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Exhibit 10.8
PROMISSORY NOTE
| $2,500,000.00 |
January 24, 2007
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Smart
Online, Inc.
2530
Meridian Parkway, 2nd Floor
Durham,
North Carolina 27713
(Hereinafter
referred to as “Borrower”)
Wachovia
Bank, National Association
Charlotte,
North Carolina 28202
(Hereinafter
referred to as “Bank”)
Borrower
promises to pay to the order of Bank, in lawful money of the
United States of America, at its office indicated above or
wherever else Bank may specify, the sum of Two Million, Five
Hundred Thousand and No/100 Dollars ($2,500,000.00) or such
sum as may be advanced and outstanding from time to time, with
interest on the unpaid principal balance at the rate and on
the terms provided in this Promissory Note (including all
renewals, extensions or modifications hereof, this
“Note”).
RENEWAL/MODIFICATION .
This Promissory Note renews, extends and/or modifies that certain
Promissory Note dated November 14, 2006 (the “Original
Promissory Note”), evidencing an original principal amount of
$1,300,000.00. This Promissory Note is not a novation.
LOAN AGREEMENT .
This Note is subject to the provisions of that certain Loan
Agreement between Bank and Borrower dated November 14, 2006, as
modified from time to time.
USE OF PROCEEDS .
Borrower shall use the proceeds of the loan(s) evidenced by this
Note for the commercial purposes of Borrower, as follows: for
working capital needs of Borrower.
SECURITY .
Borrower has granted Bank a security interest in the collateral
described in the Loan Documents, including, but not limited to,
personal property collateral described in that certain Security
Agreement of even date herewith.
INTEREST RATE .
Interest shall accrue on the unpaid principal balance of this Note
from the date hereof at the LIBOR Market Index Rate plus 0.9%, as
that rate may change from day to day in accordance with changes in
the LIBOR Market Index Rate (“Interest Rate”).
“LIBOR Market Index Rate”, for any day, means the rate
for 1 month U.S. dollar deposits as reported on Telerate page 3750
as of 11:00 a.m., London time, on such day, or if such day is not a
London business day, then the immediately preceding London business
day (or if not so reported, then as determined by Bank from another
recognized source or interbank quotation).
DEFAULT RATE .
In addition to all other rights contained in this Note, if a
default in the payment of Obligations occurs, all outstanding
Obligations, other than Obligations under any swap agreements (as
defined in 11 U.S.C. § 101, as in effect from time to time)
between Borrower and Bank or its affiliates, shall bear interest at
the Interest Rate plus 3% (“Default Rate”), except if
the Note is governed by the laws of the State of North Carolina and
the original principal amount is less than or equal to $300,000.00.
The Default Rate shall also apply from demand until the Obligations
or any judgment thereon is paid in full.
INTEREST AND FEE(S) COMPUTATION (ACTUAL/360)
.
Interest and fees, if any, shall be computed on the basis of a
360-day year for the actual number of days in the applicable period
(“Actual/360 Computation”). The Actual/360 Computation
determines the annual effective interest yield by taking the stated
(nominal) rate for a year’s period and then dividing said
rate by 360 to determine the daily periodic rate to be applied for
each day in the applicable period. Application of the Actual/360
Computation produces an annualized effective rate exceeding the
nominal rate.
REPAYMENT TERMS .
This Note shall be due and payable in consecutive monthly payments
of accrued interest only, commencing on February 1, 2007, and
continuing on the same day of each month thereafter until fully
paid. In any event, this Note shall be due and payable in full,
including all principal and accrued interest, on demand or in no
event later than August 1, 2008.
LINE OF CREDIT .
Borrower may borrow, repay and reborrow, and, upon the request of
Borrower, Bank shall advance and readvance under this Note from
time to time (each an “Advance” and together the
“Advances”), so long as the total principal balance
outstanding under this Note at any one time does not exceed the
principal amount stated on the face of this Note minus the sum of
(i) the amount available to be drawn under all letters of credit
issued by Bank for the account of Borrower plus (ii) the amount of
unreimbursed drawings under all letters of credit issued by Bank
for the account of Borrower, subject to the limitations described
in any loan agreement to which this Note is subject. Bank’s
obligation to make Advances under this Note shall terminate if a
demand for payment is made under this Note or if a Default (as
defined in the other Loan Documents) under any Loan Document occurs
or in any event, on August 1, 2008, hereof unless renewed or
extended by Bank in writing upon such terms then satisfactory to
Bank. As of the date of each proposed Advance, Borrower shall be
deemed to represent that each representation made in the Loan
Documents is true as of such date.
If
Borrower subscribes to Bank’s cash management services
and such services are applicable to this line of credit, the
terms of such service shall control the manner in which funds
are transferred between the applicable demand deposit account
and the line of credit for credit or debit to the line of
credit.
APPLICATION OF PAYMENTS .
Monies received by Bank from any source for application toward
payment of the Obligations shall be applied to accrued interest and
then to principal. Upon the occurrence of a default in the payment
of the Obligations or a Default (as defined in the other Loan
Documents) under any other Loan Document, monies may be applied to
the Obligations in any manner or order deemed appropriate by
Bank.
If
any payment received by Bank under this Note or other Loan
Documents is rescinded, avoided or for any reason returned by
Bank because of any adverse claim or threatened action, the
returned payment shall remain payable as an obligation of all
persons liable under this Note or other Loan Documents as
though such payment had not been made.
DEFINITIONS .
Loan Documents .
The term “Loan Documents”, as used in this Note and the
other Loan Documents, refers to all documents executed in
connection with or related to the loan evidenced by this Note and
any prior notes which evidence all or any portion of the loan
evidenced by this Note, and any letters of credit issued pursuant
to any loan agreement to which this Note is subject, any
applications for such letters of credit and any other documents
executed in connection therewith or related thereto, and may
include, without limitation, a commitment letter that survives
closing, a loan agreement, this Note, guaranty agreements, security
agreements, security instruments, financing statements, mortgage
instruments, any renewals or modifications, whenever any of the
foregoing are executed, but does not include swap agreements (as
defined in 11 U.S.C. § 101, as in effect from time to
time).
Obligations .
The term “Obligations”, as used in this Note and the
other Loan Documents, refers to any and all indebtedness and other
obligations under this Note, all other obligations under any other
Loan Document(s), and all obligations under any swap agreements (as
defined in 11 U.S.C. § 101, as in effect from time to time)
between Borrower and Bank, or its affiliates, whenever
executed.
Certain Other Terms .
All terms that are used but not otherwise defined in any of the
Loan Documents shall have the definitions provided in the Uniform
Commercial Code.
LATE CHARGE .
If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 4% of each payment past due for 15 or
more days. This late charge shall not apply to payments due at
maturity or by acceleration hereof, unless such late payment is in
an amount not greater than the highest periodic payment due
hereunder.
Acceptance
by Bank of any late payment without an accompanying late
charge shall not be deemed a waiver of Bank’s right to
collect such late charge or to collect a late charge for any
subsequent late payment received.
ATTORNEYS’ FEES AMD OTHER COLLECTION COSTS
.
Borrower shall pay all of Bank’s reasonable expenses actually
incurred to enforce or collect any of the Obligations including,
without limitation, reasonable arbitration, paralegals’,
attorneys’ and experts’ fees and expenses, whether
incurred without the commencement of a suit, in any trial,
arbitration, or administrative proceeding, or in any appellate or
bankruptcy proceeding.
USURY .
If at any time the effective interest rate under this Note would,
but for this paragraph, exceed the maximum lawful rate, the
effective interest rate under this Note shall be the maximum lawful
rate, and any amount received by Bank in excess of such rate shall
be applied to principal and then to fees and expenses, or, if no
such amounts are owing, returned to Borrower.
DEMAND NOTE .
This is a demand Note and all Obligations hereunder shall become
immediately due and payable upon demand. In addition, the
Obligations hereunder shall automatically become immediately due
and payable if Borrower or any guarantor or endorser of this Note
commences or has commenced against it a bankruptcy or insolvency
proceeding.
REMEDIES .
Upon the occurrence of a default in the payment of the Obligations
or a Default (as defined in the other Loan Documents) under any
other Loan Document, Bank may at any time thereafter, take the
following actions:
Bank Lien .
