EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
SILICON VALLEY BANK
AND
DIGITAL IMPACT, INC.
TABLE OF CONTENTS
Page
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1. ACCOUNTING AND OTHER TERMS............................................................................. 1
2. LOAN AND TERMS OF PAYMENT.............................................................................. 1
2.1 Promise to Pay................................................................................ 1
2.1.1 Revolving Advances................................................................... 1
2.1.2 Letters of Credit Sublimit........................................................... 2
2.1.3 FX Forward Contracts................................................................. 2
2.1.4 Cash Management Services............................................................. 2
2.2 Termination of Commitment to Lend............................................................. 2
2.3 Overadvances.................................................................................. 3
2.4 Interest Rates................................................................................ 3
2.5 Term Loan Option.............................................................................. 4
2.6 Prepayment.................................................................................... 4
2.7 General Provisions............................................................................ 4
2.8 Fees.......................................................................................... 5
3. Conditions Of Credit Extensions........................................................................ 5
3.1 Conditions Precedent to Initial Credit Extension.............................................. 5
3.2 Conditions Precedent to all Credit Extensions................................................. 6
4. CREATION OF SECURITY INTEREST.......................................................................... 6
4.1 Grant of Security Interest.................................................................... 6
4.2 Authorization to File Financing Statements.................................................... 7
5. REPRESENTATIONS AND WARRANTIES......................................................................... 7
5.1 Due Organization and Authorization............................................................ 7
5.2 Collateral.................................................................................... 7
5.3 Litigation.................................................................................... 8
5.4 No Material Deterioration in Financial Statements............................................. 8
5.5 Solvency...................................................................................... 8
5.6 Regulatory Compliance......................................................................... 8
5.7 Subsidiaries.................................................................................. 9
5.8 Full Disclosure............................................................................... 9
6. AFFIRMATIVE COVENANTS.................................................................................. 9
6.1 Government Compliance......................................................................... 9
6.2 Financial Statements, Reports, Certificates................................................... 10
6.3 Inventory; Returns............................................................................ 10
6.4 Taxes......................................................................................... 10
6.5 Insurance..................................................................................... 10
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TABLE OF CONTENTS
(continued)
Page
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6.6 Primary Accounts.............................................................................. 11
6.7 Financial Covenants........................................................................... 11
6.8 Protection of Intellectual Property Rights.................................................... 12
6.9 Further Assurances............................................................................ 12
7. NEGATIVE COVENANTS..................................................................................... 12
7.1 Dispositions.................................................................................. 12
7.2 Changes in Business, Locations of Collateral.................................................. 12
7.3 Dissolution................................................................................... 13
7.4 Mergers; Consolidations....................................................................... 13
7.5 Indebtedness.................................................................................. 13
7.6 Encumbrance................................................................................... 13
7.7 Distributions; Investments.................................................................... 13
7.8 Transactions with Affiliates.................................................................. 13
7.9 Subordinated Debt............................................................................. 13
7.10 Compliance.................................................................................... 14
8. EVENTS OF DEFAULT...................................................................................... 14
8.1 Payment Default............................................................................... 14
8.2 Covenant Default.............................................................................. 14
8.3 Attachment.................................................................................... 14
8.4 Insolvency.................................................................................... 15
8.5 Other Agreements.............................................................................. 15
8.6 Judgments..................................................................................... 15
8.7 Misrepresentations............................................................................ 15
8.8 Change of Control............................................................................. 15
9. RIGHTS AND REMEDIES.................................................................................... 15
9.1 Rights and Remedies........................................................................... 15
9.2 Power of Attorney............................................................................. 16
9.3 Accounts, Notification and Collection......................................................... 17
9.4 Bank Expenses................................................................................. 17
9.5 Bank's Liability for Collateral............................................................... 17
9.6 Remedies Cumulative........................................................................... 17
9.7 Demand Waiver................................................................................. 17
10. NOTICES................................................................................................ 18
11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER............................................................. 18
12. GENERAL PROVISIONS..................................................................................... 19
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TABLE OF CONTENTS
(continued)
Page
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12.1 Successors and Assigns........................................................................ 19
12.2 Indemnification............................................................................... 19
12.3 Attorneys' Fees, Costs and Expenses........................................................... 19
12.4 Right of Set-Off.............................................................................. 19
12.5 Time of Essence............................................................................... 20
12.6 Severability of Provisions.................................................................... 20
12.7 Amendments in Writing, Integration............................................................ 20
12.8 Counterparts.................................................................................. 20
12.9 Survival...................................................................................... 20
12.10 Confidentiality............................................................................... 20
13. DEFINITIONS............................................................................................ 21
13.1 Definitions................................................................................... 21
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as amended, restated, or otherwise
modified from time to time, this "AGREEMENT") dated the Effective Date, between
SILICON VALLEY BANK ("BANK") and DIGITAL IMPACT, INC., a Delaware corporation,
whose address is 000 Xxxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 ("BORROWER"),
provides the terms on which Bank will lend to Borrower, and Borrower will repay
Bank.
1. ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. Capitalized terms in this Agreement
shall have the meanings as set forth in SECTION 13. All other terms contained in
this Agreement, unless otherwise indicated, shall have the meanings provided by
the Code, to the extent such terms are defined therein.
2. LOAN AND TERMS OF PAYMENT
2.1 PROMISE TO PAY
Borrower hereby unconditionally promises to pay Bank the unpaid
principal amount of all Credit Extensions hereunder with all interest, fees, and
finance charges due thereon as and when due in accordance with this Agreement.
2.1.1 REVOLVING ADVANCES
(a) Subject to the terms and conditions hereof,
Bank shall make Advances to Borrower from time to time until the Revolving
Maturity Date not exceeding the Committed Revolving Line minus the Sublimit
Utilization Amount. Until the Revolving Maturity Date and subject to the terms
hereof and the applicable terms and conditions precedent in SECTIONS 3.1 and
3.2, Borrower may borrow, repay, and reborrow under this SECTION 2.1.1. The
proceeds of the Advances shall be used solely for working capital and other
general business requirements of Borrower, including, without limitation, to
provide cash collateral to secure Borrower's reimbursement obligations under
standby letters of credit.
(b) Pursuant to the terms of SECTION 2.4(a),
interest on each Advance shall be paid in arrears on the first day of each
month. The outstanding principal amount of and all accrued but unpaid interest
on the Advances shall be due and payable on the Revolving Maturity Date, except
as otherwise set forth in SECTION 2.5.
(c) To obtain an Advance, Borrower must follow
the procedures set forth in SECTION 3.2.
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2.1.2 LETTERS OF CREDIT SUBLIMIT
Bank will issue Letters of Credit for Borrower's account not exceeding
the Committed Revolving Line minus the sum of (a) all amounts for services
utilized under the Cash Management Services Sublimit, (b) the FX Reserve, and
(c) the sum of the outstanding principal balance of the Advances. Each Letter of
Credit will have an expiry date of no later than 180 days after the Revolving
Maturity Date, but Borrower's reimbursement obligation will be secured by cash
on terms acceptable to Bank on or before the Revolving Maturity Date if the term
of this Agreement is not extended by Bank. Borrower agrees to execute any
further documentation in connection with the Letters of Credit as Bank may
reasonably request.
2.1.3 FX FORWARD CONTRACTS
If there is availability under the Committed Revolving Line, then
Borrower may enter into foreign exchange forward contracts with the Bank under
which Borrower commits to purchase from or sell to Bank a set amount of foreign
currency more than one business day after the contract date (the "FX FORWARD
CONTRACT"). Bank will subtract ten percent (10%) of each outstanding FX Forward
Contract from the foreign exchange sublimit (the "FX RESERVE"). The foreign
exchange sublimit shall be the Committed Revolving Line minus the sum of (a) all
amounts for services utilized under the Cash Management Services Sublimit, (b)
the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit), and (c) the sum of the outstanding principal
balance of the Advances. The total FX Forward Contracts at any one time may not
exceed ten (10) times the amount of the FX Reserve.
2.1.4 CASH MANAGEMENT SERVICES.
Borrower may use amounts up to the Committed Revolving Line minus the
sum of (a) the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit), (b) the FX Reserve, and (c) the sum of the
outstanding principal balance of the Advances (the "CASH MANAGEMENT SERVICES
SUBLIMIT") for Bank's Cash Management Services, which may include merchant
services, direct deposit of payroll, business credit card, and check cashing
services identified in various cash management services agreements related to
such services (the "CASH MANAGEMENT SERVICES"). Such aggregate amounts utilized
under the Cash Management Services Sublimit will at all times reduce the amount
otherwise available to be borrowed under the Committed Revolving Line. Any
amounts Bank pays on behalf of Borrower or any amounts that are not paid by
Borrower for any Cash Management Services will be treated as Advances under the
Committed Revolving Line and will accrue interest at the rate for Advances.
