Exhibit 10.4
FIRST AMENDMENT TO CREDIT AGREEMENT AND LIMITED WAIVER
This FIRST AMENDMENT TO CREDIT AGREEMENT AND LIMITED WAIVER (this
"Amendment") is entered into as of January 23, 2001, by and among Network
Commerce Inc., a Washington corporation ("Borrower"), the financial institutions
named on the signature pages hereof (each, a "Lender" and collectively the
"Lenders"), and Imperial Bank, as Agent for the Lenders ("Agent"), with
reference to the following facts:
A. Borrower, Agent, and Lenders are parties to that certain Credit
Agreement dated as of May 19, 2000, as amended (the "Credit Agreement");
B. One or more Events of Default have occurred under the Loan Documents by
virtue of the Borrower's failure to comply with Section 6.2(a) of the Credit
Agreement as of December 31, 2000. Such Events of Default entitle the Lenders
immediately to enforce all the remedies set forth in the Loan Documents. The
Borrower has asked the Lenders to waive compliance with that section as of
certain dates, and the Lenders have agreed, all on the terms set forth herein.
NOW, THEREFORE, in consideration of the promises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
1. Defined Terms. Capitalized terms not otherwise defined herein shall have
the same meanings as set forth in the Loan Documents.
2. Limited Waiver. Subject to the terms and conditions contained herein,
and in reliance on the representations and warranties of the Borrower set forth
herein, Lenders hereby waive the Borrower's obligation to comply with Section
6.2(a) for the period ended December 31, 2000. Without limiting the generality
of the provisions of Section 9.1 of the Credit Agreement, the waiver set forth
herein shall be limited precisely as written and relates solely to the waiver of
compliance by the Borrower with Section 6.2(a) in the manner and to the extent
described above, and nothing in this Amendment shall be deemed to (i) constitute
a waiver of any such provision of the Credit Agreement in any other instance, or
(ii) constitute a waiver of any other Event of Default or other failure by
Borrower to perform in accordance with the Loan Documents or this Amendment, or
(iii) prejudice any right or remedy that the Agent or any Lender may now have or
may have in the future under or in connection with the Credit Agreement or the
Loan Documents.
3. Certificate of Deposit Collateral. Borrower grants to Agent, for the
benefit of Agent and Lenders, as additional security for the purpose of securing
all indebtedness and obligations owing by Borrower to Lenders, a valid, first
priority security interest in Certificate of Deposit No. __________ in the
principal amount of not less than Nine Million Eight Hundred Thirteen Thousand
Nine Hundred Sixty-Nine Dollars ($9,813,969), together with all proceeds and
substitutions of any thereof, all interest paid thereon, and all other cash and
noncash proceeds of the foregoing (the "Certificates of Deposit"). The minimum
principal amount of the Certificates of Deposit pledged hereunder (the "CD
Principal") during the term of the Credit Agreement shall be at all times equal
to or greater than the sum of all outstanding Loans and any other indebtedness
or obligations owing by Borrower to Lenders under the Loan Documents or
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otherwise. Prior to the maturity of any Collateral consisting of Certificates of
Deposit, Borrower and Agent shall agree upon a security or instrument similar in
form, quality and substance to the original Collateral in which the proceeds of
the Collateral can be reinvested on maturity. Upon maturity of the Collateral in
accordance with its terms, or in the event the Collateral otherwise becomes
payable during the term of the Credit Agreement, such maturing Collateral may be
presented for payment, exchange, or otherwise marketed by Agent on behalf of
Borrower and the proceeds therefrom used to purchase the security or instrument
agreed to by Borrower and Agent in accordance with the immediately preceding
sentence. If no agreement has been made, such proceeds shall be placed into an
interest bearing account offered by Agent in which Agent, for the benefit of
Agent and Lenders, has a first priority security interest until such time as an
agreement as to the security replacing the original Collateral can be reached.
Agent may retain any such successor collateral and the proceeds therefrom as
Collateral in accordance with the terms hereof. Notwithstanding termination of
the Loan Documents, Agent's lien on the Collateral shall remain in effect for so
long as any indebtedness or obligations owed by Borrower to Lenders are
outstanding.
