Exhibit 10.6

 

 

 

 

 

 

 

 

 

Bridgeline Digital, Inc.

 

BRIDGE BANK, NATIONAL ASSOCIATION

LOAN AND SECURITY AGREEMENT

 

 

 

 

 

 

 

 
 

--------------------------------------------------------------------------------

 

  

 

This Loan And Security Agreement is entered into as of December __, 2013, by and
between Bridge Bank, National Association (“Bank”), a subsidiary of Bridge
Capital Holdings, incorporated in the State of California, with its principal
place of business located at 55 Almaden Boulevard, Suite 100, San Jose,
California and Bridgeline Digital, Inc. (“Borrower”), a Delaware Corporation
with its principal place of business located at 80 Blanchard Road, Burlington,
Massachusetts.

 

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:

 

“Account(s)” means any “account” as defined in the Code, and 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.

 

“Account Debtor” means any “account debtor” as defined in the Code.

 

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

 

“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.

 

“Agreement” means the same as defined in the preamble above.

 

“Bank” means the same as defined in the preamble above.

 

“Bank Expenses” means all: costs or expenses (including reasonable attorneys’
fees and expenses) incurred in connection with the preparation, negotiation,
administration, and enforcement of the Loan Documents; 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” means the same as defined in the preamble above.

 

“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 eighty percent (80%) of Eligible
Accounts, as determined by Bank (provided however if the initial Collateral
audit indicates a twelve (12) month average dilution rate of less than 2%, then
the Borrowing Base shall be an amount equal to eighty five percent (85%) of
Eligible Accounts) with reference to the most recent Borrowing Base Certificate
delivered by Borrower. The Borrowing Base may be revised from time to time by
Bank following each Collateral audit or as Bank deems necessary in Bank’s
reasonable judgment and upon notification thereof to Borrower.

 

“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.

 

“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 Massachusetts Uniform Commercial Code, in effect from
time-to-time.

 

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

 

“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, Non-formula Advance, Letters of Credit
Sublimit, 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.

 

“Deposit Account” means any “deposit account” as defined by the Code.

 

“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 notification thereof to Borrower 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 one hundred
twenty (120) days of invoice date;

 

(b)     Accounts with respect to an Account Debtor, thirty-five percent (35%) of
whose Accounts the Account Debtor has failed to pay within one hundred (120)
days of invoice date;

 

 
2

--------------------------------------------------------------------------------

 

 

 

(c)     Accounts that the Account Debtor has failed to pay within ninety (90)
days of invoice date, to the extent such Accounts exceeds thirty five percent
(35%) of all Eligible Accounts;

 

(d)     Accounts with respect to which the Account Debtor is an officer,
employee, or agent of Borrower;

 

(e)     Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or other terms
by reason of which the payment by the Account Debtor may be conditional;

 

(f)      Prebillings, prepaid deposits, retention billings, or progress
billings;

 

(g)     Accounts with respect to which the Account Debtor is an Affiliate of
Borrower;

 

(h)     Accounts with respect to which the Account Debtor does not have its
principal place of business in the United States or Canada, except for Eligible
Foreign Accounts;

 

(i)      Accounts with respect to which the Account Debtor is the United States
or any department, agency, or instrumentality of the United States;

 

(j)      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;

 

(k)     Accounts with respect to an Account Debtor, including Subsidiaries and
Affiliates, whose total obligations to Borrower exceed thirty-five percent (35%)
of all Accounts, to the extent such obligations exceed the aforementioned
percentage, except as approved in writing by Bank;

 

(l)      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

 

(m)    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
Canada and that: (i) the account debtor is Dover Corporation or Novartis; or
(ii) 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 (iii) that Bank
approves on a case-by-case basis.

 

“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.

 

“Indebtedness” means any (a) 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) obligations evidenced by notes, bonds, debentures or similar
instruments, (c) capital lease obligations and (d) 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, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.

 

 
3

--------------------------------------------------------------------------------

 

 

 

“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; all amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and all proceeds and products of the foregoing.

 

“Inventory” means all inventory as defined in the Code 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.

 

“Letter of Credit” or “Letters of Credit” is defined in Section 2.1(b) hereof.

 

“Letter of Credit Sublimit” is defined in Section 2.1(b) hereof.

 

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

 

“Loan Documents” means, collectively, this Agreement, any note or notes,
documents or instruments 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) or prospects 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.

 

“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.

 

“Nonformula Sublimit” means One Million Dollars ($1,000,000).

 

“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.

 

 
4

--------------------------------------------------------------------------------

 

 

 

“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;

 

(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 $100,000 in the
aggregate at any given time; and

 

(d)     Subordinated Debt, if any.

 

“Permitted Investment” means:

 

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

 

(b)     (i) marketable direct obligations issued or unconditionally guaranteed
by the United States of America or any agency or any State thereof maturing
within one (1) year from the date of acquisition thereof, (ii) commercial paper
maturing no more than one (1) year 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, (iii) certificates of deposit maturing
no more than one (1) year from the date of investment therein issued by Bank and
(iv) Bank’s money market accounts; and

 

(c)     Other cash equivalents maintained at Bank.

 

“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;

 

(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.

 

“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.

 

 
5

--------------------------------------------------------------------------------

 

 

 

“Prime Rate” means (a) the greater of three and one quarter percent (3.25%) per
annum, or (b) the variable rate of interest, per annum, most recently announced
by Bank, as its “prime rate”, whether or not such announced rate is the lowest
rate available from Bank.

 

“Responsible Officer” means each of the Chief Executive Officer, the Chief
Financial Officer 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 an amount up to Five Million
Dollars ($5,000,000).

 

“Revolving Line Maturity Date” means March 31, 2016.

 

“SEC” means the Securities Exchange and Commission, or any successor thereto.

 

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

 

“Shares” means (i) one hundred percent (100%) of the issued and outstanding
capital stock, membership units or other securities owned or held of record by a
Borrower or any Subsidiary of Borrower, in any direct or indirect domestic
Subsidiary; and (ii) sixty five percent (65%) of the issued and outstanding
capital stock, membership units or other securities owned or held of record by a
Borrower or any Subsidiary of Borrower, in any direct or indirect Subsidiary
which is not an entity organized under the laws of the United States or any
territory thereof.

 

“Subordinated Debt” means any debt incurred by Borrower that is subordinated to
the debt owing by Borrower to Bank on terms acceptable to Bank (and identified
as being such by Borrower and Bank), pursuant to a subordination agreement in
form and substance satisfactory to 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.

 

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. All other capitalized
terms contained in this Agreement, unless otherwise indicated, shall have the
meaning provided by the Code to the extent such terms are defined therein.

 

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.

