EXHIBIT 10.23
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement"), dated as of March 16, 2000,
is made between Amerigon Incorporated, a California corporation (the "Company"),
and Big Star Investments LLC ("Lender").
The Company has requested the Lender to make term loans to the Company
in an aggregate principal amount of up to $1,500,000 (the "Initial Loans"). The
Lender is willing to make such loans to the Company upon the terms and subject
to the conditions set forth in this Agreement. In addition, this Agreement also
provides for the advance of up to $2,500,000 in aggregate principal amount of
term loans in the event the Lender, in its sole discretion, elects to make such
loans to the Company (the "Additional Loans"). The Initial Loans and any
Additional Loans are collectively referred to herein as the "Loans."
The Lender may elect to convert its Loans into Class A Common Stock of
the Company as provided herein.
In order to induce the Lender to enter into this Agreement, the
Company has agreed to issue certain warrants to the Lender or its members as
provided herein.
This Agreement amends and restates and supersedes the Credit Agreement
dated as of March 28, 1999 among the Company and lender (the "Prior Credit
Agreement").
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"ADDITIONAL BRIDGE LOAN WARRANTS" has the meaning set forth in Section
2.11.
"AFFILIATE" means any Person which, directly or indirectly, controls, is
controlled by or is under common control with another Person. For purposes of
the foregoing, "control," "controlled by" and "under common control with" with
respect to any Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"BRIDGE LOAN WARRANTS" means the Initial Bridge Loan Warrants and any
Additional Bridge Loan Warrants.
"BUSINESS DAY" means a day of the year on which commercial banks are not
required or authorized by law to close in Los Angeles, California.
"CLOSING DATE" means the date upon which the conditions set forth in
Sections 3.01 and 3.02 are satisfied and the initial Loan hereunder is made.
"COLLATERAL" means the property described in the Collateral Documents, and
all other property now existing or hereafter acquired which may at any time be
or become subject to a Lien in favor of the Lender pursuant to the Collateral
Documents or otherwise, securing the payment and performance of the Obligations.
"COLLATERAL DOCUMENTS" means the Security Agreement, the Patent and
Trademark Security Agreement, any other agreement pursuant to which the Company
provides a Lien on its assets in favor of the Lender and all filings (including,
but not limited to, all U.C.C. financing statements filed to perfect the
security interests granted in the Security Agreement), documents and agreements
made or delivered pursuant thereto.
"COMMITMENT" means $1,500,000 or, where the context so requires, the
obligation of the Lender to make an Initial Loan up to such amount on the terms
and conditions set forth in this Agreement.
"COMPANY" has the meaning set forth in the recital of parties to this
Agreement.
"DEFAULT" means an Event of Default or an event or condition which with
notice or lapse of time or both would constitute an Event of Default.
"ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances, judgments and codes, together
with all administrative orders, directives, requests, licenses, authorizations
and permits of, and agreements with (including consent decrees), any
governmental agencies or authorities, in each case relating to or imposing
liability or standards of conduct concerning public health, safety and
environmental protection matters.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"FINAL MATURITY DATE" means the earlier to occur of (i) August 31, 2000, or
(ii) the occurrence of a Trigger Event.
"GAAP" means generally accepted accounting principles in the United States,
consistently applied.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or other
hazardous substances, materials, wastes, contaminants or pollutants, including
asbestos, PCBs, petroleum products and byproducts, and any substances defined or
listed as "hazardous substances," "hazardous materials," "hazardous wastes" or
"toxic substances" (or similarly identified or having any constituent substances
displaying any of the foregoing characteristics), regulated under or forming the
basis for liability under any applicable Environmental Law.
"INDEBTEDNESS" means, for any Person, (i) all indebtedness or other
obligations of such Person for borrowed money or for the deferred purchase price
of property or services which purchase price is (a) due more than six months
from the date of incurrence of the obligation in
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respect thereof, or (b) evidenced by a note or similar written instrument, but
excluding trade payables incurred in the ordinary course of business; (ii) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses described in clause (i) above; (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person; (iv) all
reimbursement and other obligations of such Person in respect of letters of
credit and bankers acceptances and all net obligations in respect of interest
rate swaps, caps, floors and collars, currency swaps, and other similar
financial products; (v) all obligations under leases which shall have been or
should be, in accordance with GAAP, recorded as capital leases; and (vi) all
indebtedness of another Person of the types referred to in clauses (i) through
(v) guaranteed directly or indirectly in any manner by the Person for whom
Indebtedness is being determined, or in effect guaranteed directly or indirectly
by such Person through an agreement to purchase or acquire such indebtedness, to
advance or supply funds for the payment or purchase of such indebtedness or
otherwise assure a creditor against loss, or secured by any Lien upon or in
property owned by the Person for whom Indebtedness is being determined, whether
or not such Person has assumed or become liable for the payment of such
indebtedness of such other Person.
"INITIAL BRIDGE LOAN WARRANTS" has the meaning set forth in Section 2.11.
"INVESTORS" shall mean Westar Capital II LLC and Big Beaver Investments
LLC.
"INVESTORS RIGHTS AGREEMENT" means the Investors' Rights Agreement dated as
of June 8, 1999 among the Company and the Investors.
"LENDER" has the meaning set forth in the recital of parties to this
Agreement.
"LIEN" means any mortgage, pledge, security interest, assignment, deposit
arrangement, charge or encumbrance, lien or other type of preferential
arrangement (other than a financing statement filed by a lessor in respect of an
operating lease not intended as security).
"LOAN AVAILABILITY PERIOD" means the period extending from and including
the Closing Date through the earliest of : (i) August 31, 2000, (ii) the
occurrence of a Trigger Event, or (iii) the date upon which the Lender declares
an Event of Default.
"LOAN DOCUMENTS" means this Agreement, the Note, the Collateral Documents
and all other certificates, documents, agreements and instruments delivered to
the Lender under or in connection with this Agreement.
"LOANS" means the Initial Loan, and any Additional Loans.
"MARKET PRICE" shall mean, with respect to a particular Loan (i) the
average closing bid price of the Class A Common Stock, for ten (10) consecutive
business days ending on the date that Lender makes such Loan to Company, as
reported by Nasdaq, if the Class A Common Stock is traded on the Nasdaq SmallCap
Market, or (ii) the average last reported sale price of the Class A Common
Stock, for ten (10) consecutive business days ending on the date that Lender
makes such Loans to the Company, as reported by the primary exchange on which
the Class A Common Stock is traded, if the Class A Common Stock is traded on a
national securities
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exchange, or by Nasdaq, if the Class A Common Stock is traded on the Nasdaq
National Market.
"MATERIAL ADVERSE EFFECT" means any event, circumstance or condition that,
individually or in the aggregate (i) has or could reasonably be expected to have
a material adverse effect on the business, operations, assets, liabilities
(including without limitation contingent liabilities), prospects, employee
relationships, customer or supplier relationships, or the condition (financial
or otherwise) of the Company; (ii) would materially impair the ability of the
Company to perform or observe its obligations under or in respect of the Loan
Documents; or (iii) adversely affects the legality, validity, binding effect or
enforceability of any of the Loan Documents or the perfection or priority of any
Lien granted to the Lender under any of the Collateral Documents.
"NOTE" has the meaning set forth in Section 2.03.
"OBLIGATIONS" means the indebtedness, liabilities and other obligations of
the Company to the Lender under or in connection with the Loan Documents,
including all Loans, all interest accrued thereon, all fees due under this
Agreement and all other amounts payable by the Company to the Lender thereunder
or in connection therewith.