Foreclose its security interest or lien against Borrower’s
deposit accounts and investment property without notice.
Cumulative .
Exercise any rights and remedies as provided under the Note and the
other Loan Documents, or as provided by law or equity.
FINANCIAL AND OTHER INFORMATION .
Borrower shall deliver to Bank such information as Bank may
reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower’s
financial condition. Such information shall be true, complete, and
accurate.
WAIVERS AND AMENDMENTS .
No waivers, amendments or modifications of this Note and other Loan
Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default (as defined in the other
Loan Documents) shall operate as a waiver of any other Default or
the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy
under this Note and other Loan Documents shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other
right, power or remedy.
Except
to the extent otherwise provided by the Loan Documents or
prohibited by law, each Borrower and each other person liable
under this Note waives presentment, protest, notice of
dishonor, notice of intention to accelerate maturity, notice
of acceleration of maturity, notice of sale and all other
notices of any kind. Further, each agrees that Bank may (i)
extend, modify or renew this Note or make a novation of the
loan evidenced by this Note, and/or (ii) grant releases,
compromises or indulgences with respect to any collateral
securing this Note, or with respect to any Borrower or other
person liable under this Note or any other Loan Documents, all
without notice to or consent of each Borrower and other such
person, and without affecting the liability of each Borrower
and other such person; provided, Bank may not extend, modify
or renew this Note or make a novation of the loan evidenced by
this Note without the consent of the Borrower, or if there is
more than one Borrower, without the consent of at least one
Borrower; and further provided, if there is more than one
Borrower, Bank may not enter into a modification of this Note
which increases the burdens of a Borrower without the consent
of that Borrower.
MISCELLANEOUS PROVISIONS .
Assignment .
This Note and the other Loan Documents shall inure to the benefit
of and be binding upon the parties and their respective heirs,
legal representatives, successors and assigns. Bank’s
interests in and rights under this Note and the other Loan
Documents are freely assignable, in whole or in part, by Bank. In
addition, nothing in this Note or any of the other Loan Documents
shall prohibit Bank from pledging or assigning this Note or any of
the other Loan Documents or any interest therein to any Federal
Reserve Bank. Borrower shall not assign its rights and interest
hereunder without the prior written consent of Bank, and any
attempt by Borrower to assign without Bank’s prior written
consent is null and void. Any assignment shall not release Borrower
from the Obligations.
Applicable Law; Conflict Between Documents
.
This Note and, unless otherwise provided in any other Loan
Document, the other Loan Documents shall be governed by and
interpreted under the laws of the state named in Bank’s
address on the first page hereof without regard to that
state’s conflict of laws principles. If the terms of this
Note should conflict with the terms of any loan agreement or any
commitment letter that survives closing, the terms of this Note
shall control.
Borrower’s Accounts .
Except as prohibited by law, Borrower grants Bank a security
interest in all of Borrower’s deposit accounts and investment
property with Bank and any of its affiliates.
Swap Agreements .
All swap agreements (as defined in 11 U.S.C. § 101, as in
effect from time to time), if any, between Borrower and Bank or its
affiliates are independent agreements governed by the written
provisions of said swap agreements, which will remain in full force
and effect, unaffected by any repayment, prepayment, acceleration,
reduction, increase or change in the terms of this Note, except as
otherwise expressly provided in said written swap agreements, and
any payoff statement from Bank relating to this Note shall not
apply to said swap agreements except as otherwise expressly
provided in such payoff statement.
Jurisdiction .
Borrower irrevocably agrees to non-exclusive personal jurisdiction
in the state identified as the Jurisdiction above.
Severability .
If any provision of this Note or of the other Loan Documents shall
be prohibited or invalid under applicable law, such provision shall
be ineffective but only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or
the remaining provisions of this Note or other such
document.
Notices .
