Attached files
| file | filename |
|---|---|
| 8-K - MobileSmith, Inc. | v204561_8k.htm |
| EX-99.1 - MobileSmith, Inc. | v204561_ex99-1.htm |
| EX-10.1 - MobileSmith, Inc. | v204561_ex10-1.htm |
December
6, 2010
Smart
Online Inc.
4505
Emperor Blvd.
Durham,
NC 27703
Re: Letter Agreement for
$6,500,000.00 Term Facility
Gentlemen:
Israel
Discount Bank of New York ("IDB") is pleased to advise you that it holds
available for the benefit of Smart Online Inc. (the
"Borrower"), a corporation organized and in good standing under the laws of the
State of Delaware, a multi-draw term loan facility ("Credit Facility") in the
maximum principal amount of $6,500,000.00, subject to the following terms and
conditions of this letter agreement ("Letter Agreement") as set forth
below:
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Credit Facility:
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IDB
holds available for the benefit of Borrower the Credit Facility in the
aggregate amount of $6,500,000.00. Such Term Facility shall be
evidenced by IDB's promissory note ("Note") together with the terms and
conditions set forth in this Letter Agreement:
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Purpose:
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The
purpose of the Credit Facility shall be for corporate working capital
needs and to payoff current outstandings at Paragon
Bank.
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Interest and Principal
Payments:
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(a)
Interest. Rate. Each
advance under the Credit Facility shall bear interest at a rate to be
elected by the Borrower at the time of each advance request equal to
either:
(i)
Prime Rate
Option: A rate of interest established by IDB as its
prime rate of interest, as determined by IDB from time to time (the “Prime
Rate”), plus a margin of 100 basis points. Any change in the Prime Rate
shall take effect on the date of the change in the Prime Rate;
or
(ii)
LIBOR Rate
Option: A rate of interest equal to the London interbank
offered rate of interest, as determined by IDB two business days before
the beginning of each interest period, or as otherwise determined from
time to time by IDB (“LIBOR”), as such term
is defined in the Note, plus a margin of 300 basis points for interest
periods of two, three or four
months.
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ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER
FDIC
511 FIFTH AVE. NEW YORK, NY 10017-4997
· TEL: (212)
551-8500
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(b)
Interest
Payments. Interest on the unpaid principal balance of
the Note from time to time outstanding shall be payable quarterly pursuant
to the terms of the Note.
(c)
Interest
Rate Floor. There shall be an interest rate floor of
4.00% for all borrowings under the Credit Facility.
Principal.
The
unpaid principal amount due under the Credit Facility may not be
reborrowed after it is repaid.
All
amounts of interest, principal and other fees and other charges shall be
payable no later than the Maturity Date (as defined in the Note), or upon
the occurrence and continuation of an Event of Default (as defined in the
Note).
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Fees and Charges:
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Borrower
shall pay to IDB (i) an up-front fee in the amount of $10,000.00 and (ii)
a documentation fee in the amount of $1,500.00, contemporaneously with the
execution of this Letter Agreement. Borrower hereby authorizes
IDB to debit its deposit and/or operating account for the payment of such
fees.
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Collateral:
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That
certain (i) irrevocable standby letter of credit issued by HSBC
Switzerland in favor of IDB in the aggregate amount of $2,500,000.00
("HSBC SBLC") and (ii) irrevocable standby letter of credit issued by UBS
Switzerland in favor of Bank in the aggregate amount of $4,000,000.00
("UBS SBLC"), as each may be amended, assigned or otherwise renewed or
replaced from time to time.
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Deposit Account:
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From
and after the date hereof through and including the Maturity Date (as
defined in the Note), Borrower shall maintain a deposit account (Account
No. ________________) ("Deposit Account") with IDB with a reserve deposit
in the minimum amount of $250,000.00, or such lesser amount as IDB may
require in its sole and absolute discretion, based on the total aggregate
principal amount outstanding under the Credit Facility at the time in
question ("Deposit Account Amount"). If the Deposit Account reaches
$100,000.00, or such lesser amount as IDB may require in its sole and
absolute discretion, based on the total aggregate principal amount
outstanding under the Credit Facility at the time in question, the
Borrower shall be required to immediately replenish the Deposit Account up
to the lesser of (i) the Deposit Account Amount or (ii) the remaining
interest payments to be due and payable throughout the term of the Credit
Facility. All payments shall be made by automatic debit from
the Deposit Account and Borrower shall maintain balances sufficient to pay
the payments. Such debit will occur on each payment due date
for interest, as specified in the
Note.
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ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER
FDIC
511 FIFTH AVE. NEW YORK, NY 10017-4997
· TEL: (212)
551-8500
2
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Conditions Precedent:
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Prior
to the Borrower’s initial and each subsequent request for an advance or
financial accommodation under the Credit Facility, it shall have provided
to IDB the following:
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1.
A copy of the resolutions passed by the Borrower’s Board of
Directors, certified by its Secretary, as being in full force and effect
authorizing the borrowing described herein, incumbency certificate for
Borrower identifying all authorized officers with specimen signatures and
the execution of all documents and agreements required by IDB to evidence
and secure the Credit Facility, which shall include this Letter Agreement
and the Note, and such other documents, all in form and substance
acceptable to IDB and its counsel in their sole discretion;
2.
Copies of the certificates of incorporation or articles of organization of
the Borrower;
3.
Payment of all fees, expenses and charges invoiced by IDB;
4.
Satisfactory completion of standard due diligence, including Know Your
Customer procedures, searches and reports required by IDB;
5.