"PATENT AND TRADEMARK SECURITY AGREEMENT" means the Patent and Trademark
Assignment and Security Agreement between the Company and the Lender, in form
and substance satisfactory to the Lender.
"PERMITTED LIENS" means: (i) Liens in favor of the Lender; (ii) the
existing Liens (including leases and subleases) listed in SCHEDULE 1 or incurred
in connection with the extension, renewal or refinancing of the Indebtedness
secured by such existing Liens, PROVIDED that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the Indebtedness being extended, renewed or
refinanced does not increase; (iii) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and which are adequately reserved for in
accordance with GAAP, PROVIDED the same does not have priority over any of the
Lender's Liens and no notice of tax lien has been filed of record; (iv) Liens of
materialmen, mechanics, warehousemen, carriers or employees or other similar
Liens provided for by mandatory provisions of law and securing obligations
either not delinquent or being contested in good faith by appropriate
proceedings and which do not in the aggregate materially impair the use or value
of the property or risk the loss or forfeiture thereof; (v) Liens consisting of
deposits or pledges to secure the performance of bids, trade contracts, leases,
public or statutory obligations, or other obligations of a like nature incurred
in the ordinary course of business (other than for Indebtedness); (vi) Liens
upon or in any equipment acquired or held by the Company to secure the purchase
price of such equipment or Indebtedness incurred solely for the purpose of
financing the acquisition of such equipment; and (vii) restrictions and other
minor encumbrances on real property which do not in the aggregate materially
impair the use or value of such property or risk the loss or forfeiture thereof.
"PERSON" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization or any other entity of whatever nature or any
governmental agency or authority.
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"RESPONSIBLE OFFICER" means, with respect to any Person, the chief
executive officer, the president, the chief financial officer or the treasurer
of such Person, or any other senior officer of such Person having substantially
the same authority and responsibility.
"SECURITY AGREEMENT" means a Security Agreement between the Company and the
Lender, in form and substance satisfactory to the Lender.
"TRIGGER EVENT" means that the Company (or its Board of Directors) shall
have authorized, recommended, proposed or publicly announced its intention to
enter into (or has failed to recommend rejection of) any tender or exchange
offer, merger, consolidation, liquidation, dissolution, business combination,
recapitalization, acquisition, or disposition of a material amount of assets or
securities or any comparable transaction which has not been consented to in
writing by the Lender.
SECTION 1.02 ACCOUNTING TERMS. Unless otherwise defined or the context
otherwise requires, all accounting terms not expressly defined herein shall be
construed, and all accounting determinations and computations required under
this Agreement or any other Loan Document shall be made, in accordance with
GAAP.
SECTION 1.03 INTERPRETATION. In the Loan Documents, except to the extent
the context otherwise requires: (i) any reference to an Article, a Section, a
Schedule or an Exhibit is a reference to an article or section thereof, or a
schedule or an exhibit thereto, respectively, and to a subsection or a clause
is, unless otherwise stated, a reference to a subsection or a clause of the
Section or subsection in which the reference appears; (ii) the words "hereof,"
"herein," "hereto," "hereunder" and the like mean and refer to this Agreement or
any other Loan Document as a whole and not merely to the specific Article,
Section, subsection, paragraph or clause in which the respective word appears;
(iii) the meaning of defined terms shall be equally applicable to both the
singular and plural forms of the terms defined; (iv) the words "including,"
"includes" and "include" shall be deemed to be followed by the words "without
limitation;" (v) references to agreements and other contractual instruments
shall be deemed to include all subsequent amendments and other modifications
thereto, but only to the extent such amendments and other modifications are not
prohibited by the terms of the Loan Documents; (vi) references to statutes or
regulations are to be construed as including all statutory and regulatory
provisions consolidating, amending or replacing the statute or regulation
referred to; (vii) any table of contents, captions and headings are for
convenience of reference only and shall not affect the construction of this
Agreement or any other Loan Document; and (viii) in the computation of periods
of time from a specified date to a later specified date, the word "from" means
"from and including"; the words "to" and "until" each mean "to but excluding";
and the word "through" means "to and including."
ARTICLE II
THE LOANS
SECTION 2.01 LOANS. The Lender agrees, subject to the terms and
conditions of this Agreement, to make term loans (each an "Initial Loan") to the
Company on the Closing Date and from time to time during the Loan Availability
Period following the Company's
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compliance with the borrowing procedure under Section 2.02 below, in the
aggregate principal amount up to but not exceeding the Term Commitment.
The Lender may agree in its sole discretion, subject to the terms and
conditions of this Agreement, to make additional loans in an aggregate principal
amount not to exceed $2,500,000 (each an "Additional Loan") to the Company from
time to time during the Loan Availability Period following the Company's
compliance with the borrowing procedure under Section 2.02 below. In addition,
the Company acknowledges that neither the Lender nor either of its investors
have been granted the requisite internal approvals which are a condition to the
making of Additional Loans and such approvals may not be forthcoming and would
only be obtained in the sole discretion of the Lender and its investors.
Nothing in this Agreement or any other Loan Document shall constitute a
commitment or other undertaking by the Lender or any of its investors or
affiliates to make Additional Loans.
SECTION 2.02 BORROWING PROCEDURE. Each Loan shall be made upon written
notice from the Company to the Lender, which notice shall be received by the
Lender not later than 10:00 A.M. (California time) at least three (3) Business
Days prior to the proposed borrowing date. Each such notice of borrowing shall
be irrevocable and binding on the Company and shall specify the proposed date of
the borrowing (which shall be a Business Day), the amount of the borrowing
(which shall be at least $200,000 or a greater amount which is an integral
multiple of $50,000), and payment instructions with respect to the funds to be
made available to the Company. Upon fulfillment of the applicable conditions
set forth in Article III hereof, the Lender shall make the Loan available to the
Company in same day funds, or such other funds as shall separately be agreed
upon by the Company and the Lender, in accordance with the payment instructions
provided to the Lender as set forth in the borrowing request delivered pursuant
hereto.
SECTION 2.03 EVIDENCE OF INDEBTEDNESS. At the request of the Lender, the
Company shall execute and deliver for account of the Lender a promissory note
(the "Note"), in a form reasonably acceptable to the Lender, as additional
evidence of the Indebtedness of the Company to the Lender resulting from each
Loan.
SECTION 2.04 INTEREST. The Company hereby promises to pay interest on
the unpaid principal amount of each Loan from the date of such Loan until the
maturity thereof, at a rate equal to 10% per annum, on the date of any
prepayment of any such Loan and at maturity.
Any principal payments on the Loans not paid when due and, to the extent
permitted by applicable law, any interest payments on the Loans not paid when
due, in each case whether at stated maturity, by notice of prepayment, by
acceleration or otherwise, shall thereafter bear interest (including post-
petition interest in any proceeding under applicable bankruptcy laws) payable on
demand at a rate which is 2% per annum in excess of the interest rate otherwise
payable under this Agreement for Loans. Payment or acceptance of the increased
rates of interest provided for in this paragraph is not a permitted alternative
to timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Lender.
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SECTION 2.05 COMPUTATIONS. All computations of fees and interest
hereunder shall be made on the basis of a year of 360 days for the actual number
of days occurring in the period for which any such interest or fee is payable.
