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EXHIBIT 10.9
SUBORDINATED LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of June 2, 1999, is entered
into by and between E.piphany Inc., a Delaware corporation, with its chief
executive office and principal place of business located at 0000 Xxxx Xxxx, Xxxx
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 Ten Million Dollars
($10,000,000) (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 Five Million Dollars 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
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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(s) 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(s).
1.5. "ADVANCE REQUEST" means the request by Borrower for an Advance
under the Loan(s), 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) the Master Lease Agreement dated
as of June 2, 1999 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).
1.15 "FACILITY FEE" means one percent (1.0%) of the Maximum Loan Amount
of each Part I and Part II, respectively and due to Lender at the Closing Date
and Advance Date respectively. The transaction and due diligence fee of $10,000
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 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
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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,
Licenses, 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,
records and goodwill.
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 or restated, provided, that the Loan
Documents shall not include any of the Excluded Agreements.
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1.25 "MATERIAL ADVERSE EFFECT" means a material adverse effect upon:
(i) the business, operations, properties, prospects, assets or conditions
(financial or otherwise) of Borrower; or (ii) the ability of Borrower to
perform, or of Lender to enforce, the Secured Obligations other than limitations
on Lender's ability to enforce the Secured Obligations under any Subordination
Agreement.
1.26 "MATURITY DATE" means the date forty two (42) months from the
Advance Date of each installment of the Loan(s).
1.27 "MAXIMUM LOAN AMOUNT" means Five Million Dollars and No/100
($5,000,000) as to Part 1 and Five Million Dollars and No/100 ($5,000,000) as to
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 (other than with
a subsidiary of Borrower) whether or not the Borrower is the surviving
corporation, 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, specifically
excluding the financing with Integral Capital.
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) any Liens existing as of the date hereof as identified on
Schedule ____;
(iv) Liens for taxes, fees, assessments or other government charges
or levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its books in accordance with GAAP;
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(v) purchase money Liens (i) on Equipment acquired or held by Borrower
incurred for financing the acquisition of the Equipment, or (ii)
existing on Equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the Equipment;
(vi) leases or subleases and licenses or sublicenses granted in the
ordinary course of Borrower's business;
(vii) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 9.8;
(viii) Liens on assets (including the proceeds thereof and accessions
thereto) that existed at the time such assets were acquired by
Borrower; provided such Liens are not granted in contemplation of or in
connection with the acquisition of such asset by Borrower;
(ix) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payments of customs duties in connection with
the importation of goods;
(xi) Liens on insurance proceeds in favor of insurance companies
granted solely as security for financed premiums;
(xii) deposits under worker's compensation, unemployment insurance,
social security and other similar laws, or to secure the performance of
bids, tenders or contracts (other than for the repayment of borrowed
money) or to secure indemnity, performance or other similar bonds for
the performance of bids, tenders or contracts (other than for the
repayment of borrowed money) or to secure statutory obligations (other
than liens arising under ERISA or Environmental Liens) or surety or
appeal bonds, or to secure indemnity, performance or other similar
bonds in the ordinary course of business;
(xiii) Liens arising by operation of law such as artisans', mechanics',
materialman's, carriers', warehousemen's liens incurred in the ordinary
course of business.
(xiv) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described
in clause (ii) and (v) 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.
1.33 "PREFERRED STOCK" means the Borrower's Series C' 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
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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 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 a bank, insurance company, pension fund,
or other institutional lender to be determined and identified to Lender in
accordance with the 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
Five Million Dollars ($5,000,000) outstanding at any one time.
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
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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.
1.41 "SUBORDINATION AGREEMENT" means the Subordination Agreement of
even date herewith, 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 LOAN
2.1 Lender agrees to lend to Borrower an amount not to exceed Ten
Million and No/100 Dollars ($10,000,000) in the aggregate available in two
installments of Five Million and No/100 Dollars each ($5,000,000) as Parts I and
II upon the terms and subject to the conditions contained in this Agreement.
Part I shall be available immediately and Part II shall be made available upon
request of Borrower and subject to review, approval and due diligence by Lender.
