exhibit_101.htm


    EXHIBIT
10.1

    WAIVER
AND THIRD AMENDMENT

     

    TO

     

    LOAN
AND SECURITY AGREEMENT

     

    This
WAIVER AND THIRD
AMENDMENT to Loan and Security Agreement (this “Amendment”) is
entered into this 9th day of November, 2009, by and between Silicon Valley Bank
(“Bank”) and
Betawave Corporation, a Delaware corporation (“Borrower”), whose
address is 706 Mission Street, 10th Floor, San Francisco CA 94103.

     

    Recitals

     

    A. Bank and
Borrower entered into the Loan and Security Agreement, dated as of March 28,
2009, as amended by the First Amendment to Loan and Security Agreement, dated as
of July 31, 2009, and the Second Amendment to Loan and Security Agreement, dated
as of August 14, 2009 (as the same may from time to time be further amended,
modified, supplemented or restated, the “Loan
Agreement”).  Bank has extended credit to the Borrower for the
purposes permitted in the Loan Agreement.

     

    B. An Event
of Default exists under Section 8.2(a) of the Loan Agreement as a result of
Borrower’s breach as of September 30, 2009 of the minimum Tangible Net Worth
covenant set forth in Section 6.10(b) of the Loan Agreement (the “Existing
Default”).

     

    C. Borrower
has requested that Bank waive the Existing Default.

     

    D. Borrower
has further requested that Bank amend Section 6.9(a) of the Loan Agreement, with
respect to Borrower’s obligation to maintain a minimum amount of cash in its
operating account with Bank and the Sweep Account.

     

    E. Borrower
has also requested that Bank agree that (i) the minimum Tangible Net Worth
covenant set forth in Section 6.10(b) of the Loan Agreement not be tested from
October 1, 2009, to November 23, 2009, and (ii) the collateral report for
September 30, 2009, required to be delivered pursuant to Section 6.2(a)(ii) of
the Loan Agreement, may be delivered by November 1, 2009, rather than by October
20, 2009.

     

    F. Bank has
agreed to such amendment, and such requests, but only to the extent, in
accordance with the terms, subject to the conditions and in reliance upon the
representations and warranties set forth below.

     

    Agreement

     

    Now,
Therefore, in
consideration of the foregoing recitals and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, and
intending to be legally bound, the parties hereto agree as follows:

     

    1. Definitions.  Capitalized
terms used but not defined in this Amendment shall have the meanings given to
them in the Loan Agreement.

     

    


    
      
        
        

      

      
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    2. Waiver.

     

    2.1 Bank
hereby waives the Existing Default.

     

    2.2 The
foregoing Event of Default waiver shall not operate as a waiver of any other
Event of Default, now existing or occurring in the future, whether with respect
to the covenants described above or any other provisions of the Agreement or of
any of the other Loan Documents.  The foregoing waiver also shall not
operate as a waiver of any right or remedy of Bank now existing or arising in
the future with respect to any Event of Default not waived pursuant to this
section.

     

    2.3 Borrower
represents and warrants to Bank that to the best of Borrower’s knowledge, after
giving effect to this Amendment, the Event of Default waived pursuant to this
section is the only Event of Default which has occurred and is continuing as of
the date hereof.

     

    3. Amendments
to Loan Agreement.

     

    3.1 Section 6.9 (Operating
Accounts).  Subsection (a) of Section 6.9 is amended in its
entirety and replaced with the following:

     

    (a)           Maintain
its primary and its Subsidiaries’ primary operating and other deposit accounts
and securities accounts with Bank and Bank’s Affiliates, which accounts shall
represent at least 75% of the dollar value of Borrower’s and such Subsidiaries’
accounts at all financial institutions.

    


    3.2 Section 6.10(Financial
Covenants).   Section 6.10 is amended by adding a new
subsection (c) that reads as follows:

     

    (c)           Minimum Unrestricted
Cash.   At all times, at least One Million Five Hundred
Thousand Dollars ($1,500,000) in Unrestricted Cash on deposit in (i) Borrower’s
unrestricted operating accounts with Bank, (ii) Borrower’s sweep account with
Bank (the “Sweep
Account”) and (iii) Borrower’s accounts with Bank’s
Affiliates.