SECTION 2.06 HIGHEST LAWFUL RATE. Anything herein to the contrary
notwithstanding, if during any period for which interest is computed hereunder,
the applicable interest rate, together with all fees, charges and other payments
which are treated as interest under applicable law, as provided for herein or in
any other Loan Document, would exceed the maximum rate of interest which may be
charged, contracted for, reserved, received or collected by the Lender in
connection with this Agreement under applicable law (the "Maximum Rate"), the
Company shall not be obligated to pay, and the Lender shall not be entitled to
charge, collect, receive, reserve or take, interest in excess of the Maximum
Rate, and during any such period the interest payable hereunder shall be limited
to the Maximum Rate.
SECTION 2.07 TERMINATION OF THE COMMITMENT. Upon the earlier to occur of
(i) August 31, 2000, (ii) the occurrence of a Trigger Event, or (iii) the
Lender's declaration of an Event of Default, any unused portion of the Term
Commitment shall terminate. After the Term Commitment terminates under this
Section 2.07 it may not be reinstated.
SECTION 2.08 REPAYMENT OF THE LOAN. The Company hereby promises to pay
to the Lender the principal amount of the Term Loans and any accrued interest
thereon in full on the Final Maturity Date.
SECTION 2.09 PREPAYMENTS OF THE LOANS.
(a) OPTIONAL PREPAYMENTS. The Company may, upon prior notice to the
Lender, prepay the outstanding amount of the Loans in whole or in part, without
premium or penalty.
(b) NOTICE; APPLICATION. The notice given of any prepayment shall specify
the date and amount of the prepayment. If the notice of prepayment is given,
the Company shall make such prepayment and the prepayment amount specified in
such notice shall be due and payable on the date specified therein, with accrued
interest to such date on the amount prepaid.
SECTION 2.10 PAYMENTS.
(a) PAYMENTS. The Company shall make each payment under the Loan
Documents, unconditionally in full without deduction, set-off, counterclaim or,
to the extent permitted by applicable law, other defense, and free and clear of,
and without reduction for or on account of, any present and future taxes or
withholdings (other than a tax on the overall net income of the Lender), and all
liabilities with respect thereto. Each payment shall be made not later than
11:00 A.M. (California time) on the day when due to the Lender in U.S. dollars
and in immediately available funds, or such other funds as shall be separately
agreed upon by the Company and the Lender, in accordance with the Lender's
payment instructions.
(b) EXTENSION. Whenever any payment hereunder shall be stated to be due,
or whenever any interest payment date or any other date specified hereunder
would otherwise occur, on a day other than a Business Day, then, except as
otherwise provided herein,
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such payment shall be made, and such interest payment date or other date shall
occur, on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest.
(c) APPLICATION. Each payment by or on behalf of the Company hereunder
shall, unless a specific determination is made by the Lender with respect
thereto, be applied (i) first, to accrued and unpaid interest due the Lender;
and (ii) second, to principal due the Lender.
SECTION 2.11 CONVERSION OF LOANS INTO CLASS A COMMON STOCK. The Lender
shall have conversion rights as follows (the "Conversion Rights"):
(a) CONVERSION RIGHTS. The Lender may elect in its sole discretion to
convert the principal of or interest accrued under all or a portion of any Loan
into Class A Common Stock of the Company at a conversion price equal to the
Market Price of the Class A Common Stock as of the date that such Loan was made
to the Company; provided that in the event the Company issues in excess of $5
million of equity securities in an offering at an issuance price that is less
than the Market Price with respect to a particular Loan, the conversion price
relating to such Loan shall be reduced to such issuance price (the "Conversion
Price"). The Conversion Price for the Note shall be subject to adjustment as
set forth in subsection 2.11(c).
(b) MECHANICS OF CONVERSION. Before the Lender shall be entitled to
convert the Note into shares of Class A Common Stock, the Lender shall, in the
case of a partial conversion of the Note, indicate on the face of the Note the
amount so converted and provide a copy of the Note to the Company or, in the
case of the conversion of all of the remaining outstanding principal and
interest due under the Note, surrender the Note, duly endorsed, at the office of
the Company and shall give written notice to the Company at its principal
corporate office, of the election to convert the same or a portion thereof and
shall state therein the name or names in which the certificate or certificates
for shares of Class A Common Stock are to be issued. The Company shall, as soon
as practicable thereafter, issue and deliver at such office to Lender, or to the
nominee or nominees of Lender, a certificate or certificates for the number of
shares of Class A Common Stock to which such persons shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the Note and the
person or persons entitled to receive the shares of Class A Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Class A Common Stock as of such date. If
the conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act of 1933, the conversion may, at the
option of Lender, be conditioned upon the closing with the underwriters of the
sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Class A Common Stock upon conversion of the Note shall
not be deemed to have converted such Note until immediately prior to the closing
of such sale of securities.
(c) CONVERSION PRICE ADJUSTMENTS OF NOTE FOR CERTAIN DILUTIVE ISSUANCES,
SPLITS AND COMBINATIONS. The Conversion Price of the Note shall be subject to
adjustment from time to time as follows:
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(i) In the event the Company should at any time or from time to time
after the Closing Date fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Class A Common Stock or the
determination of holders of Class A Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Class A
Common Stock without payment of any consideration by such holder for the
additional shares of Class A Common Stock, then, as of such record date (or
the date of such dividend distribution, split or subdivision if no record
date is fixed), the Conversion Price of the Note shall be appropriately
decreased so that the number of shares of Class A Common Stock issuable on
conversion of the Note shall be increased in proportion to such increase of
the aggregate of shares of Class A Common Stock outstanding. In the event
the Company shall declare or pay, without consideration, any dividend on
the Class A Common Stock payable in any right to acquire Class A Common
Stock for no consideration, then the Company shall be deemed to have made a
dividend payable in Class A Common Stock in an amount of shares equal to
the maximum number of shares issuable upon exercise of such rights to
acquire Class A Common Stock.
(ii) If the number of shares of Class A Common Stock outstanding at
any time after the Closing Date is decreased by a combination of the
outstanding shares of common stock, then, following the record date of such
combination, the Conversion Price for the Note shall be appropriately
increased so that the number of shares of Class A Common Stock issuable on
conversion of the Note or a portion thereof shall be decreased in
proportion to such decrease in outstanding shares.
(iii) All adjustments to the Conversion Price will be calculated to
the nearest cent of a dollar. No adjustment in the Conversion Price will
be required unless such adjustment would require an increase or decrease of
at least one cent per dollar; provided, however, that any adjustments which
by reason of this Section 2.11(c)(iii) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
adjustments to the Conversion Price shall be made successively.
(d) RECAPITALIZATIONS AND REORGANIZATIONS. If the Class A Common Stock
issuable upon conversion of the Note shall be changed into or exchanged for a
different class or classes of capital stock, or other securities or property
whether by reorganization, recapitalization or otherwise (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in this Section 2.11) provision shall be made so that the Lender shall
thereafter be entitled to receive upon conversion of the Note the number of
shares of stock or other securities or property, to which a holder of Class A
Common Stock deliverable upon conversion would have been entitled on such
recapitalization or reorganization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 2.11 with
respect to the rights of the Lender after the recapitalization or reorganization
to the end that the provisions of this Section 2.11 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Note) shall be applicable after the event as nearly equivalent
as may be practicable.
(e) NO IMPAIRMENT. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to
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avoid the observance or performances of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out all of the provisions of this Section 2.11 and in the taking
of all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the Lender against impairment.
(f) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the conversion of the
Note and the number of shares of Class A Common Stock to be issued shall be
rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the
amount of Note the Lender is at the time converting into Class A Common
Stock and the number of shares of Class A Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of the Note pursuant to this Section 2.11, the Company, at
its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to the Lender a
certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Company shall, upon the written request at any time of the Lender, furnish
or cause to be furnished to the Lender a like certificate setting forth (A)
such adjustment and readjustment, (B) the Conversion Price for the Note at
the time in effect , and (C) the number of shares of Class A Common Stock
and the amount, if any, of other property which at the time would be
received upon the conversion of the Note.