The Borrower shall open and maintain the Deposit Account with IDB with the
Deposit Account Amount on deposit;
6.
Borrower shall have furnished to IDB, and IDB shall have approved, the
HSBC SBLC and/or the UBS SBLC, as applicable, in IDB's sole and absolute
discretion; and
7.
The absence of any action, suit, investigation or proceeding pending or
threatened in any court of before any arbitrator or governmental authority
that purports (a) to materially and adversely impact the Borrower, or (b)
to affect any transaction contemplated hereby or the ability of the
Borrower to perform its obligations under the Credit
Facility.
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Financial
Information:
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The
Borrower agrees that, so long as any obligations under the Credit Facility
remain outstanding, the Borrower shall furnish to IDB:
1.
Within 90 days after the end of each of its fiscal years, the financial
statements of the Borrower dated as of the end of the reported fiscal
year, which shall be audited
by a certified public accountant acceptable to IDB, which acceptable
accountants include Cherry Bekaert Holland, the Borrower’s current
accounting firm, and be without material exception or qualification except
as identified in the most recent Annual Report on Form 10-K;
2.
Within 60 days of each fiscal quarter, the financial statements of the
Borrower dated as of the end of the reported fiscal quarter, which shall
be reviewed by a certified public accountant acceptable to IDB
and be without material exceptions or qualifications except as identified
in the most recent Annual Report on Form 10-K; and
3.
Notice of default, litigation, proceedings or investigations, and material
changes in accounting or financing reporting
practices.
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ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER
FDIC
511 FIFTH AVE. NEW YORK, NY 10017-4997
· TEL: (212)
551-8500
3
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Documentation:
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The
utilization of the Credit Facility will be subject to the execution and
delivery to IDB of such agreements, documents, instruments, and
certificates as may be requested by IDB and its counsel to evidence the
Credit Facility and other matters relating to the Credit Facility in form
and substance satisfactory to IDB and its counsel, in their sole
discretion. The loan documents shall contain normal and
customary default provisions, as applicable. Reasonable legal
fees and costs shall be for the account of the
Borrower.
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USA Patriot
Act:
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To
comply with applicable law, the Borrower and beneficial owners of the
Borrower shall provide IDB with verifiable information including: name,
address, and corporate tax identification number, date of birth and social
security number (if an individual) and other information. This
information may be shared with government agencies and regulators as
required by applicable law. The Borrower further confirms and
represents that it is in compliance with all applicable terms and
conditions under the USA PATRIOT Act.
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General
Information:
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The
Borrower shall supply IDB with other such information, reports, and
statements as it may reasonably request, and agrees to cooperate with IDB
in order to comply with the terms and conditions of this Letter
Agreement.
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General
Indemnity:
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Borrower
shall indemnify IDB, its affiliates and their officers, directors,
employees, agents and advisors (each, an “Indemnitee”) against, and hold
each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses (including the reasonable fees, charges
and disbursements of any counsel of any Indemnitee), incurred by any
Indemnitee or asserted against any Indemnitee by any third party, Borrower
its affiliates arising out of, in connection with, or as a result of the
execution and delivery of the loan documents for the Credit Facility or
any related agreement or instrument contemplated, the performance by the
parties to the loan documents or their respective obligations under such
agreements or the consummation of the transactions contemplated by such
agreements, provided that the Borrower shall have no obligation hereunder
to any Indemnitee with respect to damages caused directly by the gross
negligence or willful misconduct of such Indemnitee.
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Waiver; Jurisdiction
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IT
IS UNDERSTOOD AND AGREED THAT IN THE EVENT OF ANY LITIGATION OR ACTION
ARISING OUT OF OR RELATING TO THE CREDIT FACILITY OR THEIR BANKING
RELATIONSHIP, THE UNDERSIGNED PARTIES UNCONDITIONALLY AND IRREVOCABLY
WAIVE TRIAL BY JURY AND CONSENT TO THE JURISDICTION OF THE COURTS OF (I)
THE STATE OF NEW YORK OR (II) THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN, NEW
YORK. No waiver of any terms or conditions of this Letter
Agreement or any other loan documents shall be effective unless set forth
in writing and executed by the Borrower and officers of
IDB.
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ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER
FDIC
511 FIFTH AVE. NEW YORK, NY 10017-4997
· TEL: (212)
551-8500
4
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Applicable Law
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This
Letter Agreement and the terms and conditions contained herein are to be
construed according to and governed by the internal laws of the State of
New York.
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Acceptance:
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By
signing below, the Borrower agrees to the terms and conditions set forth
in this Letter Agreement, which terms may not be amended or modified
unless in a writing executed by the Borrower and
IDB.
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Please
indicate your agreement and acceptance of the foregoing by signing and returning
the enclosed copy of this letter as soon as possible. Should you have
any questions, please contact the undersigned at your convenience at (212)
551-8568.
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Very
truly yours,
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ISRAEL
DISCOUNT BANK OF NEW YORK
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By:
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/s/ Mali Golan | |
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Mali
Golan, AVP
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By:
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/s/ Michael Paul | |
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Michael
Paul,
SVP
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Agreed
and Accepted:
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SMART
ONLINE INC.
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By:
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/s/
Dror Zoreff
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Name:
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Dror
Zoreff
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Title:
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Interim
Chief Executive Officer
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and
President
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ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER
FDIC
511 FIFTH AVE. NEW YORK, NY 10017-4997
· TEL: (212)
551-8500
5