Commercial Business Loan Agreement for Online Media Corporation Line of Credit
Exhibit
10.28
Commercial
Business Loan Agreement for Online Media Corporation
Line
of Credit
This Agreement is dated December 28,
2007 and is between Thermo Credit LLC ("Thermo") and Onstream Media Corporation
(hereinafter referred to as "Borrower).
A. THE LOAN OR
LOANS. Subject to the terms and conditions of this Agreement
and provided Obligor timely and completely performs all obligations in favor of
Thermo contained in this Agreement and in any other agreement, whether now
existing or hereafter arising, Thermo will make or has made:
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LINE OF CREDIT LOAN to
Borrower aggregating ONE MILLION AND NO/100 ($1,000,000.00)
Dollars in principal amount, which loan shall be evidenced by and payable
according to Thermo's form of promissory note, a copy of which is attached
as Exhibit A (“Note”).
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LOCK
BOX. Upon the request of Thermo, after the occurrence of
a Default and continuance thereof, all collections will be deposited into
an account controlled by Thermo. Upon the request of Thermo, after the
occurrence of a Default and continuance thereof, Borrower will
notify all account debtors to pay the proceeds of the accounts into a lock
box designated and controlled by Thermo and, upon the request of Thermo,
if Borrower has not timely notified its account debtors, Thermo shall also
have the right to notify the account debtors to make payments to the lock
box or directly to Thermo; provided, however, that Thermo is not obligated
to take any steps to collect any of the accounts. Borrower
shall execute a lock box agreement satisfactory to
Thermo.
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B. EFFECT OF AGREEMENT AND
DEFINITIONS. The Note is herein incorporated by
reference. Such note and any renewals, modifications or replacements
for such note are subject to the terms of this Agreement. "Loan"
shall collectively mean any and all loans made available to Borrower under
Section A of this Agreement. "Loan Documents" shall mean this
Agreement, any other loan agreement(s), the Note evidencing the Loan, any
security document(s) provided for in this Agreement and any and all other
documents evidencing or securing the obligations of Borrower to Thermo, direct
or contingent, due or to become due, now existing or hereafter
arising. The Loan and all other obligations of Borrower to Thermo,
direct or contingent, due or to become due, now existing or hereafter arising,
shall be secured by any security documents provided for in this Agreement, any
collateral set forth in any promissory note executed by Borrower, and any other
Loan Documents.
C. USE OF
PROCEEDS. The proceeds from the Loan will be used for the
following purpose(s):
Proceeds will be used for the working
capital requirements of the Borrower.
D. REPRESENTATIONS, WARRANTIES AND
COVENANTS. Borrower represents, warrants and covenants to
Thermo that:
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(1)
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Organization and
Authorization. Borrower is an entity which is duly
organized, validly existing and, if a corporation, in good standing under
applicable laws. Borrower's execution, delivery and performance of this
Agreement and all other documents delivered to Thermo has been duly
authorized and does not violate Borrower's articles of incorporation (or
other governing documents), material contracts or any applicable law or
regulations. All documents delivered to Thermo are legal and
binding obligations of Borrower who executed
same.
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(2)
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Compliance with Tax and other
Laws. Borrower shall comply (to the extent
necessary so
that any failure to do so will not materially and adversely affect the
business or property of Borrower) with all laws that are applicable to
Borrower's business activities, including, without limitation, all law
regarding (i) the collection, payment and deposit of employees' income,
unemployment, Social Security, sales and excise taxes; (ii) the filing of
returns and payment of taxes; (iii) pension liabilities including ERISA
requirements; (iv) environmental protection; and (v) occupational safety
and health.
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(3)
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Borrower
shall keep its fixed property and equipment in good working order and
condition (reasonable wear and tear excepted), and maintain property and
liability insurance coverage relating thereto in form and coverage
reasonably acceptable to Thermo.
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(4)
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Financial
Information.
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(a)
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Borrower
shall furnish to Thermo:
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i)
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within
90 days after the close of Borrower's fiscal year, a copy of the
annual unaudited financial statements of Borrower, prepared in conformity
with generally accepted accounting principles applied on a basis
consistent with that of the preceding fiscal year, and approved by an
executive officer of Borrower, consisting of a balance sheet, a statement
of operations, and a statement of cash flow;
and
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ii)
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within
45 days after the close of each month unaudited financial statements as of
the end of such month consisting of a balance sheet as of the end of such
month, a statement of operations for such month and a statement of cash
flow for such month, all approved by an appropriate executive officer of
Borrower, together with year-to-date financial
statements. Thermo will be notified promptly of any material
adjustments to the aforementioned financial
statements.
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(b)
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Borrower
shall furnish to Thermo such additional information that Thermo may
require.
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(5)
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Mergers,
etc. Without the prior notice to Thermo and payment in
full of all amounts owed to Thermo, including but not limited to
principal, interest, prepayment fees, commitment fees or any other fee due
to Thermo, Borrower shall not, without written permission from Thermo
which shall not be unreasonably withheld, (a) consummate a merger or
consolidation where Borrower is not the surviving entity, (b) acquire all
or substantially all of the assets of another entity if such transaction
is not operating cash flow positive, or (c) sell, lease or transfer all,
or substantially all, of Borrower's assets. Borrower will
notify Thermo within ten (10) business days of the execution of a letter
of intent relating to activities limited by this
Section. Borrower shall not permit any material change to be
made in the character of Borrower's business as carried on at the original
date of this Agreement.
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(6)
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Indebtedness and
Liens. Other than obligations incurred in the ordinary
course of business, including but not limited to, the purchase or lease of
equipment (including non-vendor financing of such purchases or leases),
Borrower shall not create any additional obligations for borrowed money,
without the written consent of Thermo which will not be unreasonably
withheld. Borrower shall not mortgage or encumber any of
Borrower's assets or suffer any liens to exist on any of Borrower's assets
without the prior written consent of Thermo, which shall not be
unreasonably withheld. Debt acquired in connection with a merger or asset
acquisition shall be permitted to the extent the other requirements of
Paragraph 5 are met.
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(7)
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Other
Liabilities. (a) Borrower shall not lend to or
guarantee, endorse or otherwise become contingently liable in connection
with the obligations, stock or dividends of any person, firm or
corporation, except as currently exists and as reflected in the financial
statements of Borrower as previously submitted to Thermo; (b) Borrower
shall not default in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any indenture,
agreement or other instrument to which Borrower is a party (the effect of
which would materially adversely affect the business or properties of
Borrower); and (c) except as disclosed or referred to in the financial
statements furnished to Thermo, there is no litigation, legal or
administrative proceeding, investigation or other action of any nature
pending or, to the knowledge of Borrower, threatened against or affecting
Borrower which involves the possibility of any judgment or liability not
fully covered by insurance, and which would materially and adversely
affect the business or assets of Borrower or Borrower's ability to carry
on business as now conducted.
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(8)
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Documentation. The
Loan Documents include, this Loan Agreement, the Promissory Note and
Security Agreement and all other documents necessary to effect the
purposes of this Agreement as reasonably required by Thermo. Upon the
written request of Thermo, Borrower shall promptly and duly execute and
deliver all such further instruments and documents and take such further
action as Thermo may deem reasonably necessary to obtain the full benefits
of the Loan Documents.
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(9)
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Financial Covenants and
Ratios. Borrower shall comply with the following
covenants and ratios:
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A.
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Minimum Cash Flow to Debt
Service Ratio. Borrower will maintain a ratio of cash
flow to scheduled interest payments on funded debt (excluding non-cash
interest) of not less than 1.00 to 1.00 as of the end of each fiscal
quarter beginning with the quarter ending June 30, 2008. For
the purposes of this section "cash flow" shall mean the sum of net income
after taxes, plus depreciation and amortization and other non-cash
expenses for the period as well as any interest expense included in the
denominator of this ratio. "Funded debt" shall mean all
indebtedness for borrowed money.
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B.
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Minimum Tangible Net
Worth. Borrower will maintain a tangible net worth of
not less than $5,000,000 as of the last day of each fiscal
quarter. For the purposes of this section, "tangible net worth"
shall mean the sum of common stock, preferred stock, capital surplus,
paid-in capital and retained earnings less treasury stock and the sum of
all intangible assets (including, without limitation, good will,
franchises, licenses, patents, trademarks, trade names, copyrights,
service marks and brand names but excluding capitalized
software).
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(10)
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Collateral. As
security for payment and performance of the Loan and any and all
other obligations of Borrower to Thermo, direct or contingent, due or
to become due, now existing or hereafter arising, Borrower shall execute
and deliver to Thermo, or cause others to execute and deliver to Thermo,
the following described
security documents:
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A
security agreement and financing statement by Borrower granting Thermo a
first lien and security interest in all of Borrower’s accounts, customer
contracts, insurance policies on such accounts and all other rights and
proceeds therefrom. Except as provided in Schedule 10, Borrower
agrees to maintain the collateral free from other and further voluntary
liens, and subject to no other lien or
encumbrance. Borrower shall inform Thermo of the existence of
any involuntary lien, within two (2) business days of Borrower’s first knowledge of
any involuntary lien or encumbrance affecting the Collateral and take
action to remove any involuntary lien or encumbrance within fifteen (15)
days of Borrower’s first knowledge. Borrower’s failure to
remove, pay, satisfy or otherwise clear any involuntary lien within sixty
(60) days of Borrower’s first knowledge thereof will result in a default.
In the event of such involuntary lien, Thermo reserves the right to
suspend additional fundings, if any, until such involuntary lien is
released.
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E. CONDITIONS PRECEDENT TO LOANS.
Thermo shall be obligated to make the Loan only so long as: (i) all of the Loan
Documents required by this Agreement have been delivered to Thermo, (ii)
Borrower is current in the performance of all of the other obligations of
Borrower contained in the Loan Documents, (iii) no Default has occurred, and
(iv) no adverse material change in the financial condition of Borrower has
occurred. Thermo is not obligated to advance funds against this Line of Credit
more frequently than weekly, and Borrower must provide a minimum of 24 hours
advance notice for funding. With each funding request, Borrower must submit a
borrowing base calculation supporting such request. The borrower’s repayments of
previous advances hereunder shall not reduce the amount of available future
advances hereunder.
F. DEFAULT. The
occurrence of (i) the failure of Borrower to make any payment on any Loan when
due, (ii) the failure of Borrower to observe or perform promptly when due any
covenant, agreement or obligation under this Agreement or under any of the other
Loan Documents or under any other obligation to Thermo, (iii) a default under
any of the Loan Documents or (iv) the material inaccuracy at any time of any
warranty, representation or statement made to Thermo by Borrower under this
Agreement or otherwise, shall constitute a default (Default) under this
Agreement; provided, however, that Borrower’s failure to meet financial
covenants under Section D(8) of this Agreement shall not constitute a Default
unless such failure continues for a period of thirty (30) days after Thermo has
given written notice of such failure to Borrower. Unless provided for elsewhere
in this Loan Agreement, the occurrence of any of the items in this Section F
shall not constitute a Default unless such failure continues for a period of
five (5) days after Thermo has given (and Borrower has received) written notice
of such failure to Borrower. In the event of a Default, Thermo, at its option,
shall have the right to exercise any and all of its rights and remedies under
the Loan Documents.
G. MISCELLANEOUS
PROVISIONS. Borrower agrees to pay all of the costs, expenses
and fees incurred in connection with the Loan, including attorneys’ fees and
appraisal fees. This Agreement is not assignable by Borrower and no party other
than Borrower is entitled to rely on this Agreement. No condition or
other term of this Agreement may be waived or modified except by a writing
signed by Borrower and Thermo. This Agreement shall supersede and replace any
commitment letter between Thermo and Borrower relating to any
Loan. If any provision of this Agreement shall be held to be
legally invalid or unenforceable by any court of competent jurisdiction, all
remaining provisions of this Agreement shall remain in full force and effect.
This Agreement shall be governed by and construed in accordance with the laws of
State of Louisiana.
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H. OTHER
CONDITIONS.
(1) Term- Two years with 24 monthly payments of
interest based on average balance outstanding during the month as more fully set
forth in the Note with payment of all amounts outstanding due on the Maturity
Date of the Note.
(2) Interest rate- The
outstanding principal shall be charged interest at a rate of Prime plus Eight
Percent (8.0%) per annum on a monthly basis all as more fully set forth in the
Note.
(3) Origination fee- Upon
signing of the Loan Documents for this Line of Credit Agreement, Borrower will
pay Thermo an earned non-refundable Origination Fee of One percent (1%) of the
loan amount ($10,000.00). Five Thousand dollars ($5,000.00) was paid upon
execution of the Term Sheet with an additional Five Thousand dollars ($5,000.00)
to be deducted from the first draw under this facility.
(4) Commitment Fee- The earned
non-refundable Commitment Fee shall be equal to Two percent (2.0%) of the Loan
Commitment, and shall be payable in two equal installments—the first being
deducted from the first draw under this Line of Credit and the second on the one
year anniversary of this Agreement.
(5) Unused Commitment Fee- A
..25% per annum fee payable quarterly in arrears will be charged on the daily
unused portion of the Line of Credit. The unused portion is the amount by which
the maximum dollar amount of the Line of Credit exceeds the outstanding
principal balance due under the Line of Credit.
(6) Termination Fee- Borrower
may prepay the Note in whole or in part at any time, which prepayment shall not
be considered a termination of the facility. If Borrower terminates
the facility, or if Lender accelerates payment of the Note, Borrower understands
that, unless otherwise required by law, any prepaid fees or charges will not be
subject to rebate and will be earned by Lender at the time the Note is
signed.
In the
event of such early termination of the Loan, Thermo shall receive a Prepayment
Fee of Two percent (2.0%) of the highest aggregate Loan Commitment.
(7) Borrower will reimburse Thermo
for all reasonable
out-of-pocket expenses incurred in connection with Thermo’s on-going review and
administration of the Loan, including reasonable attorney fees incurred by
Thermo.
(8) Borrowing Base – The
borrowing base shall be calculated based on historical collection levels of the
receivables Subject to compliance with all other terms of this Agreement,
including no Material Adverse Change, and concurrence by Thermo, Borrower may
increase the commitment amount hereunder to any amount supportable by the
Borrowing Base, and payment of an additional Commitment Fee for the increase.
Currently in the format and rates as attached.
(9) Extension of Term -
Subject to compliance with all other terms of this Agreement, including
no Material Adverse Change, Borrower may increase the term of this Agreement
from two years to three years, with the payment of an additional Commitment Fee
of 1% of the Loan Commitment.
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Thermo
Credit, LLC
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By:
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/s/ Seth Block
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Name:
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Seth Block
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Title:
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Executive Vice President
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ONSTREAM
MEDIA CORPORATION
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By:
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Name:
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▇▇▇▇▇ ▇▇▇▇▇▇
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Title:
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CEO
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