(g) NOTICES OF RECORD DATE. In the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution ,any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right (except the right to vote), the Company
shall mail to the Lender at least 20 days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
(h) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Class A Common Stock, solely for the purpose of effecting conversion of the
Note, such number of its shares of Class A Common Stock as shall from time to
time be sufficient to effect the conversion of the Note; and it at any time the
number of authorized but unissued shares of Class A Common Stock shall not be
sufficient to effect the conversion of the Note, in addition to such other
remedies as shall be available to the Lender, the Company will take such
corporate action as may, in the option of its counsel, be necessary to increase
its authorized but unissued shares of Class A Common Stock to such number of
shares as shall be sufficient for such purposes, including, without limitation,
engaging in best efforts to obtain the requisite shareholder approval of any
necessary amendment to its articles of incorporation.
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(i) NO STOCKHOLDER RIGHTS. Nothing contained in this Agreement shall be
construed as conferring upon the Lender or any other person the right to vote or
to consent to receive notice as a stockholder in respect of meeting of
stockholders for the election of directors of the Company or any or any other
matters or any other rights whatsoever as a stockholder of the Company; and no
dividends or interest shall be payable or accrued in respect of the Note or the
Class A Common Stock obtainable under this Section 2.11 until, and only to the
extent that, this Note shall have been converted.
(j) Any Loans that are converted into Class A Common Stock as provided
herein will be deemed to be paid in full for all purposes of this Agreement and
the other Loan Documents.
SECTION 2.12 WARRANTS.
(a) Concurrently with the execution of this Agreement, and in
consideration of the Lender's agreement to make Initial Loans to the Company,
the Company will issue to the Lender a warrant to purchase an amount of the
Class A Common Stock of the Company equal to 10% of the principal amount of the
Initial Loans divided by the Exercise Price (as defined below) and on the terms
and conditions set forth in EXHIBIT A hereto (the "Initial Bridge Loan
Warrants").
(b) In addition, on any date that the Lender, in its sole discretion,
makes Additional Loans to the Company, in consideration thereof, the Company
will issue to the Lender additional warrants to purchase shares of the Class A
Common Stock of the Company on the terms and conditions set forth in EXHIBIT A
hereto and in an amount equal to 10% of the principal amount of the Additional
Loans provided by Lender divided by the Exercise Price (the "Additional Bridge
Loan Warrants").
(c) The Exercise Price of any Warrants shall be equal to the Conversion
Price calculated as of the date of the particular Loan as further provided in
the Bridge Loan Warrants.
SECTION 2.13 LIMITATION ON CONVERSION RIGHTS AND EXERCISE OF WARRANTS.
In no event shall the Lender be entitled to convert the Note or exercise the
Warrants to the extent that, after giving effect to such conversion or exercise,
the Lender shall have acquired pursuant to such conversion and exercise more
than 19.99% of the outstanding Class A Common Stock of the Company such that a
shareholder vote would have been required in connection with the issuance of the
Note and the Bridge Loan Warrants under applicable NASDAQ rules or to the extent
that the Class A Common Stock issued pursuant to the conversion or exercise of
the Note and the Bridge Loan Warrants exceeds the amount approved by the
California Department of Corporations. In the event Lender anticipates that the
Class A Common Stock issued pursuant to the conversion or exercise of the Note
and the Bridge Loan Warrants may exceed the amount approved by the California
Department of Corporations, then at the Lender's request the Company shall apply
for an additional permit from the California Department of Corporations covering
any additional shares of Class A Common Stock requested by Lender and use its
best efforts to have such application approved.
11
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01 CONDITIONS PRECEDENT TO THE INITIAL LOAN. The obligation of
the Lender to make its initial Loan on the date of the initial borrowing
hereunder (the "Closing Date") shall be subject to the satisfaction of each of
the following conditions precedent before or concurrently with the initial Loan:
(a) FEES AND EXPENSES. The Company shall have paid all fees and invoiced
costs and expenses then due hereunder.
(b) LOAN DOCUMENTS. The Lender shall have received the following Loan
Documents: (i) this Agreement executed by the Company, (ii) the Note required
hereunder, executed by the Company; and (iii) the Collateral Documents executed
by each of the respective parties thereto.
(c) DOCUMENTS AND ACTIONS RELATING TO COLLATERAL. The Lender shall have
received, in form and substance satisfactory to it, results of such Lien
searches as it shall reasonably request, and evidence that all filings,
registrations and recordings have been made in the appropriate governmental
offices, and all other action has been taken, which shall be necessary to
create, in favor of the Lender, a perfected first priority Lien on the
Collateral, subject only to Permitted Liens.
(d) ADDITIONAL CLOSING DOCUMENTS. The Lender shall have received the
following, in form and substance satisfactory to it: (i) evidence that all (A)
authorizations or approvals of any governmental agency or authority, and (B)
approvals or consents of any other Person, required in connection with the
execution, delivery and performance of the Loan Documents shall have been
obtained; and (ii) a certificate of the Secretary or other appropriate officer
of the Company, dated the Closing Date, certifying (A) copies of the articles or
certificate of incorporation, and bylaws, of the Company and the resolutions and
other actions taken or adopted by the Company authorizing the execution,
delivery and performance of the Loan Documents, and (B) the incumbency,
authority and signatures of each officer of the Company authorized to execute
and deliver the Loan Documents and act with respect thereto.
(e) LEGAL OPINION. The Lender shall have received an opinion of legal
counsel to the Company dated the Closing Date, in the form attached hereto as
EXHIBIT B.
(f) INITIAL BRIDGE LOAN WARRANTS. The Company shall have delivered to the
Lender a duly executed Initial Bridge Loan Warrants, in the form attached hereto
as EXHIBIT A.
(g) AMENDMENT TO INVESTORS RIGHTS AGREEMENT. The Company and the Investors
shall have entered into the First Amendment to the Investors Rights' Agreement,
in substantially the form attached hereto as EXHIBIT C.
(h) PERMIT. All evidences of indebtedness issued by the Company pursuant
to (and including) this Agreement shall have been qualified by permit filed with
and approved by the
12
California Department of Corporations pursuant to Section 25113 of the
California Corporations Code.
SECTION 3.02 CONDITIONS PRECEDENT TO ALL LOANS. The obligation of the
Lender to make each Initial Loan (and to the extent that the Lender has agreed
in its sole discretion in writing after the Closing Date to make Additional
Loans, the obligation of the Lender to make Additional Loans provided for in
such writing) shall be subject to the satisfaction of each of the following
conditions precedent:
(a) NOTICE. The Company shall have given its notice of borrowing as
provided in Section 2.02.
(b) MATERIAL ADVERSE EFFECT. On and as of the date of such Loan, there
shall have occurred no change or event since the date of this Agreement (in the
case of the initial Loan) or the date of the most recent borrowing (in the case
of any subsequent Loan), as the case may be, that has or could reasonably be
expected to have a Material Adverse Effect.
(c) NO DEFAULT. On the date of such Loan, both before and after giving
effect thereto and to the application of proceeds therefrom, no material Default
shall have occurred and be continuing or shall result from the making of such
Loan. The giving of any notice of borrowing and the acceptance by the Company
of the proceeds of each Loan made on or following the Closing Date shall each be
deemed a certification to the Lender that on and as of the date of such Loan no
material Default shall have occurred or shall result from the making of the
Loan.