4. Amendments to Credit Agreement. The Credit Agreement is hereby amended
as follows:
(a) The following defined terms in Section 1.1 are amended in their
entirety to read as follows:
"Consolidated Quick Assets:" At any date of determination, the sum of (i)
unrestricted cash and unrestricted cash equivalents of the Borrower and its
consolidated Subsidiaries, plus (ii) Eligible Accounts, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Current Liabilities:" At any date of determination, the sum,
determined on a consolidated basis, of all liabilities of Borrower and its
consolidated Subsidiaries which may properly be classified as current
liabilities in accordance with GAAP, plus, to the extent not already included
therein, all Loans and any other indebtedness or obligations owed by Borrower to
Lenders pursuant to this Agreement or otherwise, but excluding deferred
maintenance contract revenue, and excluding Subordinated Debt.
"Term Commitment:" As to Imperial Bank, the amount of Nine Million Eight
Hundred Thirteen Thousand Nine Hundred Sixty-Nine Dollars ($9,813,969). The term
"Term Commitments" shall mean the aggregate Term Commitments of all of the
Lenders, as such amount may be reduced pursuant to the terms of this Agreement.
(b) Section 6.2(a) is amended to read as follows:
(a) Adjusted Quick Ratio. Permit the ratio of Consolidated Quick Assets to
Consolidated Current Liabilities at any time to be less than 1.25 to 1.0.
(c) Exhibit C is replaced with Exhibit C hereto.
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5. Conditions to Effectiveness.
This Amendment shall become effective as of January 23, 2001 (the
"Effective Date"), only upon:
(a) receipt by the Agent of the following (each of which shall be in form
and substance satisfactory to the Agent and its counsel):
(i) counterparts of this Amendment duly executed on behalf of the Borrower,
the Agent and the Lenders;
(ii) copies of resolutions of the Board of Directors or other authorizing
documents of the Borrower, authorizing the execution and delivery of this
Amendment;
(b) Borrower shall have deposited with the Agent the Certificates of
Deposit; and
(c) completion of such other matters, and delivery of such other
agreements, documents and certificates as the Agent may reasonably request.
6. No Borrowings. From and after the effective date of this Amendment, the
Borrower shall not request or receive any additional Loans.
7. Representations and Warranties. In order to induce the Lenders to enter
into this Amendment, the Borrower represents and warrants to the Lenders that
the following statements are true, correct and complete as of the effective date
of this Amendment:
(a) Corporate Power and Authority. The Borrower has all requisite corporate
power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "Amended Agreement"). The Articles
of Incorporation and Bylaws of the Borrower have not been amended since the
copies previously delivered to the Lenders.
(b) Authorization of Agreements. The execution and delivery of this
Amendment and the performance by the Borrower of the Amended Agreement have been
duly authorized by all necessary corporate action on the part of the Borrower.
(c) No Conflict. The execution and delivery by the Borrower of this
Amendment do not and will not contravene (i) any law or any governmental rule or
regulation applicable to the Borrower, (ii) the Articles of Incorporation or
Bylaws of the Borrower, (iii) any order, judgment or decree of any court or
other agency of government binding on the Borrower, or (iv) any material
agreement or instrument binding on the Borrower.
(d) Governmental Consents. The execution and delivery by the Borrower of
this Amendment and the performance by the Borrower of the Amended Agreement do
not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
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(e) Binding Obligation. This Amendment and the Amended Agreement have been
duly executed and delivered by the Borrower and are the binding obligations of
the Borrower, enforceable against the Borrower in accordance with their
respective terms, except in each case as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws and equitable principles relating to or affecting creditors' rights.
(f) Incorporation of Representations and Warranties From Credit Agreement.
The representations and warranties contained in Section 5.1 of the Credit
Agreement are correct on and as of the effective date of this Amendment as
though made on and as of such date.
(g) Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Potential Event of Default.
8. Miscellaneous.
(a) Reference to and Effect on the Credit Agreement and the Other Loan
Documents.
(i) On and after the Effective Date, each reference in the Credit Agreement
to "this Agreement," "hereunder," "hereof," "herein" or words of like import
referring to the Credit Agreement, and each reference in the other Loan
Documents to the "Credit Agreement," "thereunder," "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Amended Agreement.
(ii) Except as specifically amended by this Amendment, the Credit Agreement
and the other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall not,
except as expressly provided herein, constitute a waiver of any provision of, or
operate as a waiver of any right, power or remedy of the Agent or Lenders under
the Credit Agreement or any of the other Loan Documents.