Any notices to Borrower shall be sufficiently given, if in writing
and mailed or delivered to the Borrower’s address shown above
or such other address as provided hereunder, and to Bank, if in
writing and mailed or delivered to Wachovia Bank, National
Association, Mail Code VA7628, P. 0. Box 13327, Roanoke, VA 24040
or Wachovia Bank, National Association, Mail Code VA7628, 10 South
Jefferson Street, Roanoke, VA 24011 or such other address as Bank
may specify in writing from time to time. Notices to Bank must
include the mail code. In the event that Borrower changes
Borrower’s address at any time prior to the date the
Obligations are paid in full, Borrower agrees to promptly give
written notice of said change of address by registered or certified
mail, return receipt requested, all charges prepaid.
Plural; Captions .
All references in the Loan Documents to Borrower, guarantor,
person, document or other nouns of reference mean both the singular
and plural form, as the case may be, and the term
“person” shall mean any individual, person or entity.
The captions contained in the Loan Documents are inserted for
convenience only and shall not affect the meaning or interpretation
of the Loan Documents.
Advances .
Bank may, in its sole discretion, make other advances which shall
be deemed to be advances under this Note, even though the stated
principal amount of this Note may be exceeded as a result
thereof.
Posting of Payments .
All payments received during normal banking hours after 2:00 p.m.
local time at the office of Bank first shown above shall be deemed
received at the opening of the next banking day.
Joint and Several Obligations .
If there is more than one Borrower, each is jointly and severally
obligated together with all other parties obligated for the
Obligations.
Fees and Taxes .
Borrower shall promptly pay all documentary, intangible recordation
and/or similar taxes on this transaction whether assessed at
closing or arising from time to time.
LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES
.
EACH OF THE PARTIES HERETO INCLUDING BANK BY ACCEPTANCE HEREOF,
AGREES THAT IN ANY JUDICIAL, MEDIATION OR ARBITRATION PROCEEDING OR
ANY CLAIM OR CONTROVERSY BETWEEN OR AMONG THEM THAT MAY ARISE OUT
OF OR BE IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE LOAN
DOCUMENTS OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN OR AMONG THEM
OR THE OBLIGATIONS EVIDENCED HEREBY OR RELATED HERETO, IN NO EVENT
SHALL ANY PARTY HAVE A REMEDY OF, OR BE LIABLE TO THE OTHER FOR,
(1) INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR (2) PUNITIVE OR
EXEMPLARY DAMAGES. EACH OF THE PARTIES HEREBY EXPRESSLY WAIVES ANY
RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY HAVE OR
WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY SUCH
PROCEEDING, CLAIM OR CONTROVERSY, WHETHER THE SAME IS RESOLVED BY
ARBITRATION, MEDIATION, JUDICIALLY OR OTHERWISE.
Patriot Act Notice .
To help fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to
obtain, verify, and record information that identifies each person
who opens an account. For purposes of this section, account shall
be understood to include loan accounts.
Final Agreement .
This Note and the other Loan Documents represent the final
agreement between the parties and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements of
the parties. There are no unwritten oral agreements between the
parties.
ARBITRATION .
Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy
arising out of or relating to the Loan Documents between parties
hereto (a “Dispute”) shall be resolved by binding
arbitration conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the “Arbitration
Rules”) of the American Arbitration Association (the
“AAA”) and the Federal Arbitration Act. Disputes may
include, without limitation, tort claims, counterclaims, a dispute
as to whether a matter is subject to arbitration, or claims arising
from documents executed in the future, but shall specifically
exclude claims brought as or converted to class actions. A judgment
upon the award may be entered in any court having jurisdiction.
Notwithstanding the foregoing, this arbitration provision does not
apply to disputes under or related to swap agreements.
Special Rules .
All arbitration hearings shall be conducted in the city named in
the address of Bank first stated above. A hearing shall begin
within 90 days of demand for arbitration and all hearings shall
conclude within 120 days of demand for arbitration. These time
limitations may not be extended unless a party shows cause for
extension and then for no more than a total of 60 days. The
expedited procedures sat forth in Rule 51
et seq. of
the Arbitration Rules shall be applicable to claims of less than
$1,000,000.00. Arbitrators shall be licensed attorneys selected
from the Commercial Financial Dispute Arbitration Panel of the AAA.
The parties do not waive applicable Federal or state substantive
law except as provided herein.
