Document:

exhibit_4-6.htm

                                                                                                                                                                                                                                                                                                        Exhibit 4.6

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

COMMON STOCK PURCHASE WARRANT

To Purchase 65,359 Shares of Common Stock of

 

HSW INTERNATIONAL, INC.

 

THIS COMMON STOCK PURCHASE WARRANT (this “Warrant”) certifies that, for value received, Theorem Capital, LLC, a California limited liability company and its successors and assigns (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof  (the “Initial Exercise Date”) and on or prior to 5:00 P.M., Pacific Time, on the third anniversary of the Initial Exercise Date (the “Termination Date”), but not thereafter, to subscribe for and purchase from HSW International, Inc., a Delaware corporation (the “Company”), up to 65,359 shares (the “Warrant Shares”) of Common Stock (as hereinafter defined).  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price (as hereinafter defined).

 

Section 1.                       Definitions.  For purposes of this Warrant, the following capitalized terms shall have the meanings indicated:

 

“Business Day” means a day other than a Saturday, a Sunday or a day on which state or federally chartered banking institutions in California are not required to be open for business.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock, par value $.001 per share, of the Company and any securities into or for which such common stock shall hereinafter have been converted or exchanged pursuant to a recapitalization, reclassification, reorganization, merger, sale or otherwise.

 

“Financing” means a single transaction or series of related transactions after the Exercise Date and before the Termination Date involving the Company’s sale and issuance of Securities to one or more investors.

 

  

  

  

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Qualified Financing” means the first Financing involving the Company’s sale and issuance of Securities for gross aggregate sales proceeds of at least One Million Dollars ($1,000,000.00).  In calculating whether a Qualified Financing has occurred, there shall be excluded any and all amounts that the Holder exchanges or pays for Securities in the Financing.

 

“Registration Rights Agreement” means any registration rights agreement, or registration rights provisions, entered into with or granted to investors in a Qualified Financing.

 

“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering, among other things, the resale of the Warrant Shares.

 

“Rule 144” means Rule 144 promulgated by the Commission under to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“Securities” means shares of Common Stock or other equity securities of the Company or securities convertible into or exchangeable for equity securities of the Company.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successor to any of the foregoing).

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. Eastern Time to 4:00 p.m. Eastern Time); (b) if the Common Stock is not then listed or quoted on the Trading Market and if prices for the Common Stock are then quoted on the OTC Bulletin Board, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board (c) if the Common Stock is not then listed or quoted on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by the Pink Sheets LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported prior to the day in question; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority of the Warrants then outstanding and reasonably acceptable to the Company.

 

  

  

  

“Warrant” means this Warrant.

 

“Warrant Shares” shall be defined as the (A x B) / C

 

A = $1,000,000, the Committed Amount in the Credit Agreement

 

B = 20%, the agreed upon warrant coverage percentage

 

C = the Exercise Price of this Warrant, as determined in Section 2 (b)

 

Section 2.                       Exercise.

 

(a) Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) and, subject to Section 2(c), within three Business Days of the date said Notice of Exercise is delivered to the Company, payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three Business Days of the date the final Notice of Exercise is delivered to the Company.  Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases.  The Company shall deliver any objection to any Notice of Exercise Form within one Business Day of receipt of such notice.  In the event of any dispute or discrepancy, the records of the Company shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

(b) Exercise Price.  The exercise price per share of Common Stock under this Warrant shall be $3.06, equal to the average VWAP of the 10 trading days preceding the execution of the Senior Revolving Credit Agreement dated March 4, 2011 between the Company and the Holder (the “Credit Agreement”), subject to adjustment hereunder (the “Exercise Price”).

 

  

  

  

(c) Cashless Exercise.  If at any time there is no effective Registration Statement with respect to, or no current prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant may be exercised at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing (A-B) X by A, where:

 

	
  

	
A = the VWAP on the Business Day immediately preceding the date of such election;

	
  

	
B = the Exercise Price of this Warrant, as adjusted; and

	
  

	
X = the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

(d) Registration Rights.  The Company agrees that the Holder shall have so-called piggyback registration rights to include the Warrant Shares in any registration statement filed under the Act in accordance with the Registration Rights Agreement.

 

(e) Mechanics of Exercise.

 

(i) Delivery of Certificates Upon Exercise.  Certificates for Warrant Shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within three Business Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”).  The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vi) prior to the issuance of such shares, have been paid.

 

(ii) Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

(iii) Rescission Rights.  If the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 2(e) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

  

  

  

(iv) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.  In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including customary brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

(v) No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the VWAP or round up such final fraction to the next whole share.

 

(vi) Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

  

  

  

(vii) Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

Section 3.                       Certain Adjustments.

 

(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding (i) pays a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

 

(b) Subsequent Equity Sales. [Intentionally Omitted]

 

(c) Subsequent Rights Offerings.  If the Company, at any time while the Warrant is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to Holders) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the VWAP at the record date mentioned below, then the Exercise Price shall be multiplied by a fraction, the denominator of which shall be the sum of the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and the numerator of which shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP.  Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants.

 

(d) Pro Rata Distributions.  If the Company, at any time prior to the Termination Date, shall distribute to all holders of Common Stock (and not to Holders of the Warrants) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 3(c)), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction, the denominator of which shall be the VWAP determined as of the record date mentioned above, and the numerator of which shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith.  In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

  

  

  

(e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions or (iii) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event.  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 3(e) and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

 

  

  

  

(f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall exclude treasury shares, if any.

 

(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant reduce the then-current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

 

(h) Notice to Holders.

 

(i) Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to each Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

(ii) Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register (as defined in Section 4(c)) of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  The Holder shall remain entitled to exercise this Warrant during the 20-day period commencing on the date of such notice to the effective date of the event triggering such notice.

 

  

  

  

Section 4.                       Transfer of Warrant.