2.3 The Loan(s) shall be available in minimum Advances of One Million
Dollars ($1,000,000.00). Each Advance made by Lender to Borrower shall be
evidenced by a Note(s) in the original principal amount of such Advance. The
principal balance of each Note(s) shall bear interest thereon precomputed at the
rate of ten percent (10%) per annum, and each such Note(s) shall be due and
payable in twenty four (24) 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(s) 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 Loan(s), 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 Advance Request, Lender shall verify
the information contained in the Advance Request and if Lender determines to
fund such Advance it shall deliver a Note(s) dated the Advance Date
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evidencing such Advance to Borrower for signature. Upon receipt of the signed
Note(s), 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(s), 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(s) 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, conveys, mortgages, pledges,
hypothecates and transfers to Lender for security purposes only, and hereby
grants to Lender a security interest in, all of Borrower's right, title
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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, the security interest granted herein shall not
extend to and the term "Collateral" shall not include any property, rights or
licenses to the extent the granting of a security interest therein (i) would be
contrary to applicable law or (ii) is prohibited by or would constitute a
default under any agreement or document governing such property, rights or
licenses (but only to the extent such prohibition is enforceable under
applicable law).
SECTION 4. CONDITIONS PRECEDENT TO LOAN(S)
The obligation of Lender to fund the Loan(s) on each Advance Date shall
be subject to the satisfaction by Borrower, or waiver by Lender, of the
following conditions:
4.1 (a) Part I: The Advance Date for any installment shall occur on
or before February 19,2000.
(b) Part II: The Advance Date for any installment shall occur on
or before February 19, 2000 and shall be subject to (i) Borrower's
formal written request; and (ii) satisfactory completion of Lender's
due diligence and approval process.
4.2 Borrower, on or prior to the Closing Date, shall have delivered
to Lender the following:
(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(s) Documents;
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(c) certified copies of the 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 and similar certificates from all other jurisdictions in
which it does business and where the failure to be qualified could
reasonably be expected to have a Material Adverse Effect;
(e) payment of the Facility Fee for Part I;
(f) an executed Master Lease Agreement and associated Equipment
Schedules with Lender as lessor, in the minimum amount of One Million
Two Hundred Fifty Thousand Dollars ($1,250,000.00); and
(g) such other documents as Lender may reasonably request.
4.2 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(s) 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 compliance with all the terms and
provisions set forth herein and in each other Loan(s) 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.
4.3 PERFECTION OF SECURITY INTERESTS. Borrower shall have taken or
caused to be taken such actions requested by Lender to grant Lender a 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 or desirable to
perfect the security interest of Lender in such Collateral.
4.4 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
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both) constitute an Event of Default under this Agreement or any of the Loan(s)
Documents and 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" as
defined under the Senior Loan Documents between Borrower and Senior Creditor.
4.5 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.
4.6 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) February 19, 2000 or (ii) the occurrence and continuance 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, grant and convey
to the Lender, a perfected 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 Delaware, 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 could reasonably be expected to 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, 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
(i) violate any provisions of Borrower's Certificate of Incorporation, bylaws or
any agreement, law, regulation, order, injunction, judgment, decree or writ to
which the Borrower is subject, or (ii) violate any provisions of any contract to
which Borrower is subject to the degree that such violation could reasonably be
expected to have material adverse effect or result in the creation or imposition
of
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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 an "event of default"
as defined 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, could, individually or in the
aggregate, reasonably be expected to cause 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 could
reasonably be expected to cause 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 has resulted or could reasonably be
expected to cause 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 could 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 misleading (it being recognized by Lender that any
projections and forecasts provided by Borrower are not to be viewed as facts and
that actual results during the period or periods covered thereby may differ from
the projected or forecasted results).
