Exhibit 10.13
SUBORDINATED LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of June 11, 1999, is entered
into by and between Adesso Specialty Services Organization, Inc., a California
corporation, with its chief executive office and principal place of business
located at 000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxx Xx 00000 (the "Borrower")
and Comdisco, Inc., a Delaware corporation, with its principal place of business
located at 0000 Xxxxx Xxxxx Xxxx, Xxxxxxxx, Xxxxxxxx 00000 (the "Lender" or
sometimes, "Comdisco"). In consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
RECITALS
WHEREAS, Borrower has requested Lender to make available to Borrower a
loan or loans up to an aggregate principal amount of Three Million Five Hundred
Thousand Dollars ($3,500,000) (as the same may from time to time be amended,
modified, supplemented or revised, individually or collectively referred to as
the "Loan(s)"), which would be evidenced by Subordinated Promissory Note(s)
executed by Borrower substantially in the form of EXHIBIT A hereto (as the same
may from time to time be amended, modified, supplemented or restated the
"Note(s)") to be made available in two (2) parts of One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000) each ("Part I") and ("Part II");
WHEREAS, Lender is willing to make the Loan(s) on the terms and
conditions set forth in this Agreement;
WHEREAS, Lender and Borrower agree any Loan(s) hereunder shall be
subordinate to Senior Debt (as defined herein) to the extent set forth in the
Subordination Agreement (as defined herein); and
WHEREAS, Borrower has also given Lender certain rights to purchase the
Borrower's Preferred Stock under terms and conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, Borrower and Lender hereby agree as follows:
SECTION 1. DEFINITIONS
Unless otherwise defined herein, the following capitalized terms shall
have the following meanings (such meanings being equally applicable to both the
singular and plural form of the terms defined);
1.1 "ACCOUNT" means any "account" as such term is defined in Section
9-106 of the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest and, in any event, shall
include, without limitation, all accounts receivable, book debts and other forms
of obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to Borrower (including, without limitation, under any trade
name, style or division thereof) whether arising out of goods sold or services
rendered by Borrower or from
any other transaction, whether or not the same involves the sale of goods or
services by Borrower (including, without limitation, any such obligation which
may be characterized as an account or contract right under the UCC) and all of
Borrower's rights in, to and under all purchase orders or receipts now owned or
hereafter acquired by it for goods or services, and all of Borrower's rights to
any goods represented by any of the foregoing (including, without limitation,
unpaid seller's rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods), and all monies
due or to become due to Borrower under all purchase orders and contracts for the
sale of goods or the performance of services or both by Borrower (whether or not
yet earned by performance on the part of Borrower or in connection with any
other transaction), now in existence or hereafter occurring, including, without
limitation, the right to receive the proceeds of said purchase orders and
contracts, and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
1.2 "ACCOUNT DEBTOR" means any "account debtor," as such term is
defined in Section 9-105(1)(a) of the UCC.
1.3 "ADVANCE" means each installment made by the Lender to Borrower
pursuant to the Loan to be evidenced by the Note(s) secured by the Collateral.
1.4 "ADVANCE DATE" means the funding date of any Advance of the Loan.
1.5 "ADVANCE REQUEST" means the request by Borrower for an Advance
under the Loan, each to be substantially in the form of EXHIBIT B attached
hereto, as submitted by Borrower to Lender from time to time.
1.6 "CHATTEL PAPER" means any "chattel paper," as such term is defined
in Section 9-105(1)(b) of the UCC, now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest.
1.7 "CLOSING DATE" means the date hereof.
1.8 "COLLATERAL" shall have the meaning assigned to such term in
Section 3 of this Agreement.
1.9 "CONTRACTS" means all contracts, undertakings, franchise agreements
or other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Borrower may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
1.10 "COPYRIGHTS" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (i) all copyrights, whether registered or unregistered, held pursuant
to the laws of the United States, any State thereof or of any other country;
(ii) registrations, applications and recordings in the United States Copyright
Office or in any similar office or agency of the United States, any state
thereof or any other country; (iii) any continuations, renewals or extensions
thereof; and (iv) any registrations to be issued in any pending applications.
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1.11 "COPYRIGHT LICENSE" means any written agreement granting any right
to use any Copyright or Copyright registration now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest.
1.12 "DOCUMENTS" means any "documents," as such term is defined in
Section 9-105(1)(f) of the UCC, now owned or hereafter acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest.
1.13 "EQUIPMENT" means any "equipment," as such term is defined in
Section 9-109(2) of the UCC, now or hereafter owned or acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest and any and all
additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
1.14 "EXCLUDED AGREEMENTS" means (i) any Master Lease Agreement between
Borrower, as lessee, and Lender, as lessor, including, without limitation, any
Equipment Schedules and Summary Equipment Schedules to the Master Lease
Agreement executed or delivered by Borrower pursuant thereto and any other
modifications or amendments thereof, whereby Borrower (as lessee) leases
equipment, software, or goods from Lender (as lessor) to Borrower (as lessee)
(ii) the Purchase Option, as defined in Section 8 of the Loan, pursuant to which
Borrower granted Subordinated Creditor the right to purchase shares of the
Borrower's Preferred Stock, and any other agreements governing the rights of the
holders of any equity security of Borrower.
1.15 "FACILITY FEE" means one percent (1.0%) of the Maximum Loan Amount
of each Part I and Part II and due to Lender at the Closing Date and the Advance
Date respectively. The Commitment Deposit in the amount of $10,000 shall be
deducted from the Part I Facility Fee and the transaction due diligence expense
of $5,000 shall be added to the Part I Facility Fee.
1.16 "FIXTURES" means any "fixtures," as such term is defined in
Section 9-313(1)(a) of the UCC, now or hereafter owned or acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest and, now or
hereafter attached or affixed to or constituting a part of, or located in or
upon, real property wherever located, together with all right, title and
interest of Borrower in and to all extensions, improvements, betterments,
renewals, substitutes, and replacements of, and all additions and appurtenances
to any of the foregoing property, and all purchases of the security constituted
thereby, immediately upon any acquisition or release thereof or any such
purchase, as the case may be.
1.17 "GENERAL INTANGIBLES" means any "general intangibles," as such
term is defined in Section 9-106 of the UCC, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest and,
in any event, shall include, without limitation, all right, title and interest
which Borrower may now or hereafter have in or under any contract, all customer
lists, Copyrights, Trademarks, Patents, rights to Intellectual Property,
interests in partnerships, joint ventures and other business associations,
Licenses, permits, trade secrets, proprietary or confidential information,
inventions (whether or not patented or patentable), technical information,
procedures, designs, knowledge, know-how, software, data bases, data, skill,
expertise, recipes, experience, processes, models, drawings, materials and
records, goodwill (including, without limitation, the goodwill associated with
any Trademark, Trademark registration
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or Trademark licensed under any Trademark License), claims in or under insurance
policies, including unearned premiums, uncertificated securities, cash and other
forms of money or currency, deposit accounts (including as defined in Section
9-105(e) of the UCC), rights to xxx for past, present and future infringement of
Copyrights, Trademarks and Patents, rights to receive tax refunds and other
payments and rights of indemnification.
1.18 "INITIAL PUBLIC OFFERING" means an initial public offering of
Borrower's securities.
1.19 "INSTRUMENTS" means any "instrument," as such term is defined in
Section 9-105(1)(i) of the UCC, now owned or hereafter acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest.