 

 
6

--------------------------------------------------------------------------------

 

 

 

(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, minus, in each case, the
face amount of all outstanding Letters of Credit. Notwithstanding the foregoing,
Borrower may request Advances without regard to the Borrowing Base (each, a
“Nonformula Advance”), provided that (x) the aggregate amount of all Nonformula
Advances shall not exceed the lesser of the availability under the Revolving
Line or the Nonformula Sublimit at any time and (y) Borrower is in compliance
with Section 6.9 prior to and after giving effect to such Nonformula Advance
being made. Any Non-Formula Advance shall be deemed an Advance for all purposes
of this Agreement. 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 Line 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.

 

(ii)     Whenever Borrower desires an Advance, Borrower will notify Bank no
later than 12:00 p.m. Pacific time, on the Business Day that the Advance is to
be made. Each such notification shall be made (i) by telephone or in-person
followed by written confirmation from Borrower within 24 hours, (ii) by
electronic mail or facsimile transmission, or (iii) by delivering to Bank a
Revolving Advance Request Form in substantially the form of 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 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)     Letters of Credit. Subject to the terms and conditions of this
Agreement, at any time prior to the Revolving Line 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”), provided, however, the aggregate
outstanding face amount of all Letters of Credit shall not exceed $50,000 (the
“Letter of Credit Sublimit”) at any time, and for purposes of determining
availability under the Revolving Line, the aggregate outstanding face amount of
all Letters of Credit (whether drawn or undrawn) shall decrease, on a
dollar-for-dollar basis, the amount available for other Advances. 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 Bank’s standard fees. On any drawn
but unreimbursed Letter of Credit, the unreimbursed amount shall be deemed an
Advance under Section 2.1(a). 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, 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. If at any time the Revolving Facility is terminated or otherwise
ceases to exist, Borrower shall immediately secure in cash all obligations under
the Letter of Credit Sublimit on terms reasonably acceptable to Bank.

 

2.2     Overadvances. If the aggregate amount of the outstanding Advances plus
the aggregate amounts outstanding under the Letter of Credit Sublimit 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.

 

2.3     Interest Rates, Payments, and Calculations.

 

(a)     Interest Rates.

 

(i)     Advances. Except as set forth in Section 2.3(b), the Advances shall bear
interest, on the outstanding Daily Balance thereof, at a rate equal to one
percent (1%) above the Prime Rate.

 

 
7

--------------------------------------------------------------------------------

 

 

 

(b)     Late Fee; Default Rate. If any payment is not made within ten (10) days
after the date such payment is due, Borrower shall pay Bank a late fee equal to
the lesser of (i) five percent (5%) of the amount of such unpaid amount or (ii)
the maximum amount permitted to be charged under applicable law, not in any case
to be less than $25.00. All Obligations shall bear interest, from and after the
occurrence and during the continuance of an Event of Default, at a rate equal to
five (5) percentage points above the interest rate applicable immediately prior
to the occurrence of the Event of Default, unless the Bank otherwise elects,
from time to time, at its sole discretion to impose a smaller increase.

 

(c)     Payments; Interest Rate, Periodic Payments, and Otherwise. Interest
hereunder shall be due and payable on the tenth calendar day of each month
during the term hereof. Bank shall, at its option, charge such interest, all
Bank Expenses, and all Periodic Payments against any of Borrower’s deposit
accounts or against the Revolving Line, in which case those amounts shall
thereafter accrue interest at the rate then applicable hereunder. Any interest
not paid when due shall be compounded by becoming a part of the Obligations, and
such interest shall thereafter accrue interest at the rate then applicable
hereunder. All payments shall be free and clear of any taxes, withholdings,
duties, impositions or other charges, to the end that Bank will receive the
entire amount of any Obligations payable hereunder, regardless of source of
payment.

 

(d)     Computation; 360-Day Year. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased, effective as of the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.

 

2.4     Crediting Payments. Prior to the occurrence of an Event of Default, Bank
shall credit a wire transfer of funds, check or other item of payment to such
deposit account or Obligation as Borrower specifies. After the occurrence of an
Event of Default, the receipt by Bank of any wire transfer of funds, check, or
other item of payment shall be immediately applied to conditionally reduce
Obligations, but shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment received
by Bank after 12:00 noon Pacific time shall be deemed to have been received by
Bank as of the opening of business on the immediately following Business Day.
Whenever any payment to Bank under the Loan Documents would otherwise be due
(except by reason of acceleration) on a date that is not a Business Day, such
payment shall instead be due on the next Business Day, and additional fees or
interest, as the case may be, shall accrue and be payable for the period of such
extension.

 

2.5     Fees. Borrower shall pay to Bank the following:

 

(a)     Facility Fee. On each of the Closing Date and on the first anniversary
of the Closing Date, a facility fee equal to $12,500, each of which shall be
nonrefundable; and

 

(b)     Bank Expenses. On the Closing Date, all Bank Expenses incurred through
the Closing Date, including reasonable attorneys’ fees and expenses and, after
the Closing Date, all Bank Expenses, including reasonable attorneys’ fees and
expenses, as and when they are due by Bank.

 

2.6     Term. This Agreement shall become effective on the Closing Date and,
subject to Section 13.7, shall continue in full force and effect for so long as
any Obligations remain outstanding or Bank has any obligation to make Credit
Extensions under this Agreement. Notwithstanding the foregoing, Bank shall have
the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank’s Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding.

 

2.7     Extension of Maturity. Notwithstanding anything contained herein to the
contrary, Bank shall have the right, in its sole and absolute discretion, to
extend the Revolving Line Maturity Date to the tenth day of the month next
following the actual Revolving Line Maturity Date as stated in this Agreement.

 

 
8

--------------------------------------------------------------------------------

 

 

 

3.     CONDITIONS OF LOANS.

 

3.1     Conditions Precedent to Initial Credit Extension. The obligation of Bank
to make the initial Credit Extension is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, the
following:

 

(a)     this Agreement;

 

(b)     a certificate of the Secretary or Assistant Secretary of Borrower with
respect to incumbency and resolutions authorizing the execution and delivery of
this Agreement;

 

(c)     UCC National Form Financing Statement;

 

(d)     an intellectual property security agreement;

 

(e)     subordination agreement with existing noteholders;

 

(f)     if certificated, delivery of the share certificates representing the
Shares of Bridgeline Digital Pvt. Ltd., Borrower’s Subsidiary formed under the
laws of India and stock powers held by Borrower;

 

(g)     agreement to provide insurance;

 

(h)     payoff letter from Silicon Valley Bank;

 

(i)     payment of the fees and Bank Expenses then due specified in Section 2.5
hereof;

 

(j)     current financial statements of Borrower;

 

(k)     an audit of the Collateral, the results of which shall be satisfactory
to Bank; and

 

(l)     such other documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate.

