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EXHIBIT 10.12
LOAN AGREEMENT
This LOAN AGREEMENT, dated as of October 20, 1995 (the "Agreement"), is
made by and among ProBusiness, Inc., a California corporation ("Borrower") with
its principal office at 0000 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxxx 00000, and
the persons listed in Exhibit A attached hereto (collectively referred to herein
as "Lenders").
W I T N E S S E T H
WHEREAS, Borrower desires to borrow funds, and Lenders desire to lend
funds, for use as working capital on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties hereto
agree as follows:
1. Debt Financing.
1.1 Promissory Notes. Each Lender severally agrees to
make available to Borrower on the closing date the principal amount set forth
opposite such Lender's name in Exhibit A attached hereto to be evidenced by a
promissory note (collectively, the "Notes") the form of which is attached hereto
as Exhibit B, for up to a total aggregate principal amount to be made available
to Borrower by all Lenders of up to $2,500,000.
1.2 Interest; Payment of Interest. Interest on the
outstanding principal amount of each Note issued hereby shall accrue at an
interest rate of eight percent (8%) per annum or if less, the maximum rate
permitted by applicable law. Borrower shall make quarterly payments to each
Lender for the amount of accrued interest on the principal amount owed to such
Lender under the Notes beginning on December 31, 1995.
1.3 Loan Term; Repayment Date. Subject to the terms and
conditions herein, the provisions of this Agreement shall be in effect until
three years from the date of this Agreement. Each Note executed under the
provisions of this Agreement shall be due and payable at the earliest to occur
(the "Repayment Date" with respect to such Note):
(a) three years from the date of this Agreement;
or
(b) at the option of Lender or the Borrower,
within thirty days after the closing of a public offering of the Company that
triggers the conversion of the Company's outstanding Preferred Stock into the
Company's Common Stock under the Company's Articles of Incorporation, as
amended.
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On the Repayment Date, the then-outstanding principal balance and all accrued
interest thereon shall be payable.
1.4 Payments. All payments to Lenders shall be payable at
Lenders' address, set forth in Exhibit A attached hereto, or at such other place
or places as Lenders may designate from time to time in writing to Borrower.
1.5 Prepayment. At anytime after one year from the date
of this Agreement, Borrower may, at its option, prepay, in whole or in part, the
then outstanding principal balance and accrued interest, if any, under this
Agreement and related Notes without penalty. Such payment shall be credited to
Borrower's account and interest will cease to accrue on such prepaid principal.
Unless otherwise agreed, any prepayment shall be applied first to accrued
interest due to the date of prepayment, and the remainder shall be applied to
the then outstanding principal balance of the respective Notes.
2. Warrants to Purchase Series E Preferred Stock. Subject to the
terms and conditions hereinafter set forth and in consideration of a purchase
price of $1.00, Borrower shall issue a warrant ("Warrant") to each Lender,
entitling each Lender, upon surrender of the Warrant at the principal office of
Borrower (or at such other place as Borrower shall notify Lender hereof in
writing), to purchase from Borrower the value of fully paid and nonassessable
shares of Series E Preferred Stock of the Company as is equal to twenty-five
percent (25%) of the principal amount of each Note held by such Lender under
this Agreement at an exercise price of $7.94 per share of Series E Preferred
Stock, all as set forth in the form of Warrant attached hereto as Exhibit C.
Each Warrant shall be subject to antidilution price protection, net exercise
provisions and registration rights and shall be substantially in the form set
forth in Exhibit C, attached hereto and made a part hereof.
3. Closing Date; Delivery.
3.1 Closing Date. The closing of the execution of this
Agreement and the issuance of the Notes and Warrants hereunder shall be held at
the offices of Wilson, Sonsini, Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx
Xxxx, Xxxxxxxxxx 00000-0000 at 5:00 p.m., local time, on October 20, 1995 (the
"Closing") or at such other time and place upon which Borrower and the Lenders
shall agree (the date of the Closing is hereinafter referred to as the "Closing
Date").
3.2 Delivery. At the Closing, the Company will deliver to
each Lender an executed counterpart of this Agreement together with a Note and
Warrant, issued in such Lender's name, evidencing the principal amount borrowed
from such Lender by Borrower and the number of shares of Series E Preferred
Stock to be issued to Lender upon exercise of the Warrant as set forth beside
such Lender's name on Exhibit A, against delivery of an executed counterpart of
this Agreement, together with payment of the principal amount plus $1.00, the
purchase price of the Warrant, by check payable to Borrower or wire transfer per
Borrower's instructions.
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3.3 Subsequent Closings. If less than $2,500,000 is made
available to the Company by Lenders on the Closing Date, then, subject to the
terms and conditions of this Agreement, the Company may issue additional
promissory Notes at subsequent closings evidencing up to the balance of the
$2,500,000 not made available to the Company by Lenders to such persons as the
Company may determine with the same terms and conditions as the Notes issued
pursuant to this Agreement. Any such issuance shall be on the same terms and
conditions as those contained in the Agreement and such persons shall become
parties to the Agreement and that certain Registration Rights Agreement dated as
of December 1, 1989 as amended (the "Registration Rights Agreement") and shall
have the rights and obligations of the Purchasers as defined thereunder, subject
to the Sixteenth Amendment to the Registration Rights Agreement (the "Sixteenth
Amendment") attached hereto as Exhibit D. A copy of the Registration Rights
Agreement is attached hereto as Exhibit E.
4. Representations and Warranties of Borrower.
Borrower hereby represents and warrants to Lenders as of the Closing
Date as follows:
(a) Organization and Standing; Articles of
Incorporation and Bylaws. Borrower is a corporation duly organized and existing
under, and by virtue of, the laws of the State of California and is in good
standing under such laws. Borrower has requisite corporate power and authority
to own and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted. Borrower is not presently
qualified to do business as a foreign corporation in any jurisdiction, and the
failure to be so qualified would not have a material adverse effect on
Borrower's business as now conducted. Borrower has furnished to Lenders or their
special counsel upon request copies of its Articles of Incorporation, as
amended, and Bylaws, as amended. Said copies are true, correct and complete and
contain all amendments through the Closing Date.
(b) Corporate Power. Borrower will have at the
Closing Date all requisite legal and corporate power and authority to execute
and deliver this Agreement, to sell and issue the Notes and Warrants hereunder,
to issue the Series E Preferred Stock and Common Stock issuable upon conversion
of the Warrants and Series E Preferred Stock, respectively (collectively,
referred to as "Underlying Securities") and to carry out and perform its
obligations under the terms of this Agreement.
(c) Subsidiaries. Borrower has no subsidiaries
or affiliated companies and does not otherwise own or control, directly or
indirectly, any equity interest in any corporation, association or business
entity.
(d) Capitalization. The authorized capital stock
of Borrower consists of 20,000,000 shares of Common Stock, par value $.01 per
share, 19,262 of which are issued and outstanding as of the Closing Date, and
6,000,000 shares of Preferred Stock with par value, $.01 per share (the
"Preferred"), 1,500,000 of which have been designated Series A Preferred Stock
(the "Series A Preferred"), of which 920,000 are issued and outstanding as of
the Closing Date, 1,500,000
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of which have been designated Series B Preferred Stock (the "Series B
Preferred"), of which 919,400 are issued and outstanding as of the Closing Date,
1,500,000 of which have been designated Series C Preferred Stock (the "Series C
Preferred"), of which 260,785 are issued and outstanding as of the Closing Date,
500,000 which have been designated Series D Preferred Stock (the "Series D
Preferred"), of which 300,000 are issued and outstanding as of the closing date,
and 500,000 of which have been designated Series E Preferred stock (the "Series
E Preferred"), 213,116 of which are issued and outstanding immediately before
the Closing Date. No other series of Preferred Stock has been designated. The
outstanding shares have been duly authorized and validly issued, and are fully
paid and nonassessable. The Borrower has reserved 78,715 shares of Series E
Preferred for issuance upon the exercise of the Warrants hereunder, 151,430
shares of Common Stock for issuance upon conversion of the Series E Preferred to
be issued upon the exercise of such Warrants hereunder, 9,446 shares of Series E
Preferred Stock for issuance upon the exercise of a warrant issued to Silicon
Valley Bank ("SVB"), 18,892 shares of Common Stock for issuance upon the
conversion of the Series E Preferred to be issued upon the exercise of SVB's
warrant, 426,232 shares of Common Stock for issuance upon the conversion of the
outstanding Series E Preferred, 600,000 shares of Common Stock for issuance upon
the conversion of the Series D Preferred, 521,570 shares of Common Stock for
issuance upon conversion of the Series C Preferred, 1,838,800 shares of Common
Stock for issuance upon conversion of the Series B Preferred, 1,840,000 shares
of Common Stock for issuance upon conversion of the Series A Preferred, and, as
of June 30, 1995, excluding options that have been exercised as of October 20,
1995, 1,013,062 shares of Common Stock for issuance upon exercise of options
granted and 391,892 shares of Common Stock for issuance upon exercise of options
not yet granted under Borrower's 1989 Stock Option Plan. The Series E Preferred
Stock to be issued upon the exercise of the Warrants hereunder shall have the
rights, preferences, privileges and restrictions set forth in Borrower's
Articles of Incorporation, as amended, (the "Articles"). Other than options
granted or to be granted pursuant to Borrower's 1989 Stock Option Plan and a
warrant issued to SVB, there are no options, warrants or other rights, including
convertible debentures or notes, granted or issued by or binding upon Borrower
to purchase any of Borrower's authorized and unissued Common Stock or Preferred
Stock, except the Board of Directors has approved an increase in the number of
shares to be issued under the Company's 1989 Stock Option Plan by 147,793
shares.
(e) Authorization. All corporate action on the
part of Borrower, its directors and shareholders necessary for the
authorization, execution, delivery and performance of this Agreement, the Notes
and the Warrants by Borrower and the performance of all of Borrower's
obligations hereunder has been taken or will be taken prior to the Closing. This
Agreement and the Notes, when executed and delivered by the Borrower, shall
constitute a valid and binding obligation of the Borrower, enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies. The Warrant
and Underlying Securities, when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid and nonassessable, and will have
the rights, preferences and privileges described in the Articles. The Underlying
Securities have been duly and validly reserved and, when issued in compliance
with the provisions of this Agreement and the Articles, will be validly issued,
fully paid and nonassessable;
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and, the Underlying Securities will be free of any liens or encumbrances,
assuming Lenders take the Underlying Securities with no notice thereof, and
other than any liens or encumbrances created by or imposed upon the holders
through no action of Borrower; provided, however, that the Underlying Securities
may be subject to restrictions on transfer under state and/or federal securities
laws as set forth herein. The Notes, Warrants and the Underlying Securities are
not subject to any preemptive rights or rights of first refusal.
(f) Financial Statements. Borrower has delivered
to each Lender Borrower's audited financial statements for the twelve-month
periods ending June 30, 1994 and June 30, 1995 (the "Financial Statements"),
which are complete and correct in all material respects and to the best of the
Borrower's knowledge were prepared in accordance with generally accepted
accounting principles applied on a consistent basis. The Financial Statements
accurately set out and describe the financial condition and operating results of
Borrower as of the respective dates and for the respective periods indicated.
(g) Employees. To the best of Borrower's
knowledge, no employee of Borrower is in violation of any term of any employment
contract, patent disclosure agreement or any other contract or agreement
relating to the relationship of such employee with Borrower or any other party
because of the nature of the business conducted or to be conducted by Borrower.
Each employee of Borrower with access to confidential or proprietary information
has executed an Employee Confidential Information Agreement in a form
substantially similar to the agreement attached hereto as Exhibit F.
(h) Governmental Consent, etc. No consent,
approval or authorization of or designation, declaration or filing with any
governmental authority on the part of Borrower is required in connection with
the valid execution and delivery of this Agreement, or the offer, sale or
issuance of the Notes, Warrants and the Underlying Securities, or the
consummation of any other transaction contemplated hereby, except the
qualification (or taking such action as may be necessary to secure an exemption
from qualification, if available) of the offer and sale of the Notes, Warrants
and the Underlying Securities under applicable Blue Sky laws, which filings and
qualifications, if required, will be accomplished in a timely manner.
(i) Brokers or Finders; Other Offers. Borrower
has not incurred, and will not incur, directly or indirectly, as a result of any
action taken by Borrower, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement.
(j) No Material Liabilities. Borrower has no
material liabilities or obligations, other than: (a) liabilities and obligations
disclosed in the Financial Statements (including, without limitation, the
Company's borrowings pursuant to the Loan Agreement between the Company and
Silicon Valley Bank dated January 13, 1995 for up to a maximum principal amount
of $1,500,000) (b) liabilities incurred in the ordinary course of business; (c)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under
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generally accepted accounting principles to be reflected in the Financial
Statements; (d) leases for operating headquarters and branches of Borrower; and
(e) any other obligations which are not in any case material to the financial
condition or operating results of Borrower.
(k) Registration Rights. Except as provided in
the Registration Rights Agreement, as amended, and the Registration Rights
Agreement dated January 13, 1995 between the Company and SVB, Borrower is not
obligated to register under the Securities Act of 1933, as amended (the
"Securities Act") any of its presently outstanding securities or any of its
securities that may subsequently be issued.
(l) Use of Proceeds. Borrower's use of the
proceeds of the principal amounts made available to Borrower by Lenders pursuant
to this Agreement are, and will continue to be, legal and proper corporate uses,
and such uses are and will continue to be consistent with all applicable laws
and statutes, as in effect from time to time.
5. Representations and Warranties of Lenders
Each Lender hereby represents and warrants to Borrower with respect to
its purchase of the Notes, Warrants and Underlying Securities as follows:
5.1 Investment Representations and Covenants of Lenders.
(a) This Agreement is made by Borrower with
Lender in reliance upon such Lender's representations and covenants made in this
Section 4, which by its execution of this Agreement Lender hereby confirms.
Lender represents that the Notes, Warrants and Underlying Securities issuable
upon conversion of the Warrants to be received will be acquired for investment
for its own account, not as a nominee or agent, and not with a view to the sale
or distribution of any part thereof, and that it has no present intention of
selling, granting any participation in or otherwise distributing the same.
Lender further represents that it does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Notes, Warrants or Underlying Securities issuable upon conversion of the
Warrants.
(b) Lender understands and acknowledges that the
offering and issuance of the Notes, Warrants and Underlying Securities issuable
upon conversion of the Warrants pursuant to this Agreement will not be
registered under the Securities Act on the ground that the sale provided for in
this Agreement and the issuance of securities hereunder is exempt pursuant to
Section 4(2) of the Securities Act, and that Borrower's reliance on such
exemption is predicated on Lenders' representations set forth herein.
(c) Lender covenants that in no event will it
make any disposition of any of the Underlying Securities issuable upon
conversion of the Warrants, except in accordance with the Registration Rights
Agreement. Lender further covenants that it will not make any sale, transfer or
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other disposition of the Notes, Warrants or Underlying Securities issuable upon
conversion of the Warrants in violation of the Securities Act, the Securities
and Exchange Act of 1934 (the "Securities Exchange Act"), or the rules of the
Securities and Exchange Commission (the "Commission") promulgated thereunder.
(d) Lender represents that it is experienced in
evaluating companies similar to Borrower, is able to fend for itself in
transactions such as the one contemplated by this Agreement, has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of its prospective investment in Borrower, has
the ability to bear the economic risks of the investment and is an "accredited
investor" as defined by Regulation D promulgated under the Securities Act of
1933, as amended.
(e) Lender acknowledges and understands that the
Notes, Warrants or Underlying Securities issuable upon conversion of the
Warrants, must be held indefinitely unless it is subsequently registered under
the Securities Act or an exemption from such registration is available, and
that, except as otherwise provided in the Registration Rights Agreement,
Borrower is under no obligation to register either the Notes, Warrants or
Underlying Securities.
(f) Lender acknowledges that it has reviewed a
copy of Rule 144 promulgated under the Securities Act, which permits limited
public resales of securities acquired in a nonpublic offering, subject to the
satisfaction of certain conditions. Lender understands that before the Notes,
Warrants or Underlying Securities issuable upon conversion of the Warrants may
be sold under Rule 144, the following conditions must be fulfilled: (i) certain
public information about Borrower must be available, (ii) the sale must occur at
least two years after Lender purchased and paid for the Notes, Warrants, and
Underlying Securities issuable upon conversion of the Warrants (iii) the sale
must be made in a broker's transaction and (iv) the number of shares of
securities sold must not exceed certain volume limitations. Lender understands
that the current information referred to above is not now available and Borrower
has no present plans to make such information available.
(g) Lender acknowledges that in the event the
applicable requirements of Rule 144 are not met, registration under the
Securities Act, compliance with the Commission's Regulation A or another
exemption from registration will be required for any disposition of its
securities. Lender understands that although Rule 144 is not exclusive, the
Commission has expressed its opinion that persons proposing to sell restricted
securities received in a private offering other than in a registered offering or
pursuant to Rule 144 will have a substantial burden of proof in establishing
that an exemption from registration is available for such offers or sales and
that such persons and the brokers who participate in the transactions do so at
their own risk.
(h) Lender represents that one or more of the
following criteria are applicable to such Lender:
(1) Lender is a director or executive
officer of Borrower, or
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(2) Lender is a natural person who has
a net worth or joint net worth with the Lender's spouse exceeding $1,000,000 at
the time of purchase; or
(3) Lender is a natural person who had
an individual income in excess of $200,000 in each of the two most recent years
(or joint income with Lender's spouse in excess of $300,000 in each of the two
most recent years) and who reasonably expects an income in excess of such amount
in the current year; or
(4) Lender is either (i) a bank as
defined in Section 3(a)(2) of the Securities Act or any savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act, whether acting in its individual capacity or fiduciary capacity
as trustee; (ii) an insurance company as defined in Section 2(13) of the
Securities Act; (iii) an investment company registered under the Investment
Company Act of 1940 or a business development company as defined in Section
2(a)(48) of such Act; (iv) a Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958; (v) a plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality of a state
or its political subdivisions for the benefit of its employees if such plan has
total assets in excess of $5,000,000; (vi) any broker or dealer registered
pursuant to Section 15 of the Securities Exchange Act of 1934; or (vii) an
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or is a
self-directed plan, with investment decisions made solely by persons that are
accredited investors; or
(5) Lender is a private business
development company as defined in Section 202(a)(22) of the Investment Advisers
Act of 1940; or
(6) Lender is a not-for-profit
organization or other entity exempt from income tax under Section 501(c)(3) of
the Internal Revenue Code, a corporation, Massachusetts or similar business
trust or partnership, not formed for the specific purpose of acquiring the
securities offered with total assets in excess of $5,000,000; or
(7) Lender is a trust, with total
assets in excess of $5,000,000, not formed for the specific purpose of acquiring
the securities offered, whose purchase is directed by a "sophisticated person"
as described in Rule 506(b)(2) of Regulation D; or
(8) Lender is an entity in which each
of the equity owners of such entity meets one of the qualifications set forth in
(1) through (7) above.
5.2 No Public Market. Lender understands that no public
market now exists for any of the securities issued by Borrower and that it is
unlikely that a public market will ever exist for Borrower's securities.
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5.3 Receipt of Information. Lender has received and
reviewed this Agreement and all exhibits hereto and the Investment
Representation Statement. Lender and its counsel have had access to and an
opportunity to review all documents and other materials requested of Borrower;
Lender and its counsel have been given an opportunity to ask any and all
questions of, and receive answers from, Borrower concerning the terms and
conditions of the offering and to obtain all information it or they believe
necessary or appropriate to evaluate the suitability of an investment in the
Notes, Warrants or Underlying Securities issuable upon conversion of the
Warrants; and, in evaluating the suitability of an investment in the Notes,
Warrants or Underlying Securities issuable upon conversion of the Warrants, it
and they have not relied upon any representations or other information (whether
oral or written) other than as set forth in the documents and answers referred
to above.
5.4 Authorization. This Agreement when executed and
delivered by Lender will constitute a valid and legally binding obligation of
Lender, enforceable in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
5.5 Brokers or Finders. Borrower has not, and will not,
incur, directly or indirectly, as a result of any action taken by any Lender,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
5.6 Tax Advisors. Lender has reviewed with its own tax
advisors the federal, state, local and foreign tax consequences of this
investment, where applicable, and the transactions contemplated by this
Agreement. Lender is relying solely on such advisors and not on any statements
or representations of Borrower or any of its agents and understands that it (and
not Borrower) shall be responsible for Lender's own tax liability that may arise
as a result of this investment or the transactions contemplated by this
Agreement.
5.7 Investor Counsel. Lender acknowledges that it has had
the opportunity to review this Agreement, the exhibits and the schedules
attached hereto and the transactions contemplated by this Agreement with its own
legal and investment counsel. Lender is relying solely on such counsel and not
on any statements or representations of Borrower or any of its agents for legal
or investment advice with respect to this investment or the transactions
contemplated by this Agreement.
6. Events of Default; Remedies.
6.1 Events of Default. The occurrence of any one or more
of the following events after the date of this Agreement shall constitute an
"Event of Default":
(a) Borrower fails to make timely payment of any
principal, interest, fees or other charges when due hereunder;
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(b) Any material warranty, representation or
other statement made to Lenders by Borrower hereunder proves to have been false
or misleading in any material respect when made or furnished;
(c) Borrower fails or neglects to perform, keep
or observe any other material term, provision, condition, covenant, warranty or
representation contained in this Agreement, which is required to be performed,
kept or observed by Borrower;
(d) Borrower shall commence any proceeding or
other action relating to it in bankruptcy or seek reorganization, arrangement,
readjustment of its debts, dissolution, liquidation, winding-up, composition or
any other relief under the Bankruptcy Act, as amended, or under any other
insolvency, reorganization, liquidation, dissolution, arrangement, composition,
readjustment of debt or any other similar act or law, of any jurisdiction,
domestic or foreign, now or hereafter existing;
(e) Borrower shall admit the material
allegations of any petition or pleading in connection with any such proceeding;
(f) Borrower shall apply for, or consent to or
acquiesce in, the appointment of a receiver, conservator, trustee or similar
officer for it or for all or a substantial part of its property;
(g) Borrower shall make a general assignment for
the benefit of creditors; or
(h) Borrower shall admit in writing its
inability to pay its debts as they mature.
6.2 Acceleration of the Obligations. Upon the occurrence
of an Event of Default as above provided, all or any portion of the obligations
due or to become due from Borrower to each Lender shall, at the option of each
Lender, and without notice or demand by such Lender, become at once due and
payable. Borrower will forthwith pay to each Lender, in addition to any and all
sums and charges due, the entire outstanding principal balance and interest
accrued thereon.
7. Conditions to Closing of Lenders. Lender's obligations to
purchase the Notes, Warrants and Underlying Securities issuable upon conversion
of the Warrants at the Closing are, at the option of Lenders, subject to the
fulfillment of the following conditions:
7.1 Representations and Warranties Correct. The
representations and warranties made by Borrower in Section 4 hereof shall be
true and correct in all material respects as of the Closing Date.
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7.2 Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by Borrower on or prior to the
Closing Date shall have been performed or complied with in all material
respects.
7.3 Compliance Certificate. Borrower shall have delivered
to Lenders a certificate of Borrower in the form of Exhibit G hereto, executed
by the President of Borrower, dated the Closing Date, and certifying, among
other things, to the fulfillment of the conditions specified in Sections 7.1 and
7.2 of this Agreement.
7.4 Opinion of Borrower's Counsel. Lenders shall have
received from Wilson, Sonsini, Xxxxxxxx & Xxxxxx, P.C., counsel to Borrower, an
opinion addressed to Lenders, dated the Closing Date, in substantially the form
attached as Exhibit H.
7.5 Blue Sky. Borrower shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Notes, Warrants
or Underlying Securities issuable upon conversion of the Warrants.
7.6 Legal Matters. All material matters of a legal nature
that pertain to this Agreement and the transactions contemplated hereby, shall
have been reasonably approved by special counsel to Lenders.
7.7 Board of Directors. The Board of Directors of
Borrower shall consist of the following persons: Xxxxxx Xxxxxx, Xxxx Xxxxxx,
Xxxxxxx Xxxxxx, Xxx Xxxxx and Xxxxxx Xxxx.
7.8 Registration Rights Agreement. Borrower and each
Lender shall have entered into the Sixteenth Amendment to Registration Rights
Agreement in substantially the form attached hereto as Exhibit D.
7.9 Promissory Notes. Borrower shall have executed and
delivered a Note to each Lender evidencing the principal amount borrowed by
Borrower from Lender, in the form substantially as set forth in Exhibit B
hereto.
7.10 Warrants. Borrower shall have executed and delivered
to each Lender a Warrant subject to the terms and provisions set forth in
Section 2 hereof and in the form substantially as set forth in Exhibit C
attached hereto.
8. Conditions to Closing of Borrower. Borrower's obligation to
sell and issue the Notes, Warrants or Underlying Securities issuable upon
conversion of the Warrants pursuant to this Agreement is, at the option of
Borrower, subject to the fulfillment as of the Closing Date of the following
conditions:
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8.1 Representations and Warranties. The representations
and warranties made by Lenders in Section 5 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date.
8.2 Blue Sky. Borrower shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Notes, Warrants
or Underlying Securities issuable upon conversion of the Warrants.
8.3 Legal Matters. All material matters of a legal nature
that pertain to this Agreement and the transactions contemplated hereby, shall
have been reasonably approved by counsel to Borrower. At the time of the
Closing, the purchase of the Notes, Warrants or Underlying Securities issuable
upon conversion of the Warrants shall be legally permitted by all laws and
regulations to which each Lender and Borrower are subject.
8.4 Board Approval. All approvals of Borrower's Board of
Directors necessary for performance of the transactions contemplated by this
Agreement shall have been obtained.
8.5 Registration Rights Agreements. Borrower and each
Lender shall have entered into the Sixteenth Amendment to Registration Rights
Agreement in substantially the form attached hereto as Exhibit D.
9. Affirmative Covenants of Borrower and Lenders. Borrower hereby
covenants and agrees as follows:
9.1 Financial Information. Borrower will furnish to each
Lender for so long as such Lender holds any Notes:
(a) As soon as practicable after the end of each
fiscal year, and in any event within 120 days thereafter, consolidated balance
sheets of Borrower and its subsidiaries, if any, as of the end of such fiscal
year, and consolidated statements of income and consolidated statements of
changes in financial position of Borrower and its subsidiaries, if any, for such
year, prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by independent public
accountants of reputable standing selected by Borrower.
(b) With reasonable promptness, such other
information and data with respect to Borrower and its subsidiaries, if any, as
any such holder may from time to time reasonably request; provided, however,
that Borrower shall not be obligated pursuant to this Section 9.1(b) to disclose
or provide any information that it reasonably considers to be a trade secret or
to contain confidential proprietary information.
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(c) So long as such Lender holds any Notes with
a principal amount outstanding of $250,000 or more, as soon as practicable after
the end of the first, second and third quarterly accounting periods in each
fiscal year of Borrower and in any event within 60 days thereafter, unaudited
consolidated statements of income and consolidated statements of changes in
financial condition of Borrower and its subsidiaries, if any, for such period
and for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles, with the exception of footnotes, all in
reasonable detail and signed, subject to changes resulting from year-end audit
adjustments, by the principal financial or accounting officer of Borrower.
9.2 Rights of Inspection. For so long as a Lender is
eligible to receive reports under Section 9.1(c), such Lender shall also have
the right, at Lender's expense, to visit and inspect any of the properties of
Borrower and to discuss its affairs, finances and accounts with its officers,
all at such reasonable times and as often as may be reasonably requested,
provided that Borrower shall not be required at any time to disclose any
manufacturing or trade secret or secret process or other data of a proprietary
nature the disclosure of which Borrower reasonably believes may adversely affect
its business, provided, further, that Borrower shall not be required at any time
to disclose any customer data to any Lender or any transferee of a Lender, as
provided in Section 9.3, engaged in a business similar to the business in which
Borrower is engaged at such time, and provided, further, that Borrower shall not
be required at any time to disclose any information or data that is classified
by any governmental agency.
9.3 Assignment of Rights to Financial Information. The
rights granted pursuant to Sections 9.1 and 9.2 may not be assigned or otherwise
conveyed by a Lender or by any subsequent transferee of any such rights without
the prior written consent of Borrower; provided, however, that a Lender may
assign such rights to any transferee, other than a competitor of Borrower, and
after giving notice to Borrower, who acquires any Notes with a principal amount
outstanding of $250,000 or more.
9.4 Termination of Covenants. The covenants set forth in
Sections 9.1, 9.2 and 9.3 shall terminate and be of no further force or effect
at such time as Borrower is required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act.
10. Subordination. To the extent there is any conflict between the
provisions of this Section 10 and the other provisions of this Agreement, the
provisions of this Section 10 shall control.
(a) Each Lender hereby subordinates to Silicon Valley Bank
("Bank") any security interest or lien that Lender may have or in the future
obtain in any property of Borrower. Notwithstanding any respective dates of
attachment or perfection of the security interest of Lender and the security
interest of Bank, the security interest of Bank in the property of Borrower
shall at all times be prior to the security interest of Lender.
(b) All indebtedness hereunder (the "Subordinated Debt") is
subordinated in right of payment to all obligations of Borrower to Bank now
existing or hereafter arising, together with all
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costs of collecting such obligations (including attorneys' fees), including,
without limitation, all interest accruing after the commencement by or against
Borrower of any bankruptcy, reorganization or similar proceeding (the "Senior
Debt").
(c) Lender will not demand or receive from Borrower (and Borrower
will not pay to Lender) all or any part of the Subordinated Debt, by way of
payment, prepayment, setoff, lawsuit or otherwise, nor will Lender exercise any
remedy with respect to any of Bank's collateral, nor will Lender commence, or
cause to commence, prosecute or participate in any administrative, legal or
equitable action against Borrower, for so long as any portion of the Senior Debt
remains outstanding. The foregoing notwithstanding, Lender shall be entitled to
receive each regularly scheduled payment of interest that constitutes
Subordinated Debt, provided that an event of default, as defined in the
financing agreements between Borrower and Bank, has not occurred and is not
continuing and would not exist immediately after such payment.
(d) Lender shall promptly deliver to Bank in the form received
(except for endorsement or assignment by Lender where required by Bank) for
application to the Senior Debt any payment, distribution, security or proceeds
received by Lender with respect to the Subordinated Debt other than in
accordance with this Section 10.
(e) In the event of Borrower's insolvency, reorganization or any
case or proceeding under any bankruptcy or insolvency law or laws relating to
the relief of debtors, the provisions of this Section 10 shall remain in full
force and effect, and Bank's claims against Borrower and the estate of Borrower
shall be paid in full before any payment is made to Lender.
(f) For so long as any of the Senior Debt remains unpaid, Lender
irrevocably appoints Bank as Lender's attorney-in-fact, and grants to Bank a
power of attorney with full power of substitution, in the name of Lender or in
the name of Bank, for the use and benefit of Bank, without notice to Lender, to
perform at Bank's option the following acts in any bankruptcy, insolvency or
similar proceeding involving Borrower:
(i) To file the appropriate claim or claims in respect of
the Subordinated Debt on behalf of Lender if Lender does not do so prior to 30
days before the expiration of the time to file claims in such proceeding and if
Bank elects, in its sole discretion, to file such claim or claims; and
(ii) To accept or reject any plan of reorganization or
arrangement on behalf of Lender and to otherwise vote Lender's claims in respect
of any Subordinated Debt in any manner that Bank deems appropriate for the
enforcement of its rights hereunder.
(g) This Section 10 shall remain effective for so long as Borrower
owes any amounts to Bank. If, at any time after payment in full of the Senior
Debt any payments of the Senior Debt must be disgorged by Bank for any reason
(including, without limitation, the bankruptcy of Borrower), this Section 10 and
the relative rights and priorities set forth herein shall be reinstated as to
all such
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disgorged payments as though such payments had not been made and Lender shall
immediately pay over to Bank all payments received with respect to the
Subordinated Debt to the extent that such payments would have been prohibited
hereunder. At any time and from time to time, without notice to Lender, Bank may
take such actions with respect to the Senior Debt as Bank, in its sole
discretion, may deem appropriate, including, without limitation, terminating
advances to Borrower, increasing the principal amount, extending the time of
payment, increasing applicable interest rates, renewing, compromising or
otherwise amending the terms of any documents affecting the Senior Debt and any
collateral securing the Senior Debt, and enforcing or failing to enforce any
rights against Borrower or any other person. No such action or inaction shall
impair or otherwise affect Bank's rights hereunder. Lender waives the benefits,
if any, of California Civil Code Sections 2809, 2810, 2819, 2845, 2847, 2848,
2849, 2850, 2899 and 3433.
(h) The provisions of this Section 10 shall bind any successors or
assignees of Lender and shall benefit any successors or assigns of Bank, and, if
Borrower refinances a portion of the Senior Debt with a new lender, such new
lender shall be deemed a successor of Bank for the purposes of this Section 10.
This Section 10 is solely for the benefit of Lender and Bank and not for the
benefit of Borrower or any other party.
(i) The provisions of this Section 10 may be amended only by
written instrument signed by Lender and Bank.
(j) In the event of any legal action to enforce the rights of a
party under this Section 10, the party prevailing in such action shall be
entitled, in addition to such other relief as may be granted, all reasonable
costs and expenses, including reasonable attorneys' fees, incurred in such
action.
11. Miscellaneous.
11.1 Governing Law. This Agreement shall be governed in
all respects by the laws of the State of California. The parties expressly
stipulate that any litigation under this Agreement shall be brought in the state
courts of the County of Santa Clara, California and in the United States
District Court for the Northern District of California. The parties agree to
submit to the jurisdiction and venue of those courts.
11.2 Survival. The representations, warranties, covenants
and agreements made herein shall survive any investigation made by a Lender and
the closing of the transactions contemplated hereby.
11.3 Successors and Assigns. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto, provided, however, that the Notes, Warrants or Underlying
Securities issuable upon conversion of the Warrants shall not be assignable
without the consent of Borrower.
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11.4 Entire Agreement; Amendment. This Agreement, the
exhibits attached hereto and the other documents delivered pursuant hereto at
the Closing constitute the full and entire understanding and agreement between
the parties with regard to the subjects hereof and thereof, and no party shall
be liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
Except as expressly provided herein, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought; provided, however, that any
provisions hereof may be amended, waived, discharged or terminated, on behalf of
all holders, upon the written consent of Borrower and the holders of a majority
of the Notes.
11.5 Notices, etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed (a) if to a Lender, to such Lender's address set forth
in Exhibit A, or at such other address as the Lender shall have furnished to
Borrower in writing, or (b) if to any other holder of any Notes, Warrants or
Underlying Securities issuable upon conversion of the Warrants, at such address
as such holder shall have furnished Borrower in writing, or, until any such
holder so furnishes an address to Borrower, then to and at the address of the
last holder of such Notes, Warrants or Underlying Securities issuable upon
conversion of the Warrants who has so furnished an address to Borrower, or (c)
if to Borrower, one copy should be sent to its address set forth at the
beginning of this Agreement and addressed to the attention of the President of
Borrower, or at such other address as Borrower shall have furnished to the
Lenders.
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
11.6 Delays or Omissions. Except as expressly provided
herein, no delay or omission to exercise any right, power or remedy accruing to
any holder of any Notes, Warrants or Underlying Securities issuable upon
conversion of the Warrants, upon any breach or default of Borrower under this
Agreement, shall impair any such right, power or remedy of such holder nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any holder of any
breach or default under this Agreement or any waiver on the part of any holder
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
11.7 California Corporate Securities Law. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
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THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS AN EXEMPTION FROM SUCH
QUALIFICATION IS AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, OR SUCH EXEMPTION
BEING AVAILABLE.
11.8 Expenses. Borrower and Lenders shall bear their own
expenses and legal fees incurred with respect to this Agreement and the
transactions contemplated hereby.
11.9 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be enforceable against the party
actually executing such counterpart, and all of which together shall constitute
one instrument.
11.10 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
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IN WITNESS WHEREOF, the parties have duly executed this Loan Agreement
on the day and year first above written.
BORROWER: PROBUSINESS, INC.
a California corporation
By:_________________________________________
Xxxxxx X. Xxxxxx,
President and Chief Executive Officer
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PROBUSINESS INC.
LOAN AGREEMENT
LENDER'S SIGNATURE PAGE
-----------------------------------
(Printed Name of Lender)
-----------------------------------
(Signature)
-----------------------------------
(Title, if Applicable)
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PROBUSINESS, INC.
FIRST AMENDMENT TO
LOAN AGREEMENT
This FIRST AMENDMENT to that certain Loan Agreement dated as of October
20, 1995 (the "Agreement") is made as of December 12, 1995 (the "First
Amendment"), by an among ProBusiness, Inc, a California corporation ("Borrower")
with its principal office at 0000 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxxx 00000,
each of the persons listed in Exhibit A to the Agreement (collectively referred
to herein as the "Original Lenders") and each of the persons listed in Exhibit A
attached hereto (collectively referred to herein as "Additional Lenders"). The
Original Lenders and the Additional Lenders shall collectively be referred to
herein as "Lenders".
RECITALS
WHEREAS, the Original Lenders possess certain rights under the
Agreement;
WHEREAS, Section 11.4 of the Agreement provides that the Agreement may
be amended, waived, discharged or terminated, on behalf of all holders, upon the
written consent of the Borrower and holders of a majority of the Notes (as
defined in the Agreement) purchased under the Agreement;
WHEREAS, the Agreement provided for the authorization of up to an
aggregate principal amount of $2,500,000 of Notes with an interest rate of eight
percent (8%) per annum and Warrants (as defined in the Agreement) to purchase up
to 78,715 shares of the Borrower's Series E Preferred Stock in one or more
closings;
WHEREAS, the Borrower issued $1,100,000 of the Notes and Warrants to
purchase 34,630 shares of the Borrower's Series E Preferred Stock on October 20,
1995 to the Original Lenders and the Borrower and the Original Lenders wish to
amend the Agreement to provide for the issuance of an additional $2,900,000
principal amount of the Notes and Warrants to purchase up to an additional
91,309 shares of Series E Preferred Stock to the Additional Purchasers on the
same terms and conditions as set forth in the Agreement for an aggregate total
principal amount of the Notes issued of $4,000,000 and Warrants to purchase up
to an aggregate total of 125,939 of the Borrower's Series E Preferred Stock;
WHEREAS, the Borrower, the Original Lenders and the Additional Lenders
wish to amend the expiration date of the Warrants issued to the Original Lenders
and the Warrants to be issued to the Additional Lenders hereunder to be
substantially as set forth in Exhibits C-1 and C-2 attached hereto;
WHEREAS, the Borrower, the Original Lenders and the Additional Lenders
wish to amend the Notes issued to the Original Lenders and the Notes to be
issued to the Additional Lenders hereunder in Exhibits B-1 and B-2 to be
substantially as set forth to provide for early repayment of
21
the Note at the option of the Borrower the earlier of one year from the date of
the Loan Agreement or an initial public offering of the Borrower;
WHEREAS, the Board of Directors (the "Board") and shareholders of the
Borrower have amended the Borrower's Bylaws to change the size of the Board and
the Board has appointed Xxxx X. Xxxx, Xx. to fill a vacancy on the Board
resulting from such Bylaw amendment;
WHEREAS, the Borrower has authorized this First Amendment providing for
the sale and issuance of an additional $2,900,000 principal amount of the Notes
and Warrants to purchase up to an additional 91,309 shares of the Series E
Preferred Stock at an additional closing or closings;
WHEREAS, Additional Lenders desire to purchase the Additional Notes (as
defined below) and Additional Warrants (as defined below) on the terms and
conditions set forth herein; and
WHEREAS, the Borrower desires to issue and sell the Additional Notes
and Additional Warrants to the Additional Lenders on the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
12. Debt Financing.
a. Promissory Notes. Each Additional Lender severally
agrees to make available to Borrower on the closing date the principal amount
set forth opposite such Additional Lender's name in Exhibit A attached hereto to
be evidenced by a promissory note (collectively, the "Additional Notes") the
form of which is attached hereto as Exhibit B-1, for up to a total principal
amount to be made available to Borrower by all Additional Lenders of up to
$2,900,000 and for up to a total aggregate principal amount to be made available
to Borrower by all Lenders of up to $4,000,000. The Additional Notes shall be
issued on the same terms and conditions as the Notes issued pursuant to the
Agreement, the form of which is substantially as set forth in Exhibit B-1
attached hereto.
b. Payments. All payments to Additional Lenders shall be
payable at Additional Lenders' address, set forth in Exhibit A attached hereto,
or at such other place or places as Additional Lenders may designate from time
to time in writing to Borrower.
13. Warrants to Purchase Series E Preferred Stock. Subject to the
terms and conditions hereinafter set forth (including without limitation Section
7.11 below) and in consideration of a purchase price of $1.00, Borrower shall
issue a warrant ("Additional Warrant") to each Additional Lender, entitling each
Additional Lender, upon surrender of the Additional Warrant at the principal
office of Borrower (or at such other place as Borrower shall notify Additional
Lender hereof in writing), to purchase from Borrower the value of fully paid and
nonassessable shares of Series E Preferred Stock of Borrower as is equal to
twenty-five percent (25%) of the principal amount of each Additional Note held
by such Additional Lender under this First Amendment at an exercise price of
$7.94 per share of Series E Preferred Stock, all as set forth in the form of
Additional Warrant
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attached hereto as Exhibit C-1. Each Additional Warrant shall be subject to
antidilution price protection, net exercise provisions and registration rights
and shall be substantially in the form set forth in Exhibit C-1, attached hereto
and made a part hereof.
14. Closing Date; Delivery.
a. Closing Date. The closing of the execution of this
First Amendment and the issuance of the Additional Notes and Additional Warrants
hereunder shall be held at the offices of Wilson, Sonsini, Xxxxxxxx & Xxxxxx,
000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000-0000 at 5:00 p.m., local time,
on December 12, 1995 (the "Second Closing") or at such other time and place upon
which Borrower and Additional Lenders shall agree (the date of the Second
Closing is hereinafter referred to as the "Second Closing Date").
b. Delivery. At the Second Closing, Borrower will
deliver to each Additional Lender an executed counterpart of this First
Amendment together with an Additional Note and Additional Warrant issued in such
Additional Lender's name, evidencing the principal amount borrowed from such
Additional Lender by Borrower and the number of shares of Series E Preferred
Stock to be issued to Additional Lender upon exercise of the Additional Warrant
as set forth beside such Additional Lender's name on Exhibit A attached hereto,
against delivery of an executed counterpart of this First Amendment, together
with payment of the principal amount plus $1.00, the purchase price of the
Additional Warrant, by check payable to Borrower or wire transfer per Borrower's
instructions.
c. Subsequent Closings. If less than $4,000,000 is made
available to Borrower by Lenders on the Closing Date (as defined in the
Agreement) and Second Closing Date, then, subject to the terms and conditions of
the Agreement Borrower may issue additional Notes at subsequent closings
evidencing up to the principal balance amount of the $4,000,000 not made
available to Borrower by Lenders and Warrant to such persons as Borrower may
determine with the same terms and conditions as the Notes and Warrant issued
pursuant to the Agreement. Any such issuance shall be on the same terms and
conditions as those contained in the Agreement and such persons shall become
parties to the Agreement and that certain Registration Rights Agreement dated as
of December 1, 1989 as amended (the "Registration Rights Agreement") and shall
have the rights and obligations of the Lenders as defined thereunder, subject to
the Seventeenth Amendment to the Registration Rights Agreement (the "Seventeenth
Amendment") attached hereto as Exhibit D. A copy of the Registration Rights
Agreement is attached hereto as Exhibit E.
d. Rights and Obligations of Borrower, the Original
Lenders and the Additional Lenders. Concurrently with the execution of this
First Amendment, the Additional Lenders shall execute counterpart signature
pages to the Seventeenth Amendment. The Additional Lenders shall be entitled to
the rights, and be subject to the obligations, applicable to the Original
Lenders contained in the Agreement and the Registration Rights Agreement as if
the Additional Lenders had purchased the Additional Notes and Additional
Warrants pursuant to the Agreement. Without limiting the generality of the
foregoing, the Additional Lenders shall be considered "Lenders" as defined in
the Agreement, the Additional Notes and Additional Warrants shall be considered
"Notes" and "Warrants", respectively as defined in the Agreement and the Series
E Preferred Stock to be
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issued upon the exercise of the Additional Warrants and the Common Stock to be
issued upon the Conversion of such Series E Preferred Stock (the "Additional
Underlying Securities") shall be considered "Underlying Securities" as defined
in the Agreement. Further, the definitions of the "Agreement" and "Bylaws" in
the Agreement shall include the First Amendment and the Exhibits attached
thereto, and all amendments to the Bylaws as of the date hereof, respectively.
15. Disclosure; Capitalization.
a. Disclosure. Each Additional Lender hereby
acknowledges receipt of the Borrower's audited financial statements for the
twelve-month period ended June 30, 1995 (the "Financial Statements"). The
Company affirms to the Additional Lenders that:
i. The representations and warranties of the
Company set forth in Section 4 of the Agreement were true and accurate when
made; and
ii. Those representations and warranties are
incorporated herein by this reference and made a part hereof, and remain true
and accurate in all material respects as of the date hereof and as of the Second
Closing Date, except as otherwise set forth below.
b. Capitalization. The authorized capital stock of
Borrower consists of 20,000,000 shares of Common Stock, par value $.01 per share
244,679 of which are issued and outstanding as of the Closing Date and 6,000,000
share of Preferred Stock with par value, $.01 per share (the "Preferred"),
1,500,000 of which have been designated Series A Preferred Stock (the "Series A
Preferred"), of which 920,000 are issued and outstanding as of the Closing Date,
1,500,000 of which have been designated Series B Preferred Stock (the "Series B
Preferred"), of which 919,400 are issued and outstanding as of the Closing Date,
1,500,000 of which have been designated Series C Preferred Stock (the "Series C
Preferred"), of which 260,785 are issued and outstanding as of the Closing Date,
500,000 which have been designated Series D Preferred Stock (the "Series D
Preferred"), of which 300,000 are issued and outstanding as of the closing date,
and 500,000 of which have been designated Series E Preferred Stock (the "Series
E Preferred"), 213,116 of which are issued and outstanding immediately before
the Closing Date. No other series of Preferred Stock has been designated. The
outstanding shares have been duly authorized and validly issued, and are fully
paid and nonassessable. The Borrower has reserved 125,939 shares of Series E
Preferred for issuance upon the exercise of Warrants pursuant to the Agreement,
251,878 shares of Common Stock for issuance upon conversion of the Series E
Preferred to be issued upon the exercise of such Warrants, 9,446 shares of
Series E Preferred Stock for issuance upon the exercise of a warrant issued to
Silicon Valley Bank ("SVB"), 18,892 shares of Common Stock for issuance upon the
conversion of the Series E Preferred to be issued upon the exercise of SVB's
warrant, 426,232 shares of Common Stock for issuance upon the conversion of the
outstanding Series E Preferred, 600,000 shares of Common Stock for issuance upon
the conversion of the Series D Preferred, 521,570 shares of Common Stock for
issuance upon conversion of the Series C Preferred, 1,838,800 shares of Common
Stock for issuance upon conversion of the Series B Preferred, 1,840,000 shares
of Common Stock for issuance upon conversion of the Series A Preferred, and
862,146 shares of Common Stock for issuance upon exercise of options granted and
465,184 shares of Common Stock for issuance upon exercise of options not yet
granted under Borrower's 1989 Stock Option Plan, as
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amended. The Series E Preferred Stock to be issued upon the exercise of the
Warrants hereunder shall have the rights, privileges and restrictions set forth
in Borrowers Articles of Incorporation, as amended, (the "Articles"). Other than
options granted or to be granted pursuant to Borrower's 1989 Stock Option Plan,
as amended, Warrants to purchase 34,630 shares of the Borrower's Series E
Preferred Stock issued to the Original Lenders and a warrant issued to SVB,
there are no options, warrants or other rights, including convertible debentures
or notes, granted or issued by or binding upon Borrower to purchase any of
Borrower's authorized and unissued Common Stock or Preferred Stock.