1.20 "INTELLECTUAL PROPERTY" means all Copyrights, Trademarks, Patents,
trade secrets, source codes, customer lists, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
skill, expertise, experience, processes, models, drawings, materials and
records.
1.21 "INVENTORY" means any "inventory," as such term is defined in
Section 9-109(4) of the UCC, wherever located, now or hereafter owned or
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest, and, in any event, shall include, without limitation, all inventory,
goods and other personal property which are held by or on behalf of Borrower for
sale or lease or are furnished or are to be furnished under a contract of
service or which constitute raw materials, work in process or materials used or
consumed or to be used or consumed in Borrower's business, or the processing,
packaging, promotion, delivery or shipping of the same, and all furnished goods
whether or not such inventory is listed on any schedules, assignments or reports
furnished to Lender from time to time and whether or not the same is in transit
or in the constructive, actual or exclusive occupancy or possession of Borrower
or is held by Borrower or by others for Borrower's account, including, without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers and all inventory which may be
located on premises of Borrower or of any carriers, forwarding agents, truckers,
warehousemen, vendors, selling agents or other persons.
1.22 "LICENSE" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest
and any renewals or extensions thereof.
1.23 "LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, xxxx, xxxx or charge of
any kind, whether voluntarily incurred or arising by operation of law or
otherwise, against any property, any conditional sale or other title retention
agreement, any lease in the nature of a security interest, and the filing of any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
1.24 "LOAN DOCUMENTS" shall mean and include this Agreement, the
Note(s), and any other documents executed in connection with the Secured
Obligations or the transactions contemplated hereby, as the same may from time
to time be amended, modified, supplemented
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or restated, PROVIDED, that the Loan Documents shall NOT include any of the
Excluded Agreements.
1.25 "MATERIAL ADVERSE EFFECT" means a material adverse effect upon:
(i) the business, operations, properties, prospects, assets or financial
conditions (financial or otherwise) of Borrower; or (ii) the ability of Borrower
to perform, or of Lender to enforce, the Secured Obligations.
1.26 "MATURITY DATE" means the date thirty-six (36) months from the
Advance Date of each installment of the Loan.
1.27 "MAXIMUM LOAN AMOUNT" means One Million Seven Hundred Fifty
Thousand and No/100 Dollars ($1,750,000) as to Part I and One Million Seven
Hundred Fifty Thousand and No/100 Dollars ($1,750,000) as Part II.
1.28 "MERGER EVENT" means a capital reorganization of the shares of the
Borrower's stock (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), or a merger or
consolidation of the Borrower with or into another corporation where the
Borrower is not the surviving corporation (other than a merger event to change
the domicile of the Company), or the sale of all or substantially all of the
Borrower's properties and assets to any other person.
1.29 "NEXT EVENT" means the earlier of (i) the effective date of an
Initial Public Offering; (ii) the effective date of a Merger Event; or (iii) the
closing of Borrower's next round of private equity financing.
1.30 "PATENT LICENSE" means any written agreement granting any right
with respect to any invention on which a Patent is in existence now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest.
1.31 "PATENTS" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) letters patent of, or rights corresponding thereto in, the United
States or any other county, all registrations and recordings thereof, and all
applications for letters patent of, or rights corresponding thereto in the
United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country; (b) all reissues, continuations,
continuations-in-part or extensions thereof; (c) all xxxxx patents, divisionals,
and patents of addition; and (d) all patents to issue in any such applications.
1.32 "PERMITTED LIENS" means any and all of the following:
(i) liens in favor of Lender,
(ii) liens related to, or arising in connection with, Senior Debt;
(iii) liens securing the payment of taxes or other governmental charges not
yet delinquent or being contested in good faith by appropriate proceeding,
for which adequate reserves are
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maintained in accordance with generally accepted accounting principles;
(iv) liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons imposed without
action of such parties, provided that the payment thereof is not yet required;
(v) liens incurred or deposits made in the ordinary course of Borrower's
or a subsidiary's business in connection with worker's compensation,
unemployment insurance, social security and other like laws;
(vi) purchase money security interests in personal property acquired
after the date of this Agreement, provided such are limited to the personal
property so acquired and proceeds, thereof;
(vii) any liens existing as of the date hereof and specifically disclosed
by Borrower to Lender;
(viii) leases, subleases, licenses and sublicenses granted to others in the
ordinary course of business not interfering in any material respect with the
conduct of the business of Borrower;
(ix) liens arising from judgments, decrees or attachments to the extent
and only so long as such judgment, decree or attachment has not caused or
resulted in an Event of Default;
(x) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(xi) liens which constitute rights of set-off of a customary nature or
bankers' liens with respect to amounts on deposit, whether arising by
operation of law or by contract, in connection with arrangements entered into
with banks in the ordinary course of business;
(xii) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described in
clause (vii) above, 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.
Including without limitation, liens in favor of Imperial Bank securing a
$1,200,000 Letter of Credit and liens in favor of Transamerica Business Credit
for equipment financing.
1.33 "PREFERRED STOCK" means the Borrower's Series D Preferred Stock.
1.34 "PROCEEDS" means "proceeds," as such term is defined in Section
9-306(1) of the UCC and, in any event, shall include, without limitation, (a)
any and all Accounts, Chattel Paper, Instruments, cash or other forms of money
or currency or other proceeds payable to Borrower from time to time in respect
of the Collateral, (b) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to Borrower from time to time with respect to any
of the Collateral, (c) any and all payments (in any form whatsoever) made or due
and payable to Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any Person acting under color of
governmental authority), (d) any claim of
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Borrower against third parties (i) for past, present or future infringement of
any Copyright, Patent or Patent License or (ii) for past, present or future
infringement or dilution of any Trademark or Trademark License or for injury to
the goodwill associated with any Trademark, Trademark registration or Trademark
licensed under any Trademark License and (e) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
1.35 "PURCHASE OPTION" shall have the meaning assigned to such term in
Section 8 of this Agreement.
1.36 "RECEIVABLES" shall mean and include all of the Borrower's
accounts, instruments, documents, chattel paper and general intangibles whether
secured or unsecured, whether now existing or hereafter created or arising, and
whether or not specifically sold or assigned to Lender hereunder.
1.37 "SECURED OBLIGATIONS" shall mean and include all principal,
interest, fees, costs, or other liabilities or obligations for monetary amounts
owed by Borrower to Lender, whether due or to become due, matured or unmatured,
liquidated or unliquidated, contingent or non-contingent, and all covenants and
duties regarding such amounts, of any kind of nature, present or future, arising
under this Agreement, the Note(s), or any of the other Loan Documents, whether
or not evidenced by any Note(s), Agreement or other instrument, as the same may
from time to time be amended, modified, supplemented or restated, provided, that
the Secured Obligations shall not include any indebtedness or obligations of
Borrower arising under or in connection with the Excluded Agreements.
1.38 "SENIOR CREDITOR" means any bank, insurance company, pension fund,
or other institutional lender to be determined and identified to Lender in
accordance with a Subordination Agreement, or a syndication of such
institutional lenders that provides Senior Debt financing to Borrower; PROVIDED,
that Senior Creditor shall not include any officer, director, shareholder,
venture capital investor, or insider of Borrower, or any affiliate of the
foregoing persons, except upon the express written consent of Lender.