2.2 TERMINATION OF COMMITMENT TO LEND
Bank's obligation to make Credit Extensions shall terminate on the
earlier of (a) the occurrence and continuance of an Event of Default or if there
exists any event, condition, or act which with notice or lapse of time, or both,
would constitute an Event of Default or (b) the Revolving Maturity Date.
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2.3 OVERADVANCES
If, at any time Borrower's aggregate obligations under SECTIONS 2.1.1,
2.1.2, 2.1.3, and 2.1.4, exceed the Committed Revolving Line, Borrower shall pay
Bank the excess within 2 Business Days of receipt by Borrower of written notice
from Bank.
2.4 INTEREST RATES
(a) During the Revolving Period, each Advance
shall bear interest on the outstanding principal amount thereof from the date
when made until paid in full at a rate per annum equal to the Prime Rate.
(b) If Borrower has selected the Term Loan
Option, then, commencing on the Term Loan Option Date, the outstanding principal
amount of the Advances shall bear interest, at Borrower's option, (i) at a rate
per annum equal to the Prime Rate ("TERM LOAN OPTION ONE") or (ii) at a fixed
rate on the outstanding principal amount thereof from the Term Loan Option Date
until paid in full at a rate per annum equal to the 36-month Treasury Rate in
effect on the Term Loan Option Date plus four percent (4.00%) ("TERM LOAN OPTION
TWO").
(c) Interest on the Credit Extensions and all
fees payable hereunder shall be computed on the basis of a 360-day year and the
actual number of days elapsed in the period during which such interest accrues.
In computing interest on any Credit Extension, the date of the making of such
Credit Extension shall be included and the date of payment shall be excluded;
provided, however, that if any Credit Extension is repaid on the same day on
which it is made, such day shall be included in computing interest on such
Credit Extension. Each change in the interest rate of the Credit Extensions
based on changes in the Prime Rate shall be effective on the effective date of
such change and to the extent of such change.
(d) If Borrower fails to achieve a quarterly
revenue equal to or greater than the amounts set forth in column B in the table
set forth in SECTION 6.7(b) opposite each time period set forth in such table,
the interest rates in SECTIONS 2.4(a) and 2.4(b) shall be increased one-half
percent (.50%) per annum during the period beginning on the first day of the
fiscal quarter immediately following the quarter Borrower failed to achieve the
required quarterly revenue and continuing until the first day of the fiscal
quarter following the fiscal quarter for which Borrower does achieve the
targeted quarterly revenue amount set forth in the table (the "RATE INCREASE
PERIOD"); provided, however, in no event shall such interest rate increase occur
more than once during any Rate Increase Period pursuant to the terms of this
SECTION 2.4(d). After an Event of Default occurs and so long as such Event of
Default continues, including after an acceleration of the Obligations pursuant
to SECTION 9.1(a) (whether before or after entry of judgment to the extent
permitted by law), Obligations shall accrue interest at two percent (2.00%)
above the rate effective immediately before the Event of Default. Payment or
acceptance of the increased interest provided in this SECTION 2.4(d) is not a
permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of Bank.
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2.5 TERM LOAN OPTION
(a) To select the Term Loan Option, no less than
five (5) calendar days prior to the Revolving Maturity Date, Borrower shall
complete, execute, and deliver to Bank an election notice substantially in the
form attached hereto as EXHIBIT D.
(b) If Borrower selects Term Loan Option One,
the Advances are payable in thirty-six (36) equal monthly installments of
principal, plus accrued interest, beginning on the Repayment Date and ending on
the Term Loan Maturity Date. Borrower shall have the option to prepay all of the
Advances then-outstanding under Term Loan Option One so long as Borrower (i)
provides written notice to Bank of its election to prepay such Advances at least
five (5) Business Days prior to such prepayment and (ii) pays, on the date of
prepayment, (A) all unpaid principal and accrued interest with respect to such
Advances being prepaid, and (B) all other sums, if any, that shall have become
due and payable with respect to this Agreement. Borrower shall also have the
option to prepay less than all of the Advances then-outstanding under Term Loan
Option One so long as Borrower (x) provides written notice to Bank of its
election to prepay a portion of the Advances at least five (5) Business Days
prior to such prepayment and (i) pays, on the date of prepayment, (A) such
portion of the Advances and accrued interest with respect to such portion being
prepaid, and (B) all other sums, if any, that shall have become due and payable
with respect to this Agreement. When repaid or prepaid, Advances repaid pursuant
hereto or prepaid may not be reborrowed.
(c) If Borrower selects Term Loan Option Two,
the Advances are payable in thirty-six (36) equal monthly installments of
principal and interest, beginning on the Repayment Date and ending on the Term
Loan Maturity Date; provided, however, if Borrower chooses to prepay the
Advances, such prepayment shall comply with the terms of SECTION 2.6. When
repaid or prepaid, Advances repaid pursuant to the terms of this SECTION 2.5(b)
or prepaid pursuant to the terms of SECTION 2.6 may not be reborrowed.
2.6 PREPAYMENT
Following the Revolving Period, under Term Loan Option Two, Borrower
shall have the option to prepay all, but not less than all, of the Advances so
long as Borrower (a) provides written notice to Bank of its election to prepay
the Advances at least two (2) Business Days prior to such prepayment, and (b)
pays, on the date of the prepayment (i) all accrued and unpaid interest with
respect to the Advances through the date the prepayment is made (which shall be
a Business Day); (ii) the outstanding principal amount of the Advances; (iii) if
the Term Loan Option Two is in effect, a premium equal to the Make-Whole
Premium; and (iv) all other sums, if any, that shall have become due and payable
hereunder with respect to this Agreement.
2.7 GENERAL PROVISIONS
Bank may debit any of Borrower's deposit accounts maintained with Bank
for principal and interest payments owing or any amounts Borrower owes Bank
pursuant to the Loan Documents, including the Designated Deposit Account. These
debits are not a set-off. Payments received after 12:00 noon are considered
received at the opening of business on the
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next Business Day. When a payment is due on a day that is not a Business Day,
the payment is due the next Business Day and additional fees or interest accrue.
2.8 FEES
Borrower shall pay to Bank:
(a) all Bank's Expenses (including reasonable
attorneys' fees and expenses) incurred through and after the Effective Date,
when due; and
(b) upon the issuance of a Letter of Credit, a
fully earned, non-refundable letter of credit fee (the "LETTER OF CREDIT FEE")
equal to .50% per annum of the face amount of the issued Letter of Credit;
provided, however, such Letter of Credit Fee shall be waived for any Letter of
Credit transferred to Bank from the current issuer, Comerica Bank;
(c) on the Effective Date, a fully-earned,
non-refundable loan fee (the "LOAN FEE") equal to $20,000; provided, however,
if, on the Effective Date, the investment accounts into which Borrower deposits
or invests at least fifty percent (50%) of its total investment amounts are
maintained with Silicon Valley Bank Securities and such investment accounts are
subject to a Control Agreement, then the Loan Fee shall be reduced to $10,000;
and
(d) if, after the date hereof, any law or
regulation increases Bank's costs or reduces Bank's income for any loan, the
increase in cost or reduction in income or additional expense immediately upon
Borrower's receipt of an invoice therefor from Bank.
3. CONDITIONS OF CREDIT EXTENSIONS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION
Bank's obligation to make the initial Credit Extension is subject to
the condition precedent that the following have been satisfied, all in form and
substance reasonably satisfactory to Bank:
(a) the parties shall have executed and
delivered the Loan Documents;
(b) Borrower shall have delivered one or more
executed Control Agreement(s), in form and substance satisfactory to Bank, by
and among Borrower, Bank, and any bank or financial institution as is necessary
for Bank to perfect its security interest in any Collateral Accounts;
(c) Borrower shall have delivered its Operating
Documents and a good standing certificate of Borrower from the Secretary of
State of Borrower's jurisdiction of formation;
(d) Borrower shall have delivered resolutions of
its Board of Directors authorizing the Credit Extensions and transactions
contemplated herein;
(e) Bank shall have received the certificates of
insurance described in
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SECTION 6.5 hereof;
(f) Borrower shall have paid all costs and fees,
including Bank Expenses, then due; and
(g) Borrower shall have delivered to Bank, in
addition to the documents required in SECTION 3.2, all documents, certificates,
and other assurances that Bank or its counsel may reasonably request.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS
Bank's obligation to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) To obtain an Advance, Borrower must notify
Bank by facsimile or telephone by 12:00 noon Pacific time on the Borrower's
desired Funding Date (which shall be a Business Day). If such notification is by
telephone, Borrower must promptly confirm the notification by delivering to Bank
a completed Payment/Advance Form in the form attached as EXHIBIT B. On the
Funding Date, Bank shall credit and/or transfer (as applicable to the Designated
Deposit Account) an amount equal to the Advance requested. Bank may make
Advances under this Agreement based on instructions from a Responsible Officer
or his or her designee (or without instructions if a Credit Extension is
necessary to meet Obligations which have become due). Bank may rely on any
telephone notice given by a person whom Bank believes is a Responsible Officer
or designee. Borrower shall indemnify Bank for any loss Bank suffers due to such
reliance.
