Loan Modification and Consent Agreement - Roxio Inc., Napster LLC and Silicon Valley Bank
LOAN MODIFICATION AND CONSENT AGREEMENT
This Loan Modification and Consent Agreement is entered into as of
December __, 2004 by and among Roxio, Inc. ("Roxio") whose address is 9044
Melrose Avenue, Los Angeles, California, 90069, Napster, LLC ("Napster", and
together with Roxio, "Borrower") whose address is 9044 Melrose Avenue, Los
Angeles, California 90069, and Silicon Valley Bank ("Bank") whose address is
3003 Tasman Drive, Santa Clara, California 95054.
A. Among other indebtedness which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to, among other documents, a Loan and Security
Agreement, dated March 25, 2004, (as may be amended from time to time, the "Loan
Agreement"). The Loan Agreement provides for, among other things, a revolving
line of credit in the original principal amount of Fifteen Million Dollars
($15,000,000) and subsequently increased to Seventeen Million Dollars
($17,000,000) (the "Revolving Facility").
B. Repayment of the Indebtedness is secured by the Collateral as described in
the Loan Agreement and the Intellectual Property Security Agreement.
Additionally, repayment of the Indebtedness was guaranteed by Napster pursuant
to an Unconditional Guaranty dated March 25, 2004 (the "Guaranty") and the
obligations under the Guaranty were secured by an Intellectual Property Security
Agreement (the "Napster Intellectual Property Security Agreement") dated March
25, 2004 between Bank and Napster.
C. Borrowers have requested that Bank (i) extend the maturity date of the
Revolving Facility to December 15, 2006, (ii) add Napster, LLC as a co-Borrower
under the Loan Agreement, (iii) consent to the sale of assets by Roxio to Sonic
Solutions pursuant to that certain Asset Purchase Agreement to be entered into
between Roxio and Sonic Solutions (which Asset Purchase Agreement, in the form
provided to Bank as of the date hereof is hereinafter referred to as the
"Purchase Agreement"), (iv) release Bank's security interest in all assets being
sold by Roxio to Sonic Solutions pursuant to the Purchase Agreement, and (v)
make such other changes to the Loan Agreement all as more fully set forth
herein,
D. Defined terms used but not otherwise defined herein shall have the same
meanings as in the Loan Agreement. Hereinafter, (i) all indebtedness owing by
Borrower to Bank shall be referred to as the "Indebtedness", (ii) the
above-described security documents and guaranties, together with all other
documents securing repayment of the Indebtedness shall be referred to
hereinafter as the "Security Documents" and (iii) the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
1. DESCRIPTION OF CHANGE IN TERMS.
A. From and after the date hereof, Section 6.2(b) and (c) of the Loan
Agreement are hereby amended and restated in their entirety as follows:
(b) Borrower will deliver to Bank aged listings of accounts receivable
and accounts payable, which aged listings of accounts receivable and accounts
payable shall be due to Bank (a) within thirty (30) days after the last day of
each month if all Borrower's aggregate unrestricted cash is $40,000,000 or less,
or (b) within thirty (30) days after the last day of each calendar quarter if
all Borrowers' aggregate unrestricted cash exceeds $40,000,000.
(c) Borrower will deliver to Bank a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit C; which Compliance Certificate shall
be due to Bank (a) within thirty (30) days after the last day of each month if
all Borrowers' aggregate unrestricted cash is $40,000,000 or less, or (b) within
thirty (30) days after the last day of each calendar quarter if all Borrowers'
unrestricted cash exceeds $40,000,000.
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B. From and after the date hereof, the Section 6.7 of the Loan
Agreement is hereby amended and restated in its entirety as follows:
6.7 FINANCIAL COVENANTS. Borrower will maintain as of the last day of
each month (provided, however that the covenants set forth below shall be
measured on the last day of each calendar quarter at all times that Borrower's
unrestricted cash exceeds $40,000,000):
(a) TANGIBLE NET WORTH. An Aggregate Tangible Net Worth of at least
$45,000,000.
(b) LIQUIDITY COVERAGE. A ratio of unrestricted cash, cash equivalents
and short-term and long-term marketable securities, plus ten percent (10%) of
Net Accounts Receivable divided by the aggregate Obligations of not less than
2.00 to 1.00.
C. From and after the date hereof, the following definition set forth
in Section 13.1 (Definitions) of the Loan Agreement is hereby amended and
restated in its entirety as follows:
"REVOLVING MATURITY DATE" is December 15, 2006.