1.39 "SENIOR DEBT" means any and all indebtedness and obligations for
borrowed money (including, without limitation, principal, premium (if any),
interest, fees charges, expenses, costs, professional fees and expenses, and
reimbursement obligations) at any time owing by Borrower to Senior Creditor
under the Senior Loan Documents, including, but not limited to such amounts as
may accrue or be incurred before or after default or workout or the commencement
of any liquidation, dissolution, bankruptcy, receivership or reorganization by
or against Borrower provided, that Senior Debt shall not include debt exceeding
One Million Five Hundred Thousand Dollars ($1,500,000) outstanding at any one
time. The limitation of $1,500,000 shall not include the Letter of Credit
provided to Borrower by Imperial Bank in the amount of $1,200,000 and the
equipment financing provide by Transamerica Business Credit.
1.40 "SENIOR LOAN DOCUMENTS" means the loan agreement between Borrower
and Senior Creditor and any other agreement, security agreement, document,
promissory note, UCC financing statement, or instrument executed by Borrower in
favor of Senior Creditor pursuant to or in connection with the Senior Debt or
the loan agreement, as the same may from time to time be amended, modified,
supplemented, extended, renewed, restated or replaced.
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1.41 "SUBORDINATION AGREEMENT" means Subordination Agreement, entered
into between Borrower and Lender for the benefit of Senior Creditor.
1.42 "TRADEMARK LICENSE" means any written agreement granting any right
to use any Trademark or Trademark registration now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest.
1.43 "TRADEMARKS" means any of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) any and all trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof and (b) any reissues, extensions or
renewals thereof.
1.44 "UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois. Unless otherwise defined
herein, terms that are defined in the UCC and used herein shall have the
meanings given to them in the UCC.
SECTION 2. THE LOANS
2.1 Lender agrees to lend to Borrower an amount not to exceed Three
Million Five Hundred Thousand and No/100 Dollars ($3,500,000) in the aggregate
available in two installments of One Million Seven Hundred Fifty Thousand and
No/100 Dollars each (1,750,000) as Parts I and II and upon the terms and subject
to the conditions contained in this Agreement. Part I shall be made available
immediately and Part II shall be made available upon request of Borrower and
subject to Borrower achieving 80% or more of the forecasted GAAP revenue for the
nine (9) month period ending September 30, 1999 and no more than 120% of the
forecasted income loss for the same period. In the event the Borrower does not
achieved these milestones, the release of Part II by Lender shall be subject to
review and approval and due diligence of Lender.
2.2 The Loan(s) shall be available in minimum Advances of One Million
Seven Hundred Fifty Thousand Dollars ($1,750,000). Each Advance made by Lender
to Borrower shall be evidenced by a Note in the original principal amount of
such Advance. The principal balance of each Note shall bear interest thereon
precomputed at the rate of nine and one half percent (9.5%) per annum, and each
such Note shall be due and payable in eighteen (18) equal monthly installments
of interest only, payable on the first day of each month, followed by eighteen
(18) equal monthly installments of principal and interest, payable on the first
day of each month, to and including the Maturity Date (each, a "Payment Date").
If any payment under a Note shall be payable on a day other than a business day,
then such payment shall be due and payable on the next succeeding business day.
2.4 In order to obtain an Advance under the Loans, Borrower shall
complete, sign and deliver an Advance Request to Lender. Each Advance Request
shall identify an Advance Date which is no less than five (5) business days from
the date of such notice. Upon receipt of an
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Advance Request, Lender shall verify the information contained in the Advance
Request and if the conditions set forth herein are met it shall deliver a Note
dated the Advance Date evidencing such Advance to Borrower for signature. Upon
receipt of the signed Note, Lender will fund the Advance in the manner requested
by the Advance Request. Borrower agrees that Lender may rely on any notice given
by any Person it reasonably believes to be an authorized officer of Borrower
without the necessity of independent investigation.
2.5 Borrower shall have the option to prepay any Note, in whole or in
part, without premium after twelve (12) months from the Advance Date by paying
the principal amount thereon together with all accrued and unpaid interest with
respect to such principal amount, as of the date of such prepayment. If Borrower
prepays a Note within twelve (12) months from the Advance Date thereof, Borrower
shall pay the principal amount together with all accrued and unpaid interest and
a prepayment premium equal to one percent (1%) of the then outstanding principal
amount. Notwithstanding the foregoing, any such prepayment by the Borrower shall
not affect Lessor's right to purchase as described in Section 8 herein.
2.6 (a) Notwithstanding any provision in this Agreement, the Note(s),
or any other Loan Document, it is not the parties' intent to contract for,
charge or receive interest at a rate that is greater than the maximum rate
permissible by law which a court of competent jurisdiction shall deem applicable
hereto (which under the laws of the State of Illinois shall be deemed to be the
laws relating to permissible rates of interest on commercial loans) (the
"Maximum Rate"). If the Borrower actually pays Lender an amount of interest,
chargeable on the total aggregate principal Secured Obligations of Borrower
under this Agreement and the Note(s) (as said rate is calculated over a period
of time from the date of this Agreement through the end of time that any
principal is outstanding on the Note(s)), which amount of interest exceeds
interest calculated at the Maximum Rate on said principal chargeable over said
period of time, then such excess interest actually paid by Borrower shall be
applied first, to the payment of principal outstanding on the Note(s); second,
after all principal is repaid, to the payment of Lender's out of pocket costs,
expenses, and professional fees which are owed by Borrower to Lender under this
Agreement or the Loan Documents; and third, after all principal, costs,
expenses, and professional fees owed by Borrower to Lender are repaid, the
excess (if any) shall be refunded to Borrower, and the effective rate of
interest will be automatically reduced to the Maximum Rate.
(b) In the event any interest is not paid when due hereunder,
delinquent interest shall be added to principal and shall bear interest on
interest, compounded at the rate set forth in Section 2.3.
(c) Upon and during the continuation of an Event of Default
hereunder, all Secured Obligations, including principal, interest, compounded
interest, and professional fees, shall bear interest at a rate per annum
equal to the rate set forth in Section 2.3 plus five percent (5%) per annum
("Default Rate").
SECTION 3. SECURITY INTEREST
As security for the prompt, complete and indefeasible payment when due
(whether at stated payment dates or otherwise) of all the Secured Obligations
and in order to induce Lender to make the Loan(s) upon the terms and subject to
the conditions of the Note(s), Borrower hereby assigns, conveys, mortgages,
pledges, hypothecates and transfers to Lender for
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security purposes only, and hereby grants to Lender a security interest in, all
of Borrower's right, title and interest in, to and under each of the following
(all of which being hereinafter collectively called the "Collateral"):
(a) All Receivables;
(b) All Equipment;
(c) All Fixtures;
(d) All General Intangibles;
(e) All Inventory;
(f) All other goods and personal property of Borrower whether
tangible or intangible and whether now or hereafter owned or
existing, leased, consigned by or to, or acquired by, Borrower
and wherever located; and
(g) To the extent not otherwise included, all Proceeds of each of
the foregoing and all accessions to, substitutions and
replacements for, and rents, profits and products of each of
the foregoing.
Notwithstanding, the foregoing Collateral shall not include (i) any
contracts or agreements which prohibit Borrower from granting a security
interest therein and (ii) intent to use trademark applications (iii) leased
personal property and (iv) any collateral pledged to Transamerica Business
Credit Corporation; and (v) any deposit accounts up to $1,200,000 pledged to
Imperial Bank, now existing or hereinafter in existence, as collateral for
letters of credit provided by Imperial Bank.