 

3.2     Conditions Precedent to all Credit Extensions. The obligation of Bank to
make each Credit Extension, including the initial Credit Extension, is further
subject to the following conditions:

 

(a)     timely receipt by Bank of the Revolving Advance Request Form as provided
in Section 2.1; and

 

(b)     the representations and warranties contained in Section 5 shall be true
and correct in all material respects on and as of the date of such Revolving
Advance Request Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension. The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Credit Extension as
to the accuracy of the facts referred to in this Section 3.2.

 

4.     CREATION OF SECURITY INTEREST.

 

4.1     Grant of Security Interest. Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Such security interest
constitutes a valid, first priority security interest in the presently existing
Collateral, and will constitute a valid, first priority security interest in
Collateral acquired after the date hereof.

 

 
9

--------------------------------------------------------------------------------

 

 

 

4.2     Delivery of Additional Documentation Required. Borrower shall from time
to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue the
perfection of Bank’s security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
Borrower from time to time may deposit with Bank specific time deposit accounts
to secure specific Obligations. Borrower authorizes Bank to hold such balances
in pledge and to decline to honor any drafts thereon or any request by Borrower
or any other Person to pay or otherwise transfer any part of such balances for
so long as the Obligations are outstanding.

 

4.3     Right to Inspect. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower’s usual business hours but no more than once a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower’s Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower’s financial condition or the amount, condition of, or
any other matter relating to, the Collateral.

 

4.4     Pledge of Shares. Borrower hereby pledges, assigns and grants to Bank, a
security interest in all the Shares, together with all proceeds and
substitutions thereof, all cash, stock and other moneys and property paid
thereon, all rights to subscribe for securities declared or granted in
connection therewith, and all other cash and noncash proceeds of the foregoing,
as security for the performance of the Obligations. On the Closing Date, or, to
the extent not certificated as of the Closing Date, within ten (10) days of the
certification of any Shares, the certificate or certificates for the Shares will
be delivered to Bank, accompanied by an instrument of assignment duly executed
in blank by Borrower. To the extent required by the terms and conditions
governing the Shares, Borrower shall cause the books of each entity whose Shares
are part of the Collateral and any transfer agent to reflect the pledge of the
Shares. Upon the occurrence of an Event of Default hereunder, Bank may effect
the transfer of any securities included in the Collateral (including but not
limited to the Shares) into the name of Bank and cause new (as applicable)
certificates representing such securities to be issued in the name of Bank or
its transferee. Borrower will execute and deliver such documents, and take or
cause to be taken such actions, as Bank may reasonably request to perfect or
continue the perfection of Bank’s security interest in the Shares. Unless an
Event of Default shall have occurred and be continuing, Borrower shall be
entitled to exercise any voting rights with respect to the Shares and to give
consents, waivers and ratifications in respect thereof, provided that no vote
shall be cast or consent, waiver or ratification given or action taken which
would be inconsistent with any of the terms of this Agreement or which would
constitute or create any violation of any of such terms. All such rights to vote
and give consents, waivers and ratifications shall terminate upon the occurrence
and continuance of an Event of Default.

 

5.     REPRESENTATIONS AND WARRANTIES.

 

Borrower represents and warrants as follows:

 

5.1     Due Organization and Qualification. Borrower and each Subsidiary is a
corporation duly existing under the laws of its state of incorporation or a
registered organization, and each being qualified and licensed to do business in
any state in which the conduct of its business or its ownership of property
requires that it be so qualified.

 

5.2     Due Authorization; No Conflict. The execution, delivery, and performance
of the Loan Documents are within Borrower’s powers, have been duly authorized,
and are not in conflict with nor constitute a breach of any provision contained
in Borrower’s Articles of Incorporation or Bylaws, nor will they constitute an
event of default under any material agreement to which Borrower is a party or by
which Borrower is bound. Borrower is not in default under any material agreement
to which it is a party or by which it is bound.

 

5.3     No Prior Encumbrances. Borrower has good and marketable title to its
property, free and clear of Liens, except for Permitted Liens.

 

5.4     Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
existing obligations. The property and services giving rise to such Eligible
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.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.

 

 
10

--------------------------------------------------------------------------------

 

 

 

5.5     Merchantable Inventory. All Inventory is in all material respects of
good and marketable quality, less ordinary wear and tear, free from all known
material defects, except for Inventory for which adequate reserves have been
made.

 

5.6     Intellectual Property Collateral. Borrower is the sole owner of the
Intellectual Property Collateral, except for non-exclusive licenses granted by
Borrower to its customers in the ordinary course of business. Each of the
Patents is valid and enforceable, and no part of the Intellectual Property
Collateral has been judged invalid or unenforceable, in whole or in part, and no
claim has been made that any part of the Intellectual Property Collateral
violates the rights of any third party. Except as set forth in the Schedule,
Borrower’s rights as a licensee of intellectual property do not give rise to
more than five percent (5%) of its gross revenue in any given month, including
without limitation revenue derived from the sale, licensing, rendering or
disposition of any product or service. Except as set forth in the Schedule,
Borrower is not a party to, or bound by, any agreement that restricts the grant
by Borrower of a security interest in Borrower’s rights under such agreement.

 

5.7     Name; Location of Principal Place of Business. Except as disclosed in
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The principal place of business of
Borrower is located at the address indicated in the preamble and in Section 10
hereof. All Borrower’s Inventory and Equipment is located only at the location
set forth in Section 10 hereof.

 

5.8     Litigation. Except as set forth in the Schedule, there are no actions or
proceedings pending by or against Borrower or any Subsidiary before any court or
administrative agency in which an adverse decision could have a Material Adverse
Effect, or a material adverse effect on Borrower’s interest or Bank’s security
interest in the Collateral.

 

5.9     No Material Adverse Change in Financial Statements. All consolidated and
consolidating financial statements related to Borrower and any Subsidiary that
Bank has received from Borrower fairly present in all material respects
Borrower’s financial condition as of the date thereof and Borrower’s
consolidated and consolidating results of operations for the period then ended.
There has not been a material adverse change in the consolidated or the
consolidating financial condition of Borrower since the date of the most recent
of such financial statements submitted to Bank.

 

5.10     Solvency, Payment of Debts. Borrower is solvent and able to pay its
debts (including trade debts) as they mature.

 

5.11     Regulatory Compliance. Borrower and each Subsidiary have met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA, and no event has occurred resulting from Borrower’s failure to
comply with ERISA that could result in Borrower’s incurring any material
liability. Borrower is not an “investment company” or a company “controlled” by
an “investment company” within the meaning of the Investment Company Act of
1940. Borrower is not engaged principally, or as one of the important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations T and U of the Board of
Governors of the Federal Reserve System). Borrower has complied with all the
provisions of the Federal Fair Labor Standards Act. Borrower has not violated
any statutes, laws, ordinances or rules applicable to it, violation of which
could have a Material Adverse Effect.