Preservation and Limitation of Remedies
. Notwithstanding the preceding binding arbitration provisions, the
parties agree to preserve, without diminution, certain remedies
that any party may exercise before or after an arbitration
proceeding is brought. The parties shall have the right to proceed
in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, as applicable: (i) all rights to
foreclose against any real or personal property or other security
by exercising a power of sale or under applicable law by judicial
foreclosure including a proceeding to confirm the sale; (ii) all
rights of self-help including peaceful occupation of real property
and collection of rents, set-off, and peaceful possession of
personal property; (iii) obtaining provisional or ancillary
remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary
bankruptcy proceeding; and (iv) when applicable, a judgment by
confession of judgment. Any claim or controversy with regard to any
party’s entitlement to such remedies is a Dispute.
Waiver of Jury Trial .
THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION
THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL
WITH REGARD TO A DISPUTE AS TO WHICH BINDING ARBITRATION HAS BEEN
DEMANDED.
IN WITNESS WHEREOF ,
Borrower, on the day and year first above written, has caused this
Note to be duly executed under seal.
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Smart Online,
Inc. |
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By: |
/s/ Nicholas A.
Sinigaglia |
(SEAL) |
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Nicholas A. Sinigaglia, Chief Financial
Officer |
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Tracking#:
201318
CAT-Deal
#794013 Facility ID 588018
MODIFICATION NUMBER ONE
TO LOAN AGREEMENT
Smart
Online, Inc.
2530
Meridian Parkway, 2nd Floor
Durham,
North Carolina 27713
(Hereinafter
referred to as “Borrower”)
Wachovia
Bank, National Association
Charlotte,
North Carolina 28202
(Hereinafter
referred to as “Bank”)
THIS AGREEMENT is
entered into as of January 24, 2007 by and between Bank and
Borrower.
RECITALS
Bank
is the holder of a Promissory Note executed and delivered by
Borrower, dated of even date herewith, in the original
principal amount of $2,500,000.00 (the “Note”);
and certain other loan documents, including without
limitation, a Loan Agreement, dated November 14, 2006 (the
“Loan Agreement”);
Borrower
and Bank have agreed to modify the terms of the Loan
Agreement.
In
consideration of Bank’s continued extension of credit
and the agreements contained herein, the parties agree as
follows:
AGREEMENT
ACKNOWLEDGMENT OF BALANCE ,
Borrower acknowledges that the most recent Commercial Loan Invoice
sent to Borrower with respect to the Obligations under the Note is
correct.
MODIFICATIONS .
The
section entitled AVAILABILITY of the Loan Agreement is hereby
deleted and the following is substituted in its place and
stead:
AVAILABILITY .
With respect to the line of credit Promissory Note in the amount of
$2,500,000.00, dated January 24 , 2007, notwithstanding anything to
the contrary contained herein, the aggregate outstanding principal
balance of Advances (as defined in the Note), plus the sum of (i)
the aggregate amount available to be drawn under all letters of
credit issued by Bank for the account of Borrower plus (ii) the
aggregate amount of unreimbursed drawings under all letters of
credit issued by Bank for the account of Borrower at any one time
shall not exceed $2,500,000.00.
ACKNOWLEDGMENTS AND REPRESENTATIONS .
Borrower acknowledges and represents that the Note and other Loan
Documents, as amended hereby, are in full force and effect without
any defense, counterclaim, right or claim of set-off; that, after
giving effect to this Agreement, no default or event that with the
passage of time or giving of notice would constitute a default
under the Loan Documents has occurred, all representations and
warranties contained in the Loan Documents are true and correct as
of this date, all necessary action to authorize the execution and
delivery of this Agreement has been taken; and this Agreement is a
modification of an existing obligation and is not a
novation.
COLLATERAL .
Borrower acknowledges and confirms that there have been no changes
in the ownership of any collateral pledged to secure the
Obligations (the “Collateral”) since the Collateral was
originally pledged; Borrower acknowledges and confirms that the
Bank has existing, valid first priority security interests and
liens in the Collateral; and that such security interests and liens
shall secure Borrower’s Obligations, including any
modification of the Note or Loan Agreement, if any, and all future
modifications, extensions, renewals and/or replacements of the Loan
Documents.
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