SECTION 4. CONDITIONS PRECEDENT TO LOAN
T The obligations of the Lender to make Loans hereunder are subject to
the satisfaction by Borrower, or waiver by Lender, of the following conditions:
4.1 (a) Part I: The Advance Date for Part I shall occur
before nine months from the Closing Date hereof.
(b) Part II: The Advance Date for Part II shall occur
on or before nine months from the Closing Date hereof and shall be made
available upon request of Borrower and subject to Borrower achieving 80% or
more of the forecasted GAAP revenue for the nine (9) month period ending
September 30, 1999 and no more than 120% of the forecasted income loss for
the same period. In the event the Borrower does not achieved these
milestones, the release of Part II by Lender shall be subject to review and
approval and due diligence of Lender.
4.2 Borrower, on or prior to the Closing Date, shall have
delivered to Lender the following:
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(a) executed originals of the Agreement, the Subordination
Agreement, and any other documents reasonably required by Lender to
effectuate the liens of Lender with respect to all Collateral;
(b) certified copy of resolutions of Borrower's board of
directors evidencing approval of the borrowing and other transactions
evidenced by the Loan Documents;
(c) certified copies of the [Articles/Certificate of
Incorporation] and the Bylaws, as amended through the Closing Date, of
Borrower;
(d) certificate of good standing for Borrower from its state
of incorporation;
(e) payment of the Facility Fee for Part I;
(f) such other documents as Lender may reasonably request.
4.3 On each Advance Date:
(a) The Lender shall have received (i) an Advance Request for
such Advance as required by Section 2.4, (ii) an executed Note evidencing such
Advance and (iii) any other documents Lender may reasonably request.
(b) The representations and warranties set forth in Section 5
hereof shall be true and correct in all material respects on and as of the
Advance Date with the same effect as though made on and as of such date, except
to the extent such representations and warranties expressly relate to an earlier
date.
(c) The Borrower shall be in material compliance with all the
terms and provisions set forth herein and in each other Loan Document on its
part to be observed or performed, and at the time of and immediately after such
Advance no Event of Default shall have occurred and be continuing.
Each Advance Request shall be deemed to constitute a
representation and warranty by the Borrower on the Advance Date as to the
matters specified in paragraphs (b) and (c) of this Section 4.2.
(d) The Borrower shall deliver to Lender the Facility Fee for
Part II upon the Advance Date of any portion of Part II.
4.4 (a) In connection with the first Advance Request made under
Part II, Borrower shall deliver a certificate signed by its Chief Executive
Officer and Chief Financial Officer (or similar officer) certifying that
Borrower has achieved 80% or more of the forecasted GAAP revenue for the
nine (9) month period ending September 30, 1999 and no more than 120% of the
forecasted income loss for the same period, attached hereto as EXHIBIT C and
the Borrower shall deliver to Lender the Facility Fee for Part II upon the
Advance Date of any portion of Part II.
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4.5 PERFECTION OF SECURITY INTERESTS. Borrower shall have taken or
caused to be taken such actions reasonably requested by Lender to grant Lender a
first priority perfected security interest in the Collateral, subject only to
Permitted Liens. Such actions shall include, without limitation, the delivery to
Lender of all appropriate financing statements, executed by Borrower, as to the
Collateral granted by Borrower for all jurisdictions as may be necessary to
perfect the security interest of Lender in such Collateral.
4.6 ABSENCE OF EVENTS OF DEFAULTS. As of the Closing Date or the
Advance Date, no fact or condition exists that would (or would, with the passage
of time, the giving of notice, or both) constitute an Event of Default under
this Agreement or any of the Loan Documents and no fact or condition exists that
would (or would, with the passage of time, the giving of notice, or both)
constitute a material default under the Senior Loan Documents between Borrower
and Senior Creditor.
4.7 MATERIAL ADVERSE EFFECT. As of the Closing Date or the Advance
Date, no event which has had or could reasonably be expected to have a Material
Adverse Effect has occurred and is continuing.
4.8 TERMINATION DATE. Notwithstanding anything in this Agreement to the
contrary, Lender's obligations to provide the Loan(s) shall terminate on the
earlier of (i) nine months from the Closing Date or (ii) the occurrence of an
Event of Default pursuant to Section 9, and no Advance Requests shall be
accepted after such date.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents, warrants and agrees that:
5.1 Borrower owns all right title and interest in and to the
Collateral, free of all liens, security interests, encumbrances and claims
whatsoever, except for Permitted Liens.
5.2 Borrower has the full power and authority to, and does hereby grant
and convey to the Lender, a security interest in the Collateral as security for
the Secured Obligations, free of all liens, security interests, encumbrances and
claims, other than Permitted Liens and shall execute such Uniform Commercial
Code financing statements in connection herewith as the Lender may reasonably
request. Except for Permitted Liens, no other lien, security interest, adverse
claim or encumbrance has been created by Borrower or is known by Borrower to
exist with respect to any Collateral.
5.3 Borrower is a corporation duly organized, legally existing and in
good standing under the laws of the State of California, and is duly qualified
as a foreign corporation in all jurisdictions in which the nature of its
business or location of its properties require such qualifications and where the
failure to be qualified would have a Material Adverse Effect.
5.4 Borrower's execution, delivery and performance of the Note(s), this
Agreement, all financing statements, all other Loan Documents, required to be
delivered or executed in connection herewith, have been duly authorized by all
necessary corporate action of Borrower, the individual or individuals executing
the Loan Documents were duly authorized to do so; and the Loan Documents
constitute legal, valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency,
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reorganization or other similar laws generally affecting the enforcement of the
rights of creditors.
5.5 This Agreement and the other Loan Documents do not and will not
violate any provisions of Borrower's [Articles/Certificate of Incorporation],
bylaws or any material contract or agreement, law, regulation, order,
injunction, judgment, decree or writ to which the Borrower is subject, or result
in the creation or imposition of any lien, security interest or other
encumbrance upon the Collateral, other than those created by this Agreement.
5.6 The execution, delivery and performance of this Agreement and the
other Loan Documents do not require the consent or approval of any other person
or entity including, without limitation, any regulatory authority or
governmental body of the United States or any state thereof or any political
subdivision of the United States or any state thereof.
5.7 No event which has had or could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing.
5.8 No fact or condition exists that would (or would, with the passage
of time, the giving of notice, or both) constitute a material default under the
Senior Loan Documents.
5.9 (a) There are no actions, suits or proceedings at law or in
equity or by or before any governmental authority now pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
business, property or rights of the Borrower (i) which involve any Loan Document
or (ii) as to which there is a reasonable possibility of an adverse
determination and which, if adversely determined, is reasonably likely to
individually or in the aggregate, result in a Material Adverse Effect.
(b) The Borrower is not in violation of any law, rule or
regulation, or in default with respect to any judgment, writ, injunction or
decree of any governmental authority, where such violation or default is
reasonably likely to result in a Material Adverse Effect.
5.10 (a) The Borrower is not a party to any agreement or instrument
or subject to any corporate restriction that is reasonably likely to or has
resulted in a Material Adverse Effect.
(b) The Borrower is not in default in any manner under any
provision of any indenture or other agreement or instrument evidencing
indebtedness, or any other material agreement or instrument to which it is a
party or by which it or any of its properties or assets are or may be bound,
where such default is reasonably likely to result in a Material Adverse Effect.
5.11 No information, report, financial statement, exhibit or schedule
furnished by or on behalf of the Borrower to the Lender in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto contained, contains or will contain any material misstatement of fact or
omitted, omits or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are
or will be made, not materially misleading.