c. Brokers or Finders; Other Offers. Borrower has not
incurred, and will not incur, directly or indirectly, as a result of any action
taken by Borrower, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement, except
with respect to certain Additional Lenders, the Borrower will issue a Warrant to
Duff, Ackerman, Xxxxxxxx & Associates, L.P. to purchase 1,599 shares of
Borrower's Series E Preferred Stock on the same terms and conditions as set
forth in the Agreement and as provided for in Section 7.11 below and such
Additional Lenders will pay an amount equal to two percent of the principal
amount set forth opposite their name to such firm.
d. No Material Liabilities. Borrower has no material
liabilities or obligations, other than: (a) liabilities and obligations
disclosed in the Financial Statements (including, without limitation, Borrower's
borrowings pursuant to the Loan Agreement between Borrower and Silicon Valley
Bank dated January 13, 1995 for up to a maximum principal amount of $1,500,000);
(b) liabilities incurred in the ordinary course of business; (c) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
the Financial Statements; (d) leases for operating headquarters and branches of
Borrower; (e) liabilities and obligations pursuant to the Agreement for up to a
maximum principal amount of $1,100,000 of Notes issued to the Original
Purchasers; and (f) any other obligations which are not in any case material to
the financial condition or operating results of Borrower.
16. Representations and Warranties of Additional Lenders. Each
Additional Lender acknowledges that such Additional Lender has reviewed the
representations and warranties set forth in Sections 5 and 8.1 of the Agreement
and agrees with Borrower that such representations and warranties, which are
incorporated herein by this reference and made a part hereof, are true and
correct as of the date hereof as they relate to the purchase of any of the
Additional Notes, Additional Warrants or Additional Underlying Securities by
such Additional Lender hereunder except as follows:.
a. Brokers or Finders; Other Offers. Additional Lender
has not incurred, and will not incur, directly or indirectly, as a result of any
action taken by Additional Lender, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement,
except with respect to certain Additional Lenders, the Borrower will issue a
Warrant to Duff, Ackerman, Xxxxxxxx & Associates, L.P. to purchase 1,599 shares
of Borrower's Series E Preferred Stock on the same terms and conditions as set
forth in the Agreement and as
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provided for in Section 7.11 below and such Additional Lenders will pay an
amount equal to two percent of the principal amount set forth opposite their
name to such firm.
17. Events of Default; Remedies. The terms and provisions set
forth in Section 6 of the Agreement are incorporated herein by this reference
and made a part hereof.
18. Conditions to Closing of Lenders. Additional Lenders'
obligations to purchase the Additional Notes, Additional Warrants and Additional
Underlying Securities issuable upon conversion of the Additional Warrants at the
Second Closing and the Original Lenders' obligations to amend the Agreement are,
at the option of Additional Lenders and Original Lenders, subject to the
fulfillment of the following conditions:
a. Representations and Warranties Correct. The
representations and warranties made by Borrower in Section 4 hereof shall be
true and correct in all material respects as of the Closing Date.
b. Covenants. All covenants, agreements and conditions
contained in this First Amendment to be performed by Borrower on or prior to the
Second Closing Date shall have been performed or complied with in all material
respects.
c. Compliance Certificate. Borrower shall have delivered
to Additional Lenders a certificate of Borrower in the form of Exhibit G hereto,
executed by the President of Borrower, dated the Second Closing Date, and
certifying, among other things, to the fulfillment of the conditions specified
in Sections 7.1 and 7.2 of this First Amendment.
d. Opinion of Borrower's Counsel. Additional Lenders
shall have received from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., counsel to
Borrower, an opinion addressed to Lenders, dated the Second Closing Date, in
substantially the form attached as Exhibit H.
e. Blue Sky. Borrower shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Additional Notes,
Additional Warrants or Additional Underlying Securities issuable upon conversion
of the Additional Warrants.
f. Legal Matters. All material matters of a legal nature
that pertain to this First Amendment and the transactions contemplated hereby,
shall have been reasonably approved by special counsel to Additional Lenders.
g. Board of Directors. The Board of Directors of
Borrower shall consist of the following persons: Xxxxxx Xxxxxx, Xxxx Xxxxxx,
Xxxxxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxx and Xxxx X. Xxxx, Xx.
h. Registration Rights Agreement. Borrower, and each
Additional Lender and Duff, Ackerman, Xxxxxxxx & Associates shall have entered
into the Seventeenth Amendment to Registration Rights Agreement in substantially
the form attached hereto as Exhibit D.
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i. Promissory Notes. Borrower shall have executed and
delivered an Additional Note to each Additional Lender evidencing the principal
amount borrowed by Borrower from Additional Lender, in the form substantially as
set forth in Exhibit B-1 hereto. Borrower shall have executed and delivered to
each Original Lender an Amendment to Note in the Form substantially as set forth
in Exhibit B-2.
j. Warrants. Subject to Section 7.11 below, Borrower
shall have executed and delivered to each Additional Lender an Additional
Warrant subject to the terms and provisions set forth in Section 2 hereof and in
the form substantially as set forth in Exhibit C-1 attached hereto and Borrower
shall have executed and delivered to each Original Lender an Amendment to
Warrant in the form substantially as set forth in Exhibit C-2 attached hereto.
k. Warrants to Duff, Ackerman, Xxxxxxxx & Associates,
L.P.. Borrower shall execute and deliver a Warrant subject to the terms and
provisions set forth in Section 2 hereof and in the form substantially as set
forth in Exhibit C-1 attached hereto, to Duff, Ackerman, Xxxxxxxx & Associates,
L.P. to purchase 1,599 shares of Borrower's Series E Preferred Stock. Such
Warrant shall be delivered to Duff, Ackerman, Xxxxxxxx & Associates, L.P. at its
headquarters located at Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000, Attention: Xxxx X. Xxxx, Xx. As a result of the issuance of
such Warrant, the number of shares of Series E Preferred Stock issuable upon the
exercise of Additional Warrants issued to certain Additional Lenders shall be
reduced by ten percent as indicated on Exhibit A attached hereto.
l. Amendment to Bylaws. The Board of Directors and
shareholders of Borrower shall have amended the Bylaws of Borrower to provide
for a change in the size of the Board in the form substantially as set forth in
Exhibit I attached hereto.
19. Conditions to Closing of Borrower. Borrower's obligation to
sell and issue the Additional Notes, Additional Warrants or Additional
Underlying Securities issuable upon conversion of the Additional Warrants
pursuant to this First Amendment and to amend the Agreement is, at the option of
Borrower, subject to the fulfillment as of the Second Closing Date of the
following conditions:
a. Representations and Warranties. The representations
and warranties made by Additional Lenders in Section 5 hereof shall be true and
correct when made, and shall be true and correct on the Second Closing Date.
b. Blue Sky. Borrower shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Additional Notes,
Additional Warrants or Additional Underlying Securities issuable upon conversion
of the Additional Warrants.
c. Legal Matters. All material matters of a legal nature
that pertain to this First Amendment and the transactions contemplated hereby,
shall have been reasonably approved by counsel to Borrower. At the time of the
Second Closing, the purchase of the Additional Notes, Additional Warrants or
Additional Underlying Securities issuable upon conversion of the Additional
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Warrants shall be legally permitted by all laws and regulations to which each
Lender and Borrower are subject.
d. Board and Shareholder Approval. All approvals of
Borrower's Board of Directors and shareholders necessary for performance of the
transactions contemplated by this First Amendment shall have been obtained.
e. Registration Rights Agreements. Borrower, each
Additional Lender and Duff, Ackerman, Xxxxxxxx & Associates, L.P. shall have
entered into the Seventeenth Amendment to Registration Rights Agreement in
substantially the form attached hereto as Exhibit D.