 

5.12     Environmental Condition. None of Borrower’s or any Subsidiary’s
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower’s knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower’s knowledge, none of Borrower’s properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the releasing, or otherwise
disposing of hazardous waste or hazardous substances into the environment.

 

 
11

--------------------------------------------------------------------------------

 

 

 

5.13     Taxes. Borrower and each Subsidiary have filed or caused to be filed
all tax returns required to be filed, and have paid, or have made adequate
provision for the payment of, all taxes reflected therein.

 

5.14     Subsidiaries. Borrower does not own any stock, partnership interest or
other equity securities of any Person, except for Permitted Investments.

 

5.15     Government Consents. Borrower and each Subsidiary have obtained all
material consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower’s business as currently
conducted.

 

5.16     Accounts. None of Borrower’s nor any Subsidiary’s property is
maintained or invested with a Person other than Bank.

 

5.17     Shares. Borrower has full power and authority to create a first lien on
the Shares and no disability or contractual obligation exists that would
prohibit Borrower from pledging the Shares pursuant to this Agreement. To
Borrower’s knowledge, there are no subscriptions, warrants, rights of first
refusal or other restrictions on transfer relative to, or options exercisable
with respect to the Shares. The Shares have been and will be duly authorized and
validly issued, and are fully paid and non-assessable. To Borrower’s knowledge,
the Shares are not the subject of any present or threatened suit, action,
arbitration, administrative or other proceeding, and Borrower knows of no
reasonable grounds for the institution of any such proceedings.

 

5.18     Definition of Knowledge. For purposes of the Loan Documents, whenever a
representation or warranty is made to Borrower’s knowledge or awareness, to the
“best of” Borrower’s knowledge, or with similar qualification, knowledge or
awareness means the actual knowledge, after reasonable investigation, of the
Responsible Officers.

 

5.19     Full Disclosure. No written representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading (it being recognized by the Bank that the projections
and forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results)..

 

6.     AFFIRMATIVE COVENANTS.

 

Borrower shall do all of the following:

 

6.1     Good Standing. Borrower shall maintain its and each of its Subsidiaries’
legal existence and good standing in their respective jurisdictions of formation
and maintain qualification in each jurisdiction in which it is required under
applicable law. Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, in force all licenses, approvals and agreements, the
loss of which could have a Material Adverse Effect.

 

6.2     Government Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect.

 

6.3     Financial Statements, Reports, Certificates. Borrower shall deliver the
following to Bank: (a) as soon as available, but in any event within thirty (30)
days after the last day of each month, a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of Exhibit C hereto, together with
aged listings of accounts receivable and accounts payable and a deferred revenue
report; (b) as soon as available, but in any event within thirty (30) days after
the end of each calendar month, a company prepared consolidated and
consolidating balance sheet and income statement covering Borrower’s
consolidated and consolidating operations during such period, prepared in
accordance with GAAP, consistently applied, in a form acceptable to Bank and
certified by a Responsible Officer, together with a Compliance Certificate
signed by a Responsible Officer in substantially the form of Exhibit D hereto;
(c) as soon as available, but in any event within thirty (30) days after the end
of each calendar quarter, a company prepared consolidated and consolidating cash
flow statement covering Borrower’s consolidated and consolidating operations
during such period, prepared in accordance with GAAP, consistently applied, in a
form acceptable to Bank; (d) as soon as available, but in any event within one
hundred eighty (180) days after the end of Borrower’s fiscal year, audited
consolidated financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (e) as soon as available, but in any event no later than the
earlier to occur of thirty (30) days following the beginning of each fiscal year
or the date of approval by Borrower’s board of directors, an annual operating
budget and financial projections (including income statements, balance sheets
and cash flow statements) for such fiscal year, presented in a monthly format,
approved by Borrower’s board of directors, and in a form and substance
acceptable to Bank; (f) copies of all statements, reports and notices sent or
made available generally by Borrower to its security holders or to any holders
of Subordinated Debt and, if applicable, all reports on Forms 10-K and 10-Q
filed with the SEC or a link thereto on Borrower’s or another website; (g)
promptly upon receipt of notice thereof, a report of any legal actions pending
or threatened against Borrower or any Subsidiary that could result in damages or
costs to Borrower or any Subsidiary of One Hundred Fifty Thousand Dollars
($150,000) or more; and (h) such budgets, sales projections, operating plans or
other financial information as Bank may reasonably request from time to time.

 

 
12

--------------------------------------------------------------------------------

 

 

 

6.4     Audits. Bank shall have a right from time to time hereafter to audit
Borrower’s Accounts and appraise Collateral at Borrower’s expense, provided that
such audits will be conducted no more often than every twelve (12) months, with
reasonable notice to Borrower, unless an Event of Default has occurred and is
continuing.

 

6.5     Inventory; Returns. Borrower shall keep all Inventory in good and
marketable condition, , less ordinary wear and tear, free from all material
defects except for Inventory for which adequate reserves have been made. Returns
and allowances, if any, as between Borrower and its account debtors shall be on
the same basis and in accordance with the usual customary practices of Borrower,
as they exist at the time of the execution and delivery of this Agreement.
Borrower shall promptly notify Bank of all returns and recoveries and of all
disputes and claims, where the return, recovery, dispute or claim involves more
than One Hundred Fifty Thousand Dollars ($150,000).

 

6.6     Taxes. Borrower shall make, and shall cause each Subsidiary to make, due
and timely payment or deposit of all federal, state, and local taxes,
assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all tax payments and withholding taxes required of
it by applicable laws, including, but not limited to, those laws concerning
F.I.C.A., F.U.T.A., state disability, and local, state, and federal income
taxes, and will, upon request, furnish Bank with proof satisfactory to Bank
indicating that Borrower or a Subsidiary has made such payments or deposits;
provided that Borrower or a Subsidiary need not make any payment if the amount
or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrower.

 

6.7     Insurance.

 

(a)     Borrower, at its expense, shall keep the Collateral insured against loss
or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as ordinarily insured against by other owners in
similar businesses conducted in the locations where Borrower’s business is
conducted on the date hereof. Borrower shall also maintain insurance relating to
Borrower’s business, ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower’s.

 

(b)     All such policies of insurance shall be in such form, with such
companies, and in such amounts as are reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender’s loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof, and all liability insurance policies shall show the Bank as an
additional insured and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank’s
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.

 

 
13

--------------------------------------------------------------------------------

 

 

 

6.8     Accounts. Borrower shall (i) maintain and shall cause each of its
Subsidiaries to maintain its depository, operating, and investment accounts with
Bank and (ii) endeavor to utilize and shall cause each of its Subsidiaries to
endeavor to utilize Bank’s International Banking Division for any international
banking services required by Borrower, including, but not limited to, foreign
currency wires, hedges, swaps, foreign exchange contracts, and Letters of
Credit. For each account that Borrower maintains outside of Bank, Borrower shall
cause the applicable bank or financial institution at or with which any such
account is maintained to execute and deliver an account control agreement or
other appropriate instrument in form and substance satisfactory to Bank.

