AMENDMENT TO LOAN AND SECURITY AGREEMENT
Exhibit
10.1
AMENDMENT
TO
This
Amendment to Loan and Security Agreement is entered into as of February 4, 2010
(the “Amendment”), by and between Peninsula Bank Business Funding, a division of
The Private Bank of the Peninsula (“Bank”) and The Orchard Enterprises, Inc.
(“Orchard”), a Delaware corporation, Digital Rights Agency, Inc. (“Digital”), a
California corporation, and Orchard Enterprises NY, Inc., a New York corporation
(“Orchard NY” and collectively with Digital and Orchard, “Borrowers” and each a
“Borrower”).
RECITALS
Borrowers
and Bank are parties to that certain Loan and Security Agreement dated as of
February 5, 2009, as amended from time to time (the “Agreement”). The
parties desire to amend the Agreement in accordance with the terms of this
Amendment.
NOW,
THEREFORE, the parties agree as follows:
1. The
following definitions in Section 1.1 of the Agreement are amended in their
entirety to read as follows:
“Revolving
Line” means a credit extension of up to Three Million Dollars
($3,000,000).
“Revolving
Maturity Date” means February 4, 2011.
“Responsible
Officer” means any of the Chief Executive Officer or any individual performing
similar functions, the Chief Financial Officer and the VP of Finance of Lead
Borrower.
2. The
following definitions are added to Section 1.1 of the Agreement as
follows:
“Borrowing
Base Certificate” means the monthly certificate provided to Bank within twenty
(20) days after the last calendar month stating the Borrowing Base for the
previous calendar month, in substantially similar form as Exhibit D attached
hereto.
“Digital
Receivables” means any Account arising from the digital exploitation of any
Borrower’s assets.
“Financial
Targets” means Borrowers’ consolidated financial plan for fiscal year 2010, as
such has been previously provided to Bank and certified by a Responsible
Officer, in form and substance satisfactory to Bank.
“Physical
Receivables” means any Account arising from the shipment of physical product
(i.e. CDs and albums) by any Borrower to any account debtor of any Borrower that
purchases such physical product from a Borrower.
3. Subsection
(n) of the definition of “Eligible Accounts” in Section 1.1 of the Agreement is
amended in its entirety to read as follows:
(n) all
chargebacks, credits or debit memos;
4. The
following are added as new subsections (p) and (q) to the definition of
“Eligible Accounts” in Section 1.1 of the Agreement:
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(p) an
outstanding Physical Receivable that the relevant account debtor has failed to
pay within sixty (60) days following the due date of the invoice covering such
Account (any outstanding Account that the relevant account debtor has failed to
pay within sixty (60) days following the due date of the invoice covering such
Account is hereinafter included in the definition of “Delinquent
Account”);
(q)
Accounts arising from TVT Inventory, except as may be approved in writing by
Bank;
5. The
third sentence of Section 2.1(a)(ii) of the Agreement is amended in its entirety
to read as follows:
Upon
Bank’s reasonable request, Lead Borrower will deliver copies of invoices in
connection with any Advance request and all supporting documents, plus
transaction files for all invoices and payment application in an electronic
format reasonably acceptable to Bank for processing.
6. The
first sentence of Section 2.4 of the Agreement is amended in its entirety to
read as follows:
Except
during the continuation 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 Lead Borrower specifies
7. The
following shall be added as a new Section 4.4 of the Agreement:
4.4 Termination of Security Interest.
Bank agrees that it shall, upon full and final payment of all
Obligations and the termination of Bank’s obligation to make Credit Extensions,
at Borrowers’ cost and expense, execute and deliver such documents, agreements
or instruments which are necessary or reasonably requested by Lead Borrower to
terminate and release all Liens on the Collateral and authorizes the filing of
UCC termination statements in connection with the foregoing.
8. The
opening clause in Section 5 of the Agreement is amended in its entirety to read
as follows:
Except as
disclosed on the Schedule (which shall be delivered by Lead Borrower from time
to time and acceptable to Bank in its sole discretion), each Borrower represents
and warrants as follows:
9.
Section
5.17 of the Agreement is amended in its entirety to read as
follows:
5.17 Full Disclosure. No
representation, warranty or other statement made by a Borrower in any Loan
Document, including the Borrowing Base Certificate, Compliance Certificate or
any other certificate or written statement furnished to Bank, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained therein taken as a whole, in light of
the circumstances under which they were made, not misleading; provided that with
respect to projections and other forward-looking information, each Borrower only
represents that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time made, it being understood that
projections and other forward-looking information are subject to significant
contingencies and uncertainties, many of which are beyond the control of
Borrowers and no assurances can be given that such projections will be
realized.