(d) ADDITIONAL DOCUMENTS. The Lender shall have received, in form and
substance satisfactory to it, such additional approvals, opinions, documents and
other information as the Lender may reasonably request, including in the case of
any Additional Loans, the Additional Bridge Loan Warrants to be issued to Lender
pursuant to Section 2.12.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Lender that, except as set forth in the
Disclosure Letter:
(a) ORGANIZATION AND POWERS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
and has all requisite power and authority to execute, deliver and perform its
obligations under the Loan Documents. The Company is qualified to do business
and is in good standing in each jurisdiction in which the failure so to qualify
or be in good standing would result in a Material Adverse Effect and has all
requisite power and authority to own its assets and carry on its business.
(b) AUTHORIZATION; NO CONFLICT. The execution, delivery and performance by
the Company of the Loan Documents have been duly authorized by all necessary
corporate
13
action of the Company and do not and will not (i) result in a violation of the
Company's Articles of Incorporation or Bylaws, (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its properties is subject, or result in a
violation of any material law, rule, regulation, order, judgment or decree
(including U.S. federal and state securities laws and regulations) applicable to
the Company or by which any property or asset of the Company is bound or
affected, or (iii) except as contemplated by this Agreement, result in, or
require, the creation or imposition of any Lien upon or with respect to any of
the properties, assets or revenues of the Company. The Company is not in
violation of its Articles of Incorporation, Bylaws or other organizational
documents, or of any judgment, order, writ, decree, law, rule or regulation to
which the Company or its properties is subject in any material respect. The
Company is not in default (and no event has occurred which, with notice or lapse
of time or both, would put the Company in default) under, nor has there occurred
any event giving others (with notice or lapse of time or both) any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Company is a party or any of its properties
is subject in any material respect.
(c) BINDING OBLIGATION. The Loan Documents constitute, or when delivered
under this Agreement, will constitute, legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
(d) CONSENTS. No authorization, consent, approval, license, exemption of,
or filing or registration with, any governmental agency or authority, or
approval or consent of any other Person, is required for the due execution,
delivery or performance by the Company of any of the Loan Documents, except for
such approvals as have been obtained or as set forth in SCHEDULE 2 hereto.
(e) LITIGATION. There is no action, suit, proceeding or investigation
pending, or to the Company's knowledge, currently threatened against the
Company, except as which individually or in the aggregate would not have a
Material Adverse Effect. The Company is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. Except as set forth on the Disclosure
Letter, there is no material action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
(f) PATENTS AND TRADEMARKS. The Company owns or licenses from another
person all inventions, patents, patent rights, computer software, trademarks,
trademark rights, service marks, service xxxx rights, trade names, trade name
rights and copyrights (collectively, the "Intellectual Property") necessary for
its business without any conflict with or infringement of the valid rights of
others and the lack of which could materially and adversely affect the
operations or condition, financial or otherwise, of the Company, and the Company
has not received any notice of infringement upon or conflict with the asserted
rights of others. The Disclosure Letter contains a complete list of all such
patents, patent rights, registered trademarks,
14
registered service marks, registered copyrights, all agreements related to the
foregoing, and all agreements pursuant to which the Company licenses
Intellectual Property from or to a third party (excluding "shrink wrap" license
agreements relating solely to off the shelf software which is not material to
the Company's business). All such Intellectual Property owned by the Company is
owned free and clear of all liens, adverse claims, encumbrances, or
restrictions, except for restrictions contained in the terms of the licenses
listed in the Disclosure Letter. All such Intellectual Property licensed by the
Company is the subject of a license agreement which is legal, valid, binding and
enforceable and in full force and effect. The consummation of the transactions
contemplated hereby will not result in the termination or impairment of the
Company's ownership of, or right to use, any Intellectual Property. The Company
has a valuable body of trade secrets, including know-how, concepts, business
plans, and other technical data (the "Proprietary Information") for the
development, manufacture and sale of its products. The Company has the right to
use the Proprietary Information free and clear of any material rights, liens,
encumbrances or claims of others. The Company is not aware, after reasonable
investigation, that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of his or her best efforts to promote
the interests of the Company or that would conflict with the Company's business
in any material respect.
(g) TITLE TO PROPERTIES; LIENS. The Company has good and marketable title
to, or valid and subsisting leasehold interests in, its properties and assets,
including all property forming a part of the Collateral, in all material
respects, and there is no Lien upon or with respect to any of such properties or
assets, including any of the Collateral, except for Permitted Liens.
(h) SEC DOCUMENTS AND FINANCIAL STATEMENTS. Since January 1, 1997, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Securities and Exchange Commission
("SEC") pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (all of the foregoing and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, with amendments read together with underlying
documents, are referred to herein as the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
U.S. generally accepted accounting principles, consistently applied, during the
periods involved and fairly and accurately present in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in the
most recent balance sheet provided to the Lender or the Disclosure Schedule, the
Company
15
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to the date of such financial
statements and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in such financial statements, which, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company. Except as disclosed in such financial statements, the
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
(i) WARRANTS. The Bridge Loan Warrants is duly authorized and, upon
issuance in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable, and will be free of liens, claims, encumbrances
and restrictions on transfer, other than restrictions on transfer under
applicable state and federal securities laws or as set forth therein. The
shares of Class A Common Stock issuable upon exercise of the Bridge Loan
Warrants and upon exercise of the Conversion Rights are duly authorized and
reserved for issuance, and, upon exercise of the Bridge Loan Warrants or the
Conversion Rights, as the case may be, in accordance with the terms thereof,
will be validly issued, fully paid and nonassessable, and will be free of liens,
claims, encumbrances and restrictions on transfer, other than restrictions on
transfer under applicable state and federal securities laws or as set forth
therein.
(j) TAX RETURNS. The Company has timely filed all tax returns (federal,
state and local) required to be filed by it and such tax returns are true and
correct in all material respects. In addition, (i) the Company has not
requested any extension of time within which to file any tax returns in respect
of any fiscal year which have not since been filed and no request for waivers of
the time to assess any taxes are pending or outstanding, (ii) no claim for taxes
has become a lien against the property of the Company or is being asserted
against the Company other than liens for taxes not yet due and payable, (iii) no
audit of any tax return of the Company is being conducted by a tax authority,
(iv) no extension of the statute of limitations on the assessment of any taxes
has been granted to, by or applied for by, the Company and is currently in
effect, and (v) there is no agreement, contract or arrangement to which the
Company is a party that may result in the payment of any amount that would not
be deductible by reason of Sections 280G, 162 or 404 of the Internal Revenue
Code.
(k) PERMITS. The Company has all material franchises, permits, licenses
and any similar authority necessary for the conduct of its business ("Permits").
The Company is not in default in any material respect under any of such Permits.
(l) ENVIRONMENTAL AND SAFETY LAWS. The Company is not in violation of any
applicable material statute, law or regulation relating to the environment or
occupational health and safety, and no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
SECTION 4.02 REPRESENTATIONS AND WARRANTIES OF THE LENDER. The Lender
represents and warrants to the Company that:
(a) INVESTMENT REPRESENTATIONS. The Lender: (i) will acquire the Note,
Bridge Loan Warrants and shares underlying the Bridge Loan Warrants for its own
account for
16
investment and not with a view to any resale or other distribution (other than
to affiliates) of the Note in a transaction constituting a public offering or
otherwise requiring registration under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), or in a transaction that would result in
noncompliance with applicable state securities laws; (ii) has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and the risks of its acquisition of the Note, the Bridge Loan Warrants
(and shares underlying the Bridge Loan Warrant) and credit extensions to the
Company, (iii) is an accredited investor as such term is defined in Rule 501 of
Regulation D under the Securities Act, and (iv) understands that the Note, the
Bridge Loan Warrant and the shares underlying the Bridge Loan Warrant have not
been registered under the Securities Act or any state securities laws.
(b) ORGANIZATION AND POWERS. The Lender is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement.
(c) AUTHORIZATION; BINDING OBLIGATION. The execution, delivery and
performance by the Lender of this Agreement has been duly authorized by all
necessary organizational action of the Lender. This Agreement constitutes a
legal, valid and binding obligation of the Lender, enforceable against the
Lender in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
(d) FINANCIAL CAPACITY. The Lender has access to adequate capital to
enable it to satisfy its obligations to make the Loan contemplated hereby.
ARTICLE V
COVENANTS
SECTION 5.01 REPORTING COVENANTS. So long as any of the Obligations
shall remain unpaid or the Lender shall have any Commitment, the Company agrees
that:
(a) FINANCIAL STATEMENTS AND OTHER REPORTS. The Company will furnish to
the Lender: (i) on Monday of each week, a statement of cash flow for the prior
week and projected cash flow for the following two weeks; (ii) as soon as
available and in any event within 10 days after the end of a month, monthly
agings (aged from invoice date) of accounts receivable, payables reports, and
unaudited financial statements (including a balance sheet, income statement and
statement of cash flows) with respect to that month prepared on a basis
consistent with such statements prepared in prior months and otherwise in
accordance with GAAP and certified by a Responsible Officer as being prepared in
accordance with GAAP; and (iii) as soon as available and in any event within 45
days after the end of each fiscal quarter, its quarterly consolidated and, if
requested by the Lender, consolidating financial statements (including a balance
sheet, income statement and statement of cash flows), prepared in accordance
with GAAP, together with a certificate of a Responsible Officer of the Company
17
stating that such financial statements fairly present in all material respects
the financial condition of the Company as at such date and the results of
operations of the Company for the period ended on such date and have been
prepared in accordance with GAAP, subject to changes resulting from normal,
year-end audit adjustments and except for the absence of notes.
(b) ADDITIONAL INFORMATION. The Company will furnish to the Lender: (i)
promptly after the Company has knowledge or becomes aware thereof, notice of the
occurrence of any Default; (ii) prompt written notice of all actions, suits and
proceedings before any governmental agency or authority or arbitrator pending,
or to the best of the Company's knowledge, threatened against or affecting the
Company; (iii) prompt written notice of any other condition or event which has
resulted, or that could reasonably be expected to result, in a Material Adverse
Effect; (iv) promptly after the same are released, copies of all press releases;
(v) promptly after the giving, sending or filing thereof, copies of all reports
and financial information, if any, which the Company sends to the holders of its
capital stock or other securities, and the holders, if any, of any other
Indebtedness, and of all reports or filings, if any, by the Company with the
Securities and Exchange Commission or any national securities exchange; and (vi)
such other information respecting the operations, properties, business or
condition (financial or otherwise) of the Company (including with respect to the
Collateral) as the Lender may from time to time reasonably request. Each notice
pursuant to clauses (i) through (iii) of this subsection (b) shall be
accompanied by a written statement by a Responsible Officer of the Company
setting forth details of the occurrence referred to therein.
(c) CERTAIN CONTRACTS. Upon the Lender's reasonable request, and at least
twice monthly after the date of this Agreement, the Company shall provide
reports to the Lender concerning the status of all programs with major
customers, in such detail as Lender may reasonably request.
SECTION 5.02 AFFIRMATIVE COVENANTS. So long as any of the Obligations
shall remain unpaid or the Lender shall have any Commitment, the Company agrees
that:
(a) PRESERVATION OF EXISTENCE, ETC. The Company will maintain and preserve
its corporate existence, its rights to transact business and all other material
rights, franchises and privileges necessary or desirable in the normal course of
its business and operations and the ownership of its properties, except in
connection with any transactions expressly permitted by Section 5.03.
(b) PAYMENT OF TAXES, ETC. The Company will pay and discharge all taxes,
fees, assessments and governmental charges or levies imposed upon it or upon its
properties or assets prior to the date on which penalties attach thereto, and
all lawful claims for labor, materials and supplies which, if unpaid, might
become a Lien upon any properties or assets of the Company prior to the date on
which penalties attach thereto except to the extent such taxes, fees,
assessments or governmental charges or levies, or such claims, are being
contested in good faith by appropriate proceedings and are adequately reserved
against in accordance with GAAP.
(c) MAINTENANCE OF INSURANCE. The Company will carry and maintain in full
force and effect, at its own expense and with financially sound and reputable
insurance
18
companies, insurance in such amounts, with such deductibles and covering such
risks as is consistent with the Company's past practices.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company will keep
adequate records and books of account to permit preparation of financial
statements in accordance with GAAP.
(e) INSPECTION RIGHTS. The Company will at any reasonable time during
regular business hours and from time to time permit the Lender or any of its
agents or representatives to visit and inspect any of the properties of the
Company and to examine the records and books of account of the Company, and to
discuss the business affairs, finances and accounts of the Company with any of
the officers, employees or accountants of the Company, provided that the Company
may designate one or more individuals who will be present during such
discussions.
(f) COMPLIANCE WITH LAWS. The Company will comply in all material respects
with the requirements of all applicable laws, rules, regulations and orders of
any governmental agency or authority, including all Environmental Laws.
(g) MAINTENANCE OF PROPERTIES, ETC. The Company will maintain and preserve
all of its material properties necessary or useful in the proper conduct of its
business in good working order and condition in accordance with the general
practice of other corporations of similar character and size, ordinary wear and
tear excepted.
(h) LICENSES. The Company will obtain and maintain all licenses,
authorizations, consents, filings, exemptions, registrations and other
governmental approvals of any governmental agency or authority necessary in
connection with the execution, delivery and performance of the Loan Documents,
the consummation of the transactions therein contemplated or the operation and
conduct of its business and ownership of its properties, except where the
failure to do so would not have a Material Adverse Effect.
(i) USE OF PROCEEDS. The Company will use the proceeds of the Loans for
its general corporate purposes.
(j) FURTHER ASSURANCES AND ADDITIONAL ACTS. The Company will execute,
acknowledge, deliver, file, notarize and register at its own expense all such
further agreements, instruments, certificates, documents and assurances and
perform such acts as the Lender shall deem necessary or appropriate to
effectuate the purposes of the Loan Documents, and promptly provide the Lender
with evidence of the foregoing satisfactory in form and substance to the Lender.
SECTION 5.03 NEGATIVE COVENANTS. So long as any of the Obligations shall
remain unpaid or the Lender shall have any Commitment, the Company agrees that
without the consent of Lender, which consent will not be unreasonably withheld:
(a) LIENS; NEGATIVE PLEDGES. (i) The Company will not create, incur,
assume or suffer to exist any Lien upon or with respect to any of its
properties, revenues or assets, whether now owned or hereafter acquired, other
than Permitted Liens. (ii) The Company will
19
not enter into any agreement (other than this Agreement or any other Loan
Document) prohibiting the creation or assumption of any Lien upon any of its
properties, revenues or assets, whether now owned or hereafter acquired.
(b) CHANGE IN NATURE OF BUSINESS. The Company will not engage in any
material line of business substantially different from those lines of business
carried on by it at the date hereof.
(c) RESTRICTIONS ON FUNDAMENTAL CHANGES. The Company will not merge with
or consolidate into, or acquire all or substantially all of the assets of, any
Person, or sell, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets.