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:
(a) The authorized capital stock of the Borrower consists of
50,000,000 shares of Common Stock, par value $.0001 per share (the
"Common Stock"), of which 17,825,921 shares shall be issued and
outstanding, and 23,530,724 shares of Preferred Xxxxx, x.0000 par value
per share, of which 6,500,000 shares shall have been designated as
Series A Preferred Stock, 6,607,645 shares shall have been designated
as Series B Preferred Stock, 8,923,079 shares shall have been
designated as Series C, Preferred Stock and 1,500,000 shares shall have
been designated Series C' Preferred Stock. 6,455,752 shares of Series A
Preferred Stock, 6,457,645 shares of Series B Preferred Stock,
8,331,570 shares of Series C Preferred Stock and no shares of Series C'
Preferred Stock are issued and outstanding. All of the issued and
outstanding shares of Preferred Stock have been duly authorized and
validly issued and are fully paid and nonassessable. There are
10,600,000 shares of Common Stock reserved for issuance under the
Borrower's 1997 Stock Plan, of which 3,768,008 shares have been issued
upon the exercise of options, 4,747,405 shares are subject to
outstanding options and 2,084,587 shares remain available for issuance.
Except as set forth in this Agreement or in the schedule of exceptions,
(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. All of the issued and outstanding securities of the
Borrower have been offered, issued and sold by the Borrower in
compliance with applicable federal and state securities laws.
(b) In accordance with the Borrower's Certificate 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 thirty (30) 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;
(b) as soon as practicable (and in any event within one hundred
twenty (120) days) after the end of each fiscal year, 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;
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(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 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 be reasonably requested
by Lender; and take all further action that may be reasonably necessary or
desirable, or that Lender may reasonably 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. 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 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 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, except to the extent that such compromise or
settlement arises from a good faith dispute between the parties and is resolved
pursuant to the Borrower's customary business practices, (c) release, wholly or
partly, any Person liable for the payment thereof, or allow any credit or
discount whatsoever thereon other than trade discounts granted in the ordinary
course of business of Borrower and except to the extent that such release,
credit or discount arises from a good faith dispute between the parties and is
resolved pursuant to the Borrower's customary business practices.
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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 (taking into consideration ordinary wear
and tear and except if the Borrower determines in its reasonable business
judgment that it is in the best interest of the Borrower not to do so) 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 satisfactory to Lender, provided that such consent by the Lender shall
not be required in any transaction in which the acquiring entity has a Xxxxx'x
Bond Rating of BA3 or better or a commercially acceptable equivalent measure of
creditworthiness as reasonably determined by Lender. In the event Lender does
not consent to such assignment the parties agree Borrower shall prepay the
Loan(s) in accordance with Section 2.5 hereof.
7.8 Borrower shall not, without the prior written consent of Lender,
such consent not to be unreasonably withheld, (i) declare or pay any cash
dividend or make a distribution on any class of stock, other than (a) the
repurchase of its capital stock from directors, officers, employees and/or
consultants upon exercise of its right of repurchase upon termination of
employment or services to Borrower, (b) conversion of any of its convertible
securities into other securities pursuant to the terms of such convertible
securities or otherwise in exchange therefor, (c) repurchase of its capital
stock from the proceeds of the issuance of capital stock of the Borrower,
provided that such repurchases are effectuated immediately upon the consummation
of such transactions, or (ii) 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)
other than (a) transfers of non-exclusive licenses and similar arrangements for
the use of the property of Borrower, (b) transfers of worn-out or obsolete
Equipment or Equipment financed by other vendors, (c) joint ventures or
strategic partnerships consisting of licensing of technology, the development of
technology or the providing of technical support; (d) investments (including
debt obligations) received in connection with the bankruptcy or reorganization
of customers or suppliers and in settlement of delinquent obligations of, and
other disputes with, customers or suppliers arising in the ordinary course of
business; (e) travel advances, employee relocation loans and other employee
loans and advances in the ordinary course of business; (f) loans to employees,
officers or directors relating to the purchase of equity securities of the
Borrower; (g) other loans to officers and employees of the Borrower in an
aggregate amount not in excess of $100,000 outstanding at any time; or (i) other
transfers which in the aggregate do not exceed $100,000 in any fiscal year;
7.9 Upon the prior 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
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Equipment available to Lender for inspection. Borrower shall take all action
necessary to maintain such logs and maintenance records in a correct and
complete fashion.
