth in the table immediately below, calculated
on a rolling three-months basis, an Adjusted EBITDA of not less than the amounts shown. Minimum
amounts for 2010 shall be set (or reset as appropriate) by Bank in an amendment of this Agreement,
which Borrower hereby agrees to execute, following Bank’s receipt from Borrower of Borrower’s 2010
financial and operating plan, which shall be approved by Borrower’s board of directors and
delivered to Bank no later than December 31, 2009. If the Borrower exercises the Conversion Option
set forth in Section 2.1(c)(ii) hereof, this minimum Adjusted EBITDA covenant shall no longer apply
after the Non-Formula Revolving Maturity Date.
***
(b) Liquidity Ratio. A Liquidity Ratio of at least 1.50 to 1.00. This Liquidity Ratio
covenant shall be in force at all times and shall not be impacted in any way by whether the
Borrower exercises the Conversion Option set forth in Section 2.1(c)(ii) hereof.
(c) Adjusted Debt Service Coverage Ratio. If the Borrower fulfills the Conversion Criteria
and exercises the Conversion Option set forth in Section 2.1(c)(ii) hereof, at all times after the
Non-Formula Revolving Maturity Date, an Adjusted Debt Service Coverage ratio of at least 2.00 to
1.00.
6.8 Intentionally Omitted.
6.9 Further Assurances. At any time and from time to time Borrower shall execute and deliver
such further instruments and take such further action as may reasonably be requested by Bank to
effect the purposes of this Agreement.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall be available and
until the outstanding Obligations are paid in full or for so long as Bank may have any commitment
to make any Credit Extensions, Borrower will not do any of the following without Bank’s prior
written consent, which shall not be unreasonably withheld:
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12.
7.1 Dispositions. Convey, sell, lease, license, transfer or otherwise dispose of
(collectively, to “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, or move cash balances on deposit with Bank to accounts opened at another
financial institution, other than Permitted Transfers.
7.2 Change in Name, Location, Executive Office, or Executive Management; Change in Business;
Change in Fiscal Year; Change in Control. Change its name or the state of Borrower’s formation or
relocate its chief executive office without 30 days prior written notification to Bank; replace or
suffer the departure of its chief executive officer or chief financial officer without delivering
written notification to Bank within 10 days; fail to appoint an interim replacement or fill a
vacancy in the position of chief executive officer or chief financial officer for more than 30
consecutive days; suffer a change on its Board of Directors without delivering notice to Bank no
later than 5 Business Days thereafter; take action to liquidate, wind up, or otherwise cease to
conduct business in the ordinary course; engage in any business, or permit any of its Subsidiaries
to engage in any business, other than or reasonably related or incidental to the businesses
currently engaged in by Borrower; change its fiscal year end; have a Change in Control.
7.3 Mergers or Acquisitions.
(a) Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or
into any other business organization (other than mergers or consolidations of a Subsidiary into
another Subsidiary or into Borrower); provided however, Borrower may complete a merger or
consolidation if the Obligations are repaid in full concurrently with the closing of any such
merger or consolidation. Borrower may request that Bank give its consent to a merger, such consent
to be given or withheld in Bank’s sole discretion no later than ten (10) Business Days after Bank
receives written notice from Borrower of the acquisition.
(b) Acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person where the Obligations are not repaid in full
concurrently with the closing of such transaction except where either:
(i) Each of the following conditions is applicable: (1) at least ten (10) Business Days prior to
the consummation thereof, Borrower delivers written notice to Bank of the acquisition along with
pro forma financial projections reflecting the Borrower’s anticipated performance after the
acquisition, (2) no Event of Default has occurred, is continuing or would exist after giving
effect to such transactions, (3) such transactions do not result in a Change in Control, (4)
Borrower is the surviving entity, and (5) after giving effect to the anticipated acquisition, the
aggregate balance of Cash held by Borrower in accounts at Bank equals or exceeds *** If after
giving effect to the anticipated acquisition, the aggregate balance of Cash held by Borrower in
accounts at Bank is less than *** Borrower may request that Bank give its consent to such
acquisition, such consent to be given or withheld in Bank’s sole discretion no later than ten (10)
Business Days after Bank receives written notice from Borrower of the acquisition; or
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13.
(ii) Each of the following conditions is applicable: (1) at least ten (10) Business Days
prior to the consummation thereof, Borrower delivers written notice to Bank of the acquisition
along with pro forma financial projections reflecting the Borrower’s anticipated performance after
the acquisition, with such projections demonstrating compliance with the terms of this Agreement;
(2) the consideration paid in connection with such transactions (including assumption of
liabilities) does not in the aggregate exceed *** during any fiscal year, (3) no Event of Default
has occurred, is continuing or would exist after giving effect to such transactions, (4) such
transactions do not result in a Change in Control, and (5) Borrower is the surviving entity. If
the consideration paid in connection with such transactions (including assumption of liabilities)
exceeds an aggregate amount of *** during any fiscal year, Borrower may request that Bank give its
consent to such acquisition, such consent to be given or withheld in Bank’s sole discretion no
later than ten (10) Business Days after Bank receives written notice from Borrower of the
acquisition.
(c) Borrower shall not, without Bank’s prior written consent, enter into any binding
contractual arrangement with any Person to attempt to facilitate a merger or acquisition of
Borrower; provided however, Borrower may enter into any such agreement without Bank’s prior written
consent so long as (i) no Event of Default exists when such agreement is entered into by Borrower,
(ii) such agreement does not give such Person the right to claim any fee, payment or damages from
any parties, other than from Borrower or Borrower’s investors, in connection with a sale of
Borrower’s stock or assets pursuant to or resulting from an assignment for the benefit of
creditors, an asset turnover to Borrower’s creditors (including, without limitation, Bank),
foreclosure, bankruptcy or similar liquidation, and (iii) Borrower notifies Bank in advance of
entering into such an agreement (provided, the failure to give such notification shall not be
deemed a material breach of this Agreement).
7.4 Indebtedness. Create, incur, assume, guarantee or be or remain liable with respect to any
Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness, or prepay any
Indebtedness or take any actions which impose on Borrower an obligation to prepay any Indebtedness,
except Indebtedness to Bank.
7.5 Encumbrances. Create, incur, assume or allow any Lien with respect to its property, or
assign or otherwise convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries so to do, except for Permitted Liens, or covenant to any other
Person (other than (i) the licensors of in-licensed property with respect to such property or (ii)
the lessors of specific equipment or lenders financing specific equipment with respect to such
leased or financed equipment) that Borrower in the future will refrain from creating, incurring,
assuming or allowing any Lien with respect to any of Borrower’s property.