 

6.9     Financial Covenants.

 

(a)     Asset Coverage Ratio. Borrower shall maintain at all times a ratio of
its unrestricted cash maintained at Bank plus Eligible Accounts to all
Obligations owing to Bank of at least 1.40 to 1.00.

 

6.10     Intellectual Property Rights.

 

(a)     Borrower shall promptly give Bank written notice of any applications or
registrations of intellectual property rights filed with the United States
Patent and Trademark Office (“USPTO”), including the date of such filing and the
registration or application numbers, if any. Borrower shall (i) give Bank not
less than 30 days prior written notice of the filing of any applications or
registrations with the United States Copyright Office, including the title of
such intellectual property rights to be registered, as such title will appear on
such applications or registrations, and the date such applications or
registrations will be filed, and (ii) prior to the filing of any such
applications or registrations, shall execute such documents as Bank may
reasonably request for Bank to maintain its perfection in such intellectual
property rights to be registered by Borrower, and upon the request of Bank,
shall file such documents simultaneously with the filing of any such
applications or registrations. Upon filing any such applications or
registrations with the United States Copyright Office, Borrower shall promptly
provide Bank with (i) a copy of such applications or registrations, without the
exhibits, if any, thereto, (ii) evidence of the filing of any documents
requested by Bank to be filed for Bank to maintain the perfection and priority
of its security interest in such intellectual property rights, and (iii) the
date of such filing.

 

(b)     Bank may audit Borrower's Intellectual Property Collateral to confirm
compliance with this Section, provided such audit may not occur more often than
twice per year, unless an Event of Default has occurred and is continuing. Bank
shall have the right, but not the obligation, to take, at Borrower's sole
expense, any actions that Borrower is required under this Section to take but
which Borrower fails to take, after 15 days' notice to Borrower. Borrower shall
reimburse and indemnify Bank for all costs and expenses incurred in the exercise
of its rights under this Section.

 

6.11     Notices of Commercial Tort Claims; Event of Default. Without limiting
or contradicting any other more specific provision of this Agreement, promptly
(and in any event within three (3) Business Days) upon Borrower becoming aware
of the existence of any Event of Default or event described in Section 8 which,
with the giving of notice or passage of time, or both, would constitute an Event
of Default, Borrower shall give written notice to Bank of such occurrence, which
such notice shall include a reasonably detailed description of such Event of
Default or event which, with the giving of notice or passage of time, or both,
would constitute an Event of Default. If Borrower shall acquire a commercial
tort claim (as defined in the Code), Borrower shall promptly notify Bank in
writing of the general details thereof and grant to the Bank in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance reasonably
satisfactory to the Bank.

 

 
14

--------------------------------------------------------------------------------

 

 

 

6.12     Post Closing Covenants.

 

(a)     On or before the 30th day following the Closing Date, Borrower shall
provide to Bank a fully executed consent to removal of personal property with
respect to Borrower’s location in Atlanta, Georgia, in form and substance
satisfactory to Bank.

 

(b)     On or before March 31, 2014, Borrower shall provide evidence to Bank, in
form and substance satisfactory to Bank, that all depository, investment and
other accounts of Bridgeline Intelligence Group, Inc., a Delaware corporation
(“Bridgeline IG”), have been closed.

 

(c)     On or before September 30, 2014, Borrower shall provide to Bank, in form
and substance satisfactory to Bank, evidence of the dissolution of Bridgeline
IG.

 

6.13     Further Assurances. At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.

 

7.     NEGATIVE COVENANTS.

 

Borrower will not do any of the following:

 

7.1     Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a “Transfer”), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than: (i) Transfers of Inventory
in the ordinary course of business; (ii) Transfers of non-exclusive licenses and
similar arrangements for the use of the property of Borrower or its Subsidiaries
in the ordinary course of business; (iii) Transfers of worn-out or obsolete
Equipment which was not financed by Bank; or (iv) Transfers that constitute a
Permitted Liens or Permitted Investments.

 

7.2     Change in Business; Change in Control or Executive Office. Engage in any
business, or permit any of its Subsidiaries to engage in any business, other
than the businesses currently engaged in by Borrower and any business
substantially similar or related thereto (or incidental thereto); or cease to
conduct business in the manner conducted by Borrower as of the Closing Date; or
suffer or permit a Change in Control; or without thirty (30) days prior written
notification to Bank, relocate its principal place of business or state of
incorporation or change its legal name; or without Bank’s prior written consent,
change the date on which its fiscal year ends.

 

7.3     Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person, provided
however, only advance written notice to the Bank will be required for any action
restricted by this Section 7.3 if all Obligations are paid in full in cash out
of the proceeds of the initial closing of such action and such payment is listed
as a condition to the consummation of such action. Notwithstanding the above, a
Subsidiary may merge or consolidate into another Subsidiary or into Borrower,
following prior written notice to Bank.

 

7.4     Indebtedness. Create, incur, assume or be or remain liable with respect
to any Indebtedness, or permit any Subsidiary so to do, other than Permitted
Indebtedness.

 

7.5     Encumbrances. Create, incur, assume or suffer to exist any Lien with
respect to any of its property (including without limitation, its Intellectual
Property), or assign or otherwise convey any right to receive income, including
the sale of any Accounts, or permit any of its Subsidiaries to do so, except for
Permitted Liens, or agree with any Person other than Bank not to grant a
security interest in, or otherwise encumber, any of its property (including
without limitation, its Intellectual Property), or permit any Subsidiary to do
so.

 

7.6     Distributions. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock, or permit any of its Subsidiaries to do so, except that Borrower may
repurchase the stock of former employees pursuant to stock repurchase agreements
as long as an Event of Default does not exist prior to such repurchase or would
not exist after giving effect to such repurchase.

 

 
15

--------------------------------------------------------------------------------

 

 

 

7.7     Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments; or maintain or invest any of its property with
a Person other than Bank or permit any of its Subsidiaries to do so unless such
Person has entered into an account control agreement with Bank in form and
substance satisfactory to Bank; or suffer or permit any Subsidiary to be a party
to, or be bound by, an agreement that restricts such Subsidiary from paying
dividends or otherwise distributing property to Borrower.

 

7.8     Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower’s business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person.

 

7.9     Subordinated Debt. Make any payment in respect of any Subordinated Debt,
or permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt, or amend any provision contained in
any documentation relating to the Subordinated Debt without Bank’s prior written
consent.