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, or the
Collateral arising from or upon Borrower's ownership, possession, use, operation
or disposition thereof or upon Borrower's rents, receipts or earnings arising
therefrom except to the extent that such non-payment could not reasonably be
expected to have a Material Adverse Effect and for which Borrower maintains
adequate reserves in accordance with GAAP and provided further that Borrower
shall not be responsible for any taxes, fees or other charges arising from the
income of Lender. 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 and "mobile goods" as
such term is defined in the Illinois Commercial Code.) unless: such relocation
shall be within the continental United States. (ii) 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 necessary
to continue in effect the perfected security interest of the Lender in the
Collateral, and (iii) have given the Lender no less than thirty (30) days prior
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 shares of Borrower's
securities having a minimum value of One Hundred Thousand and No/100 Dollars
($100,000.00) upon the occurrence of the Next Event (other than a Merger Event),
upon the same terms and conditions as the other investors in the Next Event. If
such Next Event is an Initial Public Offering, Borrower shall instruct the
managing underwriters of its Initial Public Offering to give the Lender the
opportunity to purchase at least $100,000 worth of shares of common stock to be
sold in the offering (based on the "price to public" of such shares as shown on
the cover page of the final prospectus for the offering) through the directed
share program for the offering.
SECTION 8. PURCHASE OPTION
8.1 (a) In addition 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 forty-five percent (45%) of Part I of the
Maximum Loan Amount and upon Lender's firm commitment to advance Part II of the
Maximum Loan Amount, Lender shall have the right to purchase shares of
Borrower's Preferred Stock with an aggregate value of up to forty-five percent
(45%) of such Maximum Loan Amount with respect to Part II (subject to increase
as provided in Section 8.2) at any time prior to the termination of such right
pursuant to Section 8.1(c) hereof, at Lender's sole and absolute discretion (the
"Purchase Option"). The Purchase Option shall be exercisable by Lender at a
purchase price per share equal to $3.20 a per share price representing a fully
diluted valuation of $150,000,000 as of the date of this Agreement ("Purchase
Price").
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(b) In the event the Borrower completes a private equity
financing of at least $5,000,000 (excluding the Integral financing) on or after
August 11, 1999, and prior to a Merger Event or Initial Public Offering, then
upon request of the Borrower, Lender shall convert up to forty-five percent
(45%) of the outstanding principal balance of each Part I and/or Part II, as
applicable. The Purchase Price in this event shall be equal to the lesser of (i)
$3.20 or (ii) a price per share equal to 70% of the pre-money diluted valuation
of the Borrower at the time of such private equity financing. The number and
purchase price of such shares are subject to adjustment as provided in this
Section 8.
(c) The Purchase Option will terminate upon (i) the date
forty-five (45) days from receipt by Lender of notice from Borrower of an
Initial Public Offering, or (ii) twenty (20) days from receipt by Lender of
notice from Borrower of a Merger Event, 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(s) 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) If the Borrower at any time shall pay a dividend payable in,
or make any other distribution (except any distribution specifically provided
for in the foregoing subsections (a) or (b)) of the Borrower's stock, then the
Purchase Price shall be adjusted, from and after the record date of such
dividend or distribution, to that price determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction (i) the
numerator of which shall be the total number of all shares of the Borrower's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Borrower's stock outstanding immediately after such dividend or distribution.
The Lender shall thereafter be entitled to purchase, at the Purchase Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share)
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obtained by multiplying the Purchase Price in effect immediately prior to such
adjustment by the number of shares of Preferred Stock issuable upon the exercise
hereof immediately prior to such adjustment and dividing the product thereof by
the Purchase Price resulting from such adjustment.
(d) Additional antidilution rights applicable to the Preferred
Stock purchasable hereunder are as set forth in the Borrower's Certificate of
Incorporation, as amended through the date of this Agreement, a true and
complete copy of which is attached hereto as Exhibit C (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. Notwithstanding any provision of this Section 8
to the contrary, no adjustment to the Purchase Price shall be made pursuant to
any provision of this Section 8 to the extent a corresponding adjustment is made
to the Conversion Price of the Preferred Stock pursuant to the Borrower's
Charter.