 

(a) Transferability.  Subject to Section 4(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

(b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

 

(c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

(d) Transfer Restrictions.  If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions and reasonably acceptable to the Company) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws.

 

Section 5.                       Miscellaneous.

 

(a) No Rights as Shareholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof as set forth in Section 2(e)(i).

 

  

  

  

(b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

(c) Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

(d) Authorized Shares.

 

(i) Reservation of Shares.  The Company covenants that, at all times on or before the Termination Date, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that the Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

 

(ii) Noncircumvention.  Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (A) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (B) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (C) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

 

(iii) Public Approvals.  Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

  

  

  

(e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the internal laws of the State of Delaware, without regard to conflict of law principles.

 

(f) Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered under the Securities Act, will have restrictions upon resale imposed by state and federal securities laws.

 

(g) Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date, except for compliance with the notice and payment provisions of Section 2(a).  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

(h) Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Credit Agreement.

 

(i) Limitation of Liability.  No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

(j) Remedies.  Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

(k) Successors and Assigns.  Subject to Section 4(d), this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

 

  

  

  

(l) Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

(m) Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

(n) Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

[Signature page follows]

  

  

  

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

 

Dated: March 4, 2011

	  	
HSW INTERNATIONAL, INC.

	  	  
	  	  
	  	  
	  	
By: /s/Bradley T. Zimmer                                                             

	  	
Name: Bradley T. Zimmer         

	  	Title: Executive Vice President & General Counsel
	  	  
	
ATTEST:

	  
	  	  
	  	  
	  /s/ Shawn Meredith	  
	
Name:  Shawn Meredith         

	  
	
Title:    Chief Financial Officer      

	  
	  	  

  

  

  

NOTICE OF EXERCISE

TO:           HSW INTERNATIONAL, INC.

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2) Payment shall take the form of (check applicable box):

 

[  ] in lawful money of the United States; or

 

[ ] if permitted, the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in Section 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in Section 2(c).

 

(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

_______________________________

_______________________________

_______________________________

[SIGNATURE OF HOLDER]:                                                                                                                                                     

Name of Investing Entity:                                                                                                                                                     

Signature of Authorized Signatory of Investing Entity: 

Name of Authorized Signatory:                                                                                                                                                     

Title of Authorized Signatory:                                                                                                                                                     

Date:                                                                                                                                                     

  

  

  

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Dated:  ______________, _______

Holder’s Signature:                                _____________________________

Holder’s Address:                                _____________________________

_____________________________

Signature Guaranteed:  ___________________________________________

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.exhibit_10-37.htm

                                                                                                                                                                                                                                                                                  Exhibit 10.37

 

SENIOR REVOLVING CREDIT AGREEMENT

between

HSW INTERNATIONAL, INC.

and

THEOREM CAPITAL, LLC

March 4th, 2011

  

  

  

TABLE OF CONTENTS

 

Page

 

ARTICLE 1

 

THE LINE OF CREDIT

	
  

	
1.01

	
Revolving Line of Credit; Renewal; Renewal Fee 

	
1

	
  

	
1.02

	
Maximum Amount 

	
1

	
  

	
1.03

	
Loans under the Line of Credit 

	
1

	
  

	
1.04

	
Revolving Nature 

	
1

	
  

	
1.05

	
Commitment Fee; Warrant 

	
1

	
  

	
1.06

	
Renewal Fee 

	
1

	
  

	
1.07

	
Interest 

	
1

	
  

	
1.08

	
Required Payments; Maturity Date 

	
1

	
  

	
1.09

	
Termination 

	
2

	
  

	
1.10

	
The Note 

	
2

 

ARTICLE 2

 

COVENANTS REGARDING THE LOANS

	
  

	
2.01

	
Loan Requests 

	
2

	
  

	
2.02

	
Computation of Interest 

	
2

	
  

	
2.03

	
Default Rate 

	
2

	
  

	
2.04

	
Maximum Rate 

	
2

	
  

	
2.05

	
Method and Application of Payments 

	
3

	
  

	
2.06

	
Mandatory Repayments 

	
3

	
  

	
2.07

	
Right of Investment 

	
3

	
  

	
2.08

	
Remedies 

	
4

 

ARTICLE 3

 

CONDITIONS

	
  

	
3.01

	
Conditions of the Initial Loan 

	
4

	
  

	
3.02

	
Additional Loans 

	
4

 

ARTICLE 4

 

BORROWER REPRESENTATIONS

	
  

	
4.01

	
Representations 

	
5

 

ARTICLE 5

 

BORROWER COVENANTS

	
  

	
5.01

	
Reporting Requirements 

	
6

	
  

	
5.02

	
Existence and Good Standing 

	
6

	
  

	
5.03

	
Change in Business or Organizational Structure 

	
6

	
  

	
5.04

	
Compliance with Laws 

	
6

	
  

	
5.05

	
Inspections 

	
6

	
  

	
5.06

	
Use of the Loans 

	
6

	
  

	
5.07

	
Legal Fees; Costs 

	
6

  

  

  

	
  

	
5.08

	
Dividend Restrictions 

	
7

	
  

	
5.09

	
Restrictions on Indebtedness 

	
7

 

ARTICLE 6

 

EVENTS OF DEFAULT AND REMEDIES

	
  

	
6.01

	
Events of Default 

	
7

	
  

	
6.02

	
Remedies 

	
8

 

ARTICLE 7

 

NOTICES

..............................................................................................................................................................................................................................................................................................................................................................................8

 

ARTICLE 8

 

GENERAL DEFINITIONS, ACCOUNTING MATTERS AND DRAFTING CONVENTIONS

	
  

	
8.01

	
Defined Terms 

	
8

	
  

	
8.02

	
Defined Terms 

	
10

 

ARTICLE 9

 

MISCELLANEOUS

	
  

	
9.01

	
Entire Agreement 

	
12

	
  

	
9.02

	
Binding Effect; Successors and Assigns 

	
12

	
  

	
9.03

	
Assignment; Participations 

	
12

	
  

	
9.04

	
Severability 

	
12

	
  

	
9.05

	
Amendments in Writing 

	
12

	
  

	
9.06

	
Governing Law 

	
12

	
  

	
9.07

	
Counterpart Execution 

	
13

	
  

	
9.08

	
Necessary Action 

	
13

	
  

	
9.09

	
No Construction Against Drafter 

	
13

	
  

	
9.10

	
INDEMNIFICATION 

	
13

	
  

	
9.11

	
BALLOON PAYMENT 

	
13

 

  

  

  

This SENIOR REVOLVING CREDIT AGREEMENT (this “Agreement”) is made and entered into as of March 4, 2011, between HSW INTERNATIONAL, INC., a Delaware corporation (“Borrower”), and THEOREM CAPITAL, LLC, a California limited liability company (“Lender”).