7.6 Distributions. Pay any dividends or make any other distribution or payment on account of or
in redemption, retirement or purchase of any capital stock, except that Borrower may (i) repurchase
up to *** of its common stock during the term of this Agreement in accordance with the Borrower’s
previously announced stock repurchase plan, including such limitations with respect to same as have
been established or may be later established by the Borrower’s Board of Directors from time to
time, provided that an Event of Default does not exist prior to such repurchase or would not exist
after giving effect to such repurchase and Borrower’s representations on the Schedule in relation
to such repurchases remain true and
complete in their entirety at all times, and (ii) repurchase the stock of former employees
pursuant to stock repurchase agreements by the cancellation of indebtedness owed by such former
employees to Borrower regardless of whether an Event of Default exists.
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14.
7.7 Investments. Directly or indirectly acquire or own, or make any Investment in or to any
Person, or permit any of its Subsidiaries so to do, other than Permitted Investments, or maintain
or invest any of its Investment Property with a Person other than Bank or Bank’s Affiliates or
permit any Subsidiary to do so unless such Person has entered into a control agreement with Bank,
in form and substance satisfactory to Bank, or suffer or permit any Subsidiary to be a party to, or
be bound by, an agreement that restricts such Subsidiary from paying dividends or otherwise
distributing property to Borrower.
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any
material transaction with any Affiliate of Borrower except for transactions that are in the
ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable
to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any Subordinated Debt, or permit any of
its Subsidiaries to make any such payment, except in compliance with the terms of such Subordinated
Debt, or amend any provision affecting Bank’s rights contained in any documentation relating to the
Subordinated Debt without Bank’s prior written consent.
7.10 Inventory and Equipment. Store the Inventory or the Equipment of a book value in excess
of $100,000 with a bailee, warehouseman, collocation facility or similar third party unless the
third party has been notified of Bank’s security interest and Bank (a) has received an
acknowledgment from the third party that it is holding or will hold the Inventory or Equipment for
Bank’s benefit or (b) is in possession of the warehouse receipt, where negotiable, covering such
Inventory or Equipment. Except for Inventory sold in the ordinary course of business and for
movable items of personal property having an aggregate book value not in excess of $100,000, and
except for such other locations as Bank may approve in writing, Borrower shall keep the Inventory
and Equipment only at the location set forth in Section 10 and such other locations of which
Borrower gives Bank prior written notice and as to which Bank is able to take such actions as may
be necessary to perfect its security interest or to obtain a bailee’s acknowledgment of Bank’s
rights in the Collateral.
7.11 No Investment Company; Margin Regulation. Become or be controlled by an “investment
company,” within the meaning of the Investment Company Act of 1940, or become principally engaged
in, or undertake as one of its important activities, the business of extending credit for the
purpose of purchasing or carrying margin stock, or use the proceeds of any Credit Extension for
such purpose.
15.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an Event of Default by Borrower under
this Agreement:
8.1 Payment Default. If Borrower fails to pay any of the Obligations when due;
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under Sections 6.2 (financial reporting), 6.4
(taxes), 6.5 (insurance), 6.6 (primary accounts) or 6.7 (financial covenants), or violates any of
the covenants contained in Article 7 of this Agreement; or
(b) If Borrower fails or neglects to perform or observe any other material term, provision,
condition, covenant contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default under such other term,
provision, condition or covenant that can be cured, has failed to cure such default within 10 days
after Borrower receives notice thereof or any officer of Borrower becomes aware thereof; provided,
however, that if the default cannot by its nature be cured within the 15 day period or cannot after
diligent attempts by Borrower be cured within such 15 day period, and such default is likely to be
cured within a reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed 30 days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an Event of Default but no
Credit Extensions will be made.
8.3 Material Adverse Change. If there occurs any circumstance or any circumstances which
would reasonably be expected to have a Material Adverse Effect;
8.4 Attachment. If any material portion of Borrower’s assets is attached, seized, subjected
to a writ or distress warrant, or is levied upon, or comes into the possession of any trustee,
receiver or person acting in a similar capacity and such attachment, seizure, writ or distress
warrant or levy has not been removed, discharged or rescinded within 30 days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any
material part of its business affairs, or if a judgment or other claim becomes a lien or
encumbrance upon any material portion of Borrower’s assets, or if a notice of lien, levy, or
assessment is filed of record with respect to any material portion of Borrower’s assets by the
United States Government, or any department, agency, or instrumentality thereof, or by any state,
county, municipal, or governmental agency, and the same is not paid within ten days after Borrower
receives notice thereof, provided that none of the foregoing shall constitute an Event of Default
where such action or event is stayed or an adequate bond has been posted pending a good faith
contest by Borrower (provided that no Credit Extensions will be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by
Borrower, or if an Insolvency Proceeding is commenced against Borrower and is not dismissed or
stayed within 45 days (provided that no Credit Extensions will be made prior to the dismissal of
such Insolvency Proceeding);
8.6 Other Agreements. If there is a default or other failure to perform in any agreement to
which Borrower is a party with a third party or parties resulting in a right by such third party or
parties, whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount in excess of $250,000 or that would reasonably be expected to have a
Material Adverse Effect;
16.
8.7 Judgments. If a final, un-appealable, uninsured judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least $250,000 shall be rendered
against Borrower and shall remain unsatisfied and unstayed for a period of 15 days (provided that
no Credit Extensions will be made prior to the satisfaction or stay of the judgment); or
8.8 Misrepresentations. If any material misrepresentation or material misstatement exists now
or hereafter in any warranty or representation set forth herein or in any certificate delivered to
Bank by any Responsible Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
8.9 ***
9. BANK’S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence and during the continuance of an Event of
Default, Bank may, at its election, without notice of its election and without demand, do any one
or more of the following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan
Documents, or otherwise, immediately due and payable (provided that upon the occurrence of an Event
of Default described in Section 8.5 (insolvency), all Obligations shall become immediately due and
payable without any action by Bank);
(b) Demand that Borrower (i) deposit cash with Bank in an amount equal to the amount of any
Letters of Credit remaining undrawn, as collateral security for the repayment of any future
drawings under such Letters of Credit, and (ii) pay in advance all Letter of Credit fees scheduled
to be paid or payable over the remaining term of the Letters of Credit, and Borrower shall promptly
deposit and pay such amounts;
(c) Cease advancing money or extending credit to or for the benefit of Borrower under this
Agreement or under any other agreement between Borrower and Bank;
(d) Settle or adjust disputes and claims directly with account debtors for amounts, upon terms
and in whatever order that Bank reasonably considers advisable;
(e) Make such payments and do such acts as Bank considers necessary or reasonable to protect its
security interest in the Collateral. Borrower agrees to assemble the Collateral if Bank so
requires, and to make the Collateral available to Bank as Bank may designate. Borrower authorizes
Bank to enter the premises where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank’s determination appears to be prior or superior to its security
interest and to pay all expenses incurred in connection therewith. With respect to any of
Borrower’s owned premises, Borrower hereby grants Bank a license to
enter into possession of such premises and to occupy the same, without charge, in order to
exercise any of Bank’s rights or remedies provided herein, at law, in equity, or otherwise;
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and filed separately with the Securities and Exchange Commission |
17.
(f) Set off and apply to the Obligations any and all (i) balances and deposits of Borrower
held by Bank, and (ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for
sale, and sell (in the manner provided for herein) the Collateral. Bank is hereby granted a
license or other right, solely pursuant to the provisions of this Section 9.1, to use, without
charge, Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any property of a similar nature, as
it pertains to the Collateral, in completing production of, advertising for sale, and selling any
Collateral and, in connection with Bank’s exercise of its rights under this Section 9.1, Borrower’s
rights under all licenses and all franchise agreements shall inure to Bank’s benefit;
(h) Beginning on the day 15 days following the date Bank gives notice to Borrower of Bank’s
intent to do so, sell the Collateral at either a public or private sale, or both, by way of one or
more contracts or transactions, for cash or on terms, in such manner and at such places (including
Borrower’s premises) as Bank determines is commercially reasonable, and apply any proceeds to the
Obligations in whatever manner or order Bank deems appropriate; provided however, that the 15-day
notice requirement mentioned herein shall not in any way impair any other right of Bank set forth
in this Agreement, including but not limited to Bank’s rights to take control of any Collateral or
set off as described in Subsection 9.1(f) hereof. Bank may sell the Collateral without giving any
warranties as to the Collateral. Bank may specifically disclaim any warranties of title or the
like. This procedure will not be considered adversely to affect the commercial reasonableness of
any sale of the Collateral. If Bank sells any of the Collateral upon credit, Borrower will be
credited only with payments actually made by the purchaser, received by Bank, and applied to the
indebtedness of the purchaser. If the purchaser fails to pay for the Collateral, Bank may resell
the Collateral and Borrower shall be credited with the proceeds of the sale;
(i) Bank may credit bid and purchase at any public sale;
(j) Apply for the appointment of a receiver, trustee, liquidator or conservator of the
Collateral, without notice and without regard to the adequacy of the security for the Obligations
and without regard to the solvency of Borrower, any guarantor or any other Person liable for any of
the Obligations; and
(k) Any deficiency that exists after disposition of the Collateral as provided above will be
paid immediately by Borrower.
Bank may comply with any applicable state or federal law requirements in connection with a
disposition of the Collateral and compliance will not be considered adversely to affect the
commercial reasonableness of any sale of the Collateral.
18.
9.2 Power of Attorney. Effective only upon the occurrence and during the continuance of an
Event of Default, Borrower hereby irrevocably appoints Bank (and any of Bank’s designated officers,
or employees) as Borrower’s true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank’s security interest in the Accounts; (b) endorse
Borrower’s name on any checks or other forms of payment or security that may come into Bank’s
possession; (c) sign Borrower’s name on any invoice or xxxx of lading relating to any Account,
drafts against account debtors, schedules and assignments of Accounts, verifications of Accounts,
and notices to account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all
claims under and decisions with respect to Borrower’s policies of insurance; (f) settle and adjust
disputes and claims respecting the accounts directly with account debtors, for amounts and upon
terms which Bank determines to be reasonable; and (g) file, in its sole discretion, one or more
financing or continuation statements and amendments thereto, relative to any of the Collateral;
provided Bank may exercise such power of attorney to sign the name of Borrower on any of the
documents described in clause (g) above, regardless of whether an Event of Default has occurred.
The appointment of Bank as Borrower’s attorney in fact, and each and every one of Bank’s rights and
powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully
repaid and performed and Bank’s obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. At any time after the occurrence and during the continuation of an
Event of Default, Bank may notify any Person owing funds to Borrower of Bank’s security interest in
such funds and verify the amount of such Account. Borrower shall collect all amounts owing to
Borrower for Bank, receive in trust all payments as Bank’s trustee, and immediately deliver such
payments to Bank in their original form as received from the account debtor, with proper
endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any required proof of
payment due to third persons or entities, as required under the terms of this Agreement, then Bank
may do any or all of the following after reasonable notice to Borrower: (a) make payment of the
same or any part thereof; and/or (b) set up such reserves under the Formula and Non-Formula
Revolving Line as Bank deems necessary to protect Bank from the exposure created by such failure;
or (c) obtain and maintain insurance policies of the type discussed in Section 6.5 of this
Agreement, and take any action with respect to such policies as Bank deems prudent. Any amounts so
paid or deposited by Bank shall constitute Bank Expenses, shall be immediately due and payable, and
shall bear interest at the then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank to make similar
payments in the future or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank’s Liability for Collateral. Bank has no obligation to clean up or otherwise prepare
the Collateral for sale. All risk of loss, damage or destruction of the Collateral shall be borne
by Borrower.
9.6 No Obligation to Pursue Others. Bank has no obligation to attempt to satisfy the
Obligations by collecting them from any other person liable for them and Bank may release, modify
or waive any collateral provided by any other Person to secure any of the
Obligations, all without affecting Bank’s rights against Borrower. Borrower waives any right
it may have to require Bank to pursue any other Person for any of the Obligations.
19.
9.7 Remedies Cumulative. Bank’s rights and remedies under this Agreement, the Loan Documents,
and all other agreements shall be cumulative. Bank shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Bank of one
right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on
Borrower’s part shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver,
election, or acquiescence by it. No waiver by Bank shall be effective unless made in a written
document signed on behalf of Bank and then shall be effective only in the specific instance and for
the specific purpose for which it was given. Borrower expressly agrees that this Section 9.7 may
not be waived or modified by Bank by course of performance, conduct, estoppel or otherwise.
9.8 Demand; Protest. Except as otherwise provided in this Agreement, Borrower waives demand,
protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment and any
other notices relating to the Obligations.
10. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by any party relating to
this Agreement or any other agreement entered into in connection herewith shall be in writing and
(except for financial statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized overnight delivery
service, certified mail, postage prepaid, return receipt requested, or by telefacsimile to Borrower
or to Bank, as the case may be, at its addresses set forth below:
If to Borrower:
|
Xxxxx.xxx Corporation | |
| Xxx Xxxxxxxxxx Xxxxx, Xxxxxxxx X | ||
| Xxxxxx, XX 00000 | ||
| Attn: Xxxxxx Xxxxx, CFO | ||
| FAX: (000) 000-0000 | ||
If to Co-Borrower:
|
Xxxxx.xxx PG Acquisition Corporation | |
| Xxx Xxxxxxxxxx Xxxxx, Xxxxxxxx X | ||
| Xxxxxx, XX 00000 | ||
| Attn: _Brenda Agius, CFO | ||
| FAX: (000) 000-0000 | ||
With a copy to:
|
Xxxxx Xxxxxx, General Counsel | |
| Xxx Xxxxxxxxxx Xxxxx, Xxxxxxxx X | ||
| Xxxxxx, XX 00000 | ||
If to Bank:
|
Square 1 Bank | |
| 000 Xxxxxxxxx Xxxxxx, Xxxxx 000 | ||
| Xxxxxx, Xxxxx Xxxxxxxx 00000 | ||
| Attn: Loan Operations Manager | ||
| FAX: (000) 000-0000 | ||
with a copy to:
|
Square 1 Bank | |
| 0000 Xxxxxxx Xxxx, Xxxxx 000X | ||
| Xxxxx Xxxxxx, XX 00000 | ||
| Attn: Xxxxx Xxxx | ||
| FAX: |
20.
The parties hereto may change the address at which they are to receive notices hereunder, by
notice in writing in the foregoing manner given to the other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in accordance with, the internal laws of the
State of California, without regard to principles of conflicts of law. Jurisdiction shall lie in
the State of California. All disputes, controversies, claims, actions and similar proceedings
arising with respect to Borrower’s account or any related agreement or transaction shall be brought
in the Superior Court of San Mateo County, California or the United States District Court for the
Northern District of California, except as provided below with respect to arbitration of such
matters. BANK AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL
ONE, BUT THAT IT MAY BE WAIVED. EACH OF THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO
CONSULT, WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT
ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTION
OF ANY OF THEM. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY BANK OR BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM. If the
jury waiver set forth in this Section 11 is not enforceable, then any dispute, controversy, claim,
action or similar proceeding arising out of or relating to this Agreement, the Loan Documents or
any of the transactions contemplated therein shall be settled by final and binding arbitration held
in San Mateo County, California in accordance with the then current Commercial Arbitration Rules of
the American Arbitration Association by one arbitrator appointed in accordance with those rules.
The arbitrator shall apply California law to the resolution of any dispute, without reference to
rules of conflicts of law or rules of statutory arbitration. Judgment upon any award resulting from
arbitration may be entered into and enforced by any state or federal court having jurisdiction
thereof. Notwithstanding the foregoing, the parties may apply to any court of competent
jurisdiction for preliminary or interim equitable relief, or to compel arbitration in accordance
with this Section. The costs and expenses of the arbitration, including without limitation, the
arbitrator’s fees and expert witness fees, and reasonable attorneys’ fees, incurred by the parties
to
the arbitration may be awarded to the prevailing party, in the discretion of the arbitrator, or may
be apportioned between the parties in any manner deemed appropriate by the arbitrator. Unless and
until the arbitrator decides that one party is to pay for all (or a share) of such costs and
expenses, both parties shall share equally in the payment of the arbitrator’s fees as and when
billed by the arbitrator.
21.
12. GENERAL PROVISIONS.
12.1 Successors and Assigns. This Agreement shall bind and inure to the benefit of the
respective successors and permitted assigns of each of the parties and shall bind all persons who
become bound as a debtor to this Agreement; provided, however, that neither this Agreement nor any
rights hereunder may be assigned by Borrower without Bank’s prior written consent, which consent
may be granted or withheld in Bank’s sole discretion. Bank shall have the right without the
consent of or notice to Borrower to sell, assign, transfer, negotiate, or grant participation in
all or any part of, or any interest in, Bank’s obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold harmless Bank and its
officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities
claimed or asserted by any other party in connection with the transactions contemplated by this
Agreement; and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank, its
officers, employees and agents as a result of or in any way arising out of, following, or
consequential to transactions between Bank and Borrower whether under this Agreement, or otherwise
(including without limitation reasonable attorneys fees and expenses), except for losses caused by
Bank’s gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of all obligations set forth
in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement shall be severable from
every other provision of this Agreement for the purpose of determining the legal enforceability of
any specific provision.
12.5 Amendments in Writing, Integration. All amendments to or terminations of this Agreement
or the other Loan Documents must be in writing. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with respect to the
subject matter of this Agreement and the other Loan Documents, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall constitute but one and the
same Agreement. Executed copies of the signature pages of this Agreement sent by facsimile or
transmitted electronically in Portable Document Format (“PDF”), or any similar format, shall be
treated as originals, fully binding and with full legal force and effect, and the parties waive any
rights they may have to object to such treatment.
22.
12.7 Survival. All covenants, representations and warranties made in this Agreement shall
continue in full force and effect so long as any Obligations remain outstanding or Bank has any
obligation to make any Credit Extension to Borrower. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described in Section 12.2
shall survive until all applicable statute of limitations periods with respect to actions that may
be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information, Bank and all employees and
agents of Bank shall exercise the same degree of care that Bank exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any non-public
information thereby received or received pursuant to this Agreement except that disclosure of such
information may be made (i) to the subsidiaries or Affiliates of Bank or Borrower in connection
with their present or prospective business relations with Borrower, (ii) to prospective transferees
or purchasers of any interest in the Credit Extensions, provided that they have entered into a
comparable confidentiality agreement in favor of Borrower and have delivered a copy to Borrower,
(iii) as required by law, regulations, rule or order, subpoena, judicial order or similar order,
(iv) as may be required in connection with the examination, audit or similar investigation of Bank
and (v) as Bank may determine in connection with the enforcement of any remedies hereunder.
Confidential information hereunder shall not include information that either: (a) is in the public
domain or in the knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is disclosed to Bank by a
third party, provided Bank does not have actual knowledge that such third party is prohibited from
disclosing such information.
13. CO-BORROWER PROVISIONS.
13.1 Primary Obligation. This Agreement is a primary and original obligation of each Borrower
and shall remain in effect notwithstanding future changes in conditions, including any change of
law or any invalidity or irregularity in the creation or acquisition of any Obligations or in the
execution or delivery of any agreement between Bank and any Borrower. Each Borrower shall be
liable for existing and future Obligations as fully as if all of all Credit Extensions were
advanced to such Borrower. Bank may rely on any certificate or representation made by any Borrower
as made on behalf of, and binding on, all Borrowers, including without limitation Disbursement
Request Forms, Borrowing Base Certificates and Compliance Certificates.
13.2 Enforcement of Rights. Borrowers are jointly and severally liable for the Obligations
and Bank may proceed against one or more of the Borrowers to enforce the Obligations without
waiving its right to proceed against any of the other Borrowers.
13.3 Borrowers as Agents. Each Borrower appoints the other Borrower as its agent with all
necessary power and authority to give and receive notices, certificates or demands for and on
behalf of both Borrowers, to act as disbursing agent for receipt of any Credit Extensions on behalf
of each Borrower and to apply to Bank on behalf of each Borrower for Credit Extensions, any waivers
and any consents. This authorization cannot be revoked, and Bank need not inquire as to each
Borrower’s authority to act for or on behalf of Borrower.
23.
13.4 Subrogation and Similar Rights. Notwithstanding any other provision of this Agreement or
any other Loan Document, each Borrower irrevocably waives all rights that it may have at law or in
equity (including, without limitation, any law subrogating the Borrower to the rights of Bank under
the Loan Documents) to seek contribution, indemnification, or any other form of reimbursement from
any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of
the Obligations, for any payment made by the Borrower with respect to the Obligations in connection
with the Loan Documents or otherwise and all rights that it might have to benefit from, or to
participate in, any security for the Obligations as a result of any payment made by the Borrower
with respect to the Obligations in connection with the Loan Documents or otherwise. Any agreement
providing for indemnification, reimbursement or any other arrangement prohibited under this Section
13.4 shall be null and void. If any payment is made to a Borrower in contravention of this Section
13.4, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly
delivered to Bank for application to the Obligations, whether matured or unmatured.
13.5 Waivers of Notice. Except as otherwise provided in this Agreement, Xxxxx.xxx PG
Acquisition Corporation waives notice of acceptance hereof; notice of the existence, creation or
acquisition of any of the Obligations; notice of an Event of Default; notice of the amount of the
Obligations outstanding at any time; notice of intent to accelerate; notice of acceleration; notice
of any adverse change in the financial condition of any other Borrower or of any other fact that
might increase the Borrower’s risk; presentment for payment; demand; protest and notice thereof as
to any instrument; default; and all other notices and demands to which the Borrower would otherwise
be entitled. Each Borrower waives any defense arising from any defense of any other Borrower, or
by reason of the cessation from any cause whatsoever of the liability of any other Borrower.
Bank’s failure at any time to require strict performance by any Borrower of any provision of the
Loan Documents shall not waive, alter or diminish any right of Bank thereafter to demand strict
compliance and performance therewith. Nothing contained herein shall prevent Bank from foreclosing
on the Lien of any deed of trust, mortgage or other security instrument, or exercising any rights
available thereunder, and the exercise of any such rights shall not constitute a legal or equitable
discharge of any Borrower. Each Borrower also waives any defense arising from any act or omission
of Bank that changes the scope of the Borrower’s risks hereunder.
13.6 Subrogation Defenses. Each Borrower hereby waives any defense based on impairment or
destruction of its subrogation or other rights against any other Borrower and waives all benefits
which might otherwise be available to it under California Civil Code Sections 2809, 2810, 2819,
2839, 2845, 2848, 2849, 2850, 2899, and 3433 and California Code of Civil Procedure Sections 580a,
580b, 580d and 726, as those statutory provisions are now in effect and hereafter amended, and
under any other similar statutes now and hereafter in effect.
24.
13.7 Right to Settle, Release.
(a) The liability of Borrowers hereunder shall not be diminished by (i) any agreement,
understanding or representation that any of the Obligations is or was to be guaranteed by another
Person or secured by other property, or (ii) any release or unenforceability, whether partial or
total, of rights, if any, which Bank may now or hereafter
have against any other Person, including another Borrower, or property with respect to any of
the Obligations.
(b) Without affecting the liability of any Borrower hereunder, Bank may (i) compromise,
settle, renew, extend the time for payment, change the manner or terms of payment, discharge the
performance of, decline to enforce, or release all or any of the Obligations with respect to a
Borrower, (ii) grant other indulgences to a Borrower in respect of the Obligations, (iii) modify in
any manner any documents relating to the Obligations with respect to a Borrower, (iv) release,
surrender or exchange any deposits or other property securing the Obligations, whether pledged by a
Borrower or any other Person, or (v) compromise, settle, renew, or extend the time for payment,
discharge the performance of, decline to enforce, or release all or any obligations of any
guarantor, endorser or other Person who is now or may hereafter be liable with respect to any of
the Obligations.
13.8 Subordination. All indebtedness of a Borrower now or hereafter arising held by another
Borrower is subordinated to the Obligations and the Borrower holding the indebtedness shall take
all actions reasonably requested by Lender to effect, to enforce and to give notice of such
subordination.
********
25.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date
first above written.
| XXXXX.XXX CORPORATION |
||||
| By: | /s/ Xxxxxx Xxxxx | |||
| Title: Chief Financial Officer | ||||
| SQUARE 1 BANK |
||||
| By: | /s/ Xxx Xxxxxxx | |||
| Title: Senior Vice President | ||||
26.
EXHIBIT A
DEFINITIONS
“Accounts” means all presently existing and hereafter arising accounts, contract rights, payment
intangibles and all other forms of obligations owing to Borrower arising out of the sale or lease
of goods (including, without limitation, the licensing of software and other technology) or the
rendering of services by Borrower and any and all credit insurance, guaranties, and other security
therefore, as well as all merchandise returned to or reclaimed by Borrower and Borrower’s Books
relating to any of the foregoing.
“Adjusted Debt Service Coverage” means a ratio of: (A) Adjusted EBITDA, plus any increase (or minus
any decrease) in capitalized software, plus any non-Cash stock compensation expenses, plus any
other non-Cash expenses, all annualized for the preceding 3-months period; to (B) the current
portion of long-term Indebtedness, plus annualized interest for the preceding 3-months period.
“Adjusted EBITDA” means with respect to any fiscal period an amount equal to earnings before the
sum of (a) tax, plus (b) depreciation and amortization, plus (c) interest, plus (d) plus any
increase (or minus any decrease) in deferred revenues.
“Advance” or “Advances” means a cash advance or cash advances under the Formula Revolving Line or
the Non-Formula Revolving Lines.
“Affiliate” means, with respect to any Person, any Person that owns or controls directly or
indirectly such Person, any Person that controls or is controlled by or is under common control
with such Person, and each of such Person’s senior executive officers, directors, and general
partners.
“Bank Expenses” means all reasonable costs or expenses (including reasonable attorneys’ fees and
expenses) incurred in connection with the preparation, negotiation, administration, and enforcement
of the Loan Documents; reasonable Collateral audit fees; and Bank’s reasonable attorneys’ fees and
expenses (whether generated in-house or by outside counsel) incurred in amending, enforcing or
defending the Loan Documents (including fees and expenses of appeal), incurred before, during and
after an Insolvency Proceeding, whether or not suit is brought.
“Borrower’s Books” means all of Borrower’s books and records including: ledgers; records
concerning Borrower’s assets or liabilities, the Collateral, business operations or financial
condition; and all computer programs, or tape files, and the equipment, containing such
information.
“Borrowing Base” means an amount equal to 80.0% (the “Advance Rate”) of Eligible Accounts, as
determined by Bank with reference to the most recent Borrowing Base Certificate delivered by
Borrower.
“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks in the
State of North Carolina are authorized or required to close.
“Cash” means unrestricted cash and cash equivalents.
“Change in Control” shall mean a transaction other than a bona fide equity financing or series of
financings on terms and from investors reasonably acceptable to Bank in which any “person” or
“group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of
1934), directly or indirectly, of a sufficient number of shares of all classes of stock then
outstanding of Borrower ordinarily entitled to vote in the election of
directors, empowering such “person” or “group” to elect a majority of the Board of Directors of
Borrower, who did not have such power before such transaction.
1.
“Closing Date” means the date of this Agreement.
“Code” means the California Uniform Commercial Code as amended or supplemented from time to time.
“Collateral” means the property described on Exhibit B attached hereto and all Negotiable
Collateral to the extent not described on Exhibit B, except to the extent any such property (i) is
nonassignable by its terms without the consent of the licensor thereof or another party (but only
to the extent such prohibition on transfer is enforceable under applicable law, including, without
limitation, §9406 and §9408 of the Code), (ii) the granting of a security interest therein is
contrary to applicable law, provided that upon the cessation of any such restriction or
prohibition, such property shall automatically become part of the Collateral, (iii) constitutes the
capital stock of a controlled foreign corporation (as defined in the IRC), in excess of 65% of the
voting power of all classes of capital stock of such controlled foreign corporations entitled to
vote, or (iv) property (including any attachments, accessions or replacements) that is subject to a
Lien that is permitted pursuant to clause (c) of the definition of Permitted Liens, if the grant of
a security interest with respect to such property pursuant to this Agreement would be prohibited by
the agreement creating such Permitted Lien or would otherwise constitute a default thereunder,
provided, that such property will be deemed “Collateral” hereunder upon the termination and release
of such Permitted Lien.
“Collateral State” means the state or states where the Collateral is located, which is California
and Virginia.
“Contingent Obligation” means, as applied to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend,
letter of credit or other obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that
Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any
obligations with respect to undrawn letters of credit, corporate credit cards or merchant services
issued for the account of that Person; and (iii) all obligations arising under any interest rate,
currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement,
or other agreement or arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent
Obligation” shall not include endorsements for collection or deposit in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof as determined by such Person in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the guarantee or other
support arrangement.
“Conversion Criteria” means Borrower has achieved a minimum Adjusted Debt Service Coverage ratio of
at least 2.00 to 1.00 for each month during the six (6) most-recent monthly reporting periods for
which Borrower has delivered financial reporting to Bank immediately prior to the Conversion Notice
Date.
“Conversion Maturity Date” means June 26, 2012.
“Conversion Notice Date” means June 18, 2010.
“Copyrights” means any and all copyright rights, copyright applications, copyright registrations
and like protections in each work or authorship and derivative work thereof, whether published or
unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing,
created, acquired or held.
2.
“Credit Extension” means each Advance, Term Loan, or any other extension of credit, by Bank to or
for the benefit of Borrower hereunder.
“Eligible Accounts” means those Accounts that arise in the ordinary course of Borrower’s business
that comply with all of Borrower’s representations and warranties to Bank set forth in Section 5.3;
provided, that Bank may change the Advance Rate and the standards of eligibility by giving Borrower
10 days prior written notice. Unless otherwise agreed to by Bank, Eligible Accounts shall not
include the following:
(a) Account balances that the account debtor has failed to pay in full within 90 days of
invoice date;
(b) Account credit balances greater than 90 days from invoice date;
(c) Accounts with respect to an account debtor, 25% of whose Accounts the account debtor has
failed to pay within 90 days of invoice date;
(d) Accounts with respect to an account debtor, including the account debtor’s subsidiaries
and Affiliates, whose total obligations to Borrower exceed 25.0% of all Accounts, to the extent
such obligations exceed the aforementioned percentage, except: (1) as approved in writing by Bank,
or (2) Accounts with respect to Yahoo! as the account debtor, for which the aforementioned 25.0%
limitation shall instead be 65.0%;
(e) Accounts with respect to which the account debtor does not have its principal place of
business in the United States, except for Eligible Foreign Accounts;
(f) Accounts with respect to which the account debtor is the United States or any department,
agency, or instrumentality of the United States, except for Accounts of the United States if the
payee has assigned its payment rights to Bank and the assignment has been acknowledged under the
Assignment of Claims Act of 1940 (31 U.S.C. 3727);
(g) Accounts with respect to which Borrower is liable to the account debtor for goods sold or
services rendered by the account debtor to Borrower, but only to the extent of any amounts owing to
the account debtor against amounts owed to Borrower;
(h) Accounts with respect to which the account debtor is an officer, employee, agent,
Subsidiary or Affiliate of Borrower;
(i) Accounts with respect to which goods are placed on consignment, guaranteed sale, sale or
return, sale on approval, xxxx and hold, demo or promotional, or other terms by reason of which the
payment by the account debtor may be conditional;
(j) “Advanced Xxxxxxxx,” i.e., accounts that have not yet been billed to the account debtor or
that relate to deposits (such as good faith deposits) or other property of the account debtor held
by Borrower for the performance of services or delivery of goods which Borrower has not yet
performed or delivered;
(k) Accounts with respect to which the account debtor disputes liability or makes any claim
with respect thereto as to which Bank believes, in its sole discretion, that there may be a basis
for dispute (but only to the extent of the amount subject to such dispute or claim), or is subject
to any Insolvency Proceeding, or becomes insolvent, or goes out of business;
3.
(l) Accounts the collection of which Bank reasonably determines after inquiry and consultation
with Borrower to be doubtful;
(m) Retentions and hold-backs; and
(n) “Progress Xxxxxxxx,” i.e., accounts that are billed based on project milestones and not on
actual time and materials bases.
“Eligible Foreign Accounts” means Accounts with respect to which the account debtor does not have
its principal place of business in the United States and that are (i) supported by one or more
letters of credit in an amount and of a tenor, and issued by a financial institution, acceptable to
Bank, (ii) insured by the Export Import Bank of the United States, (iii) generated by an account
debtor with its principal place of business in Canada, provided that the Bank has perfected its
security interest in the appropriate Canadian province, or (iv) approved by Bank on a case-by-case
basis. All Eligible Foreign Accounts must be calculated in U.S. Dollars.
“Equipment” means all present and future machinery, equipment, tenant improvements, furniture,
fixtures, vehicles, tools, parts and attachments in which Borrower has any interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations
thereunder.
“Event of Default” has the meaning assigned in Article 8.
“Formula Advance” means a cash advance or cash advances under the Formula Revolving Line.
“Formula Revolving Line” means a Credit Extension of up to $10,000,000; provided however, that
under no circumstances shall the aggregate amount of outstanding Advances exceed the Total Facility
Cap, and availability of Formula Advances under the Formula Revolving Line shall be reduced
accordingly.
“Formula Revolving Maturity Date” means June 25, 2010.
“GAAP” means generally accepted accounting principles, consistently applied, as in effect from time
to time in the United States.
“Indebtedness” means (a) all indebtedness for borrowed money or the deferred purchase price of
property or services, including without limitation reimbursement and other obligations with respect
to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations, and (d) all Contingent Obligations,
including but not limited to any sublimit contained herein.
“Insolvency Proceeding” means any proceeding commenced by or against any Person or entity under any
provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency law, including assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
“Inventory” means all present and future inventory in which Borrower has any interest.
“Investment” means any beneficial ownership of (including stock, partnership or limited liability
company interest or other securities) any Person, or any loan, advance or capital contribution to
any Person.
“IRC” means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.
4.