5.12. All issued and outstanding shares of Common Stock, Preferred
Stock or any other securities of the Borrower have been duly authorized and
validly issued and are fully paid
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and nonassessable. All outstanding shares of Common Stock, Preferred Stock and
any other securities were issued in full compliance with all Federal and state
securities laws. In addition:
(i) The authorized capital stock of the Borrower consists of
5,800,000 shares of Common Stock, no par value per share (the "Common
Stock"), of which 290,217 shares shall be issued and outstanding, and
4,335,000 shares of Preferred Stock, no par value per share, of which
1,000,000 shares shall have been designated as Series A Preferred
Stock, 1,185,000 shares shall have been designated as Series B
Preferred Stock, 900,000 shares shall have been designated as Series C
Preferred Stock and 1,250,000 shares shall have been designated as
Series D Preferred Stock. 790,000 shares of Series A Preferred Stock,
1,021,356 shares of Series B Preferred Stock, 853,631 shares of Series
C Preferred Stock and 1,196,570 shares of Series D Preferred Stock are
issued and outstanding. There are 135,615 shares of Series A Preferred
Stock reserved for issuance upon the exercise of outstanding warrants.
There are _____ shares of Common Stock reserved for issuance under the
Borrower's 1995 Stock Option Plan and 1997 Stock Option Plan, of which
97,161 shares have been issued. Except as set forth in Schedule 5.14
hereto, the Certificate of Incorporation, or as provided in this
Agreement, (i) no subscription, warrant, option, convertible security
or other right (contingent or otherwise) to purchase or acquire any
shares of capital stock of the Borrower is authorized or outstanding,
(ii) the Borrower has no obligation (contingent or otherwise) to issue
any subscription, warrant, option, convertible security or other such
right or to issue or distribute to holders of a share of its capital
stock any evidences of indebtedness or assets of the Borrower, and
(iii) the Borrower has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock
or any interest therein or to pay any dividend to make any other
distribution in respect thereof.
(ii) In accordance with the Borrower's Articles of
Incorporation, no shareholder of the Borrower has preemptive rights to
purchase new issuances of the Borrower's capital stock.
5.13 Borrower has filed and will file all tax returns, federal, state
and local, which it is required to file and has duly paid or fully reserved for
all taxes or installments thereof (including any interest or penalties) as and
when due, which have or may become due pursuant to such returns or pursuant to
any assessment received by Borrower for the three (3) years preceding the
Closing Date, if any (including any taxes being contested in good faith and by
appropriate proceedings).
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SECTION 6. INSURANCE
6.1 So long as there are any Secured Obligations outstanding, Borrower
shall cause to be carried and maintained commercial general liability insurance
against risks customarily insured against in Borrower's line of business. Such
risks shall include, without limitation, the risks of death, bodily injury and
property damage. So long as there are any Secured Obligations outstanding,
Borrower shall also cause to be carried and maintained insurance upon the
Collateral and Borrower's business, covering casualty, hazard and such other
property risks in amounts equal to the full replacement cost of the Collateral.
Borrower shall deliver to Lender lender's loss payable endorsements (Form BFU
438 or equivalent) naming Lender as loss payee and additional insured. Borrower
shall use commercially reasonable efforts to cause all policies evidencing such
insurance to provide for at least ten (10) days prior written notice by the
underwriter or insurance company to Lender in the event of cancellation or
expiration. Such policies shall be issued by such insurers and in such amounts
as are reasonably acceptable to Lender.
6.2 Borrower shall and does hereby indemnify and hold Lender, its
agents and shareholders harmless from and against any and all claims, costs,
expenses, damages and liabilities (including, without limitation, such claims,
costs, expenses, damages and liabilities based on liability in tort, including
without limitation, strict liability in tort), including reasonable attorneys'
fees, arising out of the disposition or utilization of the Collateral, other
than claims arising at or caused by Lender's gross negligence or willful
misconduct.
SECTION 7. COVENANTS OF BORROWER
Borrower covenants and agrees as follows at all times while any of the
Secured Obligations remain outstanding:
7.1 Borrower shall furnish to Lender the financial statements listed
hereinafter, each prepared in accordance with generally accepted accounting
principles consistently applied (the "Financial Statements"):
(a) as soon as practicable (and in any event within thirty
(30) days) after the end of each month, unaudited interim financial
statements as of the end of such month (prepared on a consolidated and
consolidating basis, if applicable), including balance sheet and
related statements of income and cash flows accompanied by a report
detailing any material contingencies (including the commencement of any
material litigation by or against Borrower) or any other occurrence
that could reasonably be expected to have a Material Adverse Effect,
all certified by Borrower's Chief Executive Officer or Chief Financial
Officer to be true and correct in all material respects;
(b) as soon as practicable (and in any event within one
hundred twenty (120) days) after the end of each fiscal year,
unqualified audited financial statements as of the end of such year
(prepared on a consolidated and consolidating basis, if applicable),
including balance sheet and related statements of income and cash
flows, and setting forth in comparative form the corresponding figures
for the preceding fiscal year, certified by a firm of independent
certified public accountants selected by Borrower and reasonably
acceptable to Lender, accompanied by any management report from such
accountants;
15
(c) promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or reports
which Borrower has made available to its shareholders and copies of any
regular, periodic and special reports or registration statements which
Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any
national securities exchange; and
(d) promptly, any additional information, financial or
otherwise (including, but not limited, to tax returns and names of
principal creditors) as Lender reasonably believes necessary to
evaluate Borrower's continuing ability to meet its financial
obligations.
7.2 Provided that not more than two such inspections or examinations
shall take place in any calendar year except upon the occurrence and
continuation of an Event of Default, Borrower shall permit any authorized
representative of Lender and its attorneys and accountants on reasonable notice
to inspect, examine and make copies and abstracts of the books of account and
records of Borrower at reasonable times during normal business hours. In
addition, such representative of Lender and its attorneys and accountants shall
have the right to meet with management and officers of the Borrower to discuss
such books of account and records.
7.3 Borrower will from time to time execute, deliver and file, alone or
with Lender, any financing statements, security agreements or other documents;
procure any instruments or documents as may reasonably be requested by Lender;
and take all further action that may be necessary, or that Lender may request,
to confirm, perfect, preserve and protect the security interests intended to be
granted hereby, and in addition, and for such purposes only, Borrower hereby
authorizes Lender to execute and deliver on behalf of Borrower and to file such
financing statements, security agreement and other documents without the
signature of Borrower either in Lender's name or in the name of Borrower as
agent and attorney-in-fact for Borrower after an Event of Default. The parties
agree that a carbon, photographic or other reproduction of this Agreement shall
be sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof.
7.4 Borrower shall protect and defend Borrower's title as well as the
interest of the Lender against all persons claiming any interest adverse to
Borrower or Lender other than Permitted Liens and shall at all times keep the
Collateral free and clear from any legal process, liens or encumbrances
whatsoever (except any placed thereon by Lender and other than Permitted Liens)
and shall give Lender immediate written notice thereof.
7.5 Without Lender's prior written consent, Borrower shall not (a)
grant any material extension of the time of payment of any of the Receivables,
(b) to any material extent, compromise, compound or settle the same for less
than the full amount thereof, (c) release, wholly or partly, any Person liable
for the payment thereof, or allow any credit or discount whatsoever thereon
other than adjustments granted in the ordinary course of business of Borrower.