(b) The representations and warranties in
SECTION 5 shall be true and correct in all material respects, except those
representations and warranties expressly referring to another date shall be true
and correct in all material respect as of such date on the date of the
Payment/Advance Form and on the Funding Date, and no Event of Default shall have
occurred and be continuing, or result from, an Advance and/or Credit Extension.
Borrower's receipt of an Advance and/or Term Loan is Borrower's representation
and warranty on that date that the representations and warranties in SECTION 5
remain true and correct in all material respects, except those representations
and warranties expressly referring to another date shall be true and correct in
all material respect as of such date.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST
Borrower hereby grants Bank to secure the payment and performance in
full of all of the Obligations and the performance of each of Borrower's duties
under the Loan Documents, a continuing security interest in the Collateral and
all proceeds and products thereof. Except for Permitted Liens, Borrower warrants
and represents that the security interest granted herein shall be a first
priority security interest in the Collateral. During the existence of an Event
of Default, Bank may place a "hold" on any deposit account pledged as
Collateral.
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Borrower agrees that any disposition of the Collateral in violation of
this Agreement, by either Borrower or any other Person, shall be deemed to
violate the rights of Bank under the Code. If the Agreement is terminated,
Bank's lien and security interest in the Collateral shall continue until
Borrower fully satisfies its Obligations (other than inchoate indemnity
obligations). If Borrower shall at any time, acquire a commercial tort claim in
excess of $50,000, Borrower shall promptly notify Bank in a writing signed by
Borrower of the brief details thereof and grant to Bank in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
Bank.
4.2 AUTHORIZATION TO FILE FINANCING STATEMENTS
Borrower hereby authorizes Bank to file financing statements with all
appropriate jurisdictions, to perfect or protect Bank's security interest or
rights hereunder.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION
Borrower and each Subsidiary is duly existing and in good standing in
its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change. In connection
with this Agreement, Borrower has delivered to Bank a certificate signed by
Borrower and entitled "Collateral Information Certificate". Borrower represents
and warrants to Bank that: (a) Borrower's exact legal name is that indicated on
the Collateral Information Certificate and on the signature page hereof; (b)
Borrower is an organization of the type, and is organized in the jurisdiction,
set forth in the Collateral Information Certificate; (c) the Collateral
Information Certificate accurately sets forth Borrower's organizational
identification number or accurately states that Borrower has none; and (d) the
Collateral Information Certificate accurately sets forth Borrower's place of
business, or, if more than one, its chief executive office as well as Borrower's
mailing address if different, and (e) all other information set forth on the
Collateral Information Certificate pertaining to Borrower is accurate and
complete in all material respects. If Borrower does not now have an
organizational identification number, but later obtains one, Borrower shall
promptly notify Bank of such organizational identification number.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's organizational documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.
5.2 COLLATERAL
Borrower has good title to the Collateral, free of Liens except
Permitted Liens. Except as set forth in the Collateral Information Certificate,
Borrower has no deposit accounts or
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investment accounts other than the deposit accounts with Bank or investments
accounts with Bank's Affiliates. The Accounts are bona fide, existing
obligations, and the service or property has been performed or delivered to the
account debtor or its agent for immediate shipment to and unconditional
acceptance by the account debtor. Except as set forth in the Collateral
Information Certificate, the Collateral is not in the possession of any third
party bailee (such as a warehouse). Except as hereafter disclosed to Bank in
writing by Borrower, none of the components of the Collateral shall be
maintained at locations other than as provided in the Collateral Information
Certificate. In the event that Borrower, after the date hereof, intends to store
or otherwise deliver any portion of the Collateral to a bailee, then Borrower
shall first obtain the written consent of Bank, and such bailee must acknowledge
in writing that the bailee is holding such Collateral for the benefit of Bank.
All Inventory is in all material respects of good and marketable quality, free
from material defects. Borrower is the licensee or sole owner of the
Intellectual Property (or, if commercially available in the marketplace, could
license upon commercially reasonable terms), except for non-exclusive licenses
granted to its customers in the ordinary course of business. Each Patent is
valid and enforceable and no part of the Intellectual Property has been judged
invalid or unenforceable, in whole or in part, and no claim has been made that
any part of the Intellectual Property violates the rights of any third party,
except to the extent such claim could not reasonably be expected to cause a
Material Adverse Change.
5.3 LITIGATION
Except as shown in the Collateral Information Certificate, there are no
actions or proceedings pending or, to the knowledge of Borrower's Responsible
Officers, threatened by or against Borrower or any Subsidiary in which a
decision could reasonably be expected to cause a Material Adverse Change.
5.4 NO MATERIAL DETERIORATION IN FINANCIAL STATEMENTS
All consolidated financial statements for Borrower, including
information reported to Bank in connection with the delivery of any Compliance
Certificate pursuant to Section 6.2, and any Subsidiary, delivered to Bank
fairly present in all material respects Borrower's consolidated financial
condition and Borrower's consolidated results of operations. There has not been
any material deterioration in Borrower's consolidated financial condition since
the date of the most recent financial statements submitted to Bank.
5.5 SOLVENCY
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; Borrower is not
left with unreasonably small capital after the transactions in this Agreement;
and Borrower is able to pay its debts (including trade debts) as they mature.
5.6 REGULATORY COMPLIANCE
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve
8
Board of Governors). Borrower has complied in all material respects with the
Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances
or rules, the violation of which could reasonably be expected to cause a
Material Adverse Change. None of Borrower's or any Subsidiary's properties or
assets has been used by Borrower or any Subsidiary or, to the best of Borrower's
knowledge, by previous Persons, in disposing, producing, storing, treating, or
transporting any hazardous substance other than legally. Borrower and each
Subsidiary have timely filed all required tax returns and paid, or made adequate
provision to pay, all material taxes, except those being contested in good faith
with adequate reserves under GAAP. Borrower and each Subsidiary have obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as currently conducted, except where the failure to make
such declarations, notices or filings would not reasonably be expected to cause
a Material Adverse Change.
5.7 SUBSIDIARIES
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 FULL DISCLOSURE
No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank (taken together with all such
written certificates and written statements given to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading, it
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected or forecasted results.
6. AFFIRMATIVE COVENANTS
Borrower shall, and shall cause each of its Subsidiaries to, do all of
the following for so long as Bank has an obligation to lend or there are
outstanding Obligations (other than inchoate indemnity obligations):
6.1 GOVERNMENT COMPLIANCE
(a) Except as otherwise permitted under this
Agreement, maintain its and all its Subsidiaries' legal existence and good
standing in their respective jurisdictions of formation and maintain
qualification in each jurisdiction in which the failure to so qualify could
reasonably be expected to cause a Material Adverse Change; and
(b) Comply, and have each of its Subsidiaries
comply, with all laws, ordinances and regulations to which it is subject, for
which noncompliance would reasonably be expected to cause a Material Adverse
Change.
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6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES
(a) Deliver to Bank: (i) as soon as available,
but no later than thirty (30) days after the last day of each month, a company
prepared consolidated balance sheet and income statement covering Borrower's
consolidated operations during the period certified by a Responsible Officer and
in a form reasonably acceptable to Bank; (ii) as soon as available, but no later
than ninety (90) days after the last day of Borrower's fiscal year, audited
consolidated financial statements prepared under GAAP, consistently applied,
together with an opinion on the financial statements from a
nationally-recognized, independent, certified public accounting firm; (iii)
within five (5) Business Days of filing, notification of all reports on Forms
10-K and 10-Q filed with the Securities and Exchange Commission; (iv) a prompt
report of any legal actions pending or threatened in writing against Borrower or
any Subsidiary that could reasonably be expected to result in damages or costs
to Borrower or any Subsidiary of Five Hundred Thousand Dollars ($500,000) or
more; (v) as soon as available, but no later than thirty (30) days after the end
of each fiscal year, a one (1) year (prepared on a quarterly basis) financial
projections of Borrower on a consolidated basis, including a balance sheet and
statements of income and cash flows and showing projected operating revenues,
expenses and debt service of Borrower on a consolidated basis prepared under
GAAP; and (vii) budgets, sales projections, operating plans or other financial
information reasonably requested by Bank.
Borrower's 10K and 10Q reports required to be
delivered pursuant to this Sections 6.2(a), shall be deemed to have been
delivered on the date on which Borrower posts such report or provides a link
thereto on Borrower's website on the internet.
(b) Borrower shall deliver to Bank, together
with the monthly financial statements set forth in clause (a)(i) above and the
annual financial statements set forth in clause (a)(ii) above, a Compliance
Certificate signed by a Responsible Officer in the form of EXHIBIT C. If the
financial statements are deemed delivered via internet posting, the Compliance
Certificate shall continue to be delivered via paper copies.