“Letter of Credit” means a commercial or standby letter of credit or similar undertaking issued by
Bank at Borrower’s request.
“Lien” means any mortgage, lien, deed of trust, charge, pledge, security interest or other
encumbrance.
“Liquidity” means the sum of: (i) Cash in Bank; plus (ii) the most-recent Borrowing Base.
“Liquidity Ratio” means the ratio of Liquidity to all Indebtedness to Bank
“Loan Documents” means, collectively, this Agreement, any note or notes executed by Borrower, and
any other document, instrument or agreement entered into in connection with this Agreement, all as
amended or extended from time to time.
***
“Material Adverse Effect” means a material adverse effect on: (i) the operations, business or
financial condition of Borrower and its Subsidiaries taken as a whole; (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan Documents; or (iii)
Borrower’s interest in, or the value, perfection or priority of Bank’s security interest in the
Collateral.
“Negotiable Collateral” means all of Borrower’s present and future letters of credit of which it is
a beneficiary, drafts, instruments (including promissory notes), securities, documents of title,
and chattel paper, and Borrower’s Books relating to any of the foregoing.
“Non-Formula Advance” means a cash advance or cash advances under the Non-Formula Revolving Line.
“Non-Formula Revolving Line” means a Credit Extension of up to $3,000,000; provided however, that
under no circumstances shall the aggregate amount of outstanding Advances exceed the Total Facility
Cap, and availability of Non-Formula Advances under the Non-Formula Revolving Line shall be reduced
accordingly.
“Non-Formula Revolving Maturity Date” means June 25, 2010.
“Obligations” means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by
Borrower pursuant to this Agreement or any other agreement, whether absolute or contingent, due or
to become due, now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
“Patents” means all patents, patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of
the same.
“Periodic Payments” means all installments or similar recurring payments that Borrower may now or
hereafter become obligated to pay to Bank pursuant to the terms and provisions of any instrument,
or agreement now or hereafter in existence between Borrower and Bank.
“Permitted Indebtedness” means:
(a) Indebtedness of Borrower in favor of Bank arising under this Agreement or any other Loan
Document;
(b) Indebtedness existing on the Closing Date and disclosed in the Schedule;
| ***- | Portions of this page have been omitted pursuant to a request for confidential treatment
and filed separately with the Securities and Exchange Commission |
5.
(c) Indebtedness not to exceed $250,000 in the aggregate in any fiscal year of Borrower secured by
a lien described in clause (c) of the defined term “Permitted Liens,” provided such Indebtedness
does not exceed at the time it is incurred the lesser of the cost or fair market value of the
property financed with such Indebtedness;
(d) Subordinated Debt;
(e) Indebtedness to trade creditors incurred in the ordinary course of business; and
(f) Extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the
principal amount is not increased or the terms modified to impose more burdensome terms upon
Borrower or its Subsidiary, as the case may be.
“Permitted Investment” means:
(a) Investments existing on the Closing Date disclosed in the Schedule;
(b) (i) Marketable direct obligations issued or unconditionally guaranteed by the United States of
America or any agency or any State thereof maturing within one year from the date of acquisition
thereof, (ii) commercial paper maturing no more than one year from the date of creation thereof and
currently having rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Xxxxx’x
Investors Service, (iii) Bank’s certificates of deposit maturing no more than one year from the
date of investment therein, and (iv) Bank’s money market accounts; (v) Investments in regular
deposit or checking accounts held with Bank or subject to a control agreement in favor of Bank; and
(vi) Investments consistent with any investment policy adopted by the Borrower’s board of
directors;
(c) Repurchases of stock from former employees or directors of Borrower under the terms of
applicable repurchase agreements (i) ***, or (ii) in any amount where the consideration for the
repurchase is the cancellation of indebtedness owed by such former employees to Borrower regardless
of whether an Event of Default exists;
(d) Investments accepted in connection with Permitted Transfers;
(e) Investments of Subsidiaries in or to other Subsidiaries or Borrower and Investments by Borrower
in Subsidiaries not to exceed $250,000 in the aggregate in any fiscal year;
(f) Investments not to exceed $250,000 outstanding in the aggregate at any time consisting of (i)
travel advances and employee relocation loans and other employee loans and advances in the ordinary
course of business, and (ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plan
agreements approved by Borrower’s Board of Directors;
(g) Investments in unfinanced capital expenditures in any fiscal year, not to exceed $1,000,000;
(h) Investments (including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent obligations of, and other
disputes with, customers or suppliers arising in the ordinary course of Borrower’s business;
| ***- | Portions of this page have been omitted pursuant to a request for confidential treatment
and filed separately with the Securities and Exchange Commission |
6.
(i) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to
customers and suppliers who are not Affiliates, in the ordinary course of business, provided that
this subparagraph (h) shall not apply to Investments of Borrower in any Subsidiary;
(j) Joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting
of the non-exclusive licensing of technology, the development of technology or the providing of
technical support, provided that any cash Investments by Borrower do not exceed $1,000,000 in the
aggregate in any fiscal year; and
(k) Investments permitted under Section 7.3.
“Permitted Liens” means the following:
(a) Any Liens existing on the Closing Date and disclosed in the Schedule (excluding Liens to be
satisfied with the proceeds of the Credit Extensions) or arising under this Agreement, the other
Loan Documents, or any other agreement in favor of Bank;
(b) Liens for taxes, fees, assessments or other governmental charges or levies, either not
delinquent or being contested in good faith by appropriate proceedings and for which Borrower
maintains adequate reserves;
(c) Liens not to exceed $250,000 in the aggregate (i) upon or in any Equipment (other than
Equipment financed by a Credit Extension) acquired or held by Borrower or any of its Subsidiaries
to secure the purchase price of such Equipment or indebtedness incurred solely for the purpose of
financing the acquisition or lease of such Equipment, or (ii) existing on such Equipment at the
time of its acquisition, in each case provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such Equipment;
(d) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clauses (a) through (c) above, provided that any
extension, renewal or replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not
increase;
(e) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event
of Default under Sections 8.4 (attachment) or 8.7 (judgments); and
(f) Liens securing Subordinated Debt.
“Permitted Transfer” means the conveyance, sale, lease, transfer or disposition by Borrower or any
Subsidiary of:
(a) Inventory in the ordinary course of business;
(b) licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries
in the ordinary course of business;
(c) worn-out, surplus or obsolete Equipment not financed with the proceeds of Credit Extensions;
(d) grants of security interests and other Liens that constitute Permitted Liens; and
(e) other assets of Borrower or its Subsidiaries that do not in the aggregate exceed $250,000
during any fiscal year.
7.
“Person” means any individual, sole proprietorship, partnership, limited liability company, joint
venture, trust, unincorporated organization, association, corporation, institution, public benefit
corporation, firm, joint stock company, estate, entity or governmental agency.
