LOAN AND SECURITY AGREEMENT

 

 

This LOAN AND SECURITY AGREEMENT is entered into as of November 7, 2008, by and between Bridge Bank, NATIONAL ASSOCIATION (“Bank”) and MIVA, INC. (“Borrower”).

 

RECITALS

 

Borrower wishes to obtain credit from time to time from Bank, and Bank desires to extend credit to Borrower.  This Agreement sets forth the terms on which Bank will advance credit to Borrower, and Borrower will repay the amounts owing to Bank.

 

AGREEMENT

 

The parties agree as follows:

 

1.                                       DEFINITIONS AND CONSTRUCTION .

 

1.1                                Definitions .  As used in this Agreement, the following terms shall have the following definitions:

 

“Accounts” means all presently existing and hereafter arising accounts, contract rights, payment intangibles, and all other forms of obligations owing to Borrower arising out of the sale or lease of goods (including, without limitation, the licensing of software and other technology) or the rendering of services by Borrower, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower’s Books relating to any of the foregoing.

 

“Adjustments” means all discounts, allowances, disputes, offsets, defenses, rights of recoupment, rights of return, warranty claims, or short payments, asserted by or on behalf of any account debtor with respect to any Account.

 

“Advance” or “Advances” means a cash advance or cash advances under the Revolving Facility.

 

“AEBITDA” means earnings before interest, taxes, depreciation and amortization, one-time restructuring costs and non-cash compensation and expenses, with restructuring costs not to exceed *** annually and expenses incurred in connection with litigation matters as disclosed in accordance with Section 5.8 not to exceed *** annually.

 

“Affiliate” means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person, and each of such Person’s senior executive officers, directors, and partners.

 

“Asset Coverage Ratio” means (a) all unrestricted cash and cash equivalents in which Bank has a perfected security interest plus (b) Eligible Accounts, divided by (x) all Obligations owed to Bank plus (y) employee-related accruals plus (z) accounts payable over *** days from invoice date (excluding those accounts payable that are materially aged resulting from the inability to make such payment because the account debtor has ceased operations).

 

“Bank Expenses” means all:  reasonable costs or expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the preparation, negotiation, administration, and enforcement of the Loan Documents; reasonable Collateral audit fees; and Bank’s reasonable attorneys’ fees and expenses incurred in amending, enforcing or defending the Loan Documents (including fees and expenses of appeal), incurred before, during and after an Insolvency Proceeding, whether or not suit is brought.

 

“Borrower’s Books” means all of Borrower’s books and records including:  ledgers; records concerning Borrower’s assets or liabilities, the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment, containing such information.

 

“Borrowing Base” means an amount equal to (a) eighty percent (80%) of Eligible Accounts plus (b) UK Eligible Accounts as determined by Bank with reference to the most recent Borrowing Base Certificate delivered by Borrower.

 

[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

1

 

“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks in the State of California are authorized or required to close.

 

“Cash” means unrestricted cash and cash equivalents.

 

“Capital Stock” means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, and (ii) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person.

 

“Change in Control” shall mean 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) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of Borrower, who did not have such power before such transaction.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the California Uniform Commercial Code.

 

“Collateral” means the property described on Exhibit A attached hereto.

 

“Collections” means all payments from or on behalf of an account debtor with respect to Accounts.

 

“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards, or merchant services issued or provided for the account of that Person; and (iii) all obligations arising under any agreement or arrangement designed to protect such Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of business.  The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by Bank in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.

 

“Copyrights” means any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof.

 

“Credit Extension” means each Advance, Letter of Credit, use of Cash Management Services or Foreign Exchange Facility or any other extension of credit by Bank for the benefit of Borrower hereunder.

 

“Daily Balance” means the amount of the Obligations owed at the end of a given day.

 

“Domestic Subsidiaries” means the following wholly owned subsidiaries of Borrower: MIVA Direct, Inc. and B&B Advertising, Inc. (fka B&B Enterprises, Inc.).