 

Borrower requests that Lender provide a line of credit to Borrower.  Lender will provide a line of credit, subject to the terms of this Agreement.  Certain terms used in this Agreement and not previously defined in the body of this Agreement have the meanings given to such terms in Section 8.01.

 

ARTICLE 1

 

THE LINE OF CREDIT

 

1.01 Revolving Line of Credit; Renewal; Renewal Fee.  Lender shall extend credit (the “Line of Credit”) from time to time during the period from the Closing Date to the Maturity Date (that period, the “Availability Period”) by making one or more loans to Borrower (each such loan, a “Loan”) on a revolving basis.  Each Loan must be in a minimum principal amount of $200,000.00.  At Borrower’s written request delivered to Lender at least twenty (20) days prior to the then applicable Maturity Date, Lender shall, unless written notice of nonrenewal is given by Lender to Borrower within ten (10) days of Lender’s receipt of such renewal request from Borrower, renew the Line of Credit, whereupon the Maturity Date and the Availability Period shall each be extended for an additional period of one year.

 

1.02 Maximum Amount.  The aggregate unpaid principal balance of the Loans at any time shall not exceed $1,000,000.00 (the “Committed Amount”).

 

1.03 Loans under the Line of Credit.  The Loans are subject to Article 3 and Section 5.07.  The proceeds of the Loans shall be used for Borrower’s working capital and general corporate purposes.

 

1.04 Revolving Nature.  The Line of Credit is a revolving line of credit; during the Availability Period, subject to the terms and conditions of this Agreement, Borrower may repay principal amounts and re-borrow them.

 

1.05 Commitment Fee; Warrant.  In consideration of making available the Line of Credit under this agreement, Borrower shall pay Lender in cash a one-time commitment fee equal to 2.0% of the Committed Amount (the “Commitment Fee”) and issue and deliver to Lender the Warrant.

 

1.06 Renewal Fee.  Upon each renewal, if any, of the Line of Credit as provided in Section 1.01, Borrower shall pay Lender in cash a one-time renewal fee equal to 2.0% of the Committed Amount (the “Renewal Fee”).

 

1.07 Interest.  Subject to Section 2.03, the aggregate unpaid principal balance of Loans from time to time shall bear interest at a fixed rate equal to 8.0% per annum.

 

1.08 Required Payments; Maturity Date.  The aggregate unpaid principal balance of, and all unpaid accrued interest on, all Loans and all other charges under this Agreement with respect to the Line of Credit shall be paid on or before the one-year anniversary of the Closing Date (the “Maturity Date”), subject to any renewal of the Line of Credit and corresponding extension of the Maturity Date under Section 1.01.

 

  

  

  

1.09 Termination.  Notwithstanding any other provision of this Agreement, Lender may in its discretion, upon written notice to Borrower, terminate the Line of Credit upon Borrower’s completion of a Qualified Financing (as defined in Section 2.07), if any.  In such event, the aggregate unpaid principal balance of, and all unpaid accrued interest on, all Loans and all other charges under this Agreement with respect to the Line of Credit shall be and become immediately due and payable in full upon Borrower’s receipt of proceeds from such Qualified Financing.

 

1.10 The Note.  The Loans will be evidenced by this Agreement and a revolving promissory note in a form provided by Lender (the “Note”).

 

ARTICLE 2

 

COVENANTS REGARDING THE LOANS

 

2.01 Loan Requests.  Each Loan will be made upon the request of Borrower (a “Loan Request”) complying with the requirements of Article 7.  At Lender’s option, all Loan Requests must be received by Lender before 12:00 noon (Los Angeles, California time) on a Business Day which is not less than two Business Days prior to the requested date of that Loan.  Each Loan Request will be irrevocable and shall be for a Loan in a principal amount of not less than $200,000.00.   Lender may postpone making any Loan to the extent Lender is delayed by fire, earthquake or another circumstance outside Lender’s reasonable control.  No loan will be made if the interest rate hereunder for that Loan would exceed the Maximum Rate.

 

2.02 Computation of Interest.  All computations of accrued interest under the Loan Documents will be made on the basis of a year of 365 days for the actual number of days (including the first day but excluding the last day) elapsed; and all computations of interest accrued at the Maximum Rate will be based upon a year of the actual number of days in such year.

 

2.03 Default Rate.  Upon the occurrence of an Event of Default, the aggregate unpaid principal balance of the Loans and, to the extent permitted by Applicable Law, all other Loan Obligations shall, from the date of the Event of Default until the date Lender notifies Borrower that such Event of Default is waived or cured or all Loan Obligations are paid in full, bear interest at the Default Rate.  Subject to the provisions of Section 2.04, the “Default Rate” means the interest rate hereunder plus 3.0% per annum.  Interest payable at the Default Rate shall be paid from time to time on demand, or if not sooner demanded, on the last day of each month.  The provisions of this section will not constitute a waiver of any Event of Default.

 

2.04 Maximum Rate.  Notwithstanding any provision of this Agreement to the contrary, (a) no interest will be due on any amount due under this Agreement if, under Applicable Law, Lender is not permitted to charge interest on that amount, and (b) in all other cases interest due under this Agreement will be calculated at a rate not to exceed the Maximum Rate.  If the interest that Borrower is required to pay under this Agreement exceeds the Maximum Rate, the amount of interest paid by Borrower will be deemed the Maximum Rate and all payments in excess of the Maximum Rate will be deemed to have been prepayments of principal without prepayment fee or penalty, and not interest.  All amounts other than interest which are paid or agreed to be paid to Lender for the use, forbearance, or detention of Borrower’s indebtedness to Lender under this agreement shall, to the extent permitted by Applicable Law, be amortized over the full stated term of the indebtedness.

 

  

  

  

2.05 Method and Application of Payments.  All payments of principal, interest, and other amounts to be made under the Loan Documents shall be made to Lender in U.S. dollars and in immediately available funds, without set-off, deduction or counterclaim, not later than 2:00 P.M. (Los Angeles, California time) on the dates on which those payments will become due (any of those payments made after such designated time on the due date will be deemed to have been made on the next succeeding Business Day).  Subject to Borrower’s right to repay principal amounts under the Line of Credit and re-borrow them, all payments received by Lender will be applied to the Loan Obligations in the order of any accrued interest first, any outstanding principal second, and any other indebtedness or other amounts due third.  In any legal action or proceeding, the entries made by Lender in an account or accounts maintained by Lender or any of its Affiliates in accordance with its usual practice and evidencing the Loan Obligations, will be prima facie evidence of the existence and amounts of those Loan Obligations.

 

2.06 Mandatory Repayments.  If at any time the aggregate unpaid principal balance of the Loans exceeds the Committed Amount, then, upon demand by Lender, Borrower shall repay that portion of the principal balance thereof in excess of the Committed Amount, along with all unpaid accrued interest on that portion.

 

2.07 Right of Investment.  As used in this Agreement: (a) the term “Financing” means a single transaction or series of related transactions during the Availability Period involving the Company’s sale and issuance to one or more investors of shares of common stock or other equity-linked securities of the Company (“Securities”); and (b) the term “Qualified Financing” means the first Financing involving the Company’s sale and issuance of Securities for gross aggregate sales proceeds of at least One Million Dollars ($1,000,000.00).  In calculating whether a Qualified Financing has occurred, there shall be excluded any and all amounts outstanding under this Agreement and any remaining undrawn portion of the Committed Amount that the Lender is willing to, or does, exchange or pay for Securities in the Financing.  In connection with each Financing, including a Qualified Financing, the Company shall provide to Lender notice (the “Financing Notice”) describing in reasonable detail (x) the proposed terms of the Financing, and (y) the gross aggregate offering amount of Securities to be sold in such Financing.  Upon receiving the Financing Notice, Lender shall have the right, by written notice to the Company within ten days of its receipt of the Financing Notice, to purchase and acquire, on the same terms as other investors in the Financing and subject to the completion of the Financing, up to such amount (the “Investment Amount”) of the Securities as equals the Committed Amount.  Notwithstanding the terms of any Financing, Lender shall have the further right to apply against the purchase price for the Securities it elects to purchase in any Financing any unpaid principal of, and unpaid accrued interest on, the Loans in which such event the payment obligation of Borrower with respect to such unpaid principal and interest shall be deemed fully satisfied.  The provisions of this Section 2.07 shall terminate and be of no further force or effect following a Qualified Financing, or upon such time as the sum of the Lender’s Investment Amounts equals the Committed Amount.

 

  

  

  

2.08 Remedies.  The Parties understand and acknowledge that the nature and extent of the harm that could be expected to be suffered by Lender in the event of Borrower’s breach of any of the provisions of Section 2.07 of this Agreement are not susceptible of calculation and, consequently, that an award of monetary damages would not be an adequate remedy for an actual or threatened breach thereby by Borrower.  The Parties agree, therefore, that in addition to any other remedies available under this Agreement or at law or in equity, specific performance of Borrower’s obligations and injunctive relief shall be available to Lender to prevent any threatened breach by Borrower of any of the provisions of Section 2.07 and in the event of an actual breach.

 

ARTICLE 3

 

CONDITIONS

 

3.01 Conditions of the Initial Loan.  Lender’s obligation to make the initial Loan is subject to the following conditions precedent:

 

(a) Borrower has executed and delivered the Loan Documents to Lender; and Lender has executed this Agreement;

 

(b) Lender has received evidence satisfactory to Lender of the authorization of the individuals executing the Transaction Documents on behalf of Borrower;

 

(c) all representations and warranties of Borrower in the Transaction Documents are true and correct in all material respects; and

 

(d) Lender has received the Commitment Fee and the Warrant.

 

3.02 Additional Loans.  Lender’s obligation to make each additional Loan is subject to the conditions precedent that on the Drawdown Date:

 

(a) Lender has received a Loan Request;

 

(b) the following statements are correct (and Borrower will be deemed to represent to Lender that those representations are correct) as of the Drawdown Date: (i) the representations and warranties of Borrower in the Transaction Documents are correct in all material respects as though made on that date; (ii) no Event of Default or event which, with the passage of time or the giving of notice would constitute an Event of Default, has occurred and remains uncured or would result from the additional Loan; (iii) there has been no change in the financial condition of Borrower since the Closing Date, that would have a Material Adverse Effect; and (iv) the aggregate unpaid principal amount of the Loans, together with the principal amount of that additional Loan, does not exceed the Committed Amount; and

 

(c) Lender has received the Renewal Fee in the event that the Drawdown Date coincides with a renewal of the Line of Credit.

 

  

  

  

ARTICLE 4

 

BORROWER REPRESENTATIONS

 

4.01 Representations.  Borrower represents to Lender that except as disclosed to Lender in a schedule of exceptions:

 

(a) Borrower is a corporation, duly organized, validly existing and in good standing in its state of incorporation and is qualified and in good standing in each state in which Borrower’s failure to be so qualified and in good standing is reasonably likely to have a Material Adverse Effect;

 

(b) the execution, delivery and performance by Borrower of each Transaction Document is within the powers and authority of Borrower and has been duly authorized by all requisite action on behalf of Borrower;

 

(c) the Transaction Documents do not conflict with any Applicable Law;

 

(d) each Transaction Document is a legal, valid and binding agreement of Borrower, enforceable against Borrower in accordance with its terms, and any instrument or agreement required thereunder, when executed and delivered to Lender, will be similarly legal, valid, binding and enforceable;

 

(e) Borrower is not the subject of any Judgment; and there is no lawsuit, tax claim or other dispute pending or to Borrower’s knowledge threatened against Borrower that, if determined adverse to Borrower, is reasonably likely to have a Material Adverse Effect;

 

(f) the Transaction Documents do not conflict with, or result in a default under, Borrower’s certificate of incorporation or bylaws or under any contract or agreement to which Borrower is a party or by which it is bound;

 

(g) Borrower is in compliance in all material respects with all material Applicable Laws, and there is no claim, action, proceeding or investigation pending or to Borrower’s knowledge threatened against Borrower with respect to its violation of material Applicable Laws by Borrower;

 

(h) Borrower is not a “foreign person” within the meaning of Section 1445 of the Internal Revenue Code of 1986; and

 

(i) there is no Event of Default or event which, with notice or lapse of time would be an Event of Default.

 

  

  

  

ARTICLE 5

 

BORROWER COVENANTS

 

Until such time as all Obligations have been paid in full and Lender has no obligation to make additional Loans:

 

5.01 Reporting Requirements.  Borrower shall furnish to Lender promptly upon Lender’s request, copies of all financial information that Borrower is required to provide to its shareholders.  Upon Lender’s request and Lender’s executing an NDA and entering into a standstill towards trading in the Borrower’s publicly traded securities, the Borrower shall furnish to Lender promptly copies of all books, records, reports and other information pertaining to the financial condition, business and operations of Borrower reasonably requested by borrower.

 

5.02 Existence and Good Standing.  Borrower shall preserve and maintain its existence in good standing in the jurisdiction of its incorporation.

 

5.03 Change in Business or Organizational Structure.  Without Lender consent, Borrower shall not merge, dissolve, liquidate, consolidate with or into another Person, or dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) or any of the shares it owns of Sharecare, Inc. or any of the stock or material assets of HSW China and any assets material to the business of HSW China to or in favor of any Person; provided, however, in no event shall the foregoing be deemed to preclude Borrower from conveying to a third Person the stock or assets of HSW Brazil and any assets related to the business of HSW Brazil (and for the avoidance of doubt, no actions taken in connection therewith – including, without limitation, any termination or modification of agreements and licenses related thereto – shall be precluded or otherwise considered a Material Adverse Effect) for such consideration as Borrower determines advisable in its discretion.

 

5.04 Compliance with Laws.  Borrower shall comply in all material respects with all material Applicable Laws and pay before delinquency, all taxes, assessments, and governmental charges imposed upon Borrower or its property, in each case, except where the failure to do so would not have a Material Adverse Effect.

 

5.05 Inspections.  Borrower shall, at any reasonable time during normal business hours and from time to time, permit Lender or any of its agents or representatives, at Lender’s expense, to examine the records and books of, and visit the premises of, Borrower and to discuss the affairs, finances, and accounts of Borrower with executive officers of Borrower; provided, however, in the absence of an Event of Default, Lender shall not exercise such right more than twice during any Availability Period.

 

5.06 Use of the Loans.  Borrower shall not use the Loans (a) for personal, family or household purposes or (b) to purchase or carry “margin stock” (as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System), or to invest in other Persons for the purpose of carrying any such “margin stock,” or to reduce or retire any indebtedness incurred for that purpose.

 

5.07 Legal Fees; Costs.  Borrower shall pay the following:  (a) reasonable and necessary costs, expenses and Legal Fees paid or incurred in connection with the collection or enforcement of the Transaction Documents, whether or not suit is filed; (b) costs and Legal Fees paid or incurred in connection with any Insolvency Proceeding involving a claim under the Transaction Documents; and (c) costs of suit and such sum as the court may adjudge as Legal Fees in any action to enforce payment of the Notes or any part thereof.

 

  

  

  

5.08 Dividend Restrictions.  Borrower shall not declare, pay or make any dividend or distribution on or in respect of any capital stock or other equity interests of Borrower (other than dividends or distributions payable in its stock, or split-ups or reclassifications of its stock) or apply any of its funds, property or assets to the purchase, redemption or other retirement of any capital stock or other equity interests of Borrower.

 

5.09 Restrictions on Indebtedness.  Borrower shall not create, incur, assume or suffer to exist any indebtedness for borrowed money of Borrower, or any guarantee or other obligation of Borrower of any indebtedness for borrowed money of any other Person except for indebtedness that is subordinated to the Loans on terms reasonably satisfactory to Lender.  Additionally, without Lender consent, Borrower shall not allow trade obligation balances (including ‘Accounts Payable’ and all pari passu trade debt balances) to exceed $1,000,000 and shall not allow ‘Accrued Expenses and Other Current Liabilities’ balances to exceed $1,100,000. The foregoing shall not limit in any way the Lender’s rights outlined in Section 6 (f) pertaining to Material Adverse Effects.