 

7.10     Inventory and Equipment. Store the Inventory or the Equipment with a
bailee, warehouseman, or other third party unless the third party has been
notified of Bank’s security interest and Bank (a) has received an acknowledgment
from the third party that it is holding or will hold the Inventory or Equipment
for Bank’s benefit or (b) is in pledge possession of the warehouse receipt,
where negotiable, covering such Inventory or Equipment. Store or maintain any
Equipment or Inventory at a location other than the location set forth in
Section 10 of this Agreement.

 

7.11     Compliance. Become an “investment company” or be controlled by an
“investment company,” within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose. Fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail
to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect, or a material
adverse effect on the Collateral or the priority of Bank’s Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.

 

8.     EVENTS OF DEFAULT.

 

Any one or more of the following events shall constitute an “Event of Default”
by Borrower under this Agreement:

 

8.1     Payment Default. If Borrower fails to pay, when due, any of the
Obligations;

 

8.2     Covenant Default.

 

(a)     If Borrower fails to perform any obligation under Article 6 or violates
any of the covenants contained in Article 7 of this Agreement; or

 

(b)     If Borrower fails or neglects to perform or observe any other material
term, provision, condition, covenant contained in this Agreement, in any of the
Loan Documents, or in any other present or future agreement between Borrower and
Bank and as to any default under such other term, provision, condition or
covenant that can be cured, has failed to cure such default within ten days
after Borrower receives notice thereof or any officer of Borrower becomes aware
thereof; provided, however, that if the default cannot by its nature be cured
within the ten day period or cannot after diligent attempts by Borrower be cured
within such ten day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed 30 days) to attempt to cure such default, and
within such reasonable time period the failure to have cured such default shall
not be deemed an Event of Default but no Credit Extensions will be made.

 

 
16

--------------------------------------------------------------------------------

 

 

 

8.3     Material Adverse Effect. If there occurs any circumstance or
circumstances that could reasonably be expected to have a Material Adverse
Effect;

 

8.4     Attachment. If any portion of Borrower’s assets is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any trustee, receiver or person acting in a similar capacity and
such attachment, seizure, writ or distress warrant or levy has not been removed,
discharged or rescinded within ten (10) days, or if Borrower is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs, or if a judgment or other
claim becomes a lien or encumbrance upon any material portion of Borrower’s
assets, or if a notice of lien, levy, or assessment is filed of record with
respect to any of Borrower’s assets by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);

 

8.5     Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);

 

8.6     Other Agreements. If there is a default or other failure to perform in
any agreement to which Borrower is a party or by which it is bound resulting in
a right by a third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Fifty
Thousand Dollars ($150,000) or which could have a Material Adverse Effect;

 

8.7     Judgments. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least One Hundred Fifty Thousand
Dollars ($150,000) (not covered by independent third-party insurance as to which
liability has been accepted by such insurance carrier) shall be rendered against
Borrower and shall remain unsatisfied and unstayed for a period of ten (10) days
(provided that no Credit Extensions will be made prior to the satisfaction or
stay of such judgment); or

 

8.8     Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document; or

 

8.9     Guaranty. If any guaranty of all or a portion of the Obligations (a
“Guaranty”) ceases for any reason to be in full force and effect, or any
guarantor fails to perform any obligation under any Guaranty or a security
agreement securing any Guaranty (collectively, the “Guaranty Documents”), or any
event of default occurs under any Guaranty Document or any guarantor revokes or
purports to revoke a Guaranty, or any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
in any Guaranty Document or in any certificate delivered to Bank in connection
with any Guaranty Document, or if any of the circumstances described in Sections
8.3 through 8.8 occur with respect to any guarantor or any guarantor dies or
becomes subject to any criminal prosecution, or any circumstances arise causing
Bank, in good faith, to become insecure as to the satisfaction of any of any
guarantor’s obligations under the Guaranty Documents.

 

9.     BANK'S RIGHTS AND REMEDIES.

 

9.1     Rights and Remedies. Upon the occurrence and during the continuance of
an Event of Default, Bank may, at its election, without notice of its election
and without demand, do any one or more of the following, all of which are
authorized by Borrower:

 

(a)     Declare all Obligations, whether evidenced by this Agreement, by any of
the other Loan Documents, or otherwise, immediately due and payable (provided
that upon the occurrence of an Event of Default described in Section 8.5, all
Obligations shall become immediately due and payable without any action by
Bank);

 

 
17

--------------------------------------------------------------------------------

 

 

 

(b)     Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement or under any other agreement between Borrower and
Bank;

 

(c)     Settle or adjust disputes and claims directly with Account Debtors for
amounts, upon terms and in whatever order that Bank reasonably considers
advisable;

 

(d)     Make such payments and do such acts as Bank considers necessary or
reasonable to protect its security interest in the Collateral. Borrower agrees
to assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may designate. Borrower authorizes Bank to enter the
premises where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which in Bank’s determination appears to be prior
or superior to its security interest and to pay all expenses incurred in
connection therewith. With respect to any of Borrower’s owned premises, Borrower
hereby grants Bank a license to enter into possession of such premises and to
occupy the same, without charge, in order to exercise any of Bank’s rights or
remedies provided herein, at law, in equity, or otherwise;

 

(e)     Set off and apply to the Obligations any and all (i) balances and
deposits of Borrower held by Bank, or (ii) indebtedness at any time owing to or
for the credit or the account of Borrower held by Bank;

 

(f)     Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. Bank is hereby granted a license or other right, solely pursuant to
the provisions of this Section 9.1, to use, without charge, Borrower’s labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section 9.1, Borrower’s rights under all
licenses and all franchise agreements shall inure to Bank’s benefit;

 

(g)     Dispose of the Collateral by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Borrower’s premises) as Bank determines is commercially reasonable, and apply
any proceeds to the Obligations in whatever manner or order Bank deems
appropriate;

 

(h)     Bank may credit bid and purchase at any public sale; and

 

(i)     Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower.

 

9.2     Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank’s designated officers, or employees) as Borrower’s true and
lawful attorney-in-fact to: (a) send requests for verification of Accounts or
notify account debtors of Bank’s security interest in the Accounts; (b) endorse
Borrower’s name on any checks or other forms of payment or security that may
come into Bank’s possession; (c) sign Borrower’s name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower’s policies of insurance; (f) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; and
(g) to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral. The
appointment of Bank as Borrower’s attorney in fact, and each and every one of
Bank’s rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank’s
obligation to provide Credit Extensions hereunder is terminated.

 

 
18

--------------------------------------------------------------------------------

 

 

 

9.3     Accounts Collection. At any time after the occurrence of an Event of
Default, Bank may notify any Person owing funds to Borrower of Bank’s security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank’s trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.

 

9.4     Bank Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following after
reasonable notice to Borrower: (a) make payment of the same or any part thereof;
(b) set up such reserves under a loan facility in Section 2.1 as Bank deems
necessary to protect Bank from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type discussed in Section 6.7 of
this Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.