(b) Fees and Expenses. All costs and expenses of the Agent and Lenders,
including, but not limited to, reasonable attorneys' fees, incurred by the Agent
and Lenders in the preparation and negotiation of this Amendment constitute
costs and expenses in connection with the amendment and restructuring of the
Loan Documents, and as such are payable by the Borrower in accordance with
Section 9.5 of the Credit Agreement.
(c) Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
(d) Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
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INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
(e) Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[REMAINDER INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
NETWORK COMMERCE INC.
by:
Title:
AGENT:
Imperial Bank
By:
Title:
LENDERS:
IMPERIAL BANK
by:
Title:
EXHIBIT C
[FORM OF COMPLIANCE CERTIFICATE]
COMPLIANCE CERTIFICATE
1. This Compliance Certificate ("Compliance Certificate") is executed and
delivered by Network Commerce Inc., a Washington corporation (the "Borrower") to
Imperial Bank (the "Agent") pursuant to Section 6.1(a)(iv)(B) of the Credit
Agreement dated as of May 19, 2000 among the Borrower, the financial
institutions named therein and the Agent. Any terms used herein and not defined
herein shall have the meanings defined in the Credit Agreement. This Compliance
Certificate covers the Borrower's:
Calendar month ended _________, ____
Fiscal quarter ended _________, ____
Fiscal year ended ________, ____
2. The following paragraphs set forth calculations in compliance with
obligations pursuant to Section 6.2(a), (b), (c), and (d) of the Credit
Agreement, as of the end of the fiscal period set forth in paragraph 1 hereof.
A. Adjusted Quick Ratio (Sec. 6.2(a)):
(a) Consolidated Quick Assets $ ___________
(b) Consolidated Current Liabilities $ ___________
Ratio (a) : (b) ____________
Minimum Permitted Ratio 1.25 to 1.0
B. Consolidated Tangible Net Worth (Sec. 6.2(b)):
Minimum required Consolidated Tangible Net Worth:
$50,000,000
Actual Consolidated Tangible Net Worth: $ ___________
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3. The undersigned has reviewed the terms of the Credit Agreement and has
made, or caused to be made under his/her supervision, a review in reasonable
detail of the transactions and condition of the Borrower and its Subsidiaries
during the fiscal period covered by this Compliance Certificate. The undersigned
does not (either as a result of such review or otherwise) have any knowledge of
the existence as of the date of this Compliance Certificate of any condition or
event that constitutes an Event of Default or a Potential Event of Default, with
the exception set forth below in response to which the Borrower is taking or
proposes to take the following actions (if none, so state):
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4. The undersigned hereby certifies that the representations and warranties
contained in the Agreement and the other Loan Documents are true and correct in
all material respects on and as of the date hereof (except to the extent they
relate specifically to any earlier date, in which case such representations and
warranties shall continue to have been correct as of such date).
5. This Compliance Certificate is executed on _______________, ____ by the
Chief Executive Officer, Chief Financial Officer, or Controller of the Borrower.
The undersigned hereby certifies that each and every matter contained herein is
derived from the Borrower's books and records and is, to the best knowledge of
the undersigned, true and correct.
NETWORK COMMERCE INC.,
a Washington corporation
By:
Title:
AFFIRMATION OF GUARANTY
The undersigned Guarantors hereby acknowledge and agree to the terms of the
foregoing First Amendment to Credit Agreement and Limited Waiver (the
"Amendment"), and further acknowledge and agree that nothing contained in the
Amendment in any way affects the validity and enforceability of that certain
Subsidiary Guaranty (the "Guaranty") dated as of May 19, 2000, executed by each
of the undersigned Guarantors in favor of Lenders, the validity and
effectiveness of which Guaranty is hereby reaffirmed as of the Effective Date of
the Amendment.
CORTIX INC.
by:
Name:
Title:
FREEMERCHANT.COM, INC.
by:
Name:
Title:
SHAMU ACQUISITION, INC.
by:
Name:
Title:
SHOPNOW EBUSINESS SOLUTIONS, INC.
by:
Name:
Title:
SPEEDYCLICK, CORP.
by:
Name:
Title:
WEBCENTRIC, INC.
by:
Name:
Title: