EXHIBIT 2.03
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LOAN AGREEMENT
BETWEEN
PALM, INC.
as Lender
AND
HANDSPRING, INC.
as Borrower
Dated as of June 4, 2003
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TABLE OF CONTENTS
PAGE
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ARTICLE 1. INTERPRETATION..................................................................................... 1
1.1 Definitions........................................................................................ 1
1.2 GAAP............................................................................................... 1
1.3 Governing Law...................................................................................... 1
1.4 Construction....................................................................................... 1
1.5 Entire Agreement................................................................................... 1
1.6 Calculation of Interest and Fees................................................................... 2
1.7 Other Interpretive Provisions...................................................................... 2
ARTICLE 2. LOANS.............................................................................................. 2
2.1 Terms.............................................................................................. 2
2.2 Interest........................................................................................... 2
2.3 Maturity........................................................................................... 2
2.4 Proceeds of the Loans.............................................................................. 2
2.5 Prepayments........................................................................................ 3
2.6 Other Payment Terms................................................................................ 3
2.7 Loan Account....................................................................................... 4
2.8 Security; Guaranty; Further Assurances............................................................. 4
ARTICLE 3. REPRESENTATIONS AND WARRANTIES..................................................................... 4
3.1 Representations and Warranties of Borrower......................................................... 4
3.2 Representations and Warranties of Lender........................................................... 5
ARTICLE 4. CONDITIONS TO EFFECTIVENESS AND EACH LOAN.......................................................... 6
4.1 Conditions to Lender's Obligations to Make the Initial Loan........................................ 6
4.2 Conditions to Lender's Obligation to Make Each Loan................................................ 7
4.3 Covenant to Deliver................................................................................ 8
ARTICLE 5. COVENANTS OF BORROWER.............................................................................. 8
5.1 Affirmative Covenants.............................................................................. 8
5.2 Negative Covenants................................................................................. 10
ARTICLE 6. EVENTS OF DEFAULT.................................................................................. 12
6.1 Events of Default.................................................................................. 12
6.2 Rights of Lender upon Default...................................................................... 13
ARTICLE 7. MISCELLANEOUS...................................................................................... 14
7.1 Notices............................................................................................ 14
7.2 Expenses........................................................................................... 15
7.3 Indemnification.................................................................................... 15
7.4 Waivers; Amendments................................................................................ 15
7.5 Successors and Assigns............................................................................. 15
7.6 Set-off............................................................................................ 16
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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7.7 No Third Party Rights.............................................................................. 16
7.8 Partial Invalidity................................................................................. 16
7.9 Jury Trial......................................................................................... 16
7.10 Counterparts....................................................................................... 16
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LOAN AGREEMENT
This LOAN AGREEMENT (this "LOAN AGREEMENT"), dated as of June 4, 2003
is entered into by and between:
(1) PALM, INC., a Delaware corporation ("LENDER"); and
(2) HANDSPRING, INC., a Delaware corporation
("BORROWER").
RECITALS
A. Lender and Borrower have entered into a Merger Agreement (as
defined below) pursuant to which Borrower is to obtain from
Lender financing for general corporate purposes.
B. Lender is willing to provide such financing subject to the
terms and conditions of this Loan Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the covenants,
conditions and agreements set forth herein, the parties agree as follows:
ARTICLE 1. INTERPRETATION.
1.1 Definitions. Unless otherwise indicated in this Loan Agreement,
each capitalized term used and not otherwise defined in this Loan Agreement
shall have the respective meaning given to that term in Schedule I to this Loan
Agreement or in the Merger Agreement if not defined in either this Loan
Agreement or in Schedule I.
1.2 GAAP. Unless otherwise indicated in this Loan Agreement, all
accounting terms used in this Loan Agreement shall be construed, and all
accounting and financial computations hereunder or thereunder shall be computed,
in accordance with GAAP.
1.3 Governing Law. This Loan Agreement and each of the other Loan
Documents shall be governed by and construed in accordance with the laws of the
State of California without reference to conflicts of law rules (except to the
extent that the provisions of the California Uniform Commercial Code would cause
the laws of another jurisdiction to be applied).
1.4 Construction. Each of this Loan Agreement and the other Loan
Documents is the result of negotiations among, and has been reviewed by,
Borrower, Lender and their respective counsel. Accordingly, this Loan Agreement
and the other Loan Documents shall be deemed to be the product of all parties
hereto, and no ambiguity shall be construed in favor of or against Borrower or
Lender.
1.5 Entire Agreement. This Loan Agreement, the Merger Documents and
each of the other Loan Documents, taken together, constitute and contain the
entire agreement of Borrower and Lender and
supersede any and all prior agreements, negotiations, correspondence,
understandings and communications among the parties, whether written or oral,
respecting the subject matter hereof.
1.6 Calculation of Interest and Fees. All calculations of interest and
fees under this Loan Agreement and the other Loan Documents for any period shall
include the first day of such period and exclude the last day of such period.
1.7 Other Interpretive Provisions. References in this Loan Agreement
and the other Loan Documents to "Articles," "Sections," "Exhibits," and
"Schedules" are to articles, sections, exhibits, and schedules herein and hereto
unless otherwise indicated. References in this Loan Agreement and each of the
other Loan Documents to any document, instrument or agreement shall include (a)
all exhibits, schedules, annexes and other attachments thereto, (b) all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) such document, instrument or agreement, or replacement or predecessor
thereto, as amended, modified and supplemented from time to time and in effect
at any given time. References in this Loan Agreement and the other Loan
Documents to laws and statutes mean such laws and statutes as amended from time
to time. The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Loan Agreement or any other Loan Document refer to this
Loan Agreement or such other Loan Document, as the case may be, as a whole and
not to any particular provision of this Loan Agreement or such other Loan
Document, as the case may be. The words "include" and "including" and words of
similar import when used in this Loan Agreement or any other Loan Document shall
not be construed to be limiting or exclusive.