(d) SALES OF ASSETS. The Company will not sell, lease, transfer, or
otherwise dispose of, or part with control of (whether in one transaction or a
series of transactions) any assets (including any shares of stock in any other
Person), except: (i) sales or other dispositions of inventory, and the license,
sublicense and grant of distribution and similar rights, in the ordinary course
of business; (ii) sales or other dispositions of assets in the ordinary course
of business which have become worn out or obsolete or which are promptly being
replaced; or (iii) sales or other dispositions of assets (other than accounts
receivable) outside the ordinary course of business not exceeding in the
aggregate $25,000 in any fiscal year.
(e) DISTRIBUTIONS. The Company will not declare or pay any dividends in
respect of the Company's capital stock, or purchase, redeem, retire or otherwise
acquire for value any of its capital stock now or hereafter outstanding, return
any capital to its shareholders as such, except that the Company may: (A)
declare and deliver dividends and distributions payable only in common stock of
the Company; and (B) purchase, redeem, retire, or otherwise acquire shares of
its capital stock with the proceeds received from a substantially concurrent
issue of new shares of its capital stock.
(f) LOANS AND INVESTMENTS. The Company will not purchase or otherwise
acquire the capital stock, assets (constituting a business unit), obligations or
other securities of or any interest in any Person, or otherwise extend any
credit to or make any additional investments in any Person, other than in
connection with: (i) extensions of credit in the nature of accounts receivable
or notes receivable arising from the sales of goods or services in the ordinary
course of business; and (ii) short term, investment grade money market
instruments, in accordance with the Company's usual and customary treasury
management policies.
(g) TRANSACTIONS WITH RELATED PARTIES. The Company will not enter into any
transaction, including the purchase, sale or exchange of property or the
rendering of any services, with any Affiliate, any officer or director thereof
or any Person which beneficially owns or holds 5% or more of the equity
securities, or 5% or more of the equity interest, thereof (a "Related Party"),
or enter into, assume or suffer to exist, any employment or consulting contract
with any Related Party, except a transaction or contract which is in the
ordinary course of the Company's business and which is upon fair and reasonable
terms not less favorable to the Company than it would obtain in a comparable
arm's length transaction with a Person not a Related Party.
20
SECTION 5.04 CONFIDENTIALITY. The Lender will hold in confidence all,
and not disclose to others for any reason whatsoever any, non-public information
received by it from the Company in connection with this Agreement, except that
the Lender may provide such confidential information in response to legal
process or applicable governmental regulations provided that the Lender
forthwith notifies the Company of its obligation to provide such confidential
information and fully cooperates with the Company to protect the confidentiality
of such information.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01 EVENTS OF DEFAULT. Any of the following events which shall
occur shall constitute an "Event of Default":
(a) PAYMENTS. The Company shall fail to pay when due any amount of
principal of, or interest on, any Loan or Note, or any fee or other amount
payable under any of the Loan Documents.
(b) REPRESENTATIONS AND WARRANTIES. Any representation or warranty by the
Company under or in connection with the Loan Documents shall prove to have been
incorrect in any material respect when made or deemed made.
(c) FAILURE BY COMPANY TO PERFORM CERTAIN COVENANTS. The Company shall
fail to perform or observe any term, covenant or agreement contained in Section
5.03 or Subsections (a) or (i) of Section 5.02.
(d) FAILURE BY COMPANY TO PERFORM OTHER COVENANTS. The Company shall fail
to perform or observe any term, covenant or agreement, other than those
specified in Section 6.01(c), contained in any Loan Document on its part to be
performed or observed, and any such failure shall continue for a period of 10
days from the occurrence thereof (unless the Lender determines that such failure
is not capable of remedy).
(e) INSOLVENCY. (i) The Company shall (A) make a general assignment for
the benefit of creditors or (B) be dissolved, liquidated, wound up or cease its
corporate existence; or (ii) the Company (A) shall file a voluntary petition in
bankruptcy or a petition or answer seeking reorganization, to effect a plan or
other arrangement with creditors or any other relief under the Bankruptcy Reform
Act of 1978 (the "Bankruptcy Code") or under any other state or federal law
relating to bankruptcy or reorganization granting relief to debtors, whether now
or hereafter in effect, or (B) shall file an answer admitting the jurisdiction
of the court and the material allegations of any involuntary petition filed
against the Company pursuant to the Bankruptcy Code or any such other state or
federal law; or (iii) the Company shall be adjudicated a bankrupt, or shall make
an assignment for the benefit of creditors, or shall apply for or consent to the
appointment of any custodian, receiver or trustee for all or any substantial
part of the Company's property, or shall take any action to authorize any of the
actions or events set forth above in this subsection; or (iv) an involuntary
petition seeking any of the relief specified in this subsection shall be filed
against the Company and not dismissed within 60 days; or (v) any order for
relief
21
shall be entered against the Company, in any involuntary proceeding under the
Bankruptcy Code or any such other state or federal law referred to in this
subsection.
(f) DISSOLUTION, ETC. The Company shall (i) liquidate, wind up or dissolve
(or suffer any liquidation, wind-up or dissolution), (ii) discontinue its
operations, or (iii) take any corporate action to authorize any of the actions
or events set forth above in this subsection (f).
(g) JUDGMENTS. (i) A final judgment or order for the payment of money in
excess of $50,000 (or its equivalent in another currency) which is not fully
covered by third-party insurance shall be rendered against the Company (or its
equivalent in another currency); or (ii) any non-monetary judgment or order
shall be rendered against the Company which has or would reasonably be expected
to have a Material Adverse Effect; and in each case there shall be any period of
15 consecutive days during which such judgment continues unsatisfied or during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect.
(h) MATERIAL ADVERSE EFFECT. Any circumstance, condition, or event shall
have occurred which has or could reasonably be expected to have a Material
Adverse Effect.
(i) COLLATERAL DOCUMENTS. Any "Event of Default" as defined in the
Collateral Documents shall have occurred; or any of the Collateral Documents
after delivery thereof shall for any reason be revoked or invalidated, or
otherwise cease to be in full force and effect, or the Company or any other
Person shall contest in any manner the validity or enforceability thereof, or
the Company or any other Person shall deny that it has any further liability or
obligation thereunder; or any of the Collateral Documents for any reason, except
to the extent permitted by the terms thereof, shall cease to create a valid and
perfected first priority Lien subject only to Permitted Liens in any of the
Collateral purported to be covered thereby.
SECTION 6.02 EFFECT OF EVENT OF DEFAULT. If any Event of Default shall
occur, the Lender may, by notice to the Company, declare the Commitment to be
terminated, whereupon the same shall forthwith terminate. If any Event of
Default under Section 6.01(e) shall occur, the Lender may declare the entire
unpaid principal amount of the Loans and the Note, all interest accrued and
unpaid thereon and all other Obligations to be forthwith due and payable,
whereupon the Loans and the Note, all such accrued interest and all such other
Obligations shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Company. In addition, if any Event of Default under Section
6.01(a) or Section 6.01(e) shall occur, the Lender may exercise any or all of
the Lender's rights and remedies under the Collateral Documents and proceed to
enforce all other rights and remedies available to the Lender under the Loan
Documents and applicable law.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 AMENDMENTS AND WAIVERS. No amendment to any provision of the
Loan Documents shall be effective unless it is in writing and has been signed by
22
the Lender and the Company, and no waiver of any provision of any Loan Document,
or consent to any departure by the Company therefrom, shall be effective unless
it is in writing and has been signed by the Lender. Any such amendment, waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 7.02 NOTICES. All notices and other communications provided for
hereunder and under the other Loan Documents shall, unless otherwise stated
herein, be in writing (including by facsimile transmission) and mailed, sent or
delivered to the respective parties hereto at or to their respective addresses
or facsimile numbers set forth below their names on the signature pages hereof,
or at or to such other address or facsimile number as shall be designated by any
party in a written notice to the other party hereto. All such notices and
communications shall be effective (i) if delivered by hand, when delivered; (ii)
if sent by mail, upon the earlier of the date of receipt or five Business Days
after deposit in the mail, first class, postage prepaid; and (iii) if sent by
facsimile transmission, when sent; PROVIDED, HOWEVER, that notices and
communications to the Lender pursuant to Article II shall not be effective until
received.