2. PAYMENT OF LOAN FEE. Borrower shall pay to Bank a fully earned, nonrefundable
loan restructuring fee in the amount of Twenty Thousand Dollars ($20,000) (the
"Loan Fee") plus all out-of-pocket expenses, including, but not limited to fees
and expenses of Bank's counsel.
3. WAIVER REGARDING FILING OF TAX RETURN. Borrower has notified Bank that
Borrower will not be able to timely file its Federal tax return due December 31,
2004 (the "Applicable Tax Return") and has requested that Bank waive the
requirement. Notwithstanding anything to contrary contained in the Loan
Documents, Bank hereby waives the requirement that Borrower timely files the
Applicable Tax Return; provided, however that Borrower hereby agrees to file the
Applicable Tax Return on or before January 31, 2005. Bank's agreement to waive
the requirement of the timely filing of the Applicable Tax Return pursuant to
this Agreement shall in no way obligate Bank to make any future modifications to
the Loan Agreement or to waive Borrower's compliance with any other terms of the
Loan Documents, and shall not limit or impair Bank's right to demand strict
performance of all other terms and covenants as of any date.
4. CONSENT TO SALE OF ASSETS. Subject to the terms and conditions contained
herein, Bank hereby consents to the sale of the Acquired Assets by Roxio, Inc to
Sonic Solutions pursuant to the Purchase Agreement.
5. RELEASE OF SECURITY INTEREST IN ASSETS TO BE SOLD. Subject to the terms and
conditions contained herein, Bank hereby consents to the release of its security
interests in the Acquired Assets being sold by Roxio to Sonic Solutions pursuant
to the Purchase Agreement.
6. Compliance Certificate. From and after the effective date hereof, Exhibit C
(Compliance Certificate) of the Loan Agreement shall be deleted in its entirety
and replace with Exhibit C attached hereto.
7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
8. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness. The Borrower acknowledges
and warrants that Bank has acted in good faith and has conducted in a
commercially reasonable manner its relationships with Borrower in connection
with this Agreement and in connection with the Loan Documents, including the
Loan Agreement and the Indebtedness, the Borrower hereby waives and releases any
claims to the contrary.
9. WAIVER AND RELEASE OF CLAIMS.
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(a) Borrower ("Releasing Party") hereby releases, acquits, and
discharges Bank and Bank's employees, agents, representative, consultants,
attorneys, fiduciaries, servants, officers, directors, partners, predecessors,
successors and assigns, subsidiary corporations, parent corporations, and
related corporate divisions (all of the foregoing hereinafter called the
"Released Parties"), from all actions and causes of action, judgments,
executions, suits, debts, claims, demands, liabilities, obligations, damages,
and expenses of any and every character, known or unknown, direct and/or
indirect, at law or in equity, of whatsoever kind or nature, whether heretofore
or hereafter arising, for or because of any matter or things done, omitted or
suffered to be done by any of the Released Parties prior to and including the
date of execution hereof, and in any way directly or indirectly arising out of
or in any way connect to this Agreement and the Existing Loan Documents,
including, but not limited to, claims relating to any settlement negotiation
(all of the foregoing hereinafter called the "Released Matters"). Each Releasing
Party acknowledges that the agreements in this section are intended to be in
full satisfaction of all or any alleged injuries or damages arising in
connection with the Released Matters.
(b) Releasing Party acknowledges that it has not relied, in executing
the release set forth in this section, upon any representations, warranties, or
conditions by Bank or any other entity except as are specifically set forth in
this Agreement.
(c) Nothing contained herein shall be construed at any time as an
admission by Bank of any liability to Borrower or any other entity.
(d) Releasing Party warrants to Bank that it has not purported to
transfer, assign, or otherwise convey any right, title or interest of such
Releasing Party in any Released Matter to any other entity, and that the
foregoing constitutes a full and complete release of all Released Matters.
10. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
understands and agrees that in modifying the existing Indebtedness, Bank is
relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Agreement, the terms of the Existing Loan Documents remain unchanged and in
full force and effect. Bank's agreement to modifications to the existing
Indebtedness pursuant to this Agreement in no way shall obligate Bank to make
any future modifications to the Indebtedness. Nothing in this Agreement shall
constitute a satisfaction of the Indebtedness. It is the intention of Bank and
Borrower to retain as liable parties all makers and endorsers of Existing Loan
Documents, unless the party is expressly released by Bank in writing. No maker,
endorser, or guarantor will be released by virtue of this Agreement. The terms
of this paragraph apply not only to this Agreement, but also to all subsequent
loan modification agreements.