 

9.5     Bank’s Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.

 

9.6     Shares. Borrower recognizes that Bank may be unable to effect a public
sale of any or all the Shares, by reason of certain prohibitions contained in
federal securities laws and applicable state and provincial securities laws or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Borrower acknowledges and
agree that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. Bank shall be under no obligation to
delay a sale of any of the Shares for the period of time necessary to permit the
issuer thereof to register such securities for public sale under federal
securities laws or under applicable state and provincial securities laws, even
if such issuer would agree to do so. Upon the occurrence of an Event of Default
which continues, Bank shall have the right to exercise all such rights as a
secured party under the Code as it, in its sole judgment, shall deem necessary
or appropriate, including without limitation the right to liquidate the Shares
and apply the proceeds thereof to reduce the Obligations. Effective only upon
the occurrence and during the continuance of an Event of Default, Borrower
hereby irrevocably appoints Bank (and any of Bank’s designated officers, or
employees) as such Borrower’s true and lawful attorney to enforce such
Borrower’s rights against any Subsidiary, including the right to compel any
Subsidiary to make payments or distributions owing to such Borrower.

 

9.7     Remedies Cumulative. Bank’s rights and remedies under this Agreement,
the Loan Documents, and all other agreements shall be cumulative. Bank shall
have all other rights and remedies not inconsistent herewith as provided under
the Code, by law, or in equity. No exercise by Bank of one right or remedy shall
be deemed an election, and no waiver by Bank of any Event of Default on
Borrower’s part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.

 

9.8     Demand; Protest. Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Bank on which Borrower may be liable.

 

 
19

--------------------------------------------------------------------------------

 

 

 

10.   NOTICES.

Notices.

 

All notices, consents, requests, approvals, demands, or other communication by
any party to this Agreement or any other Loan Document must be in writing and
shall be deemed to have been validly served, given, or delivered: (a) upon the
earlier of actual receipt and three (3) Business Days after deposit in the U.S.
mail, first class, registered or certified mail return receipt requested, with
proper postage prepaid; (b) upon transmission, when sent by electronic mail or
facsimile transmission; (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email address indicated
below. Bank or Borrower may change its mailing or electronic mail address or
facsimile number by giving the other party written notice thereof in accordance
with the terms of this Section 10.

 

If to Borrower:                                      Bridgeline Digital, Inc.
                                                                80 Blanchard
Road

Burlington, MA 01803

Attn: Michael Prinn, CFO

FAX: (____) _______________
EMAIL: ___________________

 

If to Bank:                                             Bridge Bank, National
Association

55 Almaden Blvd.

San Jose, CA 95113

Attn: Note Department

FAX: (408) 282-1681

EMAIL: notedepartment@bridgebank.com

 

and

 

Bridge Bank, National Association

Attn: Charles Wehr

FAX: (617) 995-1320

EMAIL: charles.wehr@bridgebank.com

 

 

The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.

 

11.   CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

 

This Agreement and all other Loan Documents (except as otherwise expressly
provided in any of the Loan Documents) shall be governed by, and construed in
accordance with, the internal laws of the Commonwealth of Massachusetts, without
regard to principles of conflicts of law. Each of Borrower and Bank hereby
submits to the exclusive jurisdiction of the state and Federal courts located in
the County of Suffolk, Commonwealth of Massachusetts. BORROWER AND BANK EACH
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.

 

 
20

--------------------------------------------------------------------------------

 

 

 

12.   GENERAL PROVISIONS.

 

12.1     Successors and Assigns. This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank’s prior written consent, which consent
may be granted or withheld in Bank’s sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank’s
obligations, rights and benefits hereunder.

 

12.2     Indemnification. Borrower shall defend, indemnify and hold harmless
Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this Agreement; and (b) all
losses or Bank Expenses in any way suffered, incurred, or paid by Bank as a
result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys’ fees and
expenses), except for losses caused by Bank’s gross negligence or willful
misconduct.

 

12.3     Time of Essence. Time is of the essence for the performance of all
obligations set forth in this Agreement.

 

12.4     Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

 

12.5     Amendments in Writing, Integration. Neither this Agreement nor the Loan
Documents can be amended or terminated orally. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties hereto with respect to the subject matter of this Agreement and the Loan
Documents, if any, are merged into this Agreement and the Loan Documents.

 

12.6     Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.

 

12.7     Survival. All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding or Bank has any obligation to make Credit Extensions to
Borrower. The obligations of Borrower to indemnify Bank with respect to the
expenses, damages, losses, costs and liabilities described in Section 13.2 shall
survive until all applicable statute of limitations periods with respect to
actions that may be brought against Bank have run.

 

12.8     Confidentiality. In handling any confidential information Bank and all
employees and agents of Bank, including but not limited to accountants, shall
exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Credit Extensions, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order, (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and (v)
as Bank may determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include information that
either: (a) is in the public domain or in the knowledge or possession of Bank
when disclosed to Bank, or becomes part of the public domain after disclosure to
Bank through no fault of Bank; or (b) is disclosed to Bank by a third party,
provided Bank does not have actual knowledge that such third party is prohibited
from disclosing such information.

 

12.9     Patriot Act Notice. Bank hereby notifies Borrower that, pursuant to the
requirements of the USA Patriot Act, Title III of Pub. L. 107-56 (signed into
law on October 26, 2001) (the “ Patriot Act "), it is required to obtain, verify
and record information that identifies the Borrower, which information includes
names and addresses and other information that will allow Bank, as applicable,
to identify the Borrower in accordance with the Patriot Act.

 

[SIGNATURE PAGE FOLLOWS]

 

 

 
21

--------------------------------------------------------------------------------

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.

 

 

Bridgeline Digital, Inc.

     

By:                                                                             

     

Title:                                                                          

         

Bridge Bank, National Association

     

By:                                                                             

     

Title:                                                                         
 

 

 

 
22

--------------------------------------------------------------------------------

 

 

 

EXHIBIT A

 

DEBTOR:                      BRIDGELINE DIGITAL, INC.

 

SECURED PARTY:     BRIDGE BANK, NATIONAL ASSOCIATION

 

COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT

 

All personal property of Borrower (herein referred to as “Borrower” or “Debtor”)
whether presently existing or hereafter created or acquired, and wherever
located, including, but not limited to:

 

(a)      all accounts (including health-care-insurance receivables), chattel
paper (including tangible and electronic chattel paper), commercial tort claims,
deposit accounts, documents (including negotiable documents), equipment
(including all accessions and additions thereto), general intangibles (including
payment intangibles and software), goods (including fixtures), instruments
(including promissory notes), inventory (including all goods held for sale or
lease or to be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor’s books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records; and

 

(b)      any and all cash proceeds and/or noncash proceeds of any of the
foregoing, including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the Massachusetts Uniform Commercial
Code, as amended or supplemented from time to time.