20. Affirmative Covenants of Borrower and Lenders. The covenants
of Borrower and Lenders set forth in Section 9 of the Agreement are incorporated
herein by this reference and made a part hereof, to the effect that each
Additional Lender has all the rights and obligations of a Lender under such
provisions with respect to the Additional Notes, Additional Warrants or
Additional Underlying Securities acquired hereby, except for Section 9.1(c)
which is amended in full as follows:
"(c) So long as such Lender holds any Notes, as
soon as practicable after the end of the first, second and third quarterly
accounting periods in each fiscal year of Borrower and in any event within 60
days thereafter, unaudited consolidated statements of income and consolidated
statements of changes in financial condition of Borrower and its subsidiaries,
if any, for such period and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles, with the exception of
footnotes, all in reasonable detail and signed, subject to changes resulting
from year-end audit adjustments, by the principal financial or accounting
officer of Borrower."
21. Subordination. To the extent there is any conflict between the
provisions of this Section 10 and the other provisions of this First Amendment,
the provisions of this Section 10 shall control.
i. Each Lender hereby subordinates to Silicon Valley
Bank ("Bank") any security interest or lien that Lender may have or in the
future obtain in any property of Borrower. Notwithstanding any respective dates
of attachment or perfection of the security interest of Lender and the security
interest of Bank, the security interest of Bank in the property of Borrower
shall at all times be prior to the security interest of Lender.
ii. All indebtedness hereunder (the "Subordinated Debt")
is subordinated in right of payment to all obligations of Borrower to Bank now
existing or hereafter arising, together with all costs of collecting such
obligations (including attorneys' fees), including, without limitation, all
interest accruing after the commencement by or against Borrower of any
bankruptcy, reorganization or similar proceeding (the "Senior Debt").
iii. Lender will not demand or receive from Borrower (and
Borrower will not pay to Lender) all or any part of the Subordinated Debt, by
way of payment, prepayment, setoff, lawsuit or otherwise, nor will Lender
exercise any remedy with respect to any of Bank's collateral, nor will
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Lender commence, or cause to commence, prosecute or participate in any
administrative, legal or equitable action against Borrower, for so long as any
portion of the Senior Debt remains outstanding. The foregoing notwithstanding,
Lender shall be entitled to receive each regularly scheduled payment of interest
that constitutes Subordinated Debt, provided that an event of default, as
defined in the financing agreements between Borrower and Bank, has not occurred
and is not continuing and would not exist immediately after such payment.
iv. Lender shall promptly deliver to Bank in the form
received (except for endorsement or assignment by Lender where required by Bank)
for application to the Senior Debt any payment, distribution, security or
proceeds received by Lender with respect to the Subordinated Debt other than in
accordance with this Section 10.
v. In the event of Borrower's insolvency, reorganization
or any case or proceeding under any bankruptcy or insolvency law or laws
relating to the relief of debtors, the provisions of this Section 10 shall
remain in full force and effect, and Bank's claims against Borrower and the
estate of Borrower shall be paid in full before any payment is made to Lender.
vi. For so long as any of the Senior Debt remains unpaid,
Lender irrevocably appoints Bank as Lender's attorney-in-fact, and grants to
Bank a power of attorney with full power of substitution, in the name of Lender
or in the name of Bank, for the use and benefit of Bank, without notice to
Lender, to perform at Bank's option the following acts in any bankruptcy,
insolvency or similar proceeding involving Borrower:
(1) To file the appropriate claim or claims in
respect of the Subordinated Debt on behalf of Lender if Lender does not do so
prior to 30 days before the expiration of the time to file claims in such
proceeding and if Bank elects, in its sole discretion, to file such claim or
claims; and
(2) To accept or reject any plan of
reorganization or arrangement on behalf of Lender and to otherwise vote Lender's
claims in respect of any Subordinated Debt in any manner that Bank deems
appropriate for the enforcement of its rights hereunder.
vii. This Section 10 shall remain effective for so long as
Borrower owes any amounts to Bank. If, at any time after payment in full of the
Senior Debt any payments of the Senior Debt must be disgorged by Bank for any
reason (including, without limitation, the bankruptcy of Borrower), this Section
10 and the relative rights and priorities set forth herein shall be reinstated
as to all such disgorged payments as though such payments had not been made and
Lender shall immediately pay over to Bank all payments received with respect to
the Subordinated Debt to the extent that such payments would have been
prohibited hereunder. At any time and from time to time, without notice to
Lender, Bank may take such actions with respect to the Senior Debt as Bank, in
its sole discretion, may deem appropriate, including, without limitation,
terminating advances to Borrower, increasing the principal amount, extending the
time of payment, increasing applicable interest rates, renewing, compromising or
otherwise amending the terms of any documents affecting the Senior Debt and any
collateral securing the Senior Debt, and enforcing or failing to enforce any
rights against Borrower or any other person. No such action or inaction shall
impair or otherwise
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affect Bank's rights hereunder. Lender waives the benefits, if any, of
California Civil Code Sections 2809, 2810, 2819, 2845, 2847, 2848, 2849, 2850,
2899 and 3433.
viii. The provisions of this Section 10 shall bind any
successors or assignees of Lender and shall benefit any successors or assigns of
Bank, and, if Borrower refinances a portion of the Senior Debt with a new
lender, such new lender shall be deemed a successor of Bank for the purposes of
this Section 10. This Section 10 is solely for the benefit of Lender and Bank
and not for the benefit of Borrower or any other party.
ix. The provisions of this Section 10 may be amended only
by written instrument signed by Lender and Bank.
x. In the event of any legal action to enforce the
rights of a party under this Section 10, the party prevailing in such action
shall be entitled, in addition to such other relief as may be granted, all
reasonable costs and expenses, including reasonable attorneys' fees, incurred in
such action.
22. Miscellaneous.
a. Incorporation by References. The provisions set forth
in Section 11 of the Agreement are incorporated herein by this reference and
made a part hereof.
b. Notices, etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed (a) if to an Additional Lender, to such Additional
Lender's address set forth in Exhibit A, or at such other address and the
Additional Lender shall have furnished to Borrower in writing, (b) if to any
other holder of any Notes, Additional Warrants or Additional Underlying
Securities issuable upon conversion of the Additional Warrants, at such address
as holder shall have furnished Borrower in writing, or, until any such holder so
furnishes an address to Borrower, then to and at the addresses of the last
holder of such Additional Notes, Additional Warrants or Additional Underlying
Securities issuable upon conversion of the Additional Warrants who has so
furnished an address to Borrower, or (c) if to Borrower, one copy should be sent
to its address set forth at the beginning of this First Amendment and addressed
to the attention of the President of Borrower, or at such other address as
Borrower shall have furnished to the Additional Lenders or (d) if to an Original
Lender, as provided in Section 11.5 to the Agreement.
Each such notice or other communication shall for all purposes
of this First Amendment be treated as effective or having been given when
delivered if delivered personally, or, if sent by mail, at the earlier of its
receipt or 72 hours after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid.
c. California Corporate Securities Law. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
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ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS AN
EXEMPTION FROM SUCH QUALIFICATION IS AVAILABLE. THE RIGHTS OF ALL PARTIES TO
THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
OR SUCH EXEMPTION BEING AVAILABLE.
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IN WITNESS WHEREOF, the parties have duly executed this First Amendment
to the Loan Agreement on the day and year first above written.
BORROWER: PROBUSINESS, INC.
a California corporation
By:_________________________________________
Xxxxxx X. Xxxxxx,
President and Chief Executive Officer
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PROBUSINESS, INC.
FIRST AMENDMENT TO
THE LOAN AGREEMENT
ORIGINAL LENDER'S SIGNATURE PAGE
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(Printed Name of Lender)
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(Signature)
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(Title, if Applicable)
33
PROBUSINESS, INC.
FIRST AMENDMENT TO
THE LOAN AGREEMENT
ADDITIONAL LENDER'S SIGNATURE PAGE
-----------------------------------
(Printed Name of Lender)
-----------------------------------
(Signature)
-----------------------------------
(Title, if Applicable)