11 INTEGRATION. This Agreement, together with the Existing Loan Documents,
constitutes the entire agreement and understanding among the parties relating to
the subject matter hereof, and supersedes all prior and contemporaneous
proposals, negotiations, agreements, and understandings relating to the subject
matter. In entering into this Agreement, Borrower acknowledges that it is
relying on no statement, representation, warranty, covenant, or agreement of any
kind made by the Bank or any employee or agent of Bank, except for the
agreements of Bank set forth herein. No modification, rescission, waiver,
release, or amendment of any provision of this Agreement shall be made, except
by a written agreement signed by Bank and Borrower.
12. GOVERNING LAW, HEADINGS. This Agreement is one of the Loan Documents defined
in the Loan Agreement and shall be governed and construed in accordance with the
laws of the State of California. The headings and captions in this Agreement are
for the convenience of the parties only and are not a part of this Agreement.
13. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon the following:
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a. Borrower's payment of the Loan Fee;
b. delivery to Bank of a fully executed Joinder Agreement acceptable to
Bank, for the addition of Napster as a co-borrower under the Loan Documents;
c. Delivery to Bank of a fully executed Intellectual Property Security
Agreement providing Bank a security interest in Napster's Intellectual Property
as security for Napster's obligations under the Loan Documents; and
d. Delivery to Bank of resolutions (acceptable to Bank) adopted by
Roxio and Napster with respect to the transactions described herein.
[signatures on following page]
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This Agreement is executed as of the date first written above.
BORROWER: BANK:
ROXIO, INC. SILICON VALLEY BANK
By: By:
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Name: Name:
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Title: Title:
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NAPSTER, LLC
By: ,
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Manager/Member
By:
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Name:
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Title:
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EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, CA 95054
FROM: ROXIO, INC. and NAPSTER, LLC
The undersigned authorized officer of ROXIO, INC. and NAPSTER, LLC
(together "Borrower") certifies that under the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower
is in complete compliance for the period ending _______________ with all
required covenants except as noted below and (ii) all representations and
warranties in the Agreement are true and correct on this date. Attached are the
required documents supporting the certification. In addition, the undersigned
authorized officer of Borrower certifies that Borrower and each Subsidiary (i)
has timely filed all required tax returns and paid, or made adequate provision
to pay, all material taxes, except those being contested in good faith with
adequate reserves under GAAP and (ii) does not have any legal actions pending or
threatened against Borrower or any Subsidiary in which an adverse decision could
reasonably be expected to cause a Material Adverse Change for Borrower which
Borrower has not previously notified in writing to Bank. The Officer certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) consistently applied from one period to the next except as
explained in an accompanying letter or footnotes. The Officer acknowledges that
no borrowings may be requested at any time or date of determination that
Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
Monthly financial statements* Monthly within 30 days Yes No
Compliance Certificate** Monthly/Quarterly within 30 days Yes No
Quarterly financial statements (10Q) Within 5 days after filing Yes No
Annual (Audited) (10K) Within 5 days after filing Yes No
A/R & A/P Agings** Monthly/Quarterly within 30 days Yes No
Business Forecast Within 45 days after year end Yes No
*Unless Borrower's unrestricted cash exceeds $40,000,000
**Monthly if Borrower's unrestricted cash is $40,000,000 or less; quarterly if Borrower's unrestricted cash
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exceeds $40,000,000
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
Maintain on a Monthly Basis (quarterly if unrestricted cash exceeds
$40,000,000):
Minimum Tangible Net Worth $45,000,000 $________ Yes No
Minimum Liquidity Coverage 2.00:1.00 _____:1.00 Yes No
Have there been updates to Borrower's intellectual property, if appropriate? Yes / No
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COMMENTS REGARDING EXCEPTIONS: See Attached. ----------------------------------------------------
BANK USE ONLY
Sincerely, Received by:
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AUTHORIZED SIGNER
Roxio, Inc.
Date:
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SIGNATURE
Verified:
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TITLE AUTHORIZED SIGNER
Date:
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DATE
Compliance Status: Yes No
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Napster, LLC
By: ,
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Manager/Member
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SIGNATURE
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TITLE
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DATE