7.6 Borrower shall maintain and protect its properties, assets and
facilities, including without limitation, its Equipment and Fixtures, in good
order and working repair and condition
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(taking into consideration ordinary wear and tear) and from time to time make
or cause to be made all necessary and proper repairs, renewals and
replacements thereto and shall competently manage and care for its property
in accordance with prudent industry practices.
7.7 Borrower shall not merge with and into any other entity; or sell or
convey all or substantially all of its assets or stock to any other person or
entity without notifying Lender a minimum of forty-five (45) days prior to the
closing date and requesting Lender's consent to the assignment of all of
Borrower's Secured Obligations hereunder to the successor entity in form and
substance reasonably satisfactory to Lender. In the event Lender does not
consent to such assignment the parties agree Borrower shall prepay the Loan in
accordance with Section 2.2 hereof provided that such consent by the Lender
shall not be required in any transaction in which the surviving entity has a
Xxxxx'x Bond rating of BA3 or better or a commercially acceptable equivalent
measure of creditworthiness as reasonably determined by Lender.
7.8 Borrower shall not, without the prior written consent of Lender,
such consent not to be unreasonably withheld, declare or pay any cash dividend
or make a distribution on any class of stock, other than pursuant to employee
repurchase plans upon an employee's death or termination of employment or
transfer, sell, lease, lend or in any other manner convey any equitable,
beneficial or legal interest in any material portion of the assets of Borrower
(except inventory sold in the normal course of business).
7.9 Upon the request of Lender, Borrower shall, during business hours,
make the Inventory and Equipment available to Lender for inspection at the place
where it is normally located and shall make Borrower's log and maintenance
records pertaining to the Inventory and Equipment available to Lender for
inspection.
7.10 Borrower covenants and agrees to pay when due, all taxes, fees or
other charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower, Lender or the
Collateral or upon Borrower's ownership, possession, use, operation or
disposition thereof or upon Borrower's rents, receipts or earnings arising
therefrom. Borrower shall file on or before the due date therefor all personal
property tax returns in respect of the Collateral. Notwithstanding the
foregoing, Borrower may contest, in good faith and by appropriate proceedings,
taxes for which Borrower maintains adequate reserves therefor.
7.11 Borrower shall not relocate any item of the Collateral (other than
sale of inventory in the ordinary course of business) except: if such relocation
shall be within the continental United States. If permitted to relocate
Collateral pursuant to the foregoing sentence, unless otherwise agreed in
writing by Lender, Borrower shall first (a) cause to be filed and/or delivered
to the Lender all Uniform Commercial Code financing statements, certificates or
other documents or instruments reasonably necessary to continue in effect the
perfected security interest of the Lender in the Collateral, and (b) have given
the Lender no less than fifteen (15) days written notice of such relocation.
7.12 In addition to any other rights granted pursuant to Section 8 of
this Agreement, Lender shall have the right to purchase Borrower's securities of
up to Two Hundred Fifty Thousand Dollars ($250,000.00) upon the occurrence of
the Next Event (other than a Merger Event) under the same terms and conditions
as the other investors in the Next Event.
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SECTION 8. PURCHASE OPTION
8.1 In addition to the right granted pursuant to Section 7.12 hereof,
Lender shall have the right to purchase shares of Borrower's Preferred Stock
with an aggregate value of up to fifty percent (50%) of the Maximum Loan Amount
(subject to increase as provided in Section 8.2) at any time, at Lender's sole
and absolute discretion (the "Purchase Option"). The Purchase Option shall be
exercisable at a purchase price per share equal to $10.50 per share (the
"Purchase Price"). The number and purchase price of such shares are subject to
adjustment as provided in this Section 8.
The Purchase Option will terminate upon the later to occur of
(i) closing of an Initial Public Offering or Merger Event or (ii) 45 days
after notice from Borrower of Borrower's intent to close an Initial Public
Offering or Merger Event (the "Termination Date"), subject to the terms set
forth in Section 8.9 hereof.
8.2 If the Borrower has not repaid the outstanding principal amount
under a Note in its entirety by the Maturity Date (as defined in the applicable
Note(s)), then for each additional month, or portion thereof, thereafter that
the outstanding principal is not paid, Lender shall have the right to purchase
from the Borrower, at the Purchase Price (adjusted, as set forth and defined in
Section 8.3 herein), an additional amount of Preferred Stock with a value equal
to the product of (x) the outstanding principal amount which is due but unpaid
and (y) one percent (1%).
8.3 The Purchase Price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) If the Borrower at any time shall, by combination,
reclassification, exchange or subdivision of the securities as to which purchase
rights under this Purchase Option exist into the same or a different number of
securities of any other class or classes, this Purchase Option shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities which
were subject to the purchase rights under this Purchase Option immediately prior
to such classification, exchange, subdivision or other change.
(b) If the Borrower at any time shall combine or subdivide its
Preferred Stock, the Purchase Price shall be proportionately decreased in the
case of a subdivision, or proportionately increased in the case of a
combination.
(c) Additional antidilution rights applicable to the Preferred
Stock purchasable hereunder are as set forth in the Borrower's Articles of
Incorporation, as amended through the date of this Agreement, a true and
complete copy of which is attached hereto as EXHIBIT D (the "Charter"). The
Borrower shall promptly provide the Lender with any restatement, amendment,
modification or waiver of the Charter. The Borrower shall provide Lender with
prior written notice of any issuance of its stock or other equity security to
occur after the date of this Agreement, which notice shall include (i) the price
at which such stock or security is to be sold, (ii) the number of shares to be
issued, and (iii) such other information as necessary for Lender to determine if
a dilutive event has occurred.
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(d) If prior to the termination of exercise of the Purchase
Option: (i) the Borrower shall declare any dividend or distribution upon its
stock, whether in cash, property, stock or other securities; (ii) the Borrower
shall offer for subscription prorata to the holders of any class of its
preferred or other convertible stock any additional shares of stock of any class
or other rights; (iii) there shall be any Merger Event; (iv) there shall be an
Initial Public Offering; or (v) there shall be any voluntary dissolution,
liquidation or winding up of the Borrower; then, in connection with each such
event, the Borrower shall send to the Lender: (A) at least forty-five (45) days'
prior written notice of the date on which the books of the Borrower shall close
or a record shall be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall be entitled
thereto) or for determining rights to vote in respect of such Merger Event,
dissolution, liquidation or winding up; (B) in the case of any such dissolution,
liquidation or winding up, at least forty-five (45) days' prior written notice
of the date when the same shall take place (and specifying the date on which the
holders of Preferred Stock shall be entitled to exchange their Preferred Stock
for securities or other property deliverable upon dissolution, liquidation or
winding up); and (C) in the case of a Initial Public Offering or Merger Event,
the Borrower shall give the Lender at least forty-five (45) days written notice
from the date of Board of Director's acceptance thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Purchase Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Lender, at the address as shown on the books of the Lender.
(e) Failure to timely provide such notice required by
subsection (e) above shall entitle Lender to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Lender. The notice period shall begin on the
date Lender actually receives a written notice containing all the information
specified above.