     

    3.3 Section 13.1
(Definitions).  The definition “Borrowing Base” in Section 13.1
is amended in its entirety and replaced with the following:

     

    “Borrowing Base” is during the
Interim Period the lesser of (i) the sum of (a) eighty percent (80%) of Eligible
Accounts, as determined by Bank from Borrower’s most recent Transaction Report,
plus (b) if
Bank, in its sole discretion agrees to include Extended Eligible Accounts in the
Borrowing Base after completion of the Initial Audit, sixty percent (60%) of
Extended Eligible Accounts, as determined by Bank from Borrower’s most recent
Transaction Report; provided, however, that Bank
may decrease the foregoing percentages in its good faith business judgment based
on events, conditions, contingencies, or risks which, as determined by Bank, may
adversely affect Collateral, and (ii) One Million Five Hundred Thousand Dollars
($1,500,000).   “Interim Period” means
the period commencing on November 2, 2009, and ending on November 23,
2009.  Upon the termination or expiration of the Interim Period, the
“Borrowing Base” is the lesser of (i) the sum of (a) eighty percent (80%) of
Eligible Accounts, as determined by Bank from Borrower’s most recent Transaction
Report, plus
(b) if Bank, in its sole discretion agrees to include Extended Eligible Accounts
in the Borrowing Base after completion of the Initial Audit, sixty percent (60%)
of Extended Eligible Accounts, as determined by Bank from Borrower’s most recent
Transaction Report; provided, however, that Bank
may decrease the foregoing percentages in its good faith business judgment based
on events, conditions, contingencies, or risks which, as determined by Bank, may
adversely affect Collateral, and (ii) Seven Hundred Fifty Thousand Dollars
($750,000).

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    3.4 Exhibit B (Compliance
Certificate).  Exhibit B is amended and restated as set forth
in Attachment
“1” hereto

     

    4. Tangible
Net Worth Covenant; Collateral Reporting.

     

    4.1 Tangible Net Worth
Covenant.   The minimum Tangible Net Worth covenant set forth
in Section 6.10(b) of the Loan Agreement shall not apply to Borrower for the
period from October 1, 2009, to November 23, 2009.

     

    4.2 Collateral
Reporting.   Borrower shall have until November 1, 2009, to
deliver the collateral report due pursuant to Section 6.2(a)(i) and Section
6.2(a)(ii) of the Loan Agreement for the period ended September 30,
2009.

     

    5. Limitation
of Amendments.

     

    5.1 The
amendments set forth in Section
3, above, are effective for the purposes set forth herein and shall be
limited precisely as written and shall not be deemed to (a) be a consent to any
amendment, waiver or modification of any other term or condition of any Loan
Document, or (b) otherwise prejudice any right or remedy which Bank may now have
or may have in the future under or in connection with any Loan
Document.

     

    5.2 This
Amendment shall be construed in connection with and as part of the Loan
Documents and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Loan Documents, except as herein amended, are hereby
ratified and confirmed and shall remain in full force and effect.

     

    6. Representations and
Warranties.  To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:

     

    6.1 Immediately
after giving effect to this Amendment (a) the representations and warranties
contained in the Loan Documents are true, accurate and complete in all material
respects as of the date hereof (except to the extent such representations and
warranties relate to an earlier date, in which case they are true and correct as
of such date), and (b) no Event of Default other than the Existing Default has
occurred and is continuing;

     

    
      
        
        

      

      
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    6.2 Borrower
has the power and authority to execute and deliver this Amendment and to perform
its obligations under the Loan Agreement, as amended by this
Amendment;

     

    6.3 The
organizational documents of Borrower provided to Bank in connection with the
conversion of Borrower from a Nevada corporation to a Delaware corporation that
became effective in September 2009 (collectively, the “Organizational
Documents”) remain true, accurate and complete and have not been amended,
supplemented or restated and are and continue to be in full force and effect or
Borrower is delivering to Bank its current organizational documents in
connection with the execution hereof;

     

    6.4 The
execution and delivery by Borrower of this Amendment and the performance by
Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, have been duly authorized by all necessary action on the part of
Borrower;

     

    6.5 The
execution and delivery by Borrower of this Amendment and the performance by
Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not and will not contravene (a) any Requirement of Law, (b) any
contractual restriction with a Person binding on Borrower, (c) any order,
judgment or decree of any court or other governmental or public body or
authority, or subdivision thereof, binding on Borrower, or (d) the
Organizational Documents;

     

    6.6 The
execution and delivery by Borrower of this Amendment and the performance by
Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not require any Governmental Approval from any Governmental
Authority (except for Governmental Approvals which have already been obtained
and are in full force and effect and except for filings with the Securities and
Exchange Commission or NASDAQ, which shall be made following the date hereof);
and

     

    6.7 This
Amendment has been duly executed and delivered by Borrower and is the binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, liquidation, moratorium or other similar laws of general
application and equitable principles relating to or affecting creditors’
rights.