 

 
23

--------------------------------------------------------------------------------

 

 

  

Exhibit B

 

REVOLVING ADVANCE REQUEST

(To be submitted no later than 12:00 PM Pacific Time to be considered for same
day processing)

 

To:

Bridge Bank, National Association

   

 

Fax:

(408) 282-1681

   

 

Date:

 

 

From:

Bridgeline Digital, Inc.

 

Borrower's Name

 

     

Authorized Signature

 

     

Authorized Signer's Name (please print)

 

     

Phone Number

 

To Account #

 

 

Borrower hereby requests funding of an Advance / Nonformula Advance (circle
applicable one) in the amount of $ _________________ in accordance with the
Revolving Facility as defined in the Loan and Security Agreement dated December
__, 2013.

 

Borrower hereby authorizes Lender to rely on facsimile stamp signatures and
treat them as authorized by Borrower for the purpose of requesting the above
advance.

 

All representations and warranties of Borrower stated in the Loan and Security
Agreement are true, correct and complete in all material respects as of the date
of this Revolving/Equipment Advance Request; provided that those representations
and warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date.

 

Capitalized terms used herein and not otherwise defined have the meanings set
forth in the Loan and Security Agreement.

 

 
24

--------------------------------------------------------------------------------

 

 

Exhibit C

BORROWING BASE CERTIFICATE

BRIDGE BANK

55 Almaden Boulevard, San Jose, CA 95113 

 

Company: Bridgeline Digital, Inc.

                               

ACCOUNTS RECEIVABLE BORROWING BASE CALCULATION:

         

As of Date:

                                        1.  

Add: Accounts Receivable Aged Current to 30 Days

            $0           2.  

Add: Accounts Receivable Aged 31 to 60 Days

            $0           3.  

Add: Accounts Receivable Aged 61 to 90 Days

            $0           4.  

Add: Accounts Receivable Aged 91 Days and 120 Days

            $0           5.  

Add: Accounts Receivable Aged 121 Days and Over

            $0           6.  

GROSS ACCOUNTS RECEIVABLE

                    $0                                 7.  

Less: Accounts Receivable Aged over 120 days

            $0           8.  

Less: Accounts Receivable Aged over 90 days in excess of 35% of #6

            $0           9.  

Less: U.S. Government Receivables

            $0           10.  

Less: Ineligible Foreign Receivables

            $0           11.  

Less: Demo Accounts, Bill and Hold Accounts

            $0           12.  

Less: Affiliate or Related Accounts Receivables

            $0           13.  

Less: Account concentration in excess of 35%

            $0           14.  

Less: Cross Aging - 35%

            $0           15.  

Less: Contra Accounts

            $0           16.  

Less: Deposit Offsets

            $0           17.  

Less: Over 120 day A/R credits

            $0           18.  

Less: Other Ineligible Accounts

            $0                                         19.  

Add: Lines 7 through 18- Total Ineligible Accounts

            $0                                         20.  

NET ELIGIBLE ACCOUNTS RECEIVABLE

                    $0   21.  

Account Receivable Advance Rate 80% (or 85%, if dilution is < 2%)

                        22.  

Eligible Accounts Borrowing Base

                    $0   23.  

Add: Non-formula Availability of

                    $1,000,000                                 24.  

Maximum Available Line Of Credit

    $5,000,000                                                 25.  

TOTAL BORROWING BASE

                    $0   26.  

Less: Outstanding Loan Balance

                    $0   27.  

Less: Outstanding Letters of Credit

                    $0                                 28.  

AVAILABLE FOR DRAW/NEED TO PAY

                    $0  

 

If line #28 is a negative number, this amount must be remitted to the Bank
immediately to bring loan balance into compliance.

By signing this form you authorize the bank to deduct any advance amounts
directly from Borrower’s checking account at Bridge Bank in the event there is
an overadvance.

The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Bridge Bank, National
Association.

 

 

 

 

Date:

 

 

Prepared By:

                 

 

 

Date:

 

 

Bank Reviewed:

     

 

 
25

--------------------------------------------------------------------------------

 

 

 

Exhibit D

 

Compliance Certificate

 

TO:

BRIDGE BANK, NATIONAL ASSOCIATION

 

FROM:

BRIDGELINE DIGITAL, INC.

 

The undersigned authorized officer of Bridgeline Digital, Inc. hereby certifies
that in accordance with 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 of
Borrower stated in the Agreement are true and correct as of the date hereof.
Attached herewith are the required documents supporting the above certification.
The Officer further certifies that these are prepared in accordance with
Generally Accepted Accounting Principles (GAAP) and are consistently applied
from one period to the next except as explained in an accompanying letter or
footnotes.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

Required

Complies

       

A/R & A/P Agings, Deferred Revenue Report

Monthly within 30 days

Yes

No

Borrowing Base Certificate

Monthly within 30 days

Yes

No

Monthly income statement and balance sheet

Monthly within 30 days

Yes

No

Quarterly cash flow statements

Quarterly within 30 days

Yes

No

Compliance Certificate

Monthly within 30 days

Yes

No

Annual financial statements (CPA Audited)

FYE within 180 days

Yes

No

Annual operating budget, sales projections and operating plans approved by board
of directors

Annually no later than board approval or 30 days following the beginning of each
fiscal year

Yes

No

A/R Audit

Initial and Annual

Yes

No

       

Deposit balances with Bank

$ ___________________

   

Deposit balance outside Bank

$ ___________________

           

Financial Covenant

Required

Actual

Complies

         

Asset Coverage Ratio

1.40 : 1.00

_____:1.00

Yes

No

                   

 

Comments Regarding Exceptions: See Attached.

BANK USE ONLY

     

Received
by:                                                                                                 

Sincerely,

AUTHORIZED SIGNER

     

Date:                                                                                                               

       

___________________________________________

Verified:                                                                                                         
 

SIGNATURE

AUTHORIZED SIGNER

   

___________________________________________

Date:                                                                                                               

TITLE

   

Compliance
Status                                                                                      
 Yes            No

___________________________________________

 

DATE

 

 

 

 
26

--------------------------------------------------------------------------------

 

 

 

SCHEDULE OF EXCEPTIONS

 

 

Permitted Indebtedness (Section 1.1)

 

 

 

Permitted Investments (Section 1.1)

 

Borrower owns 100% of the outstanding capital stock of the following wholly
owned Subsidiaries:

 

 

●

Bridgeline Digital Pvt. Ltd., formed under the laws of India

 

●

Bridgeline Intelligence Group, Inc., a Delaware corporation

 

 

Permitted Liens (Section 1.1)

 

 

Inbound Licenses (Section 5.6)

 

 

Prior Names (Section 5.7)

 

 

●

Bridgeline Software, Inc., name used prior to 2010.

 

 

Litigation (Section 5.8)