 

 

ARTICLE 6

 

EVENTS OF DEFAULT AND REMEDIES

 

6.01 Events of Default.  The following each will be an event of default under this agreement (an “Event of Default”):

 

(a) any payment required under the Loan Documents is not made on the date when due;

 

(b) any representation in the Transaction Documents is materially incorrect or misleading;

 

(c) the filing of any federal tax lien against Borrower and same is not discharged of record within 30 days after the date filed;

 

(d) an Insolvency Proceeding is initiated by Borrower; or any Insolvency Proceeding initiated against Borrower by another Person is not discharged within 60 days after filing;

 

(e) Borrower or any Subsidiary are or become subject to a Judgment or Judgments: (i) for the payment of money in an aggregate amount (as to all such Judgments or orders) exceeding $250,000.00 or (ii) that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon any such Judgment, or (B) there is a period of thirty consecutive days during which a stay of enforcement of any such Judgment, by reason of a pending appeal or otherwise, is not in effect;

 

  

  

  

(f) any Material Adverse Effect as to Borrower;

 

(g) for more than 30 days after notice from Lender, Borrower is in default under any material term, covenant or condition of this Agreement or any of the other Transaction Documents not previously described in this Section 6.01.

 

6.02 Remedies.  Upon the occurrence of an Event of Default, Lender may: (a) without notice to Borrower, decline Loan Requests; (b) declare all Loan Obligations due and payable, without presentment, notice of intent to accelerate or notice of acceleration, demand, protest or further notice of any kind, all of which are expressly waived by Borrower; and (c) exercise all other rights and remedies afforded to Lender under the Loan Documents or Applicable Law or in equity; except that upon an actual or deemed entry of an order for relief with respect to Borrower or any of its Subsidiaries (if any) in any Insolvency Proceeding, (i) any obligation of Lender to make additional Loans shall automatically be terminated and (ii) all Loan Obligations shall automatically become due and payable, without presentment, demand, protest or any notice of any kind, all of which are expressly waived by Borrower.

 

ARTICLE 7

 

NOTICES

 

All requests, notices, approvals, consents, and other communications between the Parties (collectively, “Notices”) under the terms and conditions of the Loan Documents must be in writing and mailed or delivered to the address specified in that Loan Document, or to the address designated by any Party in a notice to the other Parties; and in the case of any other Person, to the address designated by that Person in a notice to Borrower and Lender.  All Notices will be deemed to be given or made upon the earlier to occur of (a) actual receipt by the intended recipient or (b) (i) if delivered by hand or by courier, upon delivery; (ii) if delivered by facsimile transmission, upon confirmed receipt or (iii) if delivered by mail, four Business Days after deposit in the mails, properly addressed, postage prepaid.  Borrower requests that Lender accept, and Lender may, at its option, accept and is entitled to rely and act upon any Notices purportedly given by or on behalf of Borrower, even if not made in a manner specified herein (including Notices made by email or other electronic means of communication), were incomplete or were not preceded or followed by any other form of Notice specified herein, or the terms thereof, as understood by the recipient, varied from any confirmation thereof.

 

ARTICLE 8

 

GENERAL DEFINITIONS, ACCOUNTING

 

MATTERS AND DRAFTING CONVENTIONS

 

8.01 Defined Terms.  Capitalized terms defined in this section are used in this agreement as so defined. Except as otherwise defined in this agreement, or unless the context otherwise requires, each term that is used in this Agreement which is defined in Article 9 of the UCC shall have the meaning ascribed to that term in Article 9 of the UCC.

 

  

  

  

“Affiliate” of a Person which is anything other than an individual means another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

 

“Applicable Law” means all existing and future laws, orders, ordinances, rules and regulations of or by a Governmental Authority; except that in determining the Maximum Rate, Applicable Law shall mean those laws, orders, ordinances, rules and regulations in effect during the term of the Loan Documents.

 

“Borrower” shall have the meaning specified in the preamble of this agreement.

 

“Business Day” means any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the Applicable Laws of the State of California, or are in fact closed in the State of California.

 

“Closing” means (a) the written acknowledgement by Lender that all conditions precedent to the initial Loan are satisfied or waived in accordance with this Agreement, or (b) the initial Loan is made, whichever is earlier.

 

“Closing Date” means the date of the Closing.

 

“Control” of a Person which is anything other than an individual means the power to direct the management and policies of that Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

“Drawdown Date” means in the case of any Loan, the date on which that Loan is made.

 

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

 

“Insolvency Proceeding” means the insolvency of a Person, the appointment of a receiver of any part of Person’s property, an assignment by a Person for the benefit of creditors, or the commencement of any proceeding under the Federal Bankruptcy Code or any other bankruptcy or insolvency law, by or against a Person.

 

“Judgment” means a judgment, order, writ, injunction, decree, or rule of any court, arbitrator, or Governmental Authority.

 

“Legal Fees” means any and all reasonable attorneys fees and out-of-pocket disbursements incurred or paid by Lender in protecting and enforcing its rights and interests under the Loan Documents.

 

“Lender” shall have the meaning specified in the preamble of this agreement and any successors and assigns of any of its rights and obligations under this agreement.

 

  

  

  

“Loan Documents” means this agreement, the Note and all other agreements and instruments required by Lender for purposes of evidencing the Loans.

 

“Loan Obligations” means all indebtedness, liabilities and obligations of Borrowaer to Lender arising pursuant to any of the Loan Documents, whether now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several.

 

“Losses” means any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, Judgments, awards, amounts paid in settlement of whatever kind or nature (including Legal Fees).

 

“Material Adverse Effect” means any set of circumstances or events which (a) has or could reasonably be expected to have any material adverse effect as to the validity or enforceability of any Transaction Document or any material term or condition therein against Borrower; (b) is or could reasonably be expected to be material and adverse to the financial condition, business assets, operations, or property of Borrower, taken as a whole; or (c) materially impairs or could reasonably be expected to materially impair the ability of Borrower to perform the Loan Obligations; provided that any modification or cancellation of the letter agreement for services dated October 30, 2009 , as amended December 30, 2009, between the Company and Sharecare, Inc. shall not be considered, and shall be excluded from any determination or calculation of, a Material Adverse Effect as long as such modification or cancellation does not impair Borrower’s economic interest in Sharecare, Inc.

 

“Maximum Rate” means that rate per annum which, under Applicable Law, may be charged without subjecting Lender to civil or criminal liability, or limiting Lender’s rights under the Loan Documents as a result of being in excess of the maximum interest rate which Borrower is permitted to contract or agree to pay; except that the Maximum Rate on any amount upon which Lender is not permitted to charge interest will be zero percent.

 

“Party or Parties” refers only to a named party or parties to this agreement or another Loan Document, as the context requires.

 

“Person” means an individual, a corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or other business entity, or a government or any agency or political subdivision thereof.

 

“Subsidiary” of a Person which is anything other than an individual means a business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly by that Person.  Unless otherwise specified, all references to a “Subsidiary” or to “Subsidiaries” shall refer to any Subsidiary or Subsidiaries, if any.

 

“Transaction Documents” means the Loan Documents and the Warrant.

 

“UCC” means the Uniform Commercial Code in the Governing Law State.

 

  

  

  

“Warrant” means a three-year warrant to purchase up to 65,359 shares of common stock, $.001 par value per share, of Borrower at an initial exercise price of $3.06 per share and otherwise in form and content reasonably satisfactory to Lender.

 

8.02 Drafting Conventions.  Unless expressly stated therein or the context otherwise requires, the Loan Documents will be interpreted in accordance with the following (the “Drafting Conventions”):  (a) the words “include,” “includes,” and “including” are to be read as if they were followed by the phrase “without limitation”; (b) unless otherwise expressly stated, terms and provisions applicable to two or more Persons shall apply on an individual, as well as collective basis; (c) headings and captions are provided for convenience only and do not affect the meaning of the text which follows; (d) references to an agreement or instrument means that agreement or instrument, together with all extensions, renewals, modifications, substitutions and amendments thereof, subject to any restrictions thereon in that agreement or instrument or in the Loan Documents; (e) ANY REPORT OR DOCUMENT TO BE RECEIVED BY LENDER SHALL BE REASONABLY SATISFACTORY IN FORM AND CONTENT TO LENDER; (F) WHEREVER (I) LENDER EXERCISES ANY RIGHT GIVEN TO IT TO APPROVE OR DISAPPROVE, (II) ANY ARRANGEMENT OR TERM IS TO BE SATISFACTORY TO LENDER, OR (III) ANY OTHER DECISION OR DETERMINATION IS TO BE MADE BY LENDER, THEN EXCEPT AS MAY BE OTHERWISE EXPRESSLY AND SPECIFICALLY PROVIDED THEREIN, THE DECISION TO APPROVE SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED; (g) whenever by the terms of the Loan Documents, Borrower is prohibited from taking an action or permitting the occurrence of some circumstance, Borrower shall not, directly or indirectly take that action or permit that circumstance, or directly or indirectly permit any Subsidiary to take that action or permit that circumstance; (h) evidence of the occurrence or non-occurrence of any event, or the existence or non-existence of any circumstance to be delivered to Lender must be in a form reasonably satisfactory to Lender; (i) unless specified otherwise, references to a statute or regulation means that statute or regulation as amended or supplemented from time to time and any corresponding provisions of successor statutes or regulations; (j) unless otherwise specified, all references to a time of day are references to the time in Los Angeles, California; (k) references to “month” or “year” are references to a calendar month or calendar year, respectively; (l) if any date specified in this agreement as a date for taking action falls on a day that is not a Business Day, then that action may be taken on the next Business Day; (m) a pronoun used in referring generally to any member of a class of Persons, or Persons and things, applies to each member of that class, whether of the masculine, feminine, or neuter gender; (n) references to “articles,” “sections,” “subsections,” “paragraphs;” “exhibits,” and “schedules” reference articles, sections, subsections, paragraphs, exhibits, and schedules, respectively, of this Agreement unless otherwise specifically provided; (p) the words “hereof,” “herein,” “hereunder,” and “hereby” refer to this agreement as a whole and not to any particular provision of this Agreement; (q) the definitions in this Agreement apply equally to both singular and plural forms of the terms defined; and (r) for purposes of computing periods of time from a specified date to a later specified date, the word “from “ means “from and including” and the words “to” and “until” each mean “to but excluding”.

 

  

  

  

ARTICLE 9

 

MISCELLANEOUS

 

9.01 Entire Agreement.  This Agreement and the other Transaction Documents, collectively: (i) represent the sum of the understandings and agreements between Lender and Borrower concerning this credit; (ii) replace any prior oral or written agreements between Lender and Borrower concerning this credit; and (iii) are intended by Lender and Borrower as the final, complete and exclusive statement of the terms agreed to by them.  In the event of any conflict between this Agreement and any other agreements required by this Agreement, this Agreement will prevail.

 

9.02 Binding Effect; Successors and Assigns.  The Loan Documents will inure to the benefit of and be binding upon the Parties and their respective successors and assigns.

 

9.03 Assignment; Participations.  Neither Borrower nor Lender shall assign its rights or obligations hereunder without the other Party’s prior written consent.  Lender may sell participations in all or any portion of its interest in the Loans or under the Loan Documents to any Person; provided, however, Lender may not assign its right to purchase Securities of Borrower pursuant to Section 2.07 without the consent of Borrower except to such assignees, if any, permitted under the Warrant.  Lender may disclose to any actual or potential participant any information that Borrower has delivered to Lender in connection with the Loan Documents provided that Lender takes reasonable measures to protect the confidentiality of such information.  Notwithstanding section 9.03, Lender may assign all of its rights and obligations hereunder, including its promissory note and warrants, without the consent of the Borrower in the circumstance where the assignee is under control of the Lender.

 

9.04 Severability.  Any provision of any Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of that Loan Document or affecting the validity or enforceability of that provision in any other jurisdiction; except that if such provision relates to the payment of any monetary sum (other than restricting the amount of interest payable to Lender to the Maximum Rate), then Lender may, at its option, declare all Loan Obligations immediately due and payable.

 

9.05 Amendments in Writing.  The Loan Documents may not be amended, changed, modified, altered or terminated without the prior written consent of all Parties to the respective Loan Document.