6.3 INVENTORY; RETURNS
Keep all Inventory in good and marketable condition, free from material
defects. Returns and allowances between Borrower and its account debtors shall
follow Borrower's customary practices as they exist on the Effective Date.
6.4 TAXES
Make, and cause each Subsidiary to make, timely payment of all material
federal, state, and local taxes or assessments (other than taxes and assessments
which Borrower is contesting in good faith, with adequate reserves maintained in
accordance with GAAP) and will deliver to Bank, on demand, appropriate
certificates attesting to such payments.
6.5 INSURANCE
Keep its business and the Collateral insured for risks and in amounts
of the type customarily maintained in its industry. Insurance policies shall be
in a form, with companies, and in amounts of the type customarily maintained in
its industry. All property policies shall
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have a lenders' loss payable endorsement showing Bank as an additional loss
payee; all liability policies shall show Bank as an additional insured; all
policies shall provide that the insurer must give Bank at least twenty (20) days
notice before canceling its policy. At Bank's request, Borrower shall deliver
certified copies of policies and evidence of all premium payments. During the
existence of an Event of Default, proceeds payable under any policy shall, at
Bank's option, be payable to Bank on account of the Obligations, and in all
other instances proceeds shall be payable to Borrower.
6.6 PRIMARY ACCOUNTS
(a) Within sixty (60) days after the Effective
Date, maintain Borrower's primary operating accounts with Bank; and
(b) Provide Bank five (5) Business Days advance
written notice before establishing any Deposit Account, Securities Account or
Commodity Account (collectively, the "COLLATERAL ACCOUNTS") at or with any bank
or financial institution (other than Bank). In addition, for each Collateral
Account that Borrower at any time maintains, Borrower shall cause each
applicable bank or financial institution (other than Bank) at or with which any
Collateral Account is maintained to execute and deliver a Control Agreement or
other appropriate instrument with respect to such Collateral Account to perfect
Bank's security interest in such Collateral Account.
6.7 FINANCIAL COVENANTS
(a) As of the last calendar day of each month,
Borrower shall maintain an Adjusted Quick Ratio of not less than 1.50:1.00; and
(b) For each date that is a quarter-end,
Borrower shall achieve a quarterly revenue equal to or greater than the amounts
set forth in column A below opposite each time period set forth below:
MINIMUM QUARTERLY REVENUE
------------------------------------
PERIOD A B
-------------------------------------------- ---------- -----------
For the three months ending 12/31/04 $7,200,000 $ 8,300,000
For the three months ending 3/31/05 $7,800,000 $ 9,000,000
For the three months ending 6/30/05 and each
quarter-end thereafter $8,000,000 $10,000,000
Borrower's failure to maintain a quarterly revenue equal to or greater
than the amounts set forth in column B in the table above for each period
opposite such amounts above shall cause the interest rate payable by Borrower
under this Agreement to increase pursuant to the terms of SECTION 2.4(d).
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6.8 PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
Protect, defend and maintain the validity and enforceability of the
Intellectual Property, except to the extent that the protection, defense,
maintenance, validity or enforceability of such Intellectual Property is no
longer in the best interest of Borrower as determined in good faith by Borrower
and is not likely to result in a Material Adverse Change; promptly advise Bank
in writing of material infringements of all material Intellectual Property; and
not allow any Intellectual Property material to Borrower's business to be
abandoned, forfeited or dedicated to the public unless Borrower, in its good
faith, deems it to be in the best interest of Borrower and such abandonment,
forfeiture or dedication is not likely to result in a Material Adverse Change.
6.9 FURTHER ASSURANCES
Borrower shall execute any further instruments and take further action
as Bank reasonably requests to perfect or continue Bank's security interest in
the Collateral or to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower shall not, and shall not permit any of its Subsidiaries to, do
any of the following without Bank's prior written consent, for so long as Bank
has an obligation to lend or there are any outstanding Obligations (other than
inchoate indemnity obligations):
7.1 DISPOSITIONS
Convey, sell, lease, transfer or otherwise dispose of (collectively a
"TRANSFER"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers of (a) Inventory in the ordinary
course of business; (b) non-exclusive licenses and similar arrangements for the
use of the property of Borrower or its Subsidiaries in the ordinary course of
business; (c) worn-out, damaged, or obsolete Equipment; (d) Transfers associated
with the making or disposition of a Permitted Investment; (e) dispositions of
cash or Permitted Investments in a manner not prohibited by this Agreement; (f)
Transfers consisting of sale and leaseback transactions in connection with the
financing of property acquired within 180 days of acquisition of such property
to the extent such transactions are Permitted Indebtedness; (g) Transfers not
otherwise permitted in this SECTION 7.1, provided, that the aggregate book value
of all such other Transfers by Borrower and its Subsidiaries, together, shall
not exceed One Hundred Thousand Dollars ($100,000) in any fiscal year.
7.2 CHANGES IN BUSINESS, LOCATIONS OF COLLATERAL
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto. Borrower shall not, without ten (10) days prior written notice to Bank:
(a) relocate its chief executive office, or add any new offices or business
locations, including warehouses (unless such new offices or business locations
contain less than $25,000 in Borrower's assets or property), (b) change its
jurisdiction of organization, (c) change its organizational structure or type,
(d) change its legal name, or (e) change any organizational number (if any)
assigned by its jurisdiction of organization.
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7.3 DISSOLUTION.
Permit any Subsidiary to dissolve or discontinue operations unless no
Material Adverse Change could reasonably result.
7.4 MERGERS; CONSOLIDATIONS
Merge or consolidate with another corporation or entity (except that a
Subsidiary may merge or consolidate with or into another Subsidiary or
Borrower), or acquire all or substantially all of the capital stock or property
of a Person other than a Subsidiary; provided that Borrower or any of its
Subsidiaries may merge or consolidate with another corporation or entity or
acquire all or substantially all of the capital stock or property of a Person
other than a Subsidiary, if (a) a Default or Event of Default shall not have
occurred and be continuing and would not occur as a result of such transaction,
and (b) Borrower survives such transaction.
7.5 INDEBTEDNESS
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.6 ENCUMBRANCE
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
herein.
7.7 DISTRIBUTIONS; INVESTMENTS
Directly or indirectly acquire or own any Person, or make any
Investment in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so; or pay any dividends or make any distribution or payment
or redeem, retire or purchase any capital stock except for Permitted
Distributions.
7.8 TRANSACTIONS WITH AFFILIATES
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for (i) transactions that are
in the ordinary course of Borrower's business, upon fair and reasonable terms
(when viewed in the context of any series of transactions of which it may be a
part, if applicable); or (ii) transactions among Borrower and its Subsidiaries
and among Borrower's Subsidiaries.
7.9 SUBORDINATED DEBT
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
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7.10 COMPLIANCE
Become an "investment company" or a company controlled by an
"investment company," under the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Credit Extension for that purpose; fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.
8. EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT
If Borrower fails to pay (a) the principal or interest portion of any
Credit Extension when due, or (b) any other monetary Obligations within three
(3) days after written notice to Borrower. During any cure period, the failure
to cure the payment default is not an Event of Default (but no Credit Extension
will be made during the cure period).
8.2 COVENANT DEFAULT
(a) If Borrower fails to perform any obligation
under SECTIONS 6.2 or 6.7 or violates any of the covenants contained in SECTION
7 of this Agreement, or
(b) If Borrower fails or neglects to perform,
keep, or observe any other material term, provision, condition, covenant, or
agreement contained in this Agreement, in any other Loan Document, or in any
other present or future agreement between Borrower and Bank and as to any
default under such other term, provision, condition, covenant or agreement that
can be cured, has failed to cure such default within thirty (30) days after the
occurrence thereof.
8.3 ATTACHMENT
If (a) any material portion of Borrower's assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in ten (10) days; (b) the service of process upon
Borrower seeking to attach, by trustee or similar process, any funds of Borrower
on deposit with Bank, or any entity under the control of Bank (including a
subsidiary); (c) Borrower is enjoined, restrained, or prevented by court order
from conducting a material part of its business; (d) a judgment or other claim
becomes a Lien on a material portion of Borrower's assets; or (e) a notice of
lien, levy, or assessment is filed against any of Borrower's assets by any
government agency and not paid within ten (10) days after Borrower receives
notice. These are not Events of Default if stayed or if a bond is posted pending
contest by Borrower (but no Credit Extensions shall be made during the cure
period).
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8.4 INSOLVENCY
If (a) Borrower is unable to pay its debts (including trade debts) as
they mature; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency
Proceeding is begun against Borrower and not dismissed or stayed within 60 days
(but no Credit Extensions shall be made before any Insolvency Proceeding is
dismissed).
8.5 OTHER AGREEMENTS
If there is a default in any agreement to which Borrower is a party
with a third party or parties resulting in a right by such third party or
parties, whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount in excess of Five Hundred Thousand Dollars ($500,000)
or that could result in a Material Adverse Change.