“Prime Rate” means the variable rate of interest, per annum, most recently announced by Bank, as
its “prime rate,” whether or not such announced rate is the lowest rate available from Bank.
“Responsible Officer” means each of the Chief Executive Officer, the Chief Operating Officer, the
Chief Financial Officer, Vice President of Finance and the Controller of Borrower, as well as any
other officer or employee identified in as an Authorized Officer in the corporate resolution
delivered by Borrower to Bank in connection with this Agreement.
“Schedule” means the schedule of exceptions attached hereto and approved by Bank, if any.
“Shares” means (i) sixty-five percent (65%) of the issued and outstanding capital stock, membership
units or other securities owned or held of record by Borrower in any Subsidiary of Borrower which
is not an entity organized under the laws of the United States or territory thereof, and (ii) one
hundred percent (100%) of the issued and outstanding capital stock, membership units or other
securities owned or held of record by Borrower in any Subsidiary of Borrower which is an entity
organized under the laws of the United States or any territory thereof
“SOS Reports” means the official reports from the Secretaries of State of each Collateral State,
the state where Borrower’s chief executive office is located, the state of Borrower’s formation and
other applicable federal, state or local government offices identifying all current security
interests filed in the Collateral and Liens of record as of the date of such report.
“Subordinated Debt” means any debt incurred by Borrower that is subordinated in writing to the debt
owing by Borrower to Bank on terms reasonably acceptable to Bank (and identified as being such by
Borrower and Bank).
“Subsidiary” means any corporation, partnership or limited liability company or joint venture in
which (i) any general partnership interest or (ii) more than 50% of the stock, limited liability
company interest or joint venture of which by the terms thereof ordinary voting power to elect the
Board of Directors, managers or trustees of the entity, at the time as of which any determination
is being made, is owned by Borrower, either directly or through an Affiliate.
“Total Facility Cap” means Ten Million Dollars ($10,000,000).
“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to
register and registrations of the same and like protections, and the entire goodwill of the
business of Borrower connected with and symbolized by such trademarks.
8.
DEBTOR:
|
XXXXX.XXX CORPORATION | |
SECURED PARTY:
|
SQUARE 1 BANK |
EXHIBIT B
COLLATERAL DESCRIPTION ATTACHMENT TO LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as “Borrower” or “Debtor”) whether presently
existing or hereafter created or acquired, and wherever located, including, but not limited to:
(f) all accounts (including health-care-insurance receivables), chattel paper (including tangible
and electronic chattel paper), deposit accounts, documents (including negotiable documents),
equipment (including all accessions and additions thereto), financial assets, general intangibles
(including patents, trademarks, copyrights, goodwill, payment intangibles and software), goods
(including fixtures), instruments (including promissory notes), inventory (including all goods held
for sale or lease or to be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities entitlements), letter of
credit rights, money, and all of Debtor’s books and records with respect to any of the foregoing,
and the computers and equipment containing said books and records;
(g) any and all cash proceeds and/or noncash proceeds of any of the foregoing, including, without
limitation, insurance proceeds, and all supporting obligations and the security therefor or for any
right to payment. All terms above have the meanings given to them in the California Uniform
Commercial Code, as amended or supplemented from time to time, including revised Division 9 of the
Uniform Commercial Code-Secured Transactions.
Notwithstanding the foregoing, the Collateral shall not include any of the intellectual
property, in any medium, of any kind or nature whatsoever, now or hereafter owned or acquired or
received by Borrower, or in which Borrower now holds or hereafter acquires or receives any right or
interest (collectively, the “Intellectual Property”); provided, however, that the Collateral shall
include all accounts and general intangibles that consist of rights to payment and proceeds from
the sale, licensing or disposition of all or any part, or rights in, the foregoing (the “Rights to
Payment”).
Notwithstanding the foregoing, if a judicial authority (including a U.S. Bankruptcy Court)
holds that a security interest in the underlying Intellectual Property is necessary to have a
security interest in the Rights to Payment, then the Collateral shall automatically, and effective
as of June 26, 2009 include the Intellectual Property to the extent and only to the extent
necessary to permit perfection of Bank’s security interest in the Rights to Payment, and further
provided, however, that Bank’s enforcement rights with respect to any security interest in the
Intellectual Property shall be absolutely limited to the Rights to Payment only, and Bank shall
have no recourse whatsoever with respect to the underlying Intellectual Property.
1.
DEBTOR:
|
XXXXX.XXX PG ACQUISITION CORPORATION | |
SECURED PARTY:
|
SQUARE 1 BANK |
EXHIBIT B
COLLATERAL DESCRIPTION ATTACHMENT TO LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as “Borrower” or “Debtor”) whether presently
existing or hereafter created or acquired, and wherever located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables), chattel paper (including tangible
and electronic chattel paper), deposit accounts, documents (including negotiable documents),
equipment (including all accessions and additions thereto), financial assets, general intangibles
(including patents, trademarks, copyrights, goodwill, payment intangibles and software), goods
(including fixtures), instruments (including promissory notes), inventory (including all goods held
for sale or lease or to be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities entitlements), letter of
credit rights, money, and all of Debtor’s books and records with respect to any of the foregoing,
and the computers and equipment containing said books and records;
(b) any and all cash proceeds and/or noncash proceeds of any of the foregoing, including, without
limitation, insurance proceeds, and all supporting obligations and the security therefor or for any
right to payment. All terms above have the meanings given to them in the California Uniform
Commercial Code, as amended or supplemented from time to time, including revised Division 9 of the
Uniform Commercial Code-Secured Transactions.
Notwithstanding the foregoing, the Collateral shall not include any of the intellectual
property, in any medium, of any kind or nature whatsoever, now or hereafter owned or acquired or
received by Borrower, or in which Borrower now holds or hereafter acquires or receives any right or
interest (collectively, the “Intellectual Property”); provided, however, that the Collateral shall
include all accounts and general intangibles that consist of rights to payment and proceeds from
the sale, licensing or disposition of all or any part, or rights in, the foregoing (the “Rights to
Payment”).
Notwithstanding the foregoing, if a judicial authority (including a U.S. Bankruptcy Court)
holds that a security interest in the underlying Intellectual Property is necessary to have a
security interest in the Rights to Payment, then the Collateral shall automatically, and effective
as of June 26, 2009 include the Intellectual Property to the extent and only to the extent
necessary to permit perfection of Bank’s security interest in the Rights to Payment, and further
provided, however, that Bank’s enforcement rights with respect to any security interest in the
Intellectual Property shall be absolutely limited to the Rights to Payment only, and Bank shall
have no recourse whatsoever with respect to the underlying Intellectual Property.
2.
EXHIBIT C
LOAN ADVANCE/PAYDOWN REQUEST FORM
[Please refer to New Borrower Kit]
EXHIBIT D
BORROWING BASE CERTIFICATE
[Please refer to New Borrower Kit]
EXHIBIT E
COMPLIANCE CERTIFICATE
[Please refer to New Borrower Kit]
3.