(e) 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 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 (i) Initial Public Offering, the Borrower
shall give the Lender at least forty-five (45) days prior written notice or (ii)
Merger Event, the Borrower shall give the Lender at least twenty (20) days prior
written notice.
Each such written notice shall set forth, in reasonable detail and only
as appropriate, (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.
(f) 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
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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 (i) forty-five (45) days after
receipt of notice from Borrower of a Initial Public Offering, or (ii) twenty
(20) days after receipt of notice from Borrower of a Merger Event. Lender may
exercise its Purchase Option by tendering to the Borrower at its principal
office a notice of exercise in the form attached hereto as Exhibit D (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 by bank cashier's or certified check or wire transfer; 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 E
(the "Acknowledgment of Purchase") indicating the number of shares which remain
subject to future purchases, if any. Subject to Lender's right of recission of
its election pursuant to Section 8.9, no later than thirty (30) days thereafter,
the Borrower shall issue to the Lender a certificate for the number of shares of
Preferred Stock purchased.
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 Initial Public Offering or Merger Event and
such transaction is not consummated, the Borrower shall promptly notify the
Lender that such proposed transaction
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has been terminated, and the Lender may rescind any exercise of its Purchase
Option promptly after such notice of termination of the proposed transaction.
8.10 In the event the Borrower files a registration statement
covering the sale of its securities (other than on Form S-4 or Form S-8 or any
successor forms), and if requested by the Borrower or the underwriters managing
an underwritten offering of the securities, the Lender will not (i) offer,
pledge, sell, contract to sell, grant any option, contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to purchase,
or otherwise transfer or dispose of, directly or indirectly, any shares of the
Preferred Stock (or Common Stock, as applicable) or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Preferred Stock (or Common Stock as
applicable), whether or not any such transaction described in clause (i) or (ii)
above is to be settled by delivery of such Preferred Stock (or Common Stock, as
applicable) in cash or otherwise, without prior written consent of the Borrower
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Borrower or such managing underwriters.
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 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 when 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 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
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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 An Event of Default (as such term is defined in the applicable
document) 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 (not to include the Senior Loan Documents) 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 could reasonably be expected to have a Material Adverse Effect,
that has not been bonded or stayed on appeal within thirty (30) days; or
9.9 The occurrence of any material event of default as defined under
the Senior Loan Documents that has not been waived by Senior Creditor and for
which Senior Creditor issues a Blockage Notice (as defined in the Subordination
Agreement).
SECTION 10. REMEDIES
Upon the occurrence and continuance of any one or more Events of
Default, Lender, at its option, may declare the Note(s) 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 2.6 (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.
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
ten(10) 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
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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 after full
payment of the Secured Obligations hereunder), releasing 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 exercise 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.
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 fifth
calendar day after deposit in the United States mails certified mail, return
receipt requested, with proper first class postage prepaid, and shall be
addressed to the party to be notified as follows:
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(a) IF TO LENDER.
COMDISCO VENTURES
Attention: Xxx Xxxx
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xx 00000
Facsimile: (000) 000-0000
WITH A COPY TO:
COMDISCO, INC.
Legal Department
Attention: General Counsel
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
COMDISCO, INC./COMDISCO VENTURES
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
(b) IF TO BORROWER:
E.PIPHANY, INC.
Attention: Xxxxx Xxxxxx
0000 Xxxx Xxxx
Xxxx Xxxx, XX
Facsimile: (000) 000-0000
Phone: (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 April 13, 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.
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
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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 as to
Section 6.2, 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). Unless otherwise provided herein, 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,
except that Borrower shall not indemnify Lender for any taxes based upon the
income of Lender.
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 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.
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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, 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: E.piphany, Inc.
Signature: /s/ XXXXX X. XXXXXX
Print Name: XXXXX X. XXXXXX
Title: 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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