 

“Eligible Accounts” means those Accounts that arise in the ordinary course of Borrower’s business that comply with all of Borrower’s representations and warranties to Bank set forth in Section 5.4; provided, that standards of eligibility may be fixed and revised from time to time by Bank in Bank’s reasonable judgment and upon discussion with Borrower prior to the effectiveness of such revisions, in accordance with the provisions hereof.  Unless otherwise agreed to by Bank, Eligible Accounts shall not include the following:

 

(a)                                   Accounts that the account debtor has failed to pay within *** days of invoice date;

 

[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

2

 

(b)                                   Accounts with respect to an account debtor, *** percent (***%) of whose Accounts the account debtor has failed to pay within *** days of invoice date;

 

(c)                                   Accounts with respect to which the account debtor is an officer, employee, or agent of Borrower;

 

(d)                                   Accounts with respect to which goods are placed on consignment, guaranteed sale, sale or return, sale on approval, bill and hold, pre-billed, or other terms by reason of which the payment by the account debtor may be conditional;

 

(e)                                   Accounts with respect to which the account debtor is an Affiliate of Borrower;

 

(f)                                     Accounts with respect to which the account debtor does not have its principal place of business in the United States, except for Eligible Foreign Accounts and Eligible UK Accounts;

 

(g)                                  Accounts with respect to which the account debtor is the United States or any department, agency, or instrumentality of the United States, except for Accounts of the United States if the payee has assigned its payment rights to Bank and the assignment has been acknowledged under the Assignment of Claims Act of 1940 (31 U.S.C. 3727);

 

(h)                                  Accounts with respect to which Borrower is liable to the account debtor for goods sold or services rendered by the account debtor to Borrower or for deposits or other property of the account debtor held by Borrower, but only to the extent of any amounts owing to the account debtor against amounts owed to Borrower;

 

(i)                                     Accounts with respect to an account debtor, including Subsidiaries and Affiliates, whose total obligations to Borrower exceed *** percent (***%) of all Accounts (“Concentration Limit”), to the extent such obligations exceed the aforementioned percentage, except as approved in writing by Bank; provided, however , the Concentration Limit with respect to Accounts in which the account debtor is ***shall be *** percent (***%) ;

 

(j)                                     Accounts with respect to which the account debtor disputes liability or makes any claim with respect thereto as to which Bank believes, in its sole discretion, that there may be a basis for dispute (but only to the extent of the amount subject to such dispute or claim), or is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of business; and

 

(k)                                 Progress and retention billings; and

 

(l)                                     Accounts the collection of which Bank reasonably determines to be doubtful.

 

“Eligible Foreign Accounts” means Accounts with respect to which the account debtor does not have its principal place of business in the United States or United Kingdom, and that (i) are supported by one or more letters of credit in an amount and of a tenor, and issued by a financial institution, acceptable to Bank, or (ii) that Bank reasonably approves on a case-by-case basis.

 

“Eligible UK Accounts” means the lesser of $***or ***percent (***%) of UK Accounts; provided , that Bank has perfected its first priority security interest in the assets of MIVA UK, and provided further that the standards of eligibility may be fixed and revised from time to time by Bank in Bank’s reasonable judgment and upon notification thereof to Borrower in accordance with the provisions hereof.  Unless otherwise agreed to by Bank, Eligible UK Accounts shall not include the following:

 

(a)                                   UK Accounts that the account debtor has failed to pay within ***days of invoice date;

 

(b)                                   UK Accounts with respect to an account debtor, ***of whose Accounts the account debtor has failed to pay within ***days of invoice date;

 

(c)                                   UK Accounts with respect to which the account debtor is an officer, employee, or agent of

 

[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

3

 

Borrower;

 

(d)                                   UK Accounts with respect to which goods are placed on consignment, guaranteed sale, sale or return, sale on approval, bill and hold, pre-billed or other terms by reason of which the payment by the account debtor may be conditional;

 

(e)                                   UK Accounts with respect to which the account debtor is an Affiliate of Borrower or MIVA UK;

 

(f)                                     UK Accounts with respect to which the account debtor has its principal place of business in the United States;

 

(g)                                  UK Accounts with respect to which Borrower is liable to the account debtor for goods sold or services rendered by the account debtor to Borrower or for deposits or other property of the account debtor held by Borrower, but only to the extent of any amounts owing to the account debtor against amounts owed to Borrower;

 

(h)                                  UK Accounts with respect to an account debtor, including Subsidiaries and Affiliates, whose total obligations to Borrower exceed ***of all UK Accounts, to the extent such obligations exceed the aforementioned percentage, except as approved in writing by Bank;

 

(i)                                     UK Accounts with respect to which the account debtor disputes liability or makes any claim with respect thereto as to which Bank believes, in its sole discretion, that there may be a basis for dispute (but only to the extent of the amount subject to such dispute or claim), or is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of business; and

 

(j)                                     Progress and retention billings; and

 

(k)                                 UK Accounts the collection of which Bank reasonably determines to be doubtful.

 

“Equipment” means all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest.

 

 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.

 

“Event of Default” has the meaning assigned in Article 8.

 

“GAAP” means generally accepted accounting principles as in effect from time to time.

 

“Guarantor” means MIVA UK.

 

“Indebtedness” means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations and (d) all Contingent Obligations.

 

“Insolvency Proceeding” means any proceeding commenced by or against any person or entity under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

 

“Intellectual Property Collateral” means all of Borrower’s right, title, and interest in and to the following: Copyrights, Trademarks and Patents; all trade secrets, all design rights, claims for damages by way of past, present and future infringement of any of the rights included above, all licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such use to the extent permitted by such license or rights;

 

[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

4

 

all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents; and all proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.

 

“Inventory” means all inventory in which Borrower has or acquires any interest, including 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 at any time hereafter owned by or in the custody or possession, actual or constructive, of Borrower, including such inventory as is temporarily out of its custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above, and Borrower’s Books relating to any of the foregoing.

 

“Investment” means any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person.

 

“IRC” means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

 

“Lien” means any mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance.

 

“Loan Documents” means, collectively, this Agreement, any note or notes executed by Borrower, and any other agreement entered into in connection with this Agreement, all as amended or extended from time to time.

 

“Material Adverse Effect” means a material adverse effect on (i) the business operations, condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the Obligations or otherwise perform its obligations under the Loan Documents or (iii) the value or priority of Bank’s security interests in the Collateral.

 

“Minimum Cash Ratio” means a ratio of (a) all Cash maintained at Bank plus (b) ***% of Cash held in an account in the United Kingdom under the name of MIVA UK in which Bank has a perfected first priority security interest (in any event not to exceed the lesser of *** of such account’s balance or ***) to all Obligations owed to Bank.

 

“MIVA UK” means MIVA (UK) Limited., a company incorporated under the laws of England and Wales.

 

“Negotiable Collateral” means all letters of credit of which Borrower is a beneficiary, notes, drafts, instruments, securities, documents of title, and chattel paper, and Borrower’s Books relating to any of the foregoing.

 

“Obligations” means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement or any other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from Borrower to others that Bank may have obtained by assignment or otherwise.

 

“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.

 

“Periodic Payments” means all installments or similar recurring payments that Borrower may now or hereafter become obligated to pay to Bank pursuant to the terms and provisions of any instrument, or agreement now or hereafter in existence between Borrower and Bank.

 

“Permitted Indebtedness” means:

 

(a)                                   Indebtedness of Borrower in favor of Bank arising under this Agreement or any other Loan Document;

 

(b)                                  Indebtedness existing on the Closing Date and disclosed in the Schedule;

 

[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

5

 

(c)                                   Indebtedness secured by a lien described in clause (c) of the defined term “Permitted Liens,” provided (i) such Indebtedness does not exceed the lesser of the cost or fair market value of the equipment financed with such Indebtedness and (ii) such Indebtedness does not exceed $***in the aggregate at any given time;

 

(d)                                  Subordinated Debt;

 

(e)                                   Indebtedness to trade creditors, trade payables, accruals and accounts payable incurred in the ordinary course of business, and contingent liabilities arising out of endorsements of checks and other negotiable instruments for deposit or collection in the ordinary course of business;

 

(f)                                     Guaranties of any Indebtedness permitted hereunder;

 