8.6 JUDGMENTS
If a judgment or judgments for the payment of money (not covered by
insurance) in an amount, individually or in the aggregate, of at least Five
Hundred Thousand Dollars ($500,000) shall be rendered against Borrower and shall
remain unsatisfied and unstayed for a period of 30 days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment).
8.7 MISREPRESENTATIONS
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement (when read together with Borrower's
filings with the Securities and Exchange Commission) now or later in any
warranty or representation in this Agreement or in any writing delivered to Bank
or to induce Bank to enter this Agreement or any Loan Document.
8.8 CHANGE OF CONTROL
If a Change of Control occurs.
9. RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES
When an Event of Default occurs and continues Bank may, without notice
or demand, do any or all of the following:
(a) declare all Obligations immediately due and
payable (but if an Event of Default described in SECTION 8.4 occurs, all
Obligations are immediately due and payable without any action by Bank);
(b) stop advancing money or extending credit for
Borrower's benefit under this Agreement or under any other agreement between
Borrower and Bank;
15
(c) settle or adjust disputes and claims
directly with account debtors for amounts, on terms and in any order that Bank
considers advisable and notify any Person owing Borrower money of Bank's
security interest in such funds and verify the amount of such account. Borrower
shall collect all payments in trust for Bank and, if requested by Bank,
immediately deliver the payments to Bank in the form received from the account
debtor, with proper endorsements for deposit;
(d) make any payments and do any acts it
considers necessary or reasonable to protect its security interest in the
Collateral. Borrower shall assemble the Collateral if Bank requests and make it
available as Bank designates. Bank may enter premises where the Collateral is
located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior
to its security interest and pay all expenses incurred. Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise any
of Bank's rights or remedies;
(e) apply to the Obligations any (i) balances
and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or
for the credit or the account of Borrower;
(f) ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell the Collateral.
Bank is hereby granted a non-exclusive, royalty-free license or other right to
use, without charge, Borrower's labels, patents, copyrights, mask works, rights
of use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any similar property as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral and,
in connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank;
(g) place a "hold" on any account maintained
with Bank and/or deliver a notice of exclusive control, any entitlement order,
or other directions or instructions pursuant to any control agreement or similar
agreements providing control of any Collateral;
(h) require Borrower to provide cash collateral
in the face amount of all undrawn Letters of Credit;
(i) terminate any FX Forward Contracts; and
(i) dispose of the Collateral according to the
Code.
9.2 POWER OF ATTORNEY
Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, to be effective upon the occurrence and during the continuance
of an Event of Default, to: (a) endorse Borrower's name on any checks or other
forms of payment or security; (b) sign Borrower's name on any invoice or xxxx of
lading for any Account or drafts against account debtors, (c) settle and adjust
disputes and claims about the Accounts directly with account debtors, for
amounts and on terms Bank determines reasonable; (d) make, settle, and adjust
all claims under Borrower's insurance policies; and (e) transfer the Collateral
into the name of Bank or a third party as the Code permits. Borrower hereby
appoints Bank as its lawful attorney-in-fact to sign Borrower's
16
name on any documents necessary to perfect or continue the perfection of any
security interest regardless of whether an Event of Default has occurred until
all Obligations (other than inchoate indemnity obligations) have been satisfied
in full and Bank is under no further obligation to make Credit Extensions
hereunder. Bank's foregoing appointment as Borrower's attorney in fact, and all
of Bank's rights and powers, coupled with an interest, are irrevocable until all
Obligations (other than inchoate indemnity obligations) have been fully repaid
and performed and Bank's obligation to provide Credit Extensions terminates.
9.3 ACCOUNTS, NOTIFICATION AND COLLECTION
In the event that an Event of Default occurs and is continuing, Bank
may notify any Person owing Borrower money of Bank's security interest in the
funds and verify and/or collect the amount of the Account. After the occurrence
and during the continuance of an Event of Default, any amounts received by
Borrower shall be held in trust by Borrower for Bank, and, if requested by Bank,
Borrower shall immediately deliver such receipts to Bank in the form received
from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES
Any amounts paid by Bank as provided herein are Bank Expenses and are
immediately due and payable and shall bear interest at the highest applicable
default rate and be secured by the Collateral. No payments by Bank shall be
deemed an agreement to make similar payments in the future or Bank's waiver of
any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL
So long as Bank complies with reasonable banking practices regarding
the safekeeping of Collateral, Bank shall not be liable or responsible for: (a)
the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c)
any diminution in the value of the Collateral; or (d) any act or default of any
carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss,
damage or destruction of the Collateral.
9.6 REMEDIES CUMULATIVE
Bank's rights and remedies under this Agreement, the other Loan
Documents, and all other agreements among Borrower and Bank, are cumulative.
Bank has all rights and remedies provided under the Code, by law, or in equity.
Bank's exercise of one right or remedy is not an election, and Bank's waiver of
any Event of Default is not a continuing waiver. Bank's delay in enforcing its
rights is not a waiver, election, or acquiescence. No waiver hereunder by Bank
shall be effective unless signed by Bank and then is only effective for the
specific instance and purpose for which it was given.
9.7 DEMAND WAIVER
Borrower waives demand, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
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10. NOTICES
Notices or demands by either party about this Agreement must be in
writing and personally delivered or sent by an overnight delivery service, or by
certified mail, postage prepaid, return receipt requested, or by facsimile at
the addresses and facsimile numbers listed below. A party may change its notice
address by written notice to the other party.
If to Borrower: Digital Impact, Inc.
000 Xxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Legal Department
Fax: (000) 000-0000
with a copy to: Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Selim Day, Esq.
Fax: (000) 000-0000
If to Bank: Silicon Valley Bank
0000 Xxxx Xxxx, Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxx Leaf
Fax: (000) 000-0000
with a copy to: Xxxxxxx XxXxxxxxx LLP
0000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
California law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in California, and Borrower accepts jurisdiction
of the courts and venue in Santa Xxxxx County, California. NOTWITHSTANDING THE
FOREGOING, BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST
BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH BANK
DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO
OTHERWISE ENFORCE BANK'S RIGHTS AGAINST BORROWER OR ITS PROPERTY.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN
DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF
DUTY AND ALL OTHER CLAIMS. THIS
18
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights or Obligations under it without Bank's prior written consent which may be
granted or withheld in Bank's sole discretion. Bank has the right, without the
consent of or notice to Borrower, to sell, transfer, negotiate, or grant
participation in all or any part of, or any interest in, Bank's obligations,
rights and benefits under this Agreement, the Loan Documents or any other
related agreement to any other bank or financial institution.
12.2 INDEMNIFICATION
Borrower hereby indemnifies, defends and holds Bank and its respective
officers, employees, and agents harmless against: (a) all obligations, demands,
claims, and liabilities asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses, or Bank's
Expenses incurred, or paid by Bank from, following, or consequential to
transactions between Bank and Borrower (including reasonable attorneys' fees and
expenses), except in the case of clause (a) and clause (b), for losses caused by
Bank's gross negligence or willful misconduct.
12.3 ATTORNEYS' FEES, COSTS AND EXPENSES
In any action or proceeding between Borrower and Bank arising out of
the Loan Documents the prevailing party will be entitled to recover its
reasonable attorneys' fees and other reasonable costs and expenses incurred, in
addition to any other relief to which it may be entitled.
12.4 RIGHT OF SET-OFF
Borrower hereby grants to Bank, a lien, security interest and right of
set-off as security for all Obligations to Bank hereunder, whether now existing
or hereafter arising upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
Bank or any entity under the control of Bank (including a Bank subsidiary) or in
transit to any of them. At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Bank may set-off
the same or any part thereof and apply the same to any liability or obligation
of Borrower and any guarantor even though unmatured and regardless of the
adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER OR
ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
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12.5 TIME OF ESSENCE
Time is of the essence for the payment and performance of all
Obligations in this Agreement.
12.6 SEVERABILITY OF PROVISIONS
Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.7 AMENDMENTS IN WRITING, INTEGRATION
All amendments to this Agreement must be in writing signed by both Bank
and Borrower. This Agreement and the Loan Documents represent the entire
agreement about this subject matter, and supersede prior negotiations or
agreements. All prior agreements, understandings, representations, warranties,
and negotiations between the parties about the subject matter of this Agreement
and the Loan Documents are superceded by this Agreement and the Loan Documents.
12.8 COUNTERPARTS
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.9 SURVIVAL
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations (other than inchoate indemnity
obligations) remain outstanding. The obligation of Borrower in SECTION 12.2 to
indemnify Bank shall survive until the statute of limitations with respect to
such claim or cause of action shall have run.
12.10 CONFIDENTIALITY
In handling any confidential information or non-public information
concerning the Borrower and its Subsidiaries, Bank will maintain the
confidentiality of such information, but disclosure of information may be made:
(a) to Bank's subsidiaries or affiliates in connection with their business with
Borrower; (b) to prospective transferees or purchasers of any interest in the
Credit Extensions, provided, they are bound by confidentiality obligations
similar to those set forth herein; (c) as required by law, regulation, subpoena,
or other order; (d) as required in connection with Bank's examination or audit,
provided that any Person receiving confidential or non-public information is
bound by confidentiality obligations similar to those set forth herein, or
similar regulations; and (e) as Bank considers appropriate in exercising
remedies under this Agreement, provided that any Person receiving confidential
or non-public information is bound by confidentiality obligations similar to
those set forth herein, or similar regulations. Confidential information or
non-public information does not include information that either: (x) is in the
public domain or in Bank's possession when disclosed to Bank, or becomes part of
the public domain after disclosure to Bank; or (y) is disclosed to Bank by a
third party, if, at the time
20
of disclosure, Bank does not know that the third party is prohibited from
disclosing the information.
13. DEFINITIONS
13.1 DEFINITIONS
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.
"ADJUSTED QUICK RATIO" means (a) the sum of unrestricted cash and Cash
Equivalents plus accounts receivable divided by (b) the sum of Current
Liabilities plus Obligations (to the extent not already included in Current
Liabilities) minus Deferred Revenue.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" is a Person that owns or controls directly or indirectly
the Person, any Person that controls or is controlled by or is under common
control with the Person, and each of that Person's senior executive officers,
directors, partners and, for any Person that is a limited liability company,
that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and costs or expenses
(including reasonable attorneys' fees and expenses) for preparing, negotiating,
administering, defending and enforcing the Loan Documents (including appeals or
Insolvency Proceedings).
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"BRITISH POUNDS" or "(POUND)" means lawful currency of the United
Kingdom.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which Bank is closed.
"CASH EQUIVALENTS" are (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or its agency or any state
maturing within one (1) year from its acquisition, (b) commercial paper maturing
no more than one (1) year after its creation and having the highest rating from
either Standard & Poor's Corporation or Xxxxx'x Investors Service, Inc., (c)
Bank's certificates of deposit issued maturing no more than one (1) year after
issue, and (d) any other investments administered through Bank or its
Affiliates.
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"CHANGE IN CONTROL" is a transaction in which any "person" or "group"
(within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "ACT")) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Act), directly or indirectly, of greater than 35% of the
shares of all classes of stock then outstanding of a Person ordinarily entitled
to vote in the election of the directors of such Person.
"CODE" is the Uniform Commercial Code as adopted in California as
amended and in effect from time to time.
"COLLATERAL" is the property described on EXHIBIT A attached hereto.
"COLLATERAL INFORMATION CERTIFICATE" means the Collateral Information
Certificate of Borrower dated September 29, 2004.
"COMMITTED REVOLVING LINE" is an aggregate principal amount equal to
$8,000,000.
"COMMODITY ACCOUNT" has the meaning ascribed to it in the Code.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (a) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"CONTROL AGREEMENT" means, collectively, any control agreement entered
into among Borrower, Bank and the depositary bank, securities intermediary, or
commodity intermediary at which Borrower maintains a deposit account, securities
account, or a commodity account, pursuant to which Bank obtains control (within
the meaning of the applicable provision of the Code) over such deposit account,
securities account, or commodity account.
"COPYRIGHT" means any of the following now owned or hereafter acquired
or created (as a work for hire for the benefit of Borrower) by Borrower or in
which Borrower now holds or hereafter acquires or receives any right or
interest, in whole or in part: (a) any copyright, whether registered or
unregistered, held pursuant to the laws of the United States or of any other
country or foreign jurisdiction, (b) registration, application or recording in
the United States Copyright Office or in any similar office or agency of the
United States or any other country or foreign jurisdiction, (c) any
continuation, renewal or extension thereof, and (d) any registration to be
issued in any pending application, and shall include any right or interest in
and to work protectable by any of the foregoing which are presently or in the
future owned, created or
22
authorized (as a work for hire for the benefit of Borrower) or acquired by
Borrower, in whole or in part.
"CREDIT EXTENSION" is each Advance or any other extension of credit by
Bank for Borrower's benefit.
"CURRENT LIABILITIES" are amounts that under GAAP should be included on
that date as current liabilities on Borrower's consolidated balance sheet.
"DEFERRED REVENUE" is all amounts received in advance of performance
under contracts and not yet recognized as revenue.
"DEPOSIT ACCOUNTS" means all present and future "deposit accounts" as
defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all general and
special bank accounts, demand accounts, checking accounts, savings accounts and
certificates of deposit, whether maintained with Bank or other institutions.
"DESIGNATED DEPOSIT ACCOUNT" means that certain deposit account
maintained with Bank in the name of Borrower, account number 3300447461.
"DOLLARS" or "$" means lawful currency of the United States of America.
"EFFECTIVE DATE" means the date that Bank signs this Agreement as
indicated on the signature page hereof.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"FUNDING DATE" is the date on which an Advance is made to or on account
of Borrower.
"GAAP" is generally accepted accounting principles in effect under the
laws of the United States of America from time to time.
"GENERAL INTANGIBLES" means all present and future "general
intangibles" as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, in which Borrower has any
interest and includes without limitation all Intellectual Property, payment
intangibles, royalties, contract rights, goodwill, franchise agreements,
purchase orders, customer lists, route lists, telephone numbers, domain names,
claims, income tax refunds, security and other deposits, options to purchase or
sell real or personal property, rights in all litigation presently or hereafter
pending (whether in contract, tort or otherwise), insurance policies (including
without limitation key man, property damage, and business interruption
insurance), payments of insurance and rights to payment of any kind.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
23
"INSOLVENCY PROCEEDING" is any proceeding by or against any Person
under the United States Bankruptcy Code, or any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, compositions,
extensions generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTELLECTUAL PROPERTY" means any 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, and shall include, in any event, any Copyright, Trademark,
Patent, trade secret, customer list, Internet domain name (including any right
related to the registration thereof), proprietary or confidential information,
mask work, source, object or other programming code, invention (whether or not
patented or patentable), technical information, procedure, design, knowledge,
know-how, software, data base, data, skill, expertise, recipe, experience,
process, model, drawing, material or record, all claims for damages by way of
past, present and future infringement of any of the rights included above and
all licenses or other rights to use any property or rights of a type described
above.
"INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"INVESTMENT PROPERTY" means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership interests,
limited liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets held
in any securities account or otherwise, and all options and warrants to purchase
any of the foregoing, wherever located, and all other securities of every kind,
whether certificated or uncertificated, in which Borrower has any interest.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, the Negative Pledge
Agreement, any note executed by Borrower, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"MAKE WHOLE PREMIUM" means an amount equal to: (a) two percent (2.00%)
of the outstanding Advances if the prepayment is made on or before the first
anniversary of the Term Loan Option Date; (b) one percent (1.00%) of the
outstanding Advances if the prepayment is made after the first anniversary of
the Term Loan Option Date but on or prior to the second
24
anniversary of the Term Loan Option Date; and (c) one-half percent (.50%) of
outstanding Advances if the prepayment is made after the second anniversary of
the Term Loan Option Date but prior to the third anniversary of the Term Loan
Option Date.
"MASK WORKS" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"MATERIAL ADVERSE CHANGE" is: (a) a material impairment in the
perfection or priority of Banks' security interest in the Collateral or in the
value of such Collateral; (b) a material adverse change in the business,
operations, or condition (financial or otherwise) of Borrower on a consolidated
basis; or (c) a material impairment of the prospect of repayment of any portion
of the Obligations.
"NEGATIVE PLEDGE AGREEMENT" is that certain Negative Pledge Agreement
dated as of the date hereof by and between Borrower and Bank.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses, and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"OPERATING DOCUMENTS" shall mean, for any Person, such Person's
formation documents, as currently filed with the Secretary of State of such
Person's state of formation, and, (a) if such Person is a corporation, its
bylaws in current form, (b) if such Person is a limited liability company, its
limited liability company agreement (or similar agreement), each of the
foregoing with all current modifications and amendments thereto.
"OTHER PROPERTY" means (a) the following as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and all rights relating thereto: all present and future "commercial tort
claims", "documents", "instruments", "promissory notes", "chattel paper",
"letters of credit", "letter-of-credit rights", "fixtures", "farm products" and
"money"; and (b) all other goods and personal property of every kind, tangible
and intangible, whether or not governed by the Code, but shall not include
Intellectual Property.
"PATENT" means any of the following now hereafter owned or acquired or
received by Borrower or in which Borrower now holds or hereafter acquires or
receives any right or interest: (a) letters patent and right corresponding
thereto, of the United States or any other country or other foreign
jurisdiction, any registration and recording thereof, and any application for
letters patent, and rights corresponding thereto, of the United States or any
other country or other foreign jurisdiction, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or other foreign jurisdiction; (b) any
reissue, continuation, continuation-in-part or extension thereof; (c) any xxxxx
patent, divisional, and patent of addition; and (d) any patent to issue in any
such application.
25
"PERMITTED DISTRIBUTIONS" means:
(a) purchases of capital stock from former employees,
consultants and directors pursuant to repurchase agreements or other similar
agreements;
(b) distributions or dividends consisting solely of Borrower's
capital stock;
(c) purchases for value of any rights distributed in
connection with any stockholder rights plan;
(d) payments of dividends or distributions made by any
Subsidiary of Borrower to Borrower or another Subsidiary of Borrower;
(e) mandatory dividends provided for under Borrower's
Certificate of Incorporation as in existence as of the Effective Date;
(f) exchanges of equity securities of Borrower for other
equity securities of Borrower that do not provide for any mandatory dividend or
redemption prior to the Maturity Date (as defined in the Schedule);
(g) other distributions or dividends in respect of Borrower's
capital stock in cash, not in excess of $100,000;
(h) purchases of Borrower's capital stock pursuant to a
repurchase plan approved by the Borrower's Board of Directors and in effect on
the Effective Date not to exceed an aggregate amount of $2,000,000;
(i) purchases of capital stock in connection with the exercise
of stock options or stock appreciation rights by way of cashless exercise or in
connection with the satisfaction of withholding tax obligations; and
(j) purchases of fractional shares of capital stock arising
out of stock dividends, splits or combinations or business combinations.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or
the other Loan Documents;
(b) Indebtedness existing on the Effective Date and shown on
the Collateral Information Certificate;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business;
(e) capitalized leases and purchase money Indebtedness secured
by Permitted Liens not exceeding $2,000,000;
26
(f) Indebtedness secured by Permitted Liens;
(g) Indebtedness under any performance, surety, statutory or
appeal bonds or similar obligations incurred in the ordinary course of business
(h) (i) Indebtedness of Borrower to any of its Subsidiaries to
the extent it is Subordinated Debt; (ii) Indebtedness of any Subsidiary of
Borrower to another Subsidiary of Borrower; and (iii) Indebtedness of any
Subsidiary to Borrower to the extent permitted under clause (h) of the
definition of Permitted Investments;
(i) Indebtedness consisting of interest rate, currency, or
commodity swap agreements, interest rate cap or collar agreements or
arrangements designed to protect a Person against fluctuations in interest
rates, currency exchange rates, or commodity prices;
(j) Guaranties of Permitted Indebtedness;
(k) Indebtedness of entities acquired in any permitted merger
or acquisition transaction;
(l) other Indebtedness not otherwise permitted by SECTION 7.5
not exceeding $500,000 in the aggregate outstanding at any time; and
(m) extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (l) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be, except by an amount equal to a reasonable
premium or other reasonable amount paid in connection with such refinancing and
by an amount equal to any existing, but unutilized, commitment thereunder.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Collateral Information
Certificate and existing on the Effective Date;
(b) Cash Equivalents;
(c) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of Borrower;
(d) Investments accepted in connection with Transfers
permitted by SECTION 7.1;
(e) Investments consisting of extensions of credit to
Borrower's or its Subsidiaries' customers in the nature of accounts receivable,
prepaid royalties or notes receivable arising from the sale or lease of goods,
provision of services or licensing activities of Borrower;
(f) Investments 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
27
employees, officers or directors relating to the purchase of equity securities
of Borrower or its Subsidiaries pursuant to employee stock purchase plans or
agreements approved by Borrower's Board of Directors;
(g) 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 business;
(h) (i) Investments of Subsidiaries of Borrower in or to
Borrower; (ii) Investments of Subsidiaries of Borrower in or to other
Subsidiaries of Borrower; (iii) Investments of Borrower in or to Subsidiaries
(other than Digital Impact Emarketing UK Ltd) in an amount not to exceed five
percent (5.00%) of Borrower's net assets in any fiscal year so long as no Event
of Default exists or would result therefrom; and (iv) Investments of Borrower in
Digital Impact Emarketing UK Ltd in an amount not to exceed (pound)100,000 in
any month so long as no Event of Default exists or would result therefrom;
(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 paragraph (h)
shall not apply to Investments of Borrower in any Subsidiary;
(j) Investments received in satisfaction or partial
satisfaction of obligations owed by financially troubled obligors;
(k) Investments acquired as a result of a foreclosure with
respect to any secured Investment;
(l) Deposits, prepayment and other credits to suppliers made
in the ordinary course of business not in excess of $50,000;
(m) Investments approved pursuant to an investment policy
approved by the Borrower's Board of Directors and attached hereto as Appendix 1;
(n) Subject to Section 6.6 hereof, Investments consisting of
deposit and securities accounts;
(o) Investments consisting of interest rate, currency, or
commodity swap agreements, interest rate cap or collar agreements or
arrangements which constitute Permitted Indebtedness designed to protect a
Person against fluctuations in interest rates, currency exchange rates, or
commodity prices; and
(p) Investments in connection with any transaction that is
otherwise permitted by SECTION 7.4 of this Agreement, including the creation of
any Subsidiary necessary to consummate a transaction that is otherwise permitted
by SECTION 7.4 of this Agreement.
"PERMITTED LIENS" are:
28
(a) Liens existing on the Effective Date and shown on the
Collateral Information Certificate or arising under this Agreement or other Loan
Documents;
(b) Liens for taxes, fees, assessments or other government
charges or levies, either not delinquent or being contested in good faith and
for which Borrower maintains adequate reserves on its Books, if they have no
priority over any of Bank's security interests;
(c) purchase money Liens (i) on Equipment acquired or held by
Borrower incurred for financing the acquisition of the Equipment, or (ii)
existing on equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the equipment;
(d) leases or subleases and non-exclusive licenses or
sublicenses granted in the ordinary course of Borrower's business, if the
leases, subleases, licenses and sublicenses permit granting Bank a security
interest;
(e) Liens incurred in the extension, renewal or refinancing of
the indebtedness secured by Liens described in (a) through (c), but any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness may
not increase;
(f) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under SECTION 8.3 or 8.6;
(g) Liens in favor of other financial institutions arising in
connection with Borrower's deposit accounts and securities accounts held at such
institutions, provided that Bank has a perfected security interest in the
amounts held in such accounts;
(h) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
are not overdue or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the applicable Person;
(i) pledges or deposits in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other social
security legislation, other than any Lien imposed by ERISA;
(j) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), contracts for the purchase of
property, leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature, in each case, incurred in the
ordinary course of business and not representing an obligation for borrowed
money;
(k) easements, rights-of-way, restrictions and other similar
encumbrances affecting real property which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the business of the applicable Person;
29
(l) Liens on assets acquired in transactions otherwise
permitted by SECTION 7.4 of this Agreement, provided that such Liens were not
created in connection with such transactions; and
(m) Liens on insurance proceeds securing the payment of
financed insurance premiums.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it
is not the lowest rate offered by Bank, and, in any event, shall not be less
than four percent (4.00%) per annum.
"REPAYMENT DATE" means first day of the month following the Term Loan
Option Date.
"RESPONSIBLE OFFICER" is any of the Chief Executive Officer, President,
Chief Financial Officer, or the Controller of Borrower.
"REVOLVING MATURITY DATE" is the date that is 364 days from the
Effective Date.
"REVOLVING PERIOD" means the period from the Effective Date through,
and including, the Revolving Maturity Date.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (pursuant to a subordination agreement entered into
among Bank, Borrower and the subordinated creditor), on terms reasonably
acceptable to Bank.
"SUBSIDIARY" is any Person, corporation, partnership, limited liability
company, joint venture, or any other business entity of which more than fifty
percent (50%) of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person. Without further attribution, "Subsidiary" means a Subsidiary of
Borrower.
"SUBLIMIT UTILIZATION AMOUNT" means the sum of (a) all amounts for
services utilized under the Cash Management Services Sublimit, (b) the amount of
all outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit), and (c) the FX Reserve.
"TERM LOAN OPTION" means Borrower's option to have up to $5,000,000 of
the then-outstanding principal amount of the Advances be repaid pursuant to the
terms of Term Loan Option One or Term Loan Option Two.
"TERM LOAN OPTION DATE" is the calendar day following the Revolving
Maturity Date.
"TERM LOAN MATURITY DATE" means the date that is thirty-five (35)
months from the Repayment Date.
30
"TRADEMARK" means any of the following 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: (a) any trademark, trade name,
corporate name, business name, trade style, service xxxx, logo, other source or
business identifier, print or label on which any of the foregoing have appeared
or appear, design or other general intangibles of like nature, now existing or
hereafter adopted or acquired, all registrations and recordings thereof, and any
applications in connection therewith, including registration, recording and
application in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country or
other foreign jurisdiction and (b) any reissue, extension or renewal of any of
the foregoing.
"TREASURY RATE" is the Treasury Yield Percentage.
"TREASURY YIELD PERCENTAGE" is the average weekly yield (of the week
ending figures) in the most recent Federal Reserve Statistical Release on
actively traded U.S. Treasury obligations of similar maturity to the principal
being repaid or if a Statistical Release is not published, the arithmetic
average (to the nearest .01%) of the per annum yields to maturity for each
Business Day during the week (ending at least two Business Days before the
determination is made) of all actively traded marketable U.S. Treasury fixed
interest rate securities with a constant maturity or, or not more than 30 days
longer or shorter than the average life of the principal and interest payments
that are being prepaid (excluding securities that can be surrendered at face
value to pay Federal estate tax, or which provide for tax benefits to the
holder.)
[Signature page follows.]
31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
BORROWER DIGITAL IMPACT, INC.
By: /s/ XXXXX XXXXXXXXXXX
Name: Xxxxx Xxxxxxxxxxx
Title: Senior Vice-President, Finance and
Chief Financial Officer
BANK SILICON VALLEY BANK
By: /s/ XXXXX XXXXXX LEAF
Name: Xxxxx Xxxxxx Leaf
Title: Senior Vice President
Effective Date: October 1, 2004
32
EXHIBIT A
"COLLATERAL" means of all of Borrower's right, title and interest in
and to the following whether owned now or hereafter acquired or arising, and
wherever located: all its Accounts; all its Inventory; all its Equipment; all
its Deposit Accounts; all its General Intangibles (not including its
Intellectual Property); all its Investment Property; all its Other Property; and
any and all claims, rights and interests in any of the foregoing, and all
guaranties and security for any of the foregoing, and all substitutions and
replacements for, additions, accessions, attachments, accessories, and
improvements to, and proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties) of, all of the foregoing,
and Borrower's Books relating to any of the foregoing.
Notwithstanding the foregoing, the Collateral shall include all
Accounts, license and royalty fees and other revenues, proceeds, or income
arising out of or relating to any of Borrower's Intellectual Property. To the
extent a court of competent jurisdiction holds that a security interest in any
Intellectual Property is necessary to have a security interest in any Accounts,
license and royalty fees and other revenues, proceeds, or income arising out of
or relating to any of such Intellectual Property, then the Collateral shall,
effective as of the Effective Date, include the Intellectual Property, to the
extent necessary to permit perfection of Bank's security interest in such
Accounts, license and royalty fees and other revenues, proceeds, or income
arising out of or relating to any of the Intellectual Property.
Notwithstanding the foregoing, the Collateral shall not include (a) to
the extent the pledge thereof would result in increased United States income tax
liability to Borrower or any Subsidiary, more than 65% of the issued and
outstanding voting capital stock of any Subsidiary of Borrower that is
incorporated or organized in a jurisdiction other than the United States or any
state or territory thereof or the District of Columbia, and (b) the following
accounts maintained by Borrower with Comerica Bank: account numbers
9397-50000009924, 9397- 50000001012, 9397-50000000998, 9397-50000972, 11701, and
11501.
EXHIBIT B
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 NOON PST
FAX TO: _________________
CLIENT NAME: __________________________________ DATE: _________________
- LOAN PAYMENT:
From Account # ______________________________ To Account # ___________________
(Deposit Account #) (Loan Account #)
Principal $_________________________ and/or Interest $ _________________________
All Borrower's representation and warranties in the Loan and Security
Agreement are true, correct and complete in all material respects on the date of
the telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:
AUTHORIZED SIGNATURE: _______________________________ Phone Number: ___________
- LOAN ADVANCE:
COMPLETE OUTGOING WIRE REQUEST SECTION BELOW IF ALL OR A PORTION OF THE FUNDS
FROM THIS LOAN ADVANCE ARE FOR AN OUTGOING WIRE.
From Account # ____________________________ To Account # ____________________
(Loan Account #) (Deposit Account #)
Amount of Advance $ ___________________________
All Borrower's representation and warranties in the Loan and Security
Agreement are true, correct and complete in all material respects on the date of
the telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:
AUTHORIZED SIGNATURE: ______________________________ Phone Number: _____________
- OUTGOING WIRE REQUEST
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO BE
WIRED.
Deadline for same day processing is 12:00 noon, PST
Beneficiary Name: _______________________ Amount of Wire: $_______________
Beneficiary Bank: _______________________ Account Number: ________________
City and State: _________________________
Beneficiary Bank Transit (ABA) #: __ __ __ __ __ __ __ __
Beneficiary Bank Code (Swift, Sort, Chip, etc.): _______________________________
(FOR INTERNATIONAL WIRE ONLY)
Intermediary Bank: ______________________________ Transit (ABA) #: __________
For Further Credit to: _________________________________________________________
Special Instruction: ___________________________________________________________
By signing below, I (we) acknowledge and agree that my (our) funds
transfer request shall be processed in accordance with and subject to the terms
and conditions set forth in the agreements(s) covering funds transfer
service(s), which agreements(s) were previously received and executed by me
(us).
Authorized Signature: _______________ 2nd Signature (If Required): ____________
Print Name/Title: ___________________ Print Name/Title: _______________________
Telephone # _________________________ Telephone # _____________________________
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: DIGITAL IMPACT, INC.
The undersigned Responsible Officer of Digital Impact, Inc.
("BORROWER") certifies that under the terms and conditions of the Loan and
Security Agreement dated as of the Effective Date between Borrower and Bank (as
amended, restated, or otherwise modified from time to time, the "AGREEMENT"),
(i) Borrower is in complete compliance for the period ending _______________
with all required covenants except as noted below and (ii) all representations
and warranties in the Agreement are true and correct in all material respects on
this date, except those representations and warranties expressly referring to
another date which shall be true and correct in all material respects as of such
date. In addition, the undersigned Responsible Officer certifies that Borrower
(x) has complied with Section 6.4 of the Agreement with respect to payment of
taxes of Borrower and its Subsidiaries and (y) DOES NOT HAVE ANY LEGAL ACTIONS
PENDING OR THREATENED IN WRITING AGAINST BORROWER OR ANY OF ITS SUBSIDIARIES
WHICH BORROWER HAS NOT PREVIOUSLY NOTIFIED IN WRITING TO BANK PURSUANT TO
SECTION 6.2 OF THE AGREEMENT. Attached are the required financial reports
supporting the certification. The undersigned acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMNS.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements + CC Monthly, within 30 days Yes No
Annual financial statements + CC Annually, within 90 days Yes No
Notice of 10Q, 10K filings Within 5 days of filing Yes No
FINANCIAL
COVENANTS REQUIRED ACTUAL COMPLIES
--------- -------- ------ --------
Adjusted Quick 1.50:1.00 ___ :1.00 Yes No
Ratio
Yes No
Minimum Quarterly Period
Revenue ending Minimum Quarterly Revenue $________
------ -------------------------
A B
12/31/04 $7,200,000 $ 8,300,000
3/31/05 $7,800,000 $ 9,000,000
6/30/05
and $8,000,000 $10,000,000
thereafter
(Attach summary of any litigation not previously disclosed that must be
disclosed pursuant to Section 6.2.)
Sincerely,
DIGITAL IMPACT, INC.
By: ____________________________
Name: __________________________
Title: ______________________
BANK USE ONLY
Received by: ____________________
AUTHORIZED SIGNER
Date: ___________________________
Verified: _______________________
AUTHORIZED SIGNER
Date: ___________________________
Compliance Status: Yes No
EXHIBIT D
ELECTION NOTICE
Date: ______________
TO: SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: Corporate Services Department
RE: Loan and Security Agreement dated the Effective Date (as amended,
modified, supplemented or restated from time to time, the "Loan
Agreement"), by and between DIGITAL IMPACT, INC. as the borrower
thereunder, and SILICON VALLEY BANK, as the lender (the "Bank").
Ladies and Gentlemen:
The undersigned refers to the Loan Agreement, the terms defined therein
and used herein as so defined, and hereby gives you notice irrevocably, pursuant
to SECTION 2.5(a) of the Loan Agreement, of its election of the Term Loan
Option.
1. As of the Term Loan Option Date, the aggregate amount of the
outstanding Advances requested to be repaid pursuant to the Term Loan Option is
$_____________ (collectively, the "TERM LOAN OPTION ADVANCE").
2. The Term Loan Option Advance shall be repaid under Term Loan Option
[One] [Two]*.
3. The undersigned hereby certifies that, on the date hereof and on the
Term Loan Option Date, all representations and warranties of Borrower contained
in the Loan Agreement are true, accurate and complete in all material respects
as of the date hereof; provided, however, that those representations and
warranties expressly referring to another date are true, accurate and complete
in all material respects as of such date; and provided, further, that the
representations and warranties set forth in SECTION 5 of the Loan Agreement
shall be deemed to be made with respect to the financial statements most
recently delivered to the Bank pursuant to SECTION 6.2 of the Loan Agreement.
BORROWER DIGITAL IMPACT, INC.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
______________________________
* Select desired option.