     

    7. Prior
Agreement.  Except as expressly provided for in this Amendment,
the Loan Documents are hereby ratified and reaffirmed and shall remain in full
force and effect.  This Amendment is not a novation and the terms and
conditions of this Amendment shall be in addition to and supplemental to all
terms and conditions set forth in the Loan Documents.  In the event of
any conflict or inconsistency between this Amendment and the terms of such
documents, the terms of this Amendment shall be controlling, but such document
shall not otherwise be affected or the rights therein impaired.

     

    8. Release
by Borrower.

     

    8.1 FOR GOOD AND VALUABLE
CONSIDERATION, Borrower hereby forever relieves, releases, and discharges
Bank and its present or former employees, officers, directors, agents,
representatives, attorneys, and each of them, from any and all claims, debts,
liabilities, demands, obligations, promises, acts, agreements, costs and
expenses, actions and causes of action, of every type, kind, nature, description
or character whatsoever, whether known or unknown, suspected or unsuspected,
absolute or contingent, arising out of or in any manner whatsoever connected
with or related to facts, circumstances, issues, controversies or claims
existing or arising from the beginning of time through and including the date of
execution of this Amendment (collectively “Released
Claims”).  Without limiting the foregoing, the Released Claims
shall include any and all liabilities or claims arising out of or in any manner
whatsoever connected with or related to the Loan Documents, the Recitals hereto,
any instruments, agreements or documents executed in connection with any of the
foregoing or the origination, negotiation, administration, servicing and/or
enforcement of any of the foregoing.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    8.2 In
furtherance of this release, Borrower expressly acknowledges and waives any and
all rights under Section 1542 of the California Civil Code, which provides as
follows:

     

    “A general release does not
extend to claims which the creditor does not know or expect to exist in his
favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor.” (Emphasis
added.)

     

    8.3 By
entering into this release, Borrower recognizes that no facts or representations
are ever absolutely certain and it may hereafter discover facts in addition to
or different from those which it presently knows or believes to be true, but
that it is the intention of Borrower hereby to fully, finally and forever settle
and release all matters, disputes and differences, known or unknown, suspected
or unsuspected; accordingly, if Borrower should subsequently discover that any
fact that it relied upon in entering into this release was untrue, or that any
understanding of the facts was incorrect, Borrower shall not be entitled to set
aside this release by reason thereof, regardless of any claim of mistake of fact
or law or any other circumstances whatsoever.  Borrower acknowledges
that it is not relying upon and has not relied upon any representation or
statement made by Bank with respect to the facts underlying this release or with
regard to any of such party’s rights or asserted rights.

     

    8.4 This
release may be pleaded as a full and complete defense and/or as a
cross-complaint or counterclaim against any action, suit, or other proceeding
that may be instituted, prosecuted or attempted in breach of this
release.  Borrower acknowledges that the release contained herein
constitutes a material inducement to Bank to enter into this Amendment, and that
Bank would not have done so but for Bank’s expectation that such release is
valid and enforceable in all events.

     

    8.5 Borrower
hereby represents and warrants to Bank, and Bank is relying thereon, as
follows:

     

    (a) Except as
expressly stated in this Amendment, neither Bank nor any agent, employee or
representative of Bank has made any statement or representation to Borrower
regarding any fact relied upon by Borrower in entering into this
Amendment;

     

    
      
        
        

      

      
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    (b) Borrower
has made such investigation of the facts pertaining to this Amendment and all of
the matters appertaining thereto, as it deems necessary;

     

    (c) The terms
of this Amendment are contractual and not a mere recital;

     

    (d) This
Amendment has been carefully read by Borrower, the contents hereof are known and
understood by Borrower, and this Amendment is signed freely, and without duress,
by Borrower;  and

     

    (e) Borrower
represents and warrants that it is the sole and lawful owner of all right, title
and interest in and to every claim and every other matter which it releases
herein, and that it has not heretofore assigned or transferred, or purported to
assign or transfer, to any person, firm or entity any claims or other matters
herein released.  Borrower shall indemnify Bank, defend and hold it
harmless from and against all claims based upon or arising in connection with
prior assignments or purported assignments or transfers of any claims or matters
released herein.