(g)                                  Indebtedness in respect of intercompany loans between Borrower and any Subsidiary of Borrower which Bank has a perfected first priority security interest in such Subsidiary’s assets;

 

(h)                                  Indebtedness of any Subsidiary to Borrower or another Subsidiary and Indebtedness of Borrower to any Subsidiary not to exceed $***in aggregate principal amount at any time (including any amounts considered as investment into such entities under in clause (i) of Permitted Investment);

 

(i)                                      Obligations to pay rentals; and

 

(j)                                      Obligations of Borrower under interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, or any other agreements or arrangements designed to protect Borrower against fluctuations in interest rates, currency exchange rates or commodity prices.

 

“Permitted Investment” means:

 

(a)                                   Investments existing on the Closing Date disclosed in the Schedule;

 

(b)                                  Property to be used in the ordinary course of business;

 

(c)                                   Assets arising from the sale of goods and services in the ordinary course of business of Borrower or any of its Subsidiaries;

 

(d)                                  Investments in direct obligations of the United States of America, or any agency thereof or obligations guaranteed by the United States of America; provided that such obligations mature within one year from the date of acquisition thereof;

 

(e)                                   Investments in certificates of deposit maturing within one year from the date of acquisition and fully insured by the Federal Deposit Insurance Corporation;

 

(f)                                     Investments in commercial paper maturing not more than 270 days from the date of creation thereof and currently having rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service;

 

(g)                                  Investments in money market, mutual or similar funds having assets in excess of $100,000,000 and the investments of which are limited to investment grade securities;

 

(h)                                  Investments by Borrower in any Subsidiary of Borrower in which Bank has a perfected first priority security interest; and

 

(i)                                      Investments of Subsidiaries in or to other Subsidiaries or Borrower and Investments by Borrower in Subsidiaries not to exceed $***in the aggregate at any time (including amounts considered as indebtedness of entities under clause (h) of Permitted Indebtedness).

 

“Permitted Liens” means the following:

 

(a)                                   Any Liens existing on the Closing Date and disclosed in the Schedule or arising under this Agreement or the other Loan Documents;

 

[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

 

6

 

(b)                                  Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings, provided the same have no priority over any of Bank’s security interests;

 

(c)                                   Liens (i) upon or in any equipment which was not financed by Bank acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition of such equipment, or (ii) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment;

 

(d)                                  Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (a) through (c) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase

 

(e)                                   Liens arising in the ordinary course of the business of Borrower or any of its Subsidiaries by operation of law or regulation (including without limitation, Liens of mechanics and materialmen), if payment in respect of any such Lien is not at the time required and such Liens do not, in the aggregate, materially detract from the value of the Property of Borrower or any of its Subsidiaries or materially impair the use thereof in the operation of the business of Borrower or any of its Subsidiaries;

 

(f)                                     Liens securing hedging obligations issued on terms permitted by this Agreement;

 

(g)                                  Liens incurred or deposits made in the ordinary course of business in connection with (1) worker’s compensation, social security, unemployment insurance and other like laws or (2) sales contracts, leases, statutory obligations, work in progress advances and other similar obligations not incurred in connection with the borrowing of money or the payment of the deferred purchase price of property;

 

(h)                                  Reservations, covenants, zoning and other land use regulations, title exceptions or encumbrances granted in the ordinary course of business, affecting real property owned or leased by Borrower or one of its Subsidiaries; provided that such exceptions do not in the aggregate materially interfere with the use of such property in the ordinary course of Borrower’s or such Subsidiary’s business;

 

(i)                                      Liens arising from judgments that do not give rise to an Event of Default, including under Section 8.7; and

 

(j)                                      Liens securing Subordinated Debt.

 

“Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency.

 

“Prime Rate” means the greater of ***% or the Prime Rate published in the Money Rates section of the Western Edition of The Wall Street Journal, or such other rate of interest publicly announced from time to time by Lender as its Prime Rate.  Lender may price loans to its customers at, above or below the Prime Rate.   Any change in the Prime Rate shall take effect at the opening of business on the day specified in the public announcement of a change in Prime Rate.