ARTICLE 2. LOANS.
2.1 Terms. (a) Subject to the terms and conditions of this Loan
Agreement, including, without limitation, Article 4, at any time after the
Initial Availability Date, Lender agrees to advance to Borrower from time to
time term loans (each, a "LOAN" and collectively, the "LOANS") in an aggregate
principal amount not to exceed the Credit Amount. Each Loan shall be in an
amount of at least one million dollars ($1,000,000) or any integral multiple of
two hundred fifty thousand dollars ($250,000) in excess thereof, provided that
in no event shall such Loan be greater than five million dollars ($5,000,000)
and shall be made on the third Business Day after receipt by Lender of a notice
of borrowing in the form of Schedule II hereto (the "NOTICE OF BORROWING") in
the manner specified in Section 7.1 of this Loan Agreement. Borrower may not
reborrow the principal amount of any Loan after repayment or prepayment thereof.
If the conditions set forth in Article 4 are satisfied, then Borrower may borrow
multiple Loans pursuant to the terms of this Loan Agreement.
2.2 Interest. Borrower shall pay interest on the unpaid principal
amount of the Loans from the date of each such Loan, quarterly on the last
Business Day of each calendar quarter, beginning the first such date after a
Loan is made until all of the Loans are paid in full, and on the Maturity Date,
at a rate per annum equal at all times during each Interest Period to the lesser
of the Prime Rate (on the first day of such Interest Period) plus three percent
(3.0%) or the maximum rate permitted by law. All computations of such interest
shall be based on a year of 365 days for actual days elapsed.
2.3 Maturity. Unless earlier prepaid, Loans are due and payable on the
Maturity Date.
2.4 Proceeds of the Loans. Borrower shall use the proceeds of the Loans
for general corporate purposes.
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2.5 Prepayments.
(a) Terms of all Prepayments. Upon the prepayment of any Loan
(whether such prepayment is an optional prepayment under Section 2.5(b), a
mandatory prepayment required by Section 2.5(c) or a mandatory prepayment
required by any other provision of this Loan Agreement or the other Loan
Documents, including, without limitation, a prepayment upon acceleration),
Borrower shall pay to Lender all accrued interest to the date of such prepayment
on the amount prepaid together with all other amounts then due and unpaid
hereunder.
(b) Optional Prepayments. At its option, Borrower may, upon
one (1) Business Days notice to Lender, prepay the Loans in whole, or in part.
(c) Mandatory Prepayments. Borrower shall prepay Loans as
follows:
(i) In the event of a Disposition by Borrower or
any of its Subsidiaries, Borrower shall prepay Loans in an amount equal to fifty
percent (50%) of the aggregate Net Proceeds of such Disposition to the extent
that the amount of such Net Proceeds, when aggregated with all Net Proceeds of
prior Dispositions taking place after the date of this Loan Agreement, exceeds
ten million dollars ($10,000,000); or
(ii) In the event of a Financing Event by
Borrower or any of its Subsidiaries, Borrower shall prepay Loans in an amount
equal to fifty percent (50%) of the aggregate Net Proceeds of such Financing
Event .
(d) Application of Prepayments. All prepayments hereunder
shall be applied first to unpaid fees, costs and expenses then due and payable
under this Loan Agreement or the other Loan Documents, second to accrued
interest then due and payable under this Loan Agreement or the other Loan
Documents and finally to reduce the principal amount of outstanding Loans.
(e) Reduction of Credit Amount Upon Prepayment. The Credit
Amount shall be deemed immediately reduced by the principal amount of any
prepayment made or required to be made by Borrower.
2.6 Other Payment Terms.
(a) Place and Manner. Borrower shall make all payments due to
Lender hereunder by wire transfer according to instructions provided by Lender,
in lawful money of the United States and in same day or immediately available
funds.
(b) Date. Whenever any payment due hereunder shall fall due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of interest or fees, as the case may be.
(c) Default Rate. From and after the occurrence of an Event of
Default and during the continuance thereof, Borrower shall pay interest on the
aggregate, outstanding balance of the Loans, and on interest (compounded
monthly) and other amounts not paid when due hereunder or under the other Loan
Documents, from the date due thereof until those amounts are paid in full at a
per annum rate equal to the lesser of (i) a rate equal to five percentage points
in excess of the rate otherwise applicable to the Loans at such time or (ii) the
maximum rate permitted by law, such rate to change from time to time as the rate
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otherwise applicable to the Loans shall change. All computations of such
interest shall be based on a year of 365 days for actual days elapsed.
2.7 Loan Account. The obligation of Borrower to repay the Loans, to pay
interest thereon at the rates provided herein and to pay other amounts provided
for hereunder shall be evidenced by a loan account consisting of appropriate
notations made from time to time and maintained on Lender's books. Such
notations shall be deemed conclusive absent manifest error.
2.8 Security; Guaranty; Further Assurances.
(a) Security. The Obligations shall be secured by a Security
Agreement in the form of Exhibit A (the "SECURITY AGREEMENT").
(b) Guaranty. The Obligations shall be guarantied pursuant to
the terms of a Guaranty in the form of Exhibit B (the "GUARANTY") executed by
each Subsidiary required to execute the Guaranty pursuant to the terms of
Section 5.1(g).
(c) Further Assurances. Borrower shall deliver to Lender the
Security Agreement and such other instruments, agreements, certificates,
opinions and documents as Lender may reasonably request to create, perfect,
evidence and maintain (i) a first priority security interest of Lender in all
Collateral of Borrower and its Subsidiaries as further set forth in the Security
Agreement and (ii) the rights of Lender under this Loan Agreement and the other
Loan Documents. Borrower shall cooperate with Lender and perform all additional
acts reasonably requested by Lender to effect the purposes of the foregoing and
the rights granted to Lender hereunder.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES.
3.1 Representations and Warranties of Borrower. Borrower represents and
warrants to Lender as of the date hereof and, except with respect to Section
3.1(i), as of the date each Loan is made, that, except as set forth in the
Disclosure Schedule:
(a) Due Incorporation, Qualification, etc. Each of Borrower
and its Subsidiaries (i) is a corporation or other organization duly organized,
validly existing and in good standing under the laws of its jurisdiction of its
incorporation or organization; (ii) has the requisite power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted; and (iii) is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than such jurisdictions where the failure to so qualify or to
be in good standing, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
(b) Authority. The execution, delivery and performance by
Borrower and each Guarantor of each Loan Document to be executed by Borrower or
such Guarantor and the consummation of the transactions contemplated thereby (i)
are within the corporate power and authority of Borrower or such Guarantor and
(ii) have been duly authorized by all necessary corporate actions on the part of
Borrower or such Guarantor.
(c) Enforceability. Each Loan Document executed, or to be
executed, by Borrower and each Guarantor has been, or will be, duly executed and
delivered by Borrower or such Guarantor and
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constitutes, or will constitute, a legal, valid and binding obligation of
Borrower or such Guarantor, enforceable against Borrower or such Guarantor in
accordance with its terms, except as limited by bankruptcy, insolvency or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and general principles of equity.
(d) Non-Contravention. The execution and delivery by Borrower
and each Guarantor of the Loan Documents to which each is a party and the
performance and consummation of the transactions contemplated thereby do not and
will not (i) violate any material Legal Requirements or Charter Document
applicable to Borrower or such Guarantor; (ii) violate any material provision
of, or result in the material breach or the acceleration of, or entitle any
other Person to accelerate (whether after the giving of notice or lapse of time
or both), any material agreement of Borrower or any Subsidiary; or (iii) result
in the creation or imposition of any Lien upon any property, asset or revenue of
Borrower or any Subsidiary (except such Liens as may be created in favor of
Lender pursuant to this Loan Agreement or the other Loan Documents).
(e) Approvals. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity or
other Person (including, without limitation, the shareholders of any Person) is
required to be obtained or made by Borrower or its Subsidiaries in connection
with the execution and delivery of the Loan Documents executed by Borrower or
its Subsidiaries and the performance and consummation of the transactions
contemplated thereby.
(f) No Default. No Default or Event of Default has occurred
and is continuing.
(g) Liens. Such assets and properties are subject to no Lien,
except for Permitted Liens.
(h) Other Regulations. None of Borrower or its Subsidiaries is
subject to regulation under the Investment Company Act of 1940, the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act, any state public utilities code or to any federal or state statute
or regulation limiting its ability to incur Indebtedness.
(i) Solvency, Etc.. As of the date hereof, Borrower is
Solvent.
3.2 Representations and Warranties of Lender. Lender represents and
warrants to Borrower as of the date hereof:
(a) Due Incorporation, Qualification, etc. Lender is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation.
(b) Authority. The execution, delivery and performance by
Lender of each Loan Document to be executed by Lender and the consummation of
the transactions contemplated thereby (i) are within the corporate power and
authority of Lender and (ii) have been duly authorized by all necessary
corporate actions on the part of Lender.
(c) Enforceability. Each Loan Document executed, or to be
executed, by Lender has been, or will be, duly executed and delivered by Lender
and constitutes, or will constitute, a legal, valid and binding obligation of
Lender, enforceable against Lender in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general application relating
to or affecting the enforcement of creditors' rights generally and general
principles of equity.
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(d) Non-Contravention. The execution and delivery by Lender of
the Loan Documents to which it is a party and the performance and consummation
of the transactions contemplated thereby do not and will not (i) violate any
material Legal Requirements or Charter Document applicable to Lender; or (ii)
result in the creation or imposition of any material Lien upon any property,
asset or revenue of Lender or any of its Subsidiaries. The execution and
delivery by Lender of the Loan Documents to which it is a party will not violate
or result in a default under any material agreement of Lender (excluding the
Foothill Facility). The performance on or after June 26, 2003, by Lender of the
Loan Documents to which it is a party, will not violate or result in default
under any material agreement of Lender (including the Foothill Facility).
(e) Approvals. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity or
other Person (including, without limitation, the shareholders of any Person) is
required to be obtained or made by Lender in connection with the execution and
delivery of the Loan Documents executed by Lender and the performance and
consummation of the transactions contemplated thereby.
ARTICLE 4. CONDITIONS TO EFFECTIVENESS AND EACH LOAN.
4.1 Conditions to Lender's Obligations to Make the Initial Loan. The
effectiveness of this Loan Agreement and Lender's obligation to make the initial
Loan is subject to the satisfaction or waiver of the following conditions (each
of the following conditions to be satisfied as of the date of this Loan
Agreement, unless otherwise specified below):
(a) Borrower shall have executed and delivered to Lender the
Security Agreement, which execution and delivery shall take place
contemporaneously with the execution and delivery of this Loan Agreement.
(b) Copies, certified by the Secretary or Assistant Secretary
of Borrower, as of the date of this Loan Agreement, of Borrower's charter
documents and bylaws and of all documents evidencing action taken by Borrower
authorizing the execution, delivery and performance of the Loan Documents and
setting forth the incumbency of the officers authorized to execute the Loan
Documents, in form and substance satisfactory to Lender and its counsel;
(c) Good standing certificates for Borrower from (i)
Borrower's state of incorporation, (ii) the states in which Borrower's principal
place of business is located, and (iii) the states in which Borrower operates or
has employees, together with certificates of the applicable governmental
authorities that Borrower is in compliance with the franchise tax laws of each
such state, each dated as of a recent date;
(d) Within 10 days of the date of this Loan Agreement,
evidence of the insurance coverage required by Section 5.1(c) of this Loan
Agreement;
(e) Borrower shall have provided to Lender such documents,
instruments and agreements as Lender shall have reasonably requested to evidence
the perfection and priority of the security interests granted to Lender to the
extent contemplated by the Security Agreement, including, without limitation,
(i) form UCC-1 Financing Statements (ii) Grants of Security Interest in Patents,
Trademarks and Copyrights, as applicable, to be filed in the U.S. Patent and
Trademark Office or the U.S. Copyright Office, as applicable and (iii) within
ten (10) days of the date of this Loan Agreement, account control agreements for
each deposit and investment account of Borrower located in the United States
("ACCOUNTS"), duly executed by all applicable
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parties, provided, that if Borrower is unable to deliver duly executed account
control agreements with respect to each of Borrower's Accounts within such ten
(10) day period, then Borrower covenants that it shall close any Accounts that
are not subject to account control agreements that have been entered into in
such ten (10) day period prior to the extension of the initial Loan;
(f) Within 10 days of the date of this Loan Agreement,
Borrower shall have delivered to Lender (i) stock certificates, endorsed in
blank, or shall have taken such other actions as are necessary to perfect the
security interest of Lender in the Equity Securities of each Person in which
such Borrower owns Equity Securities, in each case, to the extent required
pursuant to the terms of the Security Agreement and (ii) an updated Schedule 1-C
to this Security Agreement. Notwithstanding anything contained in this Loan
Agreement or the Security Agreement, so long as no Event of Default exists,
Borrower shall not be required to deliver stock certificates to Lender in any of
the Excluded Foreign Subsidiaries; and
(g) Evidence that all security interests granted by Borrower
in favor of Comdisco, Inc. have been terminated, including any filings with the
U.S. Patent and Trademark Office.
4.2 Conditions to Lender's Obligation to Make Each Loan. Lender's
obligation to make each Loan (including the initial Loan) is subject to the
satisfaction of the following conditions:
(a) Lender shall have received a Notice of Borrowing;
(b) The representations and warranties set forth in Article 3
shall be true and correct in all material respects as if made on such date,
except for those representations and warranties which address matters only as of
a particular date (which representations and warranties shall remain true and
correct as of such date);
(c) No Default or Event of Default shall have occurred and be
continuing or will result from the making of the Loan;
(d) Each of the Loan Documents shall be in full force and
effect and all actions necessary to perfect and maintain Lender's security
interest granted pursuant to the terms of the Security Agreement shall have been
taken to Lender's reasonable satisfaction; and no Subsidiary subject to the
requirements of Section 5.1(g) shall have been formed unless the required
actions under Section 5.1(g) have been accomplished (without regard to the
thirty (30) day periods set forth in Section 5.1(g));
(e) Any Domestic Subsidiary required to become a party to the
Guaranty and the Security Agreement pursuant to Section 5.1(g), shall have
delivered copies, certified by the Secretary or Assistant Secretary of such
Domestic Subsidiary of such Domestic Subsidiary's charter documents and bylaws
and of all documents evidencing action taken by such Domestic Subsidiary
authorizing the execution, delivery and performance of the Loan Documents to
which it is a party and setting forth the incumbency of the officers authorized
to execute the Loan Documents to which it is a party, in form and substance
satisfactory to Lender and its counsel;
(f) The Borrowing Condition shall have been satisfied;
(g) The Maturity Date shall not have occurred; and
(h) There has not been a Parent Triggering Event (as defined
in the Merger Agreement).
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The submission by Borrower to Lender of the Notice of Borrowing with respect to
the Loan shall be deemed to be a representation and warranty by Borrower as of
the date thereof as to the above.
4.3 Covenant to Deliver. Borrower agrees (not as a condition but as a
covenant) to deliver to Lender each item required to be delivered to Lender as a
condition to closing under this Article 4. Borrower expressly agrees that the
occurrence of the Closing Date prior to the receipt by Lender of any such item
shall not constitute a waiver by Lender of Borrower's obligation to deliver such
item.
ARTICLE 5. COVENANTS OF BORROWER.
5.1 Affirmative Covenants. From the termination of the Merger Agreement
until the termination of the commitment to make Loans under this Loan Agreement
and the satisfaction in full by Borrower of all Obligations, Borrower shall
comply, and shall cause compliance, with the following affirmative covenants
unless Lender shall otherwise consent in writing:
(a) Financial Statements, Reports, etc. Borrower shall furnish
to Lender the following, each in such form and such detail as Lender shall
reasonably request:
(i) Within thirty (30) days after the end of
each fiscal month of Borrower, Financial Statements of Borrower as of
the last day of such fiscal month, certified on behalf of Borrower by
the chief financial officer of Borrower to fairly present in all
material respects the financial condition, results of operations and
other information presented therein and to have been prepared in
accordance with GAAP consistently applied, subject to normal year end
adjustments and except that no footnotes need be included with such
Financial Statements;
(ii) Within forty-five (45) days after the last
day of each fiscal quarter of Borrower, a copy of the Financial
Statements of Borrower for such quarter and for the fiscal year to
date, certified on behalf of Borrower by the chief financial officer or
controller of Borrower to present fairly in all material respects the
financial condition, results of operations and other information
presented therein and to have been prepared in accordance with GAAP
consistently applied, subject to normal year end adjustments and except
that no footnotes need be included with such Financial Statements;
(iii) Within ninety (90) days after the close of
each fiscal year of Borrower, (A) copies of the audited Financial
Statements of Borrower (including, without limitation, consolidated and
consolidating Financial Statements for Borrower and its Subsidiaries)
for such year, audited by Borrower's current independent certified
public accountants or another nationally recognized firm of public
accountants that is reasonably acceptable to Lender, and (B) copies of
the unqualified opinions and management letters delivered by such
accountants in connection with such Financial Statements;
(iv) Contemporaneously with the quarterly and
year-end financial statements required by the foregoing clauses (ii)
and (iii), a certificate of the president or chief financial officer of
Borrower stating that no Event of Default and no Default has occurred,
or, if any such Event of Default or Default has occurred, a statement
as to the nature thereof and what action Borrower proposes to take with
respect thereto;
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(v) Promptly after Borrower has Knowledge of the
occurrence or existence of: (A) any Reportable Event under any Employee
Benefit Plan or Multiemployer Plan that reasonably could be expected to
have a Material Adverse Effect; (B) any actual or threatened
litigation, suits, claims or disputes against Borrower or its
Subsidiaries involving potential monetary damages payable by Borrower
or its Subsidiaries of One Hundred Thousand Dollars ($100,000) or more
(alone or in the aggregate); (C) any other event or condition which
could reasonably be expected to have a Material Adverse Effect; or (D)
any Event of Default or Default; Borrower will furnish to Lender the
statement of the president or chief financial officer of Borrower
setting forth details of such event, condition, Event of Default or
Default and the action which Borrower proposes to take with respect
thereto;
(vi) Such other instruments, agreements,
certificates, statements, documents and information relating to the
operations or condition (financial or otherwise) of Borrower or its
Subsidiaries, and compliance by Borrower with the terms of this Loan
Agreement and the other Loan Documents as Lender may from time to time
reasonably request.
(b) Books and Records. Borrower and its Subsidiaries shall at
all times keep proper books of record and account in which full, true and
correct entries will be made of their transactions in accordance with GAAP.
(c) Insurance. Borrower and its Subsidiaries shall (i) carry
and maintain insurance at its expense of the types and in the amounts currently
carried during the term of this Loan Agreement and (ii) deliver to Lender from
time to time, as Lender may request, schedules or insurance certificates setting
forth all insurance then in effect. Borrower and its Subsidiaries shall deliver
copies of all such policies to Lender with a satisfactory lender's loss payable
endorsement naming Lender as loss payee and additional insured, as appropriate.
Borrower shall use reasonable commercial efforts to cause each policy of
insurance or endorsement to contain a clause requiring the insurer to give not
less than 30 days prior written notice to Lender in the event of cancellation of
the policy for any reason whatsoever.
(d) Taxes and Other Indebtedness. Borrower and its
Subsidiaries shall promptly pay and discharge when due (i) all Taxes prior to
the date upon which penalties accrue thereon except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (b)
the Borrower or such Subsidiary has set aside on its books adequate reserves
with respect thereto in accordance with GAAP, (ii) all Indebtedness which, if
unpaid, could become a Lien (other than a Permitted Lien) upon the property of
Borrower or its Subsidiaries and (iii) all other Indebtedness which, if unpaid,
could reasonably be expected to have a Material Adverse Effect, except such
Indebtedness as may in good faith be contested or disputed, or for which
arrangements for deferred payment have been made, provided that in each such
case appropriate reserves are maintained to the reasonable satisfaction of
Lender.
(e) Use of Proceeds. Borrower shall use the proceeds of the
Loans only for the respective purposes set forth in Section 2.4.
(f) General Business Operations. Each of Borrower and its
Subsidiaries shall (i) preserve and maintain its corporate existence and all of
its material rights, privileges and franchises reasonably necessary to the
conduct of its business, (ii) conduct its business activities in compliance with
all Legal Requirements and Contractual Obligations applicable to such Person,
the violation of which could reasonably be expected to have a Material Adverse
Effect, (iii) keep all property useful and necessary in its business in good
working order and condition, ordinary wear and tear excepted, and (iv) maintain
its chief executive
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office and principal place of at the address specified in Section 7.1 unless it
shall have given Lender thirty (30) days' prior written notice of its intent to
change the location thereof.
(g) Collateral and Guaranty Requirement. Except for the
Excluded Subsidiary, within thirty (30) days of the formation of each Subsidiary
formed under the laws of a state or territory of the United States or the
District of Columbia (a "DOMESTIC SUBSIDIARY"), Borrower shall have caused such
Domestic Subsidiary to become a party to the Guaranty and the Security Agreement
and Borrower and such Domestic Subsidiary shall have taken all actions required
under the Security Agreement to perfect Lender's security interest. Within
thirty (30) days of the formation of each Subsidiary that is not a Domestic
Subsidiary (a "FOREIGN SUBSIDIARY"), but the Equity Interests of which are owned
by Borrower and/or a Domestic Subsidiary, Borrower shall have caused 65% of the
Equity Interests of such Foreign Subsidiary (or, if Borrower or such Domestic
Subsidiary owns less than 100% of the Equity Securities of such Foreign
Subsidiary, then the maximum percentage of such Equity Securities owned by
Borrower or such Domestic Subsidiary that can be pledged to Lender without
causing adverse tax consequences to Borrower or such Domestic Subsidiary) to be
pledged under the Security Agreement or other security documents required by
Lender. No Loan shall be made after the formation of any Subsidiary specified
under this Section 5.1(g) if all of the steps required to be taken under this
Section 5.1(g) (without regard to the thirty (30) day periods specified in this
Section 5.1(g)) have not been accomplished.
(h) Excluded Subsidiary. Neither Borrower nor any of its
Subsidiaries (i) shall make any Investment to, or in the Excluded Subsidiary or
any Excluded Foreign Subsidiary or (ii) shall Transfer any assets or property
to, the Excluded Subsidiary or any Excluded Foreign Subsidiary, except that
Borrower or its Subsidiaries, may make Investments in an Excluded Foreign
Subsidiary, provided that such Investments are limited in an amount not to
exceed the reasonable costs and expenses necessary to liquidate or dissolve such
Excluded Foreign Subsidiary and the proceeds of such Investments are used solely
to liquidate or dissolve such Excluded Foreign Subsidiary (for the avoidance of
doubt, any letters of credit existing as of the date hereof for the benefit of
M-F Downtown Sunnyvale, LLC and issued at the request of Borrower, shall not be
deemed an Investment or a Transfer by Borrower in, or to the Excluded
Subsidiary).
5.2 Negative Covenants. Until the termination of the Merger Agreement,
the covenants of Borrower set forth in Article IV of the Merger Agreement shall
be deemed to be a part of this Section 5.2 of this Loan Agreement as if set
forth herein. From the termination of the Merger Agreement, until the
termination of the commitment to make Loans under this Loan Agreement and the
satisfaction in full by Borrower of all Obligations, Borrower shall comply, and
shall cause compliance, with the following negative covenants:
(a) Indebtedness. Neither Borrower nor any of its Subsidiaries
shall create, incur, assume or permit to exist any Indebtedness except for
Permitted Indebtedness.
(b) Liens. Neither Borrower nor any of its Subsidiaries shall
create, incur, assume or permit to exist any Lien on or with respect to any of
its assets or property of any character, whether now owned or hereafter
acquired, except for Permitted Liens.
(c) Asset Dispositions. Neither Borrower nor any of its
Subsidiaries shall sell, lease, transfer, license or otherwise dispose of
(collectively, a "TRANSFER") any of its assets or property, whether now owned or
hereafter acquired, except Transfers in the ordinary course of its business
consisting of (i) sales of worn-out or obsolete equipment and other sales of
tangible assets not material to the business of Borrower; (ii) sales of
inventory; (iii) the non-exclusive licensing of intellectual property; and (iv)
other Transfers
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(whether or not such Transfers are in the ordinary course of business) so long
as the Transfer is for (A) fair market value, (B) for cash and (C) the Net
Proceeds thereof are applied in accordance with Section 2.5(c)(i).
(d) Mergers, Acquisitions, Etc. Except pursuant to the Merger
Agreement, neither Borrower nor any of its Subsidiaries shall consolidate with
or merge into any other Person or permit any other Person to merge into it, or
acquire all or substantially all of the assets or capital stock of any other
Person; provided that any wholly-owned Subsidiary of Borrower may merge into
Borrower or any other wholly-owned Subsidiary of Borrower.
(e) Investments. Neither Borrower nor any of its Subsidiaries
shall make any Investment except for Permitted Investments.
(f) Dividends, Redemptions, Etc. Neither Borrower nor any of
its Subsidiaries shall (i) pay any dividends or make any distributions on its
Equity Securities; (ii) purchase, redeem, retire, defease or otherwise acquire
for value any of its Equity Securities; (iii) return any capital to any holder
of its Equity Securities as such; (iv) make any distribution of assets, Equity
Securities, obligations or securities to any holder of its Equity Securities as
such; (v) set apart any sum for any such purpose; or (vi) pay any bonus or
bonuses to officers, directors, employees or consultants of Borrower or a
Subsidiary in an aggregate amount greater than Two Hundred Fifty Thousand
Dollars ($250,000) in any twelve (12) month period; provided, however, that
Borrower may pay dividends payable solely in Common Stock and Borrower may make
payments of cash in an aggregate amount not to exceed Two Hundred Fifty Thousand
Dollars ($250,000) in lieu of fractional shares in connection with any reverse
stock splits and Borrower may repurchase Equity Securities in an aggregate
amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) from
terminated employees and/or other service providers if such repurchases are
pursuant to employment, stock purchase or similar agreements.
(g) Capital Expenditures. Borrower and its Subsidiaries shall
not pay or incur Capital Expenditures which exceed One Million Dollars
($1,000,000) in any ninety (90) day period, provided further, that, in no event
shall the aggregate amount of all Capital Expenditures paid or incurred exceed
One Million Five Hundred Thousand Dollars ($1,500,000) from the date of this
Agreement until all commitments to advance Loans have been terminated and all
Obligations have been indefeasibly paid in full.
(h) Change in Business. Neither Borrower nor any of its
Subsidiaries shall engage, either directly or indirectly through Affiliates, in
any business substantially different from its present business.
(i) Indebtedness Payments. Neither Borrower nor any of its
Subsidiaries shall (i) prepay, redeem, purchase, defease or otherwise satisfy in
any manner prior to the scheduled repayment thereof any Indebtedness (other than
the Obligations) or lease obligations, provided, however, that an early payment
pursuant to financing arrangements as the result of a casualty occurrence
regarding the assets financed shall be deemed to be a scheduled payment, (ii)
amend, modify or otherwise change the terms of any Indebtedness for borrowed
money (other than the Obligations) or lease obligations so as to accelerate the
scheduled repayment thereof or (iii) repay any notes to officers, directors or
shareholders (other than the Obligations).
(j) Transactions With Affiliates. Neither Borrower nor any of
its Subsidiaries shall enter into any Contractual Obligation with any Affiliate
or engage in any other transaction with any Affiliate except (i) upon terms at
least as favorable to Borrower or such Subsidiary as an arms-length transaction
with unaffiliated Persons; (ii) transactions between or among Borrower and any
Domestic Subsidiary and between or among Domestic Subsidiaries, transactions
between or among Borrower or any Domestic Subsidiary and
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any Foreign Subsidiary to the extent the same is permitted under Section 5.2(e),
and transactions between or among Subsidiaries that are not Domestic
Subsidiaries; and (iii) to pay customary fees and reimburse out-of-pocket
expenses and satisfy existing indemnification and similar obligations to
directors and officers in the ordinary course of business.
ARTICLE 6. EVENTS OF DEFAULT.
6.1 Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Loan Agreement:
(a) Failure to Pay. Borrower shall fail to pay (i) when due
any principal or interest payment on the due date hereunder or (ii) any other
payment required under the terms of this Loan Agreement or any other Loan
Document on the date due and such payment shall not have been made within five
(5) Business Days of Borrower's receipt of Lender's written notice to Borrower
of such failure to pay; or
(b) Breaches Prior to Termination of the Merger Agreement.
Prior to the termination of the Merger Agreement, Borrower or any of its
Subsidiaries shall fail to observe or perform in any material respect any
covenant, obligation, or agreement set forth in the Merger Agreement or the Loan
Documents; provided, that, other than in the case of a willful breach, if such
breach is curable, then such Event of Default shall not occur until twenty (20)
days following notice of such breach from Lender to Borrower (it being
understood that if such breach is cured within such twenty (20) day period, no
Event of Default shall be deemed to have occurred); or
(c) Breaches After Termination of the Merger Agreement.
Following the termination of the Merger Agreement, Borrower or any of its
Subsidiaries shall fail to observe or perform any covenant, obligation, or
agreement in this Loan Agreement or the other Loan Documents, provided, that
other than in the case of a willful breach, if such breach is curable, then such
Event of Default shall not occur until twenty (20) days following notice of such
breach from Lender to Borrower (it being understood that if such breach is cured
within such twenty (20) day period, no Event of Default shall be deemed to have
occurred); or
(d) Representations and Warranties. Any representation,
warranty, certificate, or other statement (financial or otherwise) made, deemed
made or furnished by or on behalf of Borrower to Lender in writing in connection
with this Loan Agreement or any of the other Loan Documents, shall be false or
incorrect in any material respect when made or furnished; or
(e) Other Payment Obligations. Borrower or any of its
Subsidiaries shall (A)(i) fail to make any payment when due under the terms of
any bond, debenture, note or other evidence of Indebtedness to be paid by such
Person (excluding this Loan Agreement and the other Loan Documents but including
any other evidence of Indebtedness of Borrower or any of its Subsidiaries to
Lender) and such failure shall continue beyond any period of grace provided with
respect thereto, or (ii) default in the observance or performance of any other
agreement, term or condition contained in any such bond, debenture, note or
other evidence of Indebtedness, and (B) the effect of such failure or default is
to cause, or permit the holder or holders thereof to cause Indebtedness in an
aggregate amount of Five Hundred Thousand Dollars ($500,000) or more to become
due prior to its stated date of maturity; or
(f) Voluntary Bankruptcy or Insolvency Proceedings. Borrower
or any of its Subsidiaries (other than Foreign Subsidiaries) shall (i) apply for
or consent to the appointment of a receiver, trustee,
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liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature (other than in connection with (A) any negotiation or
restructuring of any contractual arrangements (other than the Loan Documents) of
Borrower or its Subsidiaries, or (B) any "going concern" qualification from
Borrower's auditors which will not in and of itself be deemed an inability, or
admission in writing, or constitute an inability, to pay its debts generally as
they mature), (iii) make a general assignment for the benefit of its or any of
its creditors, (iv) be dissolved or liquidated in full or in part, (v) commence
a voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or consent to any
such relief or to the appointment of or taking possession of its property by any
official in an involuntary case or other proceeding commenced against it, or
(vi) take any action for the purpose of effecting any of the foregoing; or
(g) Involuntary Bankruptcy or Insolvency Proceedings.
Proceedings for the appointment of a receiver, trustee, liquidator or custodian
of Borrower or any of its Subsidiaries or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to Borrower or any of
its Subsidiaries or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
sixty (60) days of commencement; or
(h) Judgments. A final judgment or order for the payment of
money in excess of Five Hundred Thousand Dollars ($500,000) (exclusive of
amounts covered by insurance issued by an insurer not an Affiliate of Borrower)
shall be rendered against Borrower or any of its Subsidiaries and the same shall
remain undischarged for a period of thirty (30) days during which execution
shall not be effectively stayed, or any judgment, writ, assessment, warrant of
attachment, or execution or similar process shall be issued or levied against a
substantial part of the property of Borrower or any of its Subsidiaries and such
judgment, writ, or similar process shall not be released, stayed, vacated or
otherwise dismissed within thirty (30) days after issue or levy; or
(i) Loan Documents. Any Loan Document or any material term
thereof shall cease to be, or be asserted by Borrower not to be (other than by
reason of a material breach by Lender), a legal, valid and binding obligation of
Borrower enforceable in accordance with its terms or if the Liens of Lender in
any of the assets of Borrower or its Subsidiaries shall cease to be or shall not
be valid, first priority perfected Liens (other than in connection with
Transfers permitted pursuant to Section 5.2(c)), subject only to Permitted
Liens, or Borrower or any Subsidiary shall assert that such Liens are not valid,
first priority and perfected Liens, subject only to Permitted Liens; or
(j) ERISA. Any Reportable Event occurs which constitutes
grounds for the termination of any Employee Benefit Plan by the PBGC or for the
appointment of a trustee to administer any Employee Benefit Plan, or any
Employee Benefit Plan shall be terminated within the meaning of Title IV of
ERISA or a trustee shall be appointed to administer any Employee Benefit Plan.
6.2 Rights of Lender upon Default. Upon the occurrence or existence of
any Event of Default (other than an Event of Default referred to in Sections
6.1(f) and 6.1(g)) and at any time thereafter during the continuance of such
Event of Default, Lender may, by written notice to Borrower, declare all
outstanding Obligations payable by Borrower hereunder to be immediately due and
payable without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived, anything contained herein to the
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 6.1(f) and 6.1(g), immediately and without notice,
all outstanding Obligations payable by Borrower
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hereunder shall automatically become immediately due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein to the contrary
notwithstanding. In addition to the foregoing remedies, upon the occurrence or
existence of any Event of Default, Lender may exercise any other right, power or
remedy granted to it by the Merger Documents, including the Loan Documents, or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both.
ARTICLE 7. MISCELLANEOUS.
7.1 Notices. All notices and other communications hereunder and under
the other Loan Documents shall be in writing and shall be deemed duly given (i)
on the date of delivery if delivered personally, (ii) on the date of
confirmation of receipt (or, the first business day following such receipt if
the date is not a business day) of transmission by telecopy or telefacsimile, or
(iii) on the date of confirmation of receipt (or, the first business day
following such receipt if the date is not a business day) if delivered by a
nationally recognized courier service. All notices hereunder shall be delivered
as set forth below, or pursuant to such other instructions as may be designated
in writing by the party to receive such notice:
(a) if to Lender, to:
Palm, Inc.
000 X. XxXxxxxx Xxxxxxxxx
M/S 4101
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: General Counsel,
Chief Financial Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with copies to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Xxxxxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(b) if to the Borrower, to:
Handspring, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: General Counsel
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Chief Financial Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000 0000
with a copies to:
Fenwick & West LLP
Silicon Valley Center
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx XxXxxxxx
Xxxxx Xxxxxxxx
Xxxxxxx Xxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
7.2 Expenses. Borrower shall pay on demand all reasonable fees
and expenses, including reasonable attorneys' fees and expenses, incurred by
Lender with respect to any amendments or waivers hereof requested by Borrower or
in the enforcement or attempted enforcement of any of the Obligations or in
preserving any of Lender's rights and remedies (including, without limitation,
all such fees and expenses incurred in connection with any "workout" or
restructuring affecting the Loan Documents or the Obligations or any bankruptcy
or similar proceeding involving Borrower or any of its Subsidiaries).
7.3 Indemnification. Borrower shall indemnify, defend, and
hold harmless Lender and each of Lender's Subsidiaries, Affiliates, directors,
officers, employees and agents (collectively, the "Indemnified Persons"), and
reimburse the Indemnified Persons for, from, and against all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities, costs
and expenses, including, without limitation, interest, penalties and reasonable
attorneys' fees, disbursements and expenses, arising out of or in connection
with (i) any willful, material breach by Borrower of any of the representations
and warranties contained in this Loan Agreement or the other Loan Documents,
(ii) any material failure by Borrower to perform any covenant, undertaking or
obligation hereunder, or (iii) any matter arising out of any use by Borrower of
any proceeds of the Loans, except to the extent such liability arises from the
gross negligence or willful misconduct of the Indemnified Person seeking
indemnity hereunder.
7.4 Waivers; Amendments. Any term, covenant, agreement or
condition of this Agreement or any other Loan Document may be amended or waived
if such amendment or waiver is in writing and is signed by Borrower and Lender.
No failure or delay by Lender in exercising any right hereunder shall operate as
a waiver thereof or of any other right nor shall any single or partial exercise
of any such right preclude any other further exercise thereof or of any other
right. A waiver or consent given hereunder shall be effective only if in writing
and in the specific instance and for the specific purpose for which given.
7.5 Successors and Assigns. This Agreement and the other Loan
Documents shall be binding upon and inure to the benefit of Borrower, Lender,
and their respective successors and permitted assigns, except that Borrower may
not assign or transfer any of its rights or obligations under any Loan Document
without the prior written consent of Lender. All references in this Agreement to
any Person shall be deemed to include all successors and assigns of such Person.
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7.6 Set-off. In addition to any rights and remedies of Lender
provided by law, Lender shall have the right, without prior notice to Borrower,
any such notice being expressly waived by Borrower to the extent permitted by
applicable law, upon the occurrence and during the continuance of an Event of
Default, to set-off and apply against any Obligations, whether matured or
unmatured, of Borrower to Lender (including, without limitation, the
Obligations), any amount owing from Lender to Borrower. Lender agrees promptly
to notify Borrower after any such set-off and application made by Lender,
provided that the failure to give such notice shall not affect the validity of
such set-off and application.
7.7 No Third Party Rights. Nothing expressed in or to be
implied from this Agreement or any other Loan Document is intended to give, or
shall be construed to give, any Person, other than the parties hereto and
thereto and their permitted successors and assigns, any benefit or legal or
equitable right, remedy or claim under or by virtue of this Agreement or any
other Loan Document.
7.8 Partial Invalidity. If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law of any jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
7.9 Jury Trial. EACH OF BORROWER AND LENDER, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY AS TO ANY ISSUE RELATING TO ANY LOAN DOCUMENT IN ANY ACTION, PROCEEDING,
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT.
7.10 Counterparts. This Agreement may be executed in any
number of identical counterparts, any set of which signed by all the parties
hereto shall be deemed to constitute a complete, executed original for all
purposes.
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IN WITNESS WHEREOF, the parties have executed this Loan Agreement as of
the date first set forth above.
PALM, INC., HANDSPRING, INC.,
a Delaware corporation a Delaware corporation
By: /s/ R. Xxxx Xxxxxxx By: /s/ Xxxxx X. Xxxxxxxx
---------------------------------- ---------------------------------
Name: R. Xxxx Xxxxxxx Name: Xxxxx X. Xxxxxxxx
Title: President and CEO, Palm, Inc. Title: CEO, Handspring, Inc.
[SIGNATURE PAGE TO LOAN AGREEMENT]