8.5 The Purchase Option is exercisable by the Lender, in whole or in
part, at any time, or from time to time, prior to the Termination Date by
tendering to the Borrower at its principal office a notice of exercise in the
form attached hereto as EXHIBIT E (the "Notice of Purchase"), duly completed and
executed together with payment in an amount equal to the Purchase Price for that
portion of the Purchase Option so exercised, in cash or by bank cashier's or
certified check; provided that Lender may satisfy all or a portion of the
Purchase Price by tender of one or more Note(s), the outstanding principal and
interest of which shall be credited against the Purchase Price, with the
balance, if any, of the Purchase Price payable in cash or by check as provided
above. In such event, the Note(s) so tendered will be deemed satisfied in full
and will be cancelled by the Borrower and the Borrower will have no further
obligation to the Lender under such Note(s).
Promptly upon receipt of the Notice of Purchase and the payment of the
Purchase Price in accordance with the terms set forth below, Borrower shall
execute the acknowledgment of exercise in the form attached hereto as EXHIBIT F
(the "Acknowledgment of Purchase") indicating the aggregate value which remain
subject to future purchases, if any. Subject to Lenders right of recission of
its election pursuant to Section 8.9, no later than twenty-one (21) days
thereafter, the Borrower shall issue to the Lender a certificate for the number
of shares of Preferred Stock purchased.
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8.6 (a) During the term of this Purchase Option, the Borrower will
at all times have authorized and reserved a sufficient number of shares of its
Preferred Stock to provide for the exercise of the rights to purchase Preferred
Stock as provided for herein.
(b) If any shares of Preferred Stock required to be reserved
hereunder require registration with or approval of any governmental authority
under any Federal or State law (other than any registration under the Securities
Act of 1933, as amended ("1933 Act"), as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such purchase), or listing on any domestic securities
exchange, before such shares may be issued upon purchase, the Borrower will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
8.7 No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of the Purchase Option, but in lieu of such
fractional shares the Borrower shall make a cash payment therefor upon the basis
of the Purchase Price then in effect.
8.8 This Purchase Option does not entitle the Lender to any voting
rights or other rights as a shareholder of the Borrower prior to the exercise of
the Purchase Option.
8.9 In the event Lender has exercised the Purchase Option based upon
receipt of notice from Borrower of a Board of Directors; accepted Initial Public
Offering or Merger Event and if such transaction is not consummated, the
Borrower shall promptly notify the Lender that such proposed transaction has
been terminated, and the Lender may rescind any exercise of its Purchase Option
promptly after such notice of termination of the proposed transaction.
SECTION 9. DEFAULT
The occurrence of any one or more of the following events (herein
called "Events of Default") shall constitute a default hereunder and under the
Note(s) and other Loan Documents:
9.1 Borrower defaults in the payment of any principal, interest or
other Secured Obligation involving the payment of money under this Agreement,
the Note(s) or any of the other Loan Documents, and such default continues for
more than five (5) days after the due date and written notice thereof; or
9.2 Borrower defaults in the performance of any other covenant or
Secured Obligation of Borrower hereunder or under the Note(s) or any of the
other Loan Documents, and such default continues for more than twenty (20) days
after Lender has given notice of such default to Borrower.
9.3 Any representation or warranty made herein by Borrower shall prove
to have been false or misleading in any material respect as of the date made; or
9.4 Borrower shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition in bankruptcy, or shall file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
20
present or future statute, law or regulation pertinent to such circumstances, or
shall seek or consent to or acquiesce in the appointment of any trustee,
receiver, or liquidator of Borrower or of all or any substantial part (33-1/3%
or more) of the properties of Borrower; or Borrower or its directors or majority
shareholders shall take any action initiating the dissolution or liquidation of
Borrower; or
9.5 Sixty (60) days shall have expired after the commencement of an
action by or against Borrower seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, without such action being dismissed or all
orders or proceedings thereunder affecting the operations or the business of
Borrower being stayed; or a stay of any such order or proceedings shall
thereafter be set aside and the action setting it aside shall not be timely
appealed; or Borrower shall file any answer admitting or not contesting the
material allegations of a petition filed against Borrower in any such
proceedings; or the court in which such proceedings are pending shall enter a
decree or order granting the relief sought in any such proceedings; or
9.6 Sixty (60) days shall have expired after the appointment, without
the consent or acquiescence of Borrower, of any trustee, receiver or liquidator
of Borrower or of all or any substantial part of the properties of Borrower
without such appointment being vacated; or
9.7 The default by Borrower under any Excluded Agreement(s), any other
promissory note or agreement for borrowed money, or any other agreement between
Borrower and Lender; or
9.8 The occurrence of any default under any lease or other agreement or
obligation of Borrower involving an amount in excess of $200,000.00 or having a
Material Adverse Effect; or the entry of any judgment against Borrower involving
an award in excess of $200,000.00 that would have a Material Adverse Effect,
that has not been bonded or stayed on appeal within thirty (30) days; or
9.9 The occurrence and continuance of any material default under the
Senior Loan Documents.
SECTION 10. REMEDIES
Upon the occurrence and continuance of any one or more Events of
Default, Lender, at its option, may declare the Note and all of the other
Secured Obligations to be accelerated and immediately due and payable (PROVIDED,
that upon the occurrence of an Event of Default of the type described in
Sections 9.4 or 9.5, the Note(s) and all of the other Secured Obligations shall
automatically be accelerated and made due and payable without any further act),
whereupon the unpaid principal of and accrued interest on such Note(s) and all
other outstanding Secured Obligations shall become immediately due and payable,
and shall thereafter bear interest at the Default Rate set forth in, and
calculated according to, Section 2.3 (c) of this Agreement. Lender may Purchase
all rights and remedies with respect to the Collateral under the Loan Documents
or otherwise available to it under applicable law, including the right to
release, hold or otherwise dispose of all or any part of the Collateral and the
right to occupy, utilize, process and commingle the Collateral.
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Upon the happening and during the continuance of any Event of Default,
Lender may then, or at any time thereafter and from time to time, apply,
collect, sell in one or more sales, lease or otherwise dispose of, any or all of
the Collateral, in its then condition or following any commercially reasonable
preparation or processing, in such order as Lender may elect, and any such sale
may be made either at public or private sale at its place of business or
elsewhere. Borrower agrees that any such public or private sale may occur upon
five (5) calendar days' prior written notice to Borrower. Lender may require
Borrower to assemble the Collateral and make it available to Lender at a place
designated by Lender which is reasonably convenient to Lender and Borrower. The
proceeds of any sale, disposition or other realization upon all or any part of
the Collateral shall be distributed by Lender in the following order of
priorities:
First, to Lender in an amount sufficient to pay in full Lender's costs
and professionals' and advisors' fees and expenses;
Second, to Lender in an amount equal to the then unpaid amount of the
Secured Obligations in such order and priority as Lender may choose in
its sole discretion; and
Finally, upon payment in full of all of the Secured Obligations, to
Borrower or its representatives or as a court of competent jurisdiction
may direct.
Lender shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it complies with the
obligations of a secured party under Section 9-207 of the UCC.
Lender's rights and remedies hereunder are subject to the terms of the
Subordination Agreement.
SECTION 11. MISCELLANEOUS
11.1 CONTINUATION OF SECURITY INTEREST. This is a continuing Agreement
and the grant of a security interest hereunder shall remain in full force and
effect and all the rights, powers and remedies of Lender hereunder shall
continue to exist until the Secured Obligations are paid in full as the same
become due and payable and until Lender has executed a written termination
statement (which Lender shall execute within a reasonable time and not to exceed
30 days after full payment of the Secured Obligations hereunder), reassigning to
Borrower, without recourse, the Collateral and all rights conveyed hereby and
returning possession of the Collateral to Borrower. The rights, powers and
remedies of Lender hereunder shall be in addition to all rights, powers and
remedies given by statute or rule of law and are cumulative. The Purchase of any
one or more of the rights, powers and remedies provided herein shall not be
construed as a waiver of or election of remedies with respect to any other
rights, powers and remedies of Lender.