 

“Responsible Officer” means each of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the General Counsel, Senior Vice President of Finance, and the Controller of Borrower.

 

“Revolving Facility” means the facility under which Borrower may request Bank to issue Advances, as specified in Section 2.1(a) hereof.

 

“Revolving Line” means a credit extension of up to Ten Million Dollars ($10,000,000).

 

“Revolving Maturity Date” means the second anniversary of the Closing Date.

 

[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

7

 

“Schedule” means the schedule of exceptions attached hereto and approved by Bank, if any.

 

“Shares” means securities representing 65% of the aggregate voting power of the issued and outstanding Capital Stock and ownership interests of MIVA UK.  Notwithstanding the foregoing, the term “Shares” shall not include securities representing at any time more than 65% of the aggregate voting power of the Capital Stock of a “controlled foreign corporation,” as defined in Section 957 of the Code.

 

“Subordinated Debt” means any debt incurred by Borrower that is subordinated to the debt owing by Borrower to Bank in a manner reasonably acceptable to Bank (and identified as being such by Borrower and Bank).

 

“Subsidiary” means any corporation, company or partnership in which (i) any general partnership interest or (ii) more than 50% of the stock or other units of ownership which by the terms thereof has the ordinary voting power to elect the Board of Directors, managers or trustees of the entity, at the time as of which any determination is being made, is owned by Borrower, either directly or through an Affiliate.

 

 “Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.

 

“UK Accounts” means those means all presently existing and hereafter arising accounts, contract rights, payment intangibles, and all other forms of obligations owing to MIVA UK arising out of the sale or lease of goods (including, without limitation, the licensing of software and other technology) or the rendering of services by MIVA UK, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by MIVA UK and MIVA UK’s Books relating to any of the foregoing, that (a) arise in the ordinary course of MIVA UK’s business, (b) are bona fide existing obligations, (c) the property and services giving rise to such Accounts has been delivered or rendered to the account debtor or to the account debtor’s agent for immediate and unconditional acceptance by the account debtor, and (d) neither Borrower nor MIVA UK has received notice of actual or imminent Insolvency Proceeding of any account debtor that is included in any Borrowing Base Certificate as an Eligible UK Account.

 

1.2                                Accounting Terms .  All accounting terms not specifically defined herein shall be construed in accordance with GAAP and all calculations made hereunder shall be made in accordance with GAAP.  When used herein, the terms “financial statements” shall include the notes and schedules thereto.

 

2.                                       LOAN AND TERMS OF PAYMENT .

 

2.1                                Credit Extensions .

 

Borrower promises to pay to the order of Bank, in lawful money of the United States of America, the aggregate unpaid principal amount of all Credit Extensions made by Bank to Borrower hereunder.  Borrower shall also pay interest on the unpaid principal amount of such Credit Extensions at rates in accordance with the terms hereof.

 

(a)                                   Revolving Advances.

 

(i)                                     Subject to and upon the terms and conditions of this Agreement, Borrower may request Advances in an aggregate outstanding amount not to exceed the lesser of (i) the Revolving Line or (ii) the Borrowing Base, less any outstanding Letter of Credit Outstandings, Cash Management Outstandings, and Foreign Exchange Outstandings (all as defined below). Subject to the terms and conditions of this Agreement, amounts borrowed pursuant to this Section 2.1(a) may be repaid and reborrowed at any time prior to the Revolving Maturity Date, at which time all Advances under this Section 2.1(a) shall be immediately due and payable.  Borrower may prepay any Advances without penalty or premium, including in case of overadvances pursuant to Section 2.2.

 

(ii)                                 Whenever Borrower desires an Advance, Borrower will notify Bank by facsimile transmission or telephone no later than 3:00 p.m. Pacific time, on the Business Day that the Advance is to be made.  Each such notification shall be promptly confirmed by a Payment/Advance Form in substantially the form of

 

[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

8

 

Exhibit B hereto.  Bank is authorized to make Advances under this Agreement, based upon instructions received from a Responsible Officer or a designee of a Responsible Officer, or without instructions if in Bank’s discretion such Advances are necessary to meet Obligations which have become due and remain unpaid.  Bank shall be entitled to rely on any telephonic notice given by a person who Bank reasonably believes to be a Responsible Officer or a designee thereof, and Borrower shall indemnify and hold Bank harmless for any damages or loss suffered by Bank as a result of such reliance.  Bank will credit the amount of Advances made under this Section 2.1(a) to Borrower’s deposit account.