 

9.06 Governing Law.  Except as expressly stated therein, the Loan Documents will be governed exclusively by the applicable laws of the State of California (the “Governing Law State”) without regard or reference to its conflict of laws principles.  Borrower understands, agrees and acknowledges that (a) this Agreement and the transaction evidenced hereby have significant and substantial contacts with the Governing Law State, (b) it is convenient to Borrower and Lender to select the law of the Governing Law State to govern this Agreement and the transactions evidenced hereby, (c) the transactions evidenced by this Agreement bear a reasonable connection to the laws of the Governing Law State, (d) the choice of the internal laws of the Governing Law State was made for good and valid reasons, and (e) the choice of the Governing Law State constitutes good and valuable consideration for Lender to enter into this Agreement and Lender has entered into this Agreement in reliance on this choice.

 

  

  

  

9.07 Counterpart Execution.  The Loan Documents may be executed in counterparts, each of which will be an original and all of which together are deemed one and the same instrument.

 

9.08 Necessary Action.  Lender is authorized to execute any other documents or take any other actions reasonably necessary to effectuate the Loan Documents and the consummation of the transactions contemplated therein.

 

9.09 No Construction Against Drafter.  Each Party has participated in negotiating and drafting this Agreement, so if an ambiguity or a question of intent or interpretation arises, this agreement is to be construed as if the parties had drafted it jointly, as opposed to being construed against a Party because it was responsible for drafting one or more provisions of this Agreement.

 

9.10 INDEMNIFICATION.  BORROWER SHALL DEFEND, INDEMNIFY AND HOLD LENDER AND ITS OFFICERS, DIRECTORS, EMPLOYEES, PARTNERS, AGENTS AND ATTORNEYS (THE “INDEMNIFIED PERSONS”) HARMLESS AGAINST ANY AND ALL LOSSES OF ANY KIND OR NATURE WHATSOEVER THAT MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE INDEMNIFIED PERSONS: (I) INCURRED AS A RESULT OF THE FAILURE BY BORROWER TO BORROW THE AMOUNT SPECIFIED IN A LOAN REQUEST (INCLUDING ANY FAILURE RESULTING FROM THE FAILURE TO FULFILL THE APPLICABLE CONDITIONS PRECEDENT), INCLUDING ANY LOSS OF ANTICIPATED PROFITS AND LOSSES BY REASON OF THE LIQUIDATION OR REEMPLOYMENT OF FUNDS ACQUIRED BY LENDER TO FUND SUCH LOAN; (II) AS A RESULT OF ITS ACTS OR OMISSIONS WHICH RESULT FROM COMMUNICATIONS GIVEN OR PURPORTED TO BE GIVEN, BY BORROWER OR ANY AUTHORIZED REPRESENTATIVE OF BORROWER, WHICH ARE INTERRUPTED; (III) RESULTING FROM THE RELIANCE BY LENDER ON EACH NOTICE PURPORTEDLY GIVEN BY OR ON BEHALF OF BORROWER; AND (IV) ARISING OUT OF CLAIMS ASSERTED AGAINST THE INDEMNIFIED PERSONS AS A RESULT OF LENDER BEING PARTY TO THIS AGREEMENT OR THE TRANSACTIONS CONSUMMATED PURSUANT TO THIS AGREEMENT; EXCEPT THAT BORROWER SHALL HAVE NO OBLIGATION TO AN INDEMNIFIED PERSON UNDER THIS SECTION WITH RESPECT TO LOSSES RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THAT INDEMNIFIED PERSON AS DETERMINED BY A COURT OF COMPETENT JURISDICTION. IF AND TO THE EXTENT THAT ANY INDEMNITY UNDER THE LOAN DOCUMENTS IN FAVOR OF INDEMNIFIED PARTIES IS UNENFORCEABLE FOR ANY REASON, BORROWER SHALL TO MAKE THE MAXIMUM CONTRIBUTION TO THE PAYMENT AND SATISFACTION THEREOF WHICH IS PERMISSIBLE UNDER APPLICABLE LAW.  ALL INDEMNITIES UNDER THE LOAN DOCUMENTS IN FAVOR OF INDEMNIFIED PARTIES SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.

 

9.11 BALLOON PAYMENT.  THIS AGREEMENT PROVIDES FOR A BALLOON PAYMENT.  BORROWER ACKNOWLEDGES THAT, EXCEPT WITH RESPECT TO THE RENEWAL PROVISIONS OF THIS AGREEMENT, LENDER HAS NOT AGREED TO REFINANCE THAT PAYMENT.

 

[Signature page follows]

  

  

  

The Parties have signed this Agreement effective as of the day and year first written above.

 

	
Address for notices:

3280 Peachtree Road, Suite 600

Atlanta, Georgia 30305

 

Attention: General Counsel

Facsimile No.: ______________

	
BORROWER

 

HSW INTERNATIONAL, INC.

 

By:  /s/ Bradley T. Zimmer      

Name: Bradley T. Zimmer                                                 

Title:  Executive Vice President & General Counsel                                                 

 

 

 

	
With a copy to:

Wyrick Robbins Yates & Ponton LLP

4101 Lake Boone Trail, Suite 300

Raleigh, North Carolina 27607

Attention: Donald R. Reynolds

Facsimile No.: 919-781-4865

	  
	
Address for notices:

10880 Wilshire Boulevard, Suite 950

Los Angeles, California 90024

Attention: Anshuman Dube

Facsimile No.: (310) 500-2151

	
LENDER

 

THEOREM CAPITAL, LLC

 

By:        /s/Anshuman Dube

Name: Anshuman Dube

Title: Manager

	  	  
	  	  
	
With a copy to:

	  
	  	  
	
TroyGould PC

	  
	
1801 Century Park East, 16th Floor

	  
	
Los Angeles, California 90067

	  
	
Attention: Istvan Benko

	  
	
Facsimile No.: 310-201-4746

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