11.2 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective only to the extent
and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
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11.3 NOTICE. Except as otherwise provided herein, all notices and
service of process required, contemplated, or permitted hereunder or with
respect to the subject matter hereof shall be in writing, and shall be deemed to
have been validly served, given or delivered upon the earlier of: (i) the first
business day after transmission by facsimile or hand delivery or deposit with an
overnight express service or overnight mail delivery service; or (ii) the third
calendar day after deposit in the United States mails, with proper first class
postage prepaid, and shall be addressed to the party to be notified as follows:
(a) IF TO LENDER:
COMDISCO VENTURES
Attention: Xxxxx X. Xxxx
0000 Xxxx Xxxx Xxxx
Xxxx. 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
WITH A COPY TO:
COMDISCO, INC./COMDISCO VENTURES
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
COMDISCO, INC.
Legal Department
Attention: General Counsel
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
(b) IF TO BORROWER:
ADESSO SPECIALTY SERVICS ORGANIZATION, INC.
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
or to such other address as each party may designate for itself by like notice.
11.4 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Note(s), and the
other Loan Documents constitute the entire agreement and understanding of the
parties hereto in respect of the subject matter hereof and thereof, and
supersede and replace in their entirety any prior proposals, term sheets,
letters, negotiations or other documents or agreements, whether written or oral,
with respect to the subject matter hereof or thereof (including, without
limitation, Lender's proposal letter dated May 18, 1999, all of which are merged
herein and therein. None of the terms of this Agreement, the Note(s) or any of
the other Loan Documents may be amended except by an instrument executed by each
of the parties hereto.
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11.5 HEADINGS. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
11.6 NO WAIVER. The powers conferred upon Lender by this Agreement are
solely to protect its interest in the Collateral and shall not impose any duty
upon Lender to exercise any such powers. No omission, or delay, by Lender at any
time to enforce any right or remedy reserved to it, or to require performance of
any of the terms, covenants or provisions hereof by Borrower at any time
designated, shall be a waiver of any such right or remedy to which Lender is
entitled, nor shall it in any way affect the right of Lender to enforce such
provisions thereafter.
11.7 SURVIVAL. All agreements, representations and warranties contained
in this Agreement, the Note(s) and the other Loan Documents or in any document
delivered pursuant hereto or thereto shall be for the benefit of Lender and
shall survive the execution and delivery of this Agreement and the expiration or
other termination of this Agreement.
11.8 SUCCESSOR AND ASSIGNS. The provisions of this Agreement and the
other Loan Documents shall inure to the benefit of and be binding on Borrower
and its permitted assigns (if any). Borrower shall not assign its obligations
under this Agreement, the Note(s) or any of the other Loan Documents without
Lender's express written consent, and any such attempted assignment shall be
void and of no effect. Lender may assign, transfer, or endorse its rights
hereunder and under the other Loan Documents without prior notice to Borrower,
and all of such rights shall inure to the benefit of Lender's successors and
assigns.
11.9 FURTHER INDEMNIFICATION. Borrower agrees to pay, and to save
Lender harmless from, any and all liabilities with respect to, or resulting from
any delay in paying, any and all excise, sales or other similar taxes which may
be payable or determined to be payable with respect to any of the Collateral or
in connection with any of the transactions contemplated by this Agreement.
11.10 GOVERNING LAW. This Agreement, the Note(s) and the other Loan
Documents have been negotiated and delivered to Lender in the State of Illinois,
and shall not become effective until accepted by Lender in the State of
Illinois. Payment to Lender by Borrower of the Secured Obligations is due in the
State of Illinois. This Agreement, the Note(s) and the other Loan Documents
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Illinois, excluding conflict of laws principles that would cause
the application of laws of any other jurisdiction.
11.11 CONSENT TO JURISDICTION AND VENUE. All judicial proceedings
arising in or under or related to this Agreement, the Note(s) or any of the
other Loan Documents may be brought in any state or federal court of competent
jurisdiction located in the State of Illinois. By execution and delivery of this
Agreement, each party hereto generally and unconditionally: (a) consents to
personal jurisdiction in Xxxx County, State of Illinois; (b) waives any
objection as to jurisdiction or venue in Xxxx County, State of Illinois; (c)
agrees not to assert any defense based on lack of jurisdiction or venue in the
aforesaid courts; and (d) irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement, the Note(s) or the other
Loan Documents. Service of process on any party hereto in any action arising out
of or relating to this agreement shall be effective if given in accordance with
the requirements for
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notice set forth in Section 11.3, above and shall be deemed effective and
received as set forth in Section 11.3, above. Nothing herein shall affect the
right to serve process in any other manner permitted by law or shall limit the
right of either party to bring proceedings in the courts of any other
jurisdiction.
11.12 MUTUAL WAIVER OF JURY TRIAL. Because disputes arising in
connection with complex financial transactions are most quickly and economically
resolved by an experienced and expert person and the parties wish applicable
state and federal laws to apply (rather than arbitration rules), the parties
desire that their disputes be resolved by a judge applying such applicable laws.
EACH OF BORROWER AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL
BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY
CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY BORROWER AGAINST
LENDER OR ITS ASSIGNEE AND/OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER. This
waiver extends to all such Claims, including, without limitation, Claims which
involve persons or entities other than Borrower and Lender; Claims which arise
out of or are in any way connected to the relationship between Borrower and
Lender; and any Claims for damages, breach of contract arising out of this
Agreement, any other Loan Document or any of the Excluded Agreements, specific
performance, or any equitable or legal relief of any kind.
11.13 CONFIDENTIALITY. Lender acknowledges that certain items of
Collateral, including, but not limited to trade secrets, source codes, customer
lists and certain other items of Intellectual Property, and any Financial
Statements provided pursuant to Section 7 hereof, constitute proprietary and
confidential information of the Borrower (the "Confidential Information").
Accordingly, Lender agrees that any Confidential Information it may obtain in
the course of acquiring, perfecting or foreclosing on the Collateral or
otherwise provided under this Agreement, provided such Confidential Information
is marked as confidential by Borrower at the time of disclosure or is oral
information which is confirmed in writing and marked as confidential within
thirty (30) days following disclosure, shall be received in the strictest
confidence and will not be disclosed to any other person or entity in any manner
whatsoever, in whole or in part, without the prior written consent of the
Borrower, unless and until Lender has acquired indefeasible title thereto.
11.14 COUNTERPARTS. This Agreement and any amendments, waivers,
consents or supplements hereto may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.
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IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and delivered
this Agreement as of the day and year first above written.
BORROWER: ADESSO SPECIALTY SERVICES ORGANIZATION, INC.
Signature: /s/ Xxxxx Xxxxxxx
-----------------------------
Print Name: Xxxxx Xxxxxxx
-----------------------------
Title: President/CEO
-----------------------------
ACCEPTED IN ROSEMONT, ILLINOIS:
LENDER: COMDISCO, INC.
Signature: /s/ Xxxxx Xxxx
------------------------------
Print Name: Xxxxx Xxxx
------------------------------
Title: President
Comdisco Ventures Division
------------------------------
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Exhibit A
PROMISSORY NOTE
27