10. Sections
6.3(a), 6.3(g) and 6.3(h) of the Agreement are each amended in their entirety to
read as follows:
(a) as
soon as available, but in any event within fifteen (15) days after the end of
each calendar month, a company prepared report of Borrowers’ cash balance, in a
form reasonably acceptable to Bank and certified by a Responsible
Officer;
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(g) Within
twenty (20) days after the last day of each calendar month, Lead Borrower shall
deliver to Bank an aged listings of Accounts (including Digital Receivables and
Physical Receivables) and accounts payable, along with a Borrowing Base
Certificate in substantially similar form as Exhibit D attached
hereto;
(h) Lead
Borrower shall deliver to Bank with the quarterly and annual financial
statements a Compliance Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto.
11. Section
6.8 of the Agreement is amended in its entirety to read as follows:
6.8 Minimum
Cash. Commencing with the calendar month ended January 31, 2010,
Borrowers shall maintain a balance (determined on an aggregate basis for all
Borrowers) of unrestricted cash and cash equivalents in an aggregate amount that
is not less than the lesser of (a) 90% of the aggregate amounts of unrestricted
cash and cash equivalents that are set forth in the projections with respect to
such calendar month in Lead Borrower’s Financial Targets or (b)
$2,000,000.
12. Section
6.9 of the Agreement is amended in its entirety to read as follows:
6.9 Net
Income/Loss. Borrowers shall achieve quarterly income/loss
(determined on an aggregate basis for all Borrowers) for each calendar quarter,
beginning with the quarter ending March 31, 2010, that does not adversely
deviate from the quarterly projections of income/loss for the Borrowers
(determined on an aggregate basis for all Borrowers) for such quarter as set
forth in Lead Borrower’s Financial Targets.
13. The
following is added to the end of Section 7.1 of the Agreement:
Notwithstanding
the foregoing, Borrowers may engage in Transfers to any other Borrower, or to
any wholly owned domestic Subsidiary in which Bank has a perfected, first
priority security interest on terms acceptable to Bank.
14. The
Compliance Certificate attached hereto replaces Exhibit C to the Agreement in
its entirety. The Exhibit D attached hereto replaces Exhibit D to the Agreement
in its entirety.
15. Borrowers
and Bank agree that any Advances to be made on (a) amounts owing to Borrowers
from iTunes that have not yet been invoiced by Borrowers to iTunes or (b) any
Physical Receivables which do not otherwise qualify as an Eligible Account,
shall be at Bank’s sole discretion, based on documentation in form and substance
satisfactory to Bank, as may be reasonably requested by Bank.
16. Unless
otherwise defined, all initially capitalized terms in this Amendment shall be as
defined in the Agreement. The Agreement, as amended hereby, shall be
and remain in full force and effect in accordance with its respective terms and
hereby is ratified and confirmed in all respects. Except as expressly
set forth herein, the execution, delivery, and performance of this Amendment
shall not operate as a waiver of, or as an amendment of, any right, power, or
remedy of Bank under the Agreement, as in effect prior to the date
hereof. Each Borrower ratifies and reaffirms the continuing
effectiveness of all agreements entered into in connection with the
Agreement.
17. Each
Borrower represents and warrants that the representations and warranties
contained in the Agreement are true and correct as of the date of this
Amendment, and that no Event of Default has occurred and is
continuing.
18. This
Amendment 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 Amendment. In the event that any
signature is delivered by facsimile transmission or by e-mail delivery of a
“.pdf” format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof. Notwithstanding the
foregoing, Borrower shall deliver all original signed documents requested by
Bank no later than ten (10) Business Days following the date of this
Amendment.
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19. As
a condition to the effectiveness of this Amendment, Bank shall have received, in
form and substance satisfactory to Bank, the following:
(a) this
Amendment, duly executed by Borrowers;
(b) the
Financial Targets, certified by Lead Borrower and accepted in writing by
Bank;
(c) an
updated Schedule of Exceptions;
(d) Corporate
Resolutions certified by each Borrower;
(e) Affirmation
of Guaranty executed by each Guarantor;
(f)
a
fee equal to $22,500, plus an amount equal to all Bank Expenses incurred through
the date of this Amendment; and
(g) such
other documents, and completion of such other matters, as Lender may reasonably
deem necessary or appropriate.
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IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as
of the date first above written.
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BANK:
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Peninsula
Bank Business Funding,
A
Division Of The Private Bank of the Peninsula
By:
/s/Xxxxxx
Xxxxx
Title:
Vice
President
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BORROWERS:
By:
/s/ Xxxxxx X.
Xxxx
Title:
Chief Financial
Officer
Digital
Rights Agency, Inc.
By:
/s/ Xxxxxx X.
Xxxx
Title: Treasurer
Orchard
Enterprises NY, Inc.
By: /s/
Xxxxxx X.
Xxxx
Title: Treasurer
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