     

    9. Counterparts.  This
Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.

     

    10. Effectiveness.  This
Amendment shall be deemed effective upon (a) the due execution and delivery
to Bank of this Amendment by each party hereto, and (b) Borrower’s payment
of all Bank Expenses relating to this Amendment.

     

    11. Governing Law.  This
Amendment and the rights and obligations of the parties hereto shall be governed
by and construed in accordance with the laws of the State of California, without
giving effect to conflicts of law principles.

     

    [Signature
page follows.]

    


    
      
        
        

      

      
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    In
Witness Whereof, the parties hereto have caused this Amendment to be duly
executed and delivered as of the date first written above.

     

    
      	
              BANK

               

              Silicon
      Valley Bank

               

               

               

              By:
      /s/ Mike Meier      

              Name:  Mike
      Meier

              Title:   Relationship
      Manager

            	
              BORROWER

               

              Betawave
      Corporation

               

               

               

              By:  /s/
      David Lorie      

              Name:   David
      Lorie

              Title:   Secretary
      and General Counsel

            


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ATTACHMENT
“1”

    


    EXHIBIT
B

    COMPLIANCE
CERTIFICATE

    


    TO:                 SILICON
VALLEY
BANK                                                                                                           Date:

    FROM:                 BETAWAVE
CORPORATION

    


    The
undersigned authorized officer of Betawave Corporation (“Borrower”) certifies
that under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for
the period ending _______________ with all required covenants except as noted
below, (2) there are no Events of Default, (3) all representations and
warranties in the Agreement are true and correct in all material respects on
this date except as noted below; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed
all required tax returns and reports, and Borrower has timely paid all foreign,
federal, state and local taxes, assessments, deposits and contributions owed by
Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of
the Agreement, and (5) no Liens have been levied or claims made against Borrower
or any of its Subsidiaries relating to unpaid employee payroll or benefits of
which Borrower has not previously provided written notification to
Bank.  Attached are the required documents supporting the
certification.  The undersigned certifies that these are prepared in
accordance with GAAP consistently applied from one period to the next except as
explained in an accompanying letter or footnotes.  The undersigned
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.  Capitalized terms used but not otherwise
defined herein shall have the meanings given them in the Agreement.

     

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

            
	 
      
	
              Reporting Covenant

            	
              Required

            	
              Complies

            
	 
      	 
      	 
      
	
              Transaction
      Report with Accounts Receivable and Accounts Payable Agings, Deferred
      Revenue Report, Publisher Guarantees and Publisher
Advances

            	
              Monthly
      within 20 days

            	
              Yes   No

            
	
              Annual
      financial statement (CPA Audited) + CC

            	
              FYE
      within 180 days

            	
              Yes   No

            
	
              10-Q,
      10-K and 8-K

            	
              Within
      5 days after filing with SEC

            	
              Yes   No

            
	
              Monthly
      financial statements and Compliance Certificate

            	
              Monthly
      within 30 days

            	
              Yes   No

            
	
              Annual
      financial projections

            	
              Within
      30 days prior to fiscal year commencement

            	
              Yes   No

            
	
              The
      following intellectual property was registered after the Effective Date
      (if no registrations, state “None”)

              ____________________________________________________________________________

               

            


    

    


    
      	
              Financial Covenant

            	
              Required

            	
              Actual

            	
              Complies

            
	 
      	 
      	 
      	 
      
	
              Maintain:

            	 
      	 
      	 
      
	
              At
      all Times, Minimum Liquidity Ratio

            	
              1.50:1.00

            	
              _____:1.00

            	
              Yes   No

            
	
              At
      all Times, Minimum Unrestricted Cash in Sweep Account, Operating Accounts
      and Bank Affiliate Accounts

            	
              $1,500,000

               

            	
              $________

            	
              Yes   No

            
	
              On
      a Monthly Basis, Minimum Tangible Net Worth

            	
              $_______

            	
              $_______

            	
              Yes   No

            


    

    


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    The following financial covenant
analyses and information set forth in Schedule 1 attached hereto are true and
accurate as of the date of this Certificate.

    


    The following are the exceptions with
respect to the certification above:  (If no exceptions exist, state
“No exceptions to note.”)

    


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

    


    
      	
              BETAWAVE
      CORPORATION

               

               

              By:                                                       

              Name:                                                       

              Title:                                                       

               

            	
              BANK
      USE ONLY

               

              Received
      by: _____________________

              authorized
      signer

              Date:                    _________________________

               

              Verified:
      ________________________

              authorized
      signer

              Date:                    _________________________

               

              Compliance
      Status:                                         Yes     No