SECTION 7.03 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of
the Lender to exercise, no delay in exercising, and no course of dealing with
respect to, any right, remedy, power or privilege under any Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, remedy, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights and remedies under the Loan Documents are cumulative and not exclusive of
any rights, remedies, powers and privileges that may otherwise be available to
the Lender.
SECTION 7.04 COSTS AND EXPENSES; INDEMNITY.
(a) COSTS AND EXPENSES. The Company agrees to pay on demand: (i) the
reasonable out-of-pocket costs and expenses of the Lender and any of its
Affiliates, and the reasonable fees and disbursements of counsel to the Lender
and its Affiliates, in connection with the negotiation, preparation, execution,
delivery and administration of the Loan Documents and any amendments,
modifications or waivers of the terms thereof and (ii) all reasonable costs and
expenses of the Lender and its Affiliates, and fees and disbursements of
counsel, in connection with (A) any Default, (B) the enforcement or attempted
enforcement of, and preservation of any rights or interests under, the Loan
Documents, (C) any out-of-court workout or other refinancing or restructuring or
any bankruptcy or insolvency case or proceeding, and (D) the preservation of and
realization upon any of the Collateral.
(b) INDEMNIFICATION. Whether or not the transactions contemplated hereby
shall be consummated, the Company hereby agrees to indemnify the Lender, any
Affiliate thereof and their respective directors, officers, employees, agents,
counsel and other advisors (each an "Indemnified Person") against, and hold each
of them harmless from, any and all liabilities, obligations, losses, claims,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever, including the reasonable fees and
disbursements of counsel to an Indemnified Person, which may be imposed on,
incurred by, or asserted against any Indemnified Person, (i) in any way relating
to or arising out of any of the Loan Documents, the use or intended use of the
proceeds of the Loans or the transactions
23
contemplated hereby or thereby, (ii) with respect to any investigation,
litigation or other proceeding relating to any of the foregoing, irrespective of
whether the Indemnified Person shall be designated a party thereto, or (iii) in
any way relating to or arising out of the use, generation, manufacture,
installation, treatment, storage or presence, or the spillage, leakage,
leaching, migration, dumping, deposit, discharge, disposal or release, at any
time, of any Hazardous Substances on, under, at or from any properties of the
Company, including any personal injury or property damage suffered by any
Person, and any investigation, site assessment, environmental audit, feasibility
study, monitoring, clean-up, removal, containment, restoration, remedial
response or remedial work undertaken by or on behalf of the any Indemnified
Person at any time, voluntarily or involuntarily, with respect to the Premises
(the "Indemnified Liabilities"); PROVIDED that the Company shall not be liable
to any Indemnified Person for any portion of such Indemnified Liabilities to the
extent they are found by a final decision of a court of competent jurisdiction
to have resulted from such Indemnified Person's gross negligence or willful
misconduct. If and to the extent that the foregoing indemnification is for any
reason held unenforceable, the Company agrees to make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
SECTION 7.05 SURVIVAL. All covenants, agreements, representations and
warranties made in any Loan Documents shall, except to the extent otherwise
provided therein, survive the execution and delivery of this Agreement, the
making of the Loans and the execution and delivery of the Note, and shall
continue in full force and effect so long as the Lender has any Commitment, any
Loans remain outstanding or any other Obligations remain unpaid or any
obligation to perform any other act hereunder or under any other Loan Document
remains unsatisfied. Without limiting the generality of the foregoing, the
obligations of the Company under Section 7.04, and all similar obligations under
the other Loan Documents (including all obligations to pay costs and expenses
and all indemnity obligations), shall survive the repayment of the Loans and the
termination of the Commitments.
SECTION 7.06 BENEFITS OF AGREEMENT. The Loan Documents are entered into
for the sole protection and benefit of the parties hereto and their successors
and assigns, and no other Person shall be a direct or indirect beneficiary of,
or shall have any direct or indirect cause of action or claim in connection
with, any Loan Document.
SECTION 7.07 BINDING EFFECT; ASSIGNMENT. This Agreement shall become
effective when it shall have been executed by the Company and the Lender and
thereafter shall be binding upon, inure to the benefit of and be enforceable by
the Company, the Lender and their respective successors and assigns. The Company
shall not have the right to assign its rights and obligations hereunder or under
the other Loan Documents or any interest herein or therein without the prior
written consent of the Lender. The Lender reserves the right to sell, assign,
transfer or grant participations in all or any portion of the Lender's rights
and obligations hereunder and under the other Loan Documents (i) to one or more
Affiliates of the Lender and/or (ii) with the prior consent of the Company
(which consent shall not be unreasonably withheld) to any other Person. In the
event of any such assignment, the assignee shall be deemed a "Lender" for all
purposes of the Loan Documents with respect to the rights and obligations
assigned to it, and the obligations of the Lender so assigned shall thereupon
terminate. The Company shall, from time to time upon request of the Lender,
enter into such amendments to the Loan Documents and execute and deliver such
other documents as shall be
24
necessary to effect any such grant or assignment. The Company agrees that in
connection with any such grant or assignment, the Lender may deliver to the
prospective participant or assignee financial statements and other relevant
information relating to the Company (subject to such Person entering into a
confidentiality agreement with the Company on terms reasonably satisfactory to
the Company).
SECTION 7.08 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA.
SECTION 7.09 WAIVER OF JURY TRIAL. THE COMPANY AND THE LENDER EACH WAIVE
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS,
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. THE COMPANY AND THE LENDER EACH AGREE THAT ANY SUCH CLAIM OR CAUSE
OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
SECTION 7.10 ENTIRE AGREEMENT. The Loan Documents reflect the entire
agreement between the Company and the Lender with respect to the matters set
forth herein and therein and supersede any prior agreements, commitments,
drafts, communication, discussions and understandings, oral or written, with
respect thereto.
SECTION 7.11 SEVERABILITY. Whenever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of any of the
Loan Documents shall be prohibited by or invalid under any such law or
regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed
modified to conform to the minimum requirements of such law or regulation, or,
if for any reason it is not deemed so modified, it shall be ineffective and
invalid only to the extent of such prohibition or invalidity without affecting
the remaining provisions of such Loan Document, or the validity or effectiveness
of such provision in any other jurisdiction.
SECTION 7.12 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Credit
Agreement, as of the date first above written.
THE COMPANY
AMERIGON INCORPORATED, a California
corporation
By: ________________________________
Name: ________________________________
Title:________________________________
THE LENDER
BIG STAR INVESTMENTS LLC
By: ________________________________
Name: ________________________________
Title: _______________________________
S-1
EXHIBIT A
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BEGINS ON THE FOLLOWING PAGE
S-2
EXHIBIT B
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BEGINS ON THE FOLLOWING PAGE
S-3