 

(b)                                   Letter of Credit Sublimit .  Subject to the terms and conditions of this Agreement, at any time prior to the Revolving Maturity Date, Bank agrees to issue letters of credit for the account of Borrower (each, a “Letter of Credit” and collectively, the “Letters of Credit”) in an aggregate outstanding face amount (the “Letter of Credit Outstandings”) not to exceed the lesser of the Revolving Line or the Borrowing Base minus, in each case, the aggregate amount of the outstanding Advances, Cash Management Outstandings and the Foreign Exchange Outstandings at any time, provided that the Letter of Credit Advances Outstandings shall not exceed $***.  All Letters of Credit shall be, in form and substance, acceptable to Bank in its sole discretion and shall be subject to the terms and conditions of Bank’s form of standard application and letter of credit agreement (the “Application”), which Borrower hereby agrees to execute, including payment of Bank’s standard fees based on the face amount of each Letter of Credit.  On any drawn but unreimbursed Letter of Credit, the unreimbursed amount shall be deemed an Advance under Section 2.1(a).  Prior to the Revolving Maturity Date, Borrower shall secure in cash all obligations under any outstanding Letters of Credit on terms acceptable to Bank.  The obligation of Borrower to reimburse Bank for drawings made under Letters of Credit shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, the Application, and such Letters of Credit, under all circumstances whatsoever.  Borrower shall indemnify, defend, protect, and hold Bank harmless from any loss, cost, expense or liability, including, without limitation, reasonable attorneys’ fees, arising out of or in connection with any Letters of Credit, except for expenses caused by Bank’s gross negligence or willful misconduct.

 

(c)                                   Cash Management Services .  Subject to the terms and conditions of this Agreement, Bank agrees to make available to Borrower up to $***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”).  All amounts Bank pays for any Cash Management Services will be treated as Advances under Section 2.1(a) and the outstanding amount thereof at any time (collectively, the “Cash Management Outstandings”) shall reduce, on a dollar-for-dollar basis, the amount available for other Advances.  The Cash Management Services shall be subject to additional terms set forth in applicable cash management services agreements.

 

(d)                                   Foreign Exchange Facility .  Subject to the terms and conditions of this Agreement, Borrower may, at its option from time to time, enter into foreign exchange forward contracts (collectively, the “Foreign Exchange Facility”) with 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 (each such contract a “FX Forward Contract”).  Bank will subtract ***%, or such greater amount as determined by Bank, of each outstanding FX Forward Contract from a  foreign exchange sublimit of $*** (the “FX Reserve”). The total FX Forward Contracts at any one time may not exceed *** times the amount of the FX Reserve.  ***of the amount of each outstanding FX Forward Contract shall be treated as Advances under Section 2.1(a) and shall reduce, so long as outstanding, on a dollar-for-dollar basis, the amount available for other Advances.  Bank may terminate the FX Forward Contracts if an Event of Default occurs.  Each FX Forward Contract shall be subject to additional terms set forth in the applicable FX Forward Contract or other agreements executed in connection with the Foreign Exchange Facility.

 

(e)                                   Total Availability of Letter of Credit Sublimit, Cash Management Services, and Foreign Exchange Facility . The aggregate amount of (i) Letter of Credit Outstandings, (ii) Cash Management Outstandings, and (iii) ten (10) times the amount of Foreign Exchange Outstandings, shall not exceed the lesser of ***or the Borrowing Base.

 

2.2                                Overadvances .  If the aggregate amount of the outstanding Advances plus the aggregate face amount of all outstanding Letters of Credit, outstanding amounts under the Cash Management Services, and outstsanding amounts under the Foreign Exchange Facility exceeds the lesser of the Revolving Line or the Borrowing Base at any time, Borrower shall immediately pay to Bank, in cash, the amount of such excess